Unexpected Opportunities: Windfalls and Their Impacts on Third Sector Organizations

• In Event: Game-changing philanthropy

Abstract

Third sector organizations operate in open systems and are susceptible to changes in their environment. Thus, third sector organizations must be learning organizations, capable of removing or redesigning organizational “systems in a way that responds to the changing environment with creative and effective approaches” (Green, 2004, p. 22). As learning organizations, managers guide introspection and analysis of both internal and external patterns and conditions for actions, as well as resulting consequences, leading to organizational adaptation. This study explores how nonprofits engage learning and adaptation following unexpected financial opportunities.
Philanthropic contributions are one source of revenue that equips third sector organizations for their mission. Occasionally, philanthropic disruptions emerge that pose unparalleled opportunities to learn about the impact of philanthropy on nonprofit operations. Unexpected gifts, such as the case of a single $175 million planned gift to the Modern Poetry Association, can be transformative occurrences (Stephenson, et al., 2009). Recent media attention has covered the series of gifts from MacKenzie Scott totaling $5.7 billion and benefitting 1,604 global organizations (Yield Giving, 2022). These donations were unsolicited and mostly unexpected, and pose significant investments for the overall revenue portfolios of these organizations.
These types of donations are philanthropic windfalls, an expected good fortune for the organizations, and have had limited examination in the research literature. As a rare event, third sector organizations receiving a philanthropic windfall may have little precedent from their own experience or their peers to follow. Any examples from the private or public sectors may have some similarities, but given differing logics and organizational capacities, third sector organizations may encounter limitations in following these examples. Thus, these windfall events pose uncharted territory for a third sector organization, and pose an opportunity to gain a better understanding about how organizations learn from these experiences and adapt, particularly following the COVID-19 pandemic. Thus, this research study explores: How have philanthropic windfalls impacted third sector organizations? and How have third sector organizations adapted following other windfall events (i.e. legal settlements)?
This research applies resource dependence (RDT) and institutional theories to an exploratory case study to explain and assess how organizations may respond to these unexpected events. According to RDT, the survival of an organization depends on its effectiveness, ability to acquire and maintain resources, and the role of management in manipulating the environment and operating in social contexts and constraints (Pfeffer & Salancik, 2003). Many third sector organizations operate from this logic, thus I anticipate philanthropic windfalls will disrupt the power dynamics and resource controls that have been informed by a resource dependent organizational logic and organizational designs will have to adapt. Moreover, institutional pressures subject an organization to coercive or mimetic isomorphic pressures to adapt in certain ways, and they may react differently to the environment and these pressures differently based on their organizational goals and objectives (DiMaggio & Powell, 1983; Oliver, 1991). This exploratory case study seeks to better understand the nuances of philanthropic windfall events and provide some insights on how they impact third sector organizations.

References

DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and
collective rationality in organizational fields. American sociological review, 147-160.

Green, F. L. (2004). Ten things nonprofits must do in the twenty-first century. Improving
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Oliver, C. (1991). Strategic responses to institutional processes. Academy of management review,
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Pfeffer, J., & Salancik, G. R. (2003). THE EXTERNAL CONTROL. The Sociology of
Organizations: Classic, Contemporary, and Critical Readings, 233.

Stephenson Jr, M. O., Schnitzer, M. H., & Arroyave, V. M. (2009). Nonprofit governance,
management, and organizational learning: Exploring the implications of one “mega-gift”. The American Review of Public Administration, 39(1), 43-59.

Yield giving. Yield Giving. (2022). https://yieldgiving.com/. Retrieved on May 24, 2023.

Author

• Ryne Crout Jones