netowrking modes and performance in nonprofit organizations

Correspondence to: Rita S. Mano, University of Haifa, Department of Human Services, Mount Carmel, Haifa, Israel 31995. E-mail: [email protected]

NONPROFIT MANAGEMENT & LEADERSHIP, vol. xx, no. xx, xxxx 2014 © 2014 Wiley Periodicals, Inc 1Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21104

Networking Modes and Performance in Israel’s Nonprofit Organizations

Rita S. ManoUniversity of Haifa, Israel

The present article examines the relationship between net-working modes and performance for 138 nonprofits in Israel. We draw upon the bridging and bonding concepts and social exchange theory and introduce the sharing and consulting networking modes to predict performance in terms of organi-zational growth in resources. We suggest that differences in networking modes (1) reflect variations in organizational size and age and (2) affect organizational growth in resources. We show that (1) the consulting networking mode is more frequent among managers of smaller and younger nonprofits, (2) shar-ing is characteristic of managers in older and larger nonprofits, (3) sharing has a strong effect on organizational growth, and (4) the sharing and consulting modes are better predictors of organizational performance than those of bonding and bridg-ing. The results indicate that nonprofit growth in organiza-tional resources is possible with networking when managers aspire to higher involvement in the networking process due to the scope and extent of goals.

Keywords: networking, consulting, sharing, bridging, bonding, organizational age, size, performance

NETWORKING IS A PROCESS through which formal and collabo-rations are formed, creating channels through which infor-mation about other individuals and groups can be easily

retrieved, tested, and verified (Brass et al. 2004). Effective network-ing modes are characterized by high degrees of coordination, coop-eration, and communication, in which goal setting “results from a

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Nonprofit Management & Leadership DOI: 10.1002/nml

communicative process in which shared meanings either exist, or are created through a reciprocal relationship” (Hardy et al. 1998, 71). Sustainable organizations aim to increase resources (Gazley 2010; Sowa 2009), but, according to Enjoiras (2009), variations in networking modes (Chang 2003; Chew and Osborne 2008; Kavanaugh et al. 2005; Snavely and Tracy 2002) ultimately define their benefits to the organization (Brass et al. 2004; Galaskiewicz, Bielefeld, and Dowell 2006).

The study examines how four networking modes used by managers in Israel’s nonprofits improve organizational growth in resources (term interchangeably used with the term performance). Extending earlier studies (Schmid, Bar, and Nirel 2008; York and Zychlinski 1997) the article contends that networking between managers in nonprofit settings is intended to increase organiza-tional resources and organizational performance (Hutt and Walker 2006). Drawing upon the resource-based view (RBV) of organiza-tions, we propose a set of measurable outcomes indicating growth in resources. We compare between four networking modes—bond-ing, bridging, sharing, and consulting—and show that only the two latter—sharing and consulting—actually improve organizational growth in resources in Israel’s nonprofits. We also control for vari-ations in organizational age and size in order to provide evidence of organizational context effects on the networking–performance relationship. The study does not examine all possible networking forms in the nonprofit sector but focuses on those revealed by the field study that tests the networking modes among managers in 138 individual nonprofit organizations.

Early in the 1970s, social capital theory introduced bonding and bridging as two major social networking interactions (Granovetter 1973). Putnam (2000) defined bridging as the overall link between diverse individuals and social groups, and bonding as the overall connectedness between groups with similar traits. In both interac-tions the formation of close “ties” has the potential to provide useful resources, increased access to influence and power, and improved social and economic status. At the organizational level, network-ing is a form of collaboration aiming to achieve common goals, but according to the social exchange approach, variations in networking occur due to differences in types of goals, extent of collaboration, networking relationships between partners, and the organizational context in which the managers are employed. For example, some managers use networking to attain specific, short-range goals or ad hoc challenges, whereas others choose networking as a strate-gic approach toward achieving long-term goals. Moreover, in some nonprofit organizations (NPOs) networking is a regular, extensive practice, whereas in other organizations competition is considered a more effective management strategy and networking is limited in extent and purpose (Brass et al. 2004; Gazley 2010). In smaller countries such as Israel, where there is considerable risk of losing

NETWORKING MODES AND PERFORMANCE IN ISRAEL’S NONPROFIT ORGANIZATIONS 3


valuable sources following the creation of a partnership, NPOs may prefer competition to cooperation despite the advantages of net-working (York and Zychlinski 1997).

We draw upon concepts from social capital and social exchange theory (Lawler et al. 2008). In addition to the classic bonding and bridging types of social capital connections we distinguish among four—networking modes: bonding, bridging, consulting and shar-ing. We claim that this distinction is essential to capture how the scope, extent, and goals of the networking association affect manag-ers’ networking modes (Graddy and Chen 2006) and thereby more accurately predict the influence of networking modes on a nonprof-it’s organizational growth in resources.

We expect that the consulting mode has less effect than the sharing mode in generating performance and that the bridging and bonding networking modes are also less effective. We use the terms engagement and involvement in regard to how nonprofit managers invest more in the networking modes when the potential for per-formance is extensive. We also expect that differences of age and size in organizational context affect networking practices, and test and assess the effect of each networking mode on performance. We ask the following research questions:

1. How do different networking modes—bonding, bridging, sharing, and consulting—affect performance?

RQ2. Do differences in organizational context generate different networking modes?

The Israeli SettingActivities in Israel’s NPOs amount to 1.4 percent of the gross domestic product (GDP)—second only to the United States with 1.85 percent (Schmid et al. 2008). In 2005, 40,000 associations were registered in Israel, 23,659 of which are still active, and it is estimated that more than 1,000 new organizations are added each year. In Israel, many NPOs are supported by government funds; becoming eligible for this support is difficult. As in many Western societies, increasing support for ideological service and/or advo-cacy issues has given rise to increasing support for NPOs’ causes. Funding was relatively abundant until recently, and stakeholders’ support for social goals was strong (Mishra 1996). As a result, many NPOs refused to back down from their definition of proper management, viewing collaboration with other organizations to be undesirable or impossible to implement, and there is some indirect evidence that although networking has largely positive effects on performance, it is possible that collaboration may also affect NPOs’ performance negatively, because engaging in ineffective networking modes with partners may give rise to goal displacement and failure to attain organizational goals (Schmid et al. 2008; Provan, Isett,

We distinguish among four networking

modes: bonding, bridging,

consulting and sharing.

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and Milward 2004). Measuring performance in NPOs is therefore a complex process, mainly because of the conflicting expectations of multiple stakeholders (Baruch and Ramahlo 2006; Herman and Renz 2008) and managers choosing the best networking mode that ensures performance, that is, organizational growth of resources is not easy (Provan and Kenis 2008).

Theoretical BackgroundThe importance of interactions as able to generate benefits—social, psychological, emotional, and economic—either immediately or in the long run, has been a concern of almost every social science discipline (Cross and Cummings, 2004). Two possible theoretical directions provide insights into the origins and outcomes of net-working interactions: social capital theory and social exchange theory. Social capital theory assumes that the origins of forming associations derive from shared norms and interests. Bridging and bonding are structured forms of interaction that promote the abil-ity of social groups to work together and achieve their goals using personal connections (Bourdieu 1986; Coleman 1990; Granovetter 1973). Bridging, in this context, consists of individuals and orga-nizations seeking access to information that are remote from each other in location. In such cases, social capital includes norms and networks that people draw upon to solve problems. Bonding refers to facilitating the creation of strong (as opposed to weak) ties. It includes the element of proximity and offers defense strategies, mostly to weak—ethnic/minority social groups. The effectiveness of bridging and bonding “networking” forms has not yet been examined in nonprofit settings, but the concepts are widely con-sidered as theoretically valid for measuring connectedness (Putnam 2000).

Social exchange theory focuses on the processes conducive to variations in types of collaboration according to desired social out-comes. The theory suggests that benefit-oriented behaviors differ from bridging and bonding because collaborating is less structured to “fit” the partners’ wish to maximize benefits and minimize costs (Cheshire, Gerbasi, and Cook 2010). Partners in an exchange proc-ess “weight” potential benefits and risks by being involved and adjust their level of involvement accordingly. When the risks sig-nificantly outweigh rewards, people will either terminate or aban-don that relationship, or minimize their involvement (Provan et al. 2004). In balanced interactions different levels of “reciprocity” and involvement are possible and, according to Cheshire et al. (2010) networking is not something that you either do or not, but how much you mean to do it (Hipp and Perrin 2006; Simpson and Willer 2005). These variations were first noticed by Enjoiras (2009), who pointed to the different coordinating mechanisms developed in local authorities. The sensitivity and centrality of information shared

Measuring performance in NPOs is therefore a

complex process, mainly because

of the conflicting expectations of multiple

stakeholders.



with a networking partner affected the partner’s’ learning experience (Chang 2003; Graddy and Chen 2006; Kekale and Viitala 2003). Sometimes networking was wide-ranging, ongoing, and based on intense contacts, whereas in other cases, networking was limited to fewer and far apart contacts (Muthusamy and White 2005; Weeks and Feeny 2008).

Capturing differences in networking modes among NPO man-agers has significance for the outcome of a partnership (Gazley 2010; Sowa 2009). Enjoiras (2009) described how networking in NPOs should be motivated by moral obligation rather than by per-sonal gain, so that social goals are attained. Failing in this respect increases the risk of losing the NPO’s identity (Chang 2003; East-erby-Smith, Lyles, and Tsang 2008; Kekale and Viitala 2003). Net-working managers therefore choose the extent of network exchange according to the goals they wish to attain (Gazley 2010; Guo and Acar 2005; Simpson and Willer 2005). Empirical evidence suggests that NPOs in Israel find it difficult to create collaborations, and managers often prefer competition to cooperation (York and Zych-linski 1997).

Networking and PerformanceA wide definition of performance covers a broad range of organi-zational practices. Some are related to mobilization of resources, others to attracting public attention or to influencing policies at the political, national, or international level. Sometimes the focus is on organizational variables such as management, boards, fis-cal health, and mission; or on attracting community support and recruitment of volunteers. With the ongoing and never-ending dis-cussion on NGO (nongovernmental organization)/NPO, a compre-hensive review on performance in NPOs falls beyond the scope of the present study. Even though the need to use quantitative studies and adhere to commonly defined terms and methodologies is con-tinually raised (Lecy, Schmitz and Swedlund 2012), at the moment variations in definitions force authors to use convenient and case-specific measures.

Performance has been assessed according to different crite-ria, including those described by Quinn and Rohrbaugh (1981), who concluded that that there is a high level of similarity among the different settings. Cameron (1987) discussed how “type” and “source” of stakeholder influence affect the choice of criteria related to performance (605). Recently, in their critical overview of NPOs’ performance, Herman and Renz (2008) presented nine theses, including lack of objective measurement, lack of comparability and bias due to differences between boards, management practices, social expectations, and criterion usefulness. Lecy et al. (2011) have sug-gested that a relatively neglected aspect of performance is organi-zational networking, stating that “effective organizations are likely

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to be those that can mobilize actors through networks or leverage resources and achieve strategic objectives through participating in networks” (446). Indeed, networking provides a sense that both partners gain out of the collaborative effort, but the effort invested relates to how partners define those gains. When the level of efforts adequately reflects the goals to be reached, then the odds for improv-ing both the quantity and quality of technical resources and knowl-edge transfer increase (Camarero and Garrido 2009; Easterby-Smith et al. 2008; Faems, Janssens, and van Looy 2007; Inkpen and Tsang 2005). Accordingly, it is expected that:

Hypothesis 1. Variations in performance are related to varia-tions in networking modes.

Moderating Effects: NPOs’ Organizational Context

Organizational theory focuses on the age and size of the organiza-tional context as two attributes that define the majority of organi-zational inputs, processes, and outputs (Pugh and Hickson 1976). Task structuring, allocation of authority, degree of openness and flexibility in interpersonal relations all reflect the level at which organizations feel confident and supported by their institutional, social, and organizational environment (Sine, Mitsuhashi, and Kirsch 2006), thereby decreasing the odds of using networking (Provan and Kenis 2008). Conversely, larger organizations achieve social goals by formally collaborating with smaller enterprises. In such cases, larger settings are presumed to provide greater net-working capacity because of larger resources (Sine et al. 2006). The value of networking in smaller and younger NPOs is unclear. Lacking expertise, small and/or new NPOs are more likely to use networking because they do not have adequate intellectual, social, or financial facilities for acquiring and exploiting opportunities (Brass et al. 2004; Galaskiewicz et al. 2006). This is partly due to the organizational context of the managers. Some organizations adhere to “shared governance” networks and others to “lead gov-ernance” (Provan, Fish, and Sydow 2007; Provan and Kenis 2008). We therefore hypothesize that

Hypothesis 2. Variations in managers’ networking modes are related to differences in organizational context.

MethodologyIn the methodology section we present the details regarding the collecting of data and provide information about the sample and the questionnaire items used in the study.



DataThe survey is based on a field study of 255 NPOs in Shatil’s list of social organizations (Shatil 2001) that were still operating in 2007. Managers were first contacted via telephone or e-mail and were invited to participate in the survey. The interviewers then sent a closed-end questionnaire consisting of sixty-eight items concern-ing social capital and networking reports, and evaluations of orga-nizational performance, after which the interviewers recontacted the managers, who completed the questionnaires in their pres-ence. Managers from 135 organizations (67 percent of those listed) returned the questionnaires. They averaged six years of organiza-tional experience; 50 percent of them had had professional mana-gerial training. Mean organizational age was fourteen years, and 30 percent of the organizations were located in metropolitan areas. We used a questionnaire compiled from items referring to both organi-zational-level and individual-level information (Mano 2013).

Dependent VariablesThe performance construct used in the study is loading on the fol-lowing items:

1. Increased number of clients 2. Increased number of paying members 3. More branches in our organization 4. Added areas/products/services 5. More pledges for the organization 6. Expenses higher than extent of activities 7. Inadequate number of employees/volunteers 8. Concerns about fundraising for next year; 9. Diffi culties in recruiting volunteers (Cronbach’s alpha = .899)

The set of items partially follows Gazley’s (2010) list of items related to performance.

Independent VariablesThe networking modes used in the study reflect the empiri-cal extension of the bridging and bonding theoretical concepts (Bourdieu 1986). We used CFA (confirmatory factor analysis) to tap into the differences across four modes of networking. Bonding connections denote the extent that managerial networking is based on social involvement. Bridging connections relate to the extent that networking is aimed at attainment of concrete outcomes. Consulting refers to the extent that networking improves manage-rial knowledge, and know-how about lower levels of managerial engagement in the networking process. Sharing is oriented toward bilateral exchange of goals and goods, reflecting higher levels of managerial engagement in networking.

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Networking Modes. The CFA analysis loadings distinguished among four factors:

Bonding loaded on the following items (Cronbach Alpha = .90):Most of my professional contacts are

1. Managers from my age group 2. Ethnic groups 3. Gender 4. Military service 5. Religious affi liation

Bridging loaded on the following items (Cronbach Alpha = .79):

1. My decision making on the job is mostly affected by managers from other NPOs.

2. My decision making on the job is mostly affected by employees in other NPOs.

3. I tend to let other NPOs managers know about my organiza-tional successes.

4. I tend to let other NPOs managers know about my organiza-tional challenges.

5. I tend to apply other managers’ advice in my own organization. 6. I collaborate with other NPOs managers because of our common

goals. 7. I collaborate with other NPOs managers because of our common

vision. 8. I collaborate with other NPOs managers because of our common

goals even when our visions are different. 9. I collaborate with other NP managers because of our common

vision even when our goals are different.

Consulting loaded on the following items (Cronbach Alpha = .83):

1. Consulting with subordinates in decision making 2. Consulting with supervisor in decision making 3. Consulting with people from other nonprofi ts in decision making 4. Consulting with managers from other nonprofi ts in decision

making 5. Consulting with managers from other organizations in decision

making 6. Consulting with other professionals in decision making 7. Participating in social activities with other managers

Sharing loaded on the following items (Cronbach’s alpha = .78):

1. Sharing with other managers in professional challenges 2. Sharing with other managers in professional successes 3. Implementing advice from other managers 4. Cooperating with other organizations with the same goals



5. Cooperating with other organizations with the same vision 6. Cooperating with other organizations with the same goals and

different vision 7. Cooperating with other organizations with the same vision and

different goals

Despite some degree of similarity between items, the correlation matrix (see Results Table 1) indicates no collinearity effects between the examined networking constructs.

Moderating Effects. Organizational characteristics include a set of variables affecting organizational variations in performance:

1. Age (years of operation); 2. Size/number of branches, percentage of volunteers (see the

appendix)

All attitudinal dependent and independent variables were meas-ured on Likert scales ranging from 1 (low) to 10 (high).

ResultsThe Results section includes a description of the analysis strategy employed in the study followed by the presentation and analysis of the results.

Analysis StrategyFirst we present a correlation matrix of interrelations between network modes and assess the degree of co-linearity between the

Table 1. Pearson Correlations between Examined Variables

Bonding Bridging Consulting Sharing Organization Age

Org. Size: Branches

Org. Size: Volunteers

Performance

Bonding 1

Bridging .243** 1

Consulting .203* .418** 1

Sharing .129 .316** .327*** 1

Organiza-tion age

.298** .293** .147 .003 1

Organiza-tion size: Branches

.180* .028 .026 −.168* .328** 1

Organiza-tion size: Volunteers

.187 .162 .151 .054 .354** −.063 1

Perform-ance

−.052 −.098 .292** .310* −.163 .041 −.140 1

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different modes (Table 1). Next we present a general model based on two sets of variables—networking modes and organizational context are presented in order to assess their overall influence in predicting performance (Table 2). Finally, we present the estimated overall effect of each networking type on performance (Table 3).

Most of the correlations are relatively small, but there is a posi-tive correlation between bridging and other types of networking. Comparison of the relationships shows that bridging is correlated more with sharing (r = .386) and consulting (r = .318), and less with bonding (r = .243). Another interesting relationship is that of sharing and consulting (r = .267). The results suggest that indi-viduals tend to network on various levels, and that one form of networking may lead to another—similar to snowball or spillover effect—but without mixing them, evidently while considering the different ways in which performance is measured and being aware that different networking modes reveal different social or techni-cal aspects of performance. As the results indicate, only consulting (r = .292) and sharing (r = .310) networking modes are related to performance. To validate the effects of all networking types on performance, a model predicting performance on the basis of three sets of variables—networking, individual, and organizational—is presented in Table 2.

The findings clearly point to the significant effect of networking modes on performance. Of the two sets of predictors, networking is

There is a positive

correlation between bridging and other types of

networking.

Table 2. General Model Assessing Impact of Networking Modes on Performance

R R2 SE Estimate R2 Square Change F Change df1 Sig. F Change

Networking modes .382 .146 12.22073 .146 2.940 4 .026

Organization context: Age, size .483 .233 12.21116 .044 1.186 3 .322

Table 3. Regression Estimates Predicting Organizational Performance

B SE β t Sig.

Networking Modes

(Constant) 26.487 5.502 4.814 .000

Bridging −.181 .193 −.102 −.938 .350

Bonding −.097 .084 −.108 −1.148 .253

Consulting .402 .184 .233 2.185 .031

Sharing .251 .104 .265 2.409 .018

Organization Context

Organization age −.055 .087 −.093 −.635 .529

Organization size: Branches −.191 .247 −.104 −.773 .443

Organization size: Volunteers −.034 .032 −.137 −1.070 .290



the only one contributing the major part of the variance (R² = .146), followed by organizational context (R² change = .044). The findings suggest that performance in nonprofit settings provides resources that can significantly shape level of performance of NPO managers. Moreover, despite organizational affiliation, that is, type of organiza-tional setting, networking in its various forms still takes place, and it is thus probable that the Israeli setting encourages involvement, either directly or indirectly, in networking activities.

Next we estimate the effect of each networking type and organi-zational context on performance (Table 3).

These results indicate that, of all the networking modes, only consulting and sharing generate organizational growth in resources. Bonding and bridging have no significant effect on performance, but consulting and sharing increase the level of performance. However, contrary to our expectation, the consulting mode has a higher direct effect on performance (B = .402) than sharing (B = .251). These results indicate that NPO managers tend to network more formally, to facilitate connections and promote common goals. This substan-tiates previous studies concerning the risk of sharing too much (Chang 2003; Chew and Osborne 2008; Kavanaugh et al. 2005; Sna-vely and Tracy 2002) without defining networking range and scope (Brass et al. 2004; Galaskiewicz et al. 2006). According to Graddy and Chen (2006), the size and scope of networks are crucial fac-tors in the delivery of social services. NPO managers nonetheless prefer lower levels of networking, that is, consulting, so that shared information is probably confined to basic issues of common interest. This also emphasizes the fact that the connection between network-ing and performance requires better definition of networking modes (Sowa 2009). Confirming theories of exchange in networks (Mox-ham and Boaden 2007), the findings suggest that public image and organizational power involving higher levels of risk affect the degree of sharing in networking. It seems that the consulting mode is the most frequent means for creating and maintaining networks.

Conclusions Recent budget cuts and lower donations have increased awareness of the need for cooperation among organizations in Israel’s non-profit settings. As public support has declined significantly, Israel’s NPOs have realized that networking can advance specific goals that are of interest to the involved parties. The difficulty is decid-ing which networking modes are best for organizational growth. Our study addresses how different modes of networking affect performance. It shows that networking modes significantly affect performance and that such alliances are effective, as indicated in previous nonprofit studies (Galaskiewicz et al. 2006; Gazley 2010; Moxham and Boaden 2007). We also show that some networking modes are more effective in generating performance and involve

Of all the networking modes, only

consulting and sharing generate organizational

growth in resources.

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stronger managerial engagement. In regard to measuring perfor-mance, such definitions are ongoing in NPOs’ activities—some stakeholders adhere to “technical” and cost-effective measures, others to the “institutional” and ideological aspects (Chew 2008). To overcome possible differences in defining performance, we used objective measures indicating organizational growth in resources. We assumed that variations in organizational age and size affect the way and extent of managers’ networking. We also suggested that managers’ networking mode depends on the potential value that networking has for performance and reflects our definition of per-formance as “organizational growth in resources.”

Confirming hypothesis 1, sharing and consulting modes were revealed as more effective forms of networking than bridging and bonding, and significantly promote organizational growth in resources, indicating that managers’ higher levels of engagement in networking modes is necessary to increase performance, but organizational context effects measured by organizational age and size (Sine et al. 2006) provide the necessary background in which managers are either encouraged or prevented from networking with other organizations.

These results support the notion that not all networking modes effectively promote organizational growth and improve performance. Subtle definitions of networking modes are required to reflect the necessary degree of engagement in networking. Some modes are evidently more effective, and it is through them that organizational growth in resources is attainable, mainly because they enable learning and co-creation of shared goals, as suggested in previous studies. Despite the fact that competition is still prof-itable, partners are essential for gaining knowledge through coop-eration (Galaskiewicz et al. 2006). The results of our study clearly indicate that Israel’s NPOs are interested in cooperating and col-laborating within specific circumstances and towards clearly set goals. In an attempt to gain access to information from network-ing partners in order to increase organizational resources (Chang, 2003; Sowa, 2009) while retaining their own identity, NPOs man-agers prefer the more limited in scope consulting mode rather than the more encompassing sharing mode. As budgets shrink and information becomes more valuable, networking practices may become more involving in the future even among reluctant NPO managers.

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Despite the fact that competition is still profitable,

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for gaining knowledge

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Appendix: Means and Standard Deviations for Examined Variables

Mean SD

Networking Modes

Bonding 26.1356 12.82032

Bridging 24.8906 8.08902

Consulting 22.5414 7.44425

Sharing 43.4812 13.56053

Performance 41.3017 12.85384

Organization Context

Organization age 23.6791 17.81655

Organization size: Branches 13.8226 30.61368

Organization size: Volunteers 166.6441 555.98216

netowrking modes and performance in nonprofit organizations

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