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Internal and External Determinants of Formal Plans in the Nonprofit Sector

Internal and External Determinants of Formal Plans in the Nonprofit Sector

Hokyu Hwang and Patricia Bromley

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The study of formal planning in nonprofits and the public sector is thriving, with management gurus providing abundant advice on its value and proper execution. We address a related, but broader issue: why has the management tool of formal planning become prevalent in organizations with a public goal in the first place? To answer this question, we draw on insights from institutional theories of organization, bringing a fresh perspective to the increasingly common practice of formal planning in the administration of public entities. Using a unique dataset constructed from interviews with a random, representative sample of the leaders of 200 nonprofits in the San Francisco Bay Area, we analyze the factors associated with the presence of a formal plan. We combine the interview data with details on organizational characteristics from tax reports and consider the features of nonprofits that plan using logistic regression. The findings reveal that size and capacity are important, but links to an external, rationalized environment dampen the effects of both. Thus, functional factors, while important, are insufficient to explain why nonprofits engage in planning. For those interested in promoting formal planning as a management tool, our findings provide insight into other organizational features that promote the use of planning. And for those concerned with the potentially deleterious effects of this tool in the nonprofit sector, we show that certain types of organizations seem adept at maintaining a less formal structure.