Crises may happen anytime, anywhere and may hit anyone. Researchers widely agree that no one can generally be immune to crises. However, there exists consensus, that certain entities are more vulnerable to experience a crisis than others, and that it is possible to build up resilience in order to prevent or at least mitigate the impact of a crisis to a mere challenge to be overcome. For doing so, research is needed to determine what kinds of crises actually exist and also, how to recognize the upcoming crisis situations. There has been some research conducted for For-profit Organizations, however research lacks in the field of Non-Profit Organizations. Findings from Forprofits cannot easily be transcribed to apply to NPOs as well, as quite different characteristics are inherent respectively. Therefore, this research project aimed at entering a first step into this field of research by asking the following research question:

What are typical crisis situations for NPOs and how to recognize such upcoming crisis situations for NPOs?

This research project shall be understood as a first move to closely determine which inherent NPO character traits may render a crisis more or less likely. It was aimed to develop a conceptualization which enables future research to enhance concrete indicators for crisis resilience of NPOs and thus policy recommendations.

As per definition, NPOs do not seek to accumulate wealth, but are required to spend and invest all their potential income on their mission. This is an important factor, as it means that savings are to be seen as critical and cannot amount up too high in order to correspond to the NPO’s self-definition and to avoid questioning by the ministry of finance. This also means that in face of a crisis, there are no extra resources to be spent to solve this extraordinary challenge, but the NPO has to overcome a problem in a different way. In contrast, Forprofits usually are required to build up equity in order to be able to survive challenges and dry times. Furthermore, there is no single version of what an NPO looks like. There are immense varieties regarding the legal framework and organizational structures. This makes it even harder to find common solutions to diverse demands. Nevertheless, it is believed, that NPOs employ some more common character traits which can be addressed together, such as being torn between their mission and economic requirements, dealing with volunteers, the strong motivation and dedication to the cause of their employees and volunteers, a triangular relationship between the NPO and its different groups of stakeholders such as clients and financiers, and the great challenge to receive monetary resources and long-term stable funding.

 A crisis can be described as a situation of increased tension which cannot be eased through usual methods until it reaches a tipping point and results either in demise or in survival of an organization. A crisis model describes this increase in tension in four phases, being pre-crisis, crisis, crisis end and post-crisis, each in turn consisting of further stages such as start, escalation, de-escalation and impact. It is further noted, that with proper risk management, resilience can be build up and crises can be prevented, or their impact at least be mitigated. Furthermore, it was found that Resource Dependency Theory is directly applicable to NPOs as it deals with scarce resources (which in the case of NPOs usually is presented by monetary income) and the unbalanced power relations that go along with this. The owners of scarce resources will always be able to exert power over those in need of these resources.

As a summarizing step, based on these previous findings, paired with insights from the theoretical background and building on inherent NPO characteristics, a conceptualization was developed, serving as a framework to determine aspects that most likely indicate an upcoming crisis for NPOs. This conceptualization is composed of four thematic propositions, each entailing several sub propositions respectively.

The aim of the following empirical part was to confirm or disconfirm the developed propositions, and to accompany them with examples respectively. In order to do so, it was decided that a qualitative small-n case study method is the most adequate way. Case studies were decided to be undertaken by conducting expert interviews with NPOs in Austria, which have been in existential crises and either survived that crisis or not.

Conducting the interviews delivered a wide range of interesting insights. Analyzing them, it was intended to evaluate the findings along the previously developed theoretical conceptualization in order to be able to either confirm or disconfirm theory. It turned out, that the theoretical findings embodied in the propositions have mostly been confirmed by the empirical findings. Only some minor sub propositions had to be discarded, however there were no major contradictions between theory and praxis.

Four Problem Areas

Against the background of the empirical findings merged with the theoretical conceptualization, the initial research question, what are typical crisis situations for NPOs and how to recognize such upcoming crisis situations, can be answered. The task was first, to determine typical crisis situations for NPOs and second, how to recognize the emergence of such. Concerning the first part, it was found that there exist a variety of different crises which NPOs might experience, sometimes even presenting a combination of different causes. Nevertheless, common issues are standing out. Most NPOs are struggling with resource aspects, mainly of monetary kind but also regarding other types of resources. The RDT therefore seems like an appropriate approach to address NPO crises. This also is important with regards to NPOs’ main difference to Forprofits, being limited in the ability to build up resource reserves, as apparently this difference is one of the main drivers of crises. However, in this small-n case study, also other roots of crises were mentioned. As any other organization, NPOs may face the challenge of appropriate organizational structure and lack of strategy. This then results in unclear areas of responsibility and decision-making competences, which in turn render usual challenges into unsurmountable crises as development and decisions are held up and stagnating.

Problem Area 1 – (Resource-) Dependency and Stakeholder Imbalances

Regarding the second part of the research question, how to potentially recognize upcoming crises, different statements can be made. As was explained above, most of the crises stem from resource problems, therefore it was confirmed that NPOs are more likely to experience an existential crisis, if they are highly dependent on (financing) stakeholders and face power imbalances. This involves a higher likelihood for NPOs to experience a crisis if they are currently dependent on only one or few sources of (monetary) resource inflow, and if they are currently receiving state grants from a country’s governmental institutions. The same applies, if NPOs are receiving grants or donations from other stakeholders which exercise their interests and power over the NPOs. If NPOs find themselves currently in one of the described situations, they are more likely to experience an existential crisis in the future and should take measures to prevent this.

Problem Area 2 – Organizational Structure

Regarding their organizational structure, if NPOs’ current structure enables high degrees of informality and uncertainty, it is more likely that they will be experiencing a crisis in the future. If NPOs currently experience mission drift or are having a high number of different stakeholders is no indicator of them being more likely to experience a crisis. However, in cases in which NPOs are currently only focusing on the thematic mission and not concentrating to also accomplish administrative requirements, or they are currently not part of a meta organization, a network or embedded within another organization, do not employ proper volunteer management or their current structures do not adequately correspond with the way they wish to reach their goal, NPOs are more likely to experience a crisis in the future.

Problem Area 3 – Organizational Culture

What is more, if NPOs do not inhibit an organizational culture with a pleasant work atmosphere, a decent salary for their employees and/or are experiencing a rise in tension within the organization that cannot be eased, they are more likely to experience an existential crisis in the future.

Problem Area 4 – Strategy

Furthermore, if NPOs currently does not have clear and evident strategies developed for their operations, they are more likely to experience a crisis in the future. This involves them being too conservative and neglecting innovation, engaging in an over served field with too much competition, and not investing in any form of risk management, which renders the NPO more likely to experience a crisis in the future. If an NPO does not implement mechanisms to evaluate its work, this does not seem to have any indicating function towards the likelihood to experience existential crises.

These four broad problem areas that were identified serve as a guideline for NPOs, which issues to pay special attention to. If addressed thoroughly, resilience can be developed, making an NPO less prone to struggle with existential crises respectively. Nevertheless, these four thematic fields are by no means exhaustive and may be subject to further research and future modification. It is hoped however, that they serve as a first step into supporting NPOs to become resilient and therefore to survive on the long run, therewith maximizing and accelerating social impact in Austria.