Sunday, 16 January 2005 - 8:45 AM

This presentation is part of: Organization of Social Services

Houses Built on Sand? Real Consequences of For-Profit Social Service Delivery

Purpose This research project represents the first longitudinal examination of the organizational shifts within social services. Nonprofit entities represent the majority form, but for-profit establishments are increasingly more common. Little attention has focused on the fundamental dynamics creating this shift, specifically the organizational birth and death processes that shape the resulting net distribution of organizations. Organizational theory suggests for-profit and nonprofit organizations will exhibit specific mortality patterns due to their internal motivating logics and available external supports. Overall, for-profit organizations will likely have substantially higher mortality rates. In fields such as social services that provide crucial supports to vulnerable populations, increased organizational mortality diminishes the capacity to create stable systems of service delivery. Methods: Addressing these research questions requires detailed longitudinal event-history data at the level of the individual establishment for an entire industry. Until recently, such data were not available. Following an adjudicated review process by the U.S. Center for Economic Studies, the author obtained access to a new confidential source spanning from 1976-1999. These data represent the most complete organizational universe available and record when organizations form and die. For this paper, survival analysis techniques are utilized to model and test the different organizational mortality trajectories of all social service organizations (coded as 8321 in the Standard Industrial Classification system). In particular, Kaplan-Meier life-tests illustrate the different survivor functions, Wilcoxon tests for statistically significant differences, and Cox proportional hazards model allows for multivariate analyses of organizational mortality over time.

Results *: This study confirmed the overall trend toward greater for-profit activity between 1976 and 1999. The absolute and relative growth of the for-profit social service organizations is especially impressive given that, consistent with expectations, for-profit organizations experience a much greater overall death rate than their nonprofit counterparts. The median life span for for-profit organizations is much shorter than nonprofits. Wilcoxon test’s for differences between nonprofit and for-profits are significant at p < .0000. In multivariate Cox proportional hazard analyses, the effect of organizational form (nonprofit or for-profit status) remained statistically and substantially significant. Overall, these tests indicated that nonprofits face considerably less likelihood of failure relative to for-profit establishments.

Implications: Understanding the dynamic nonprofit and for-profit structure of the social services field is crucial to assess our contemporary social safety net, particularly since the public sector has shifted much of the responsibility and actual service delivery to the private sector. The above findings suggest caution in relying too heavily on organizations that demonstrate a marked reduction in longevity. Additionally, these findings suggest current views of organizational “efficiency” need to be expanded to a systems level approach to include the additional social and economic costs of opening and closing service organizations. Nonprofit organizations appear to represent a much more stable and potentially “cost-effective” service delivery mechanism in this regard. Social policies should acknowledge these fundamental organizational differences when considering the distribution of public social service funds.

* Disclosure restrictions prevent me from releasing detailed coefficients at this time. For more information about the release of findings please visit http://148.129.75.160/ces.php/rdc#output

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