The Internal Consequences of Embeddedness for Nonprofit Child Welfare Agencies

Background

Over half of child welfare services are delivered by private, generally nonprofit, agencies (Martin, 2000).  These agencies often have long-lasting contractual relationships with public child welfare agencies, and can depend financially on these service contracts (McBeath, Collins-Camargo, & Chuang, 2012).  With such close ties, nonprofits’ internal operations can be strongly influenced by formal institutional requests and informal expectations of the public agency (Uzzi, 1997). While embedded relationships could enhance performance they could also lead to mission drift and service delivery challenges (Hasenfeld, 2015; Hasenfeld & Garrow, 2012). Literature has not examined the relationship between public and nonprofit child welfare agencies. Our study expands on prior research in two ways. First, we assess the degree of fiscal and relational embeddedness experienced by nonprofit child welfare agencies. Second, we examine the influence of embeddedness on nonprofits’ finances, service programming, staffing, and performance.

Methods

Analyses used quantitative survey data gathered in 2011 from a national sample of nonprofit child welfare agencies (n=399). Participants reported on three dimensions of embeddedness: (1) the level of fiscal dependence on public child welfare funding (number of contracts with public child welfare agencies, and % annual revenue derived from them); (2) relationship quality; and (3) frequency of four types of collaboration with public child welfare agencies (measured with 5-point Likert scales). Participants also reported on the degree to which their organization’s relationship with public child welfare agencies influenced organizational finances, programs, staffing, and performance along a 5-point Likert scale. We used multivariate regression to examine the relationships between embeddedness and organizational functioning.

Results:

Nonprofit agencies report substantial financial dependence on public child welfare agencies. Organizations maintain an average of 4 contracts with public child welfare agencies, and nearly half derive more than 80% of their revenue from public sources. In terms of relational embeddedness, organizations generally reported a “good” relationship with public child welfare agencies, with moderate to low levels of data sharing and joint service delivery (M=3.4, SD=1.2), cross-training (M=2.3, SD=1.1), and joint budgeting (M=2.1, SD=1.2).

Results of multivariate regression suggest that controlling for organizational size, fiscal dependence (deriving 80% or more of annual revenue from public contracts) was positively associated with programming. However, relationship quality was perceived to positively influence organizational finances, programming, staffing, and performance.  In terms of collaboration, joint budgeting with the public child welfare system was positively associated with organizational finances, programming, and performance, while joint service delivery was positively associated with programming and staff retention.

Conclusions:

Results showed that public agency embeddedness may positively influence nonprofit agency operations.  Our findings focus attention on how nonprofit agencies structure their internal operations in response to relationships with public agencies characterized by different levels of embeddedness and dependency. Results highlight the importance of tracking the quality of nonprofit-public agency relationships, as relationship quality may positively influence programming. The quality of nonprofits’ relationships with their public agency counterparts, and the frequency of their collaboration (especially around joint budgeting and joint service delivery) may be especially important for improving organizational finances, staffing and performance.