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Creating Social Capital for Not-for-Profit Support

Ask any non-for-profit development director and they will tell you there are two ways to fundraise: 

  • Ask 1000 people for $10
  • Ask 10 people for $1000

Which is the easier task? In terms of time and resources spent, certainly option B is the easier option. But in terms of broader reach and influence over a large audience, option A is a formidable contender because of something called social capital. Social capital is a concept that points to the power of networks to build a powerful entity, such as support for a cause, political candidate or even a corporate brand.

NPOs increasingly rely on the power of their social capital to help develop social connections that ensure the delivery of services, fundraise and build goodwill among the public and potential donors. Social capital also allows for greater access to detailed, confidential and fine-grained information from more extensive networks. In addition, NPOs benefit from the acquisition of influence, power and control of the stakeholders who are a part of their network.

Benefactors take into consideration numerous issues regarding an organization before they are willing to lend their emotional and financial support, so NPOs must tread carefully to ensure neutral politics (or political stances that suit the appropriate base) and use of funds are carefully controlled.

Social capital can take two forms: bonding and bridging. Bonding involves developing close interpersonal relationships with stakeholders based on shared aims and bridging builds networks between the NPOs and other organizations and various stakeholders, from big ticket donors to walk-a-thon participants.

There are several implications for the management of NPOs and how performance measurement and management controls can be used to preserve and develop social capital, as illustrated in Figure 1.

Social capital measurement

The latest CGMA report Performance Measurement and Management Control in Non-Profit Organizations discusses methods for developing performance measurement and management controls, related to social capital. The report summarizes research undertaken within two NPOs—the Tennant Centre, which provides welfare services to the disadvantaged; and Voluntary Service Overseas, which addresses poverty alleviation in developing countries through volunteering—and examines how formal performance measurement and management controls can have beneficial and damaging effects on social capital.

You can find out more about social capital and how to leverage it at your organization, by downloading the report from cgma.org.

As a CPA, CGMA, have you been able to effectively assist an NPO in leveraging its social capital? 

Arleen Thomas, CPA, CGMA, Senior Vice-President - Management Accounting, American Institute of CPAs.

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