McGill - Management in The Third Sector - 1975

Management in the Third Sector
Author(s): Michael E. McGill and Leland M. Wooten

Source: Public Administration Review, Vol. 35, No. 5 (Sep. - Oct., 1975), pp. 444-455
Published by: Wiley on behalf of the American Society for Public Administration
Stable URL: http://www.jstor.org/stable/974172
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444 PUBLIC ADMINISTRATION REVIEW
MANAGEMENT IN THE THIRD SECTOR
Michael E. McGill and Leland M. Wooten, Southern Methodist University
As early as Weber's "Ideal Type," observers private

of sectors and treated all other organizations
as relatively unimportant and primarily "voluntary
the organizational world have noted the existence
of organizations which neither conform nor sub- organizations." Indeed, these volunteer organiza-
scribe to traditional assumptions about publictions
and had a literature of their own; but they were
private entities. In recent years, the existencesoof
varied and diffuse that few people thought they
these neither public nor private organizationswere
has important enough to compare with the
activities of public or private organizations.1 The
been increasingly apparent, perhaps because there
tremendous growth in recent years in the number
are in fact more of them, or perhaps because those
and influence of third sector organizations has
which do exist are increasingly active and there-
occasioned a changed outlook on their societal
fore more visible. Such has been the evidence of
these organizations that they have come to be relevance and role, as well as upon their organiza-
known collectively as the "third sector." tional significance. Two recent attempts to define
Traditional business or private sector perspec- the third sector are instructive for our purposes.
tives upon the third sector have viewed with alarm Theodore Levitt, in his book The Third Sector:
the increasing "publicness" of heretofore private New Tactics for a Responsive Society, sees the
pursuits, and some have even labeled such move- third sector as a "divergent" movement and
ments as creeping socialism. From the public collectively defines it as comprised of "those
sector viewpoint, the control of public domains byorganizations which have arisen to institutionalize
private enterprise has correspondingly been de-activism in order to meet problems ignored by the
cried as examples of the social irresponsibility of other two sectors."2 In essence, he traces the
capitalism run rampant. Regardless of the labels development of third sector organizations to the
assigned to this movement, one fact of our presentinadequacies and inequities of public and private
era of industrialization seems apparent - we are bureaucracies - with particular attention paid to
seeing the emergence of a wide variety of organi- the dissatisfactions of the political New Left (a
zations and/or organizational processes which re- term he uses loosely since many conservative
flect the convergent and increasing (some would middleclass consumer groups would today fall
say inevitably) interdependent nature of our cur-under his label of New Left organizations). The
rent stage of economic development. Aside from issue, as Levitt sees it, is not that bureaucracy is
the occasional emotional response such as those superfluous; the issue is how the dominant bu-
reaucracies of our times can be made more
noted above, these third sector organizations have
been largely ignored by students of business compassionate and responsible while performin
administration and public administration alike. necessary jobs on a mass scale. One response
In this article, we attempt to identify some newthis issue is to disrupt bureaucratic routine - su
is the effect of the insistent confrontation tactics
directions in management theory and practice as
they relate to the emergence of third sector of Levitt's third sector organizations.
organizations as important entities in our post- According to Levitt, third sector organizations
industrial society. We begin by specifying thediffer widely in size, constitution, concern, and
definitional criteria of the third sector, after which consequences, but share three important proper-
we advance a model of third sector organizations,ties: (1) purposes, (2) a reliance on voluntarism,
and conclude by discussing its implications for(3) operating style.
management in the coming decades. Levitt points out that the general purposes of
third sector organizations are broadly similar -
On Defining the Third Sector "to do things business and government are either
not doing, not doing well, or not doing often
It is not surprising that the third sector hasenough."3 Given this perspective, churches, com-
been neglected for so long. For many years wemunity groups, and consumer groups may all be
acknowledged only the existence of the public and viewed as third sector organizations. Beyond a
SEPTEMBER/OCTOBER 1975
THIRD SECTOR MANAGEMENT 445
common general purpose, these organizations are Third Sector organizations will proliferate as a
further characterized by a reliance on voluntarism
result of these successes, as will the employment
to provide the human resources necessary to of New Third Sector confrontation tactics; but not
accomplish the work of the organization. This without costs. His concerns are stated very clearly:
"The dilemma for America is that the New Third
reliance on voluntarism as a source of legitimacy
sets third sector organizations apart from their Sector tactics, which seem best able to produce a
more responsive and benign society, may also
public and private counterparts, with the former's
reliance on law and the latter's reliance on capital.
produce a more unstable and malignant society."7
How to prod society's institutions into honest
Finally, third sector organizations are character-
ized in Levitt's view by their unique operating responsiveness while avoiding the self-depreciation
style - "social or moral pressure used in support
and despair which seem so rampant today, is the
of the technology of persuasion by voluntarily delicate balance which he feels must be struck.
associated members."4 Such is the scenario advanced by Levitt in his
book. He brings to our attention an active arena of
Levitt acknowledges that third sector organiza-
tions differ greatly in the degree to which theythe organizational world which has received rela-
might be characterized by these common proper- tively little academic attention. We see in Levitt's
ties, citing their very diversity as perhaps their
analysis the pervasiveness of third sector organiza-
most common characteristics. However, he be- tions and the actual and potential power of their
lieves a more important phenomenon is taking influence. Yet, we believe his scenario is incom-
place today regarding changes in the third sector
plete at best. Amitai Etzioni, in a recent article in
itself. As he puts it, we now have the emergencethis
of journal, helps to complement the perspective
a New Third Sector to challenge the traditions of
ofLevitt on the definition of the third sector.
the Old Third Sector. He writes of this change as Levitt's third sector, whether Old or New, is
follows: traditional in the sense that it includes only those
organizations that are constituted through volun-
In recent years the Third Sector has also moved up - to
new and more aggressive forms of social action.... The tarism and that pursue goals of either confronting
Old Third Sector sought largely to soften the abrasions large bureaucratic organizations in hope of making
caused by the operations of the other two sectors - by them more responsive, or organizing around cer-
quietly providing aid to the down and out, supporting tain functions that established organizations will
artistic endeavors for which the commercial system saw not or cannot perform. Granted, some recent third
no profitable markets, setting aside land sanctuaries for
sector organizations tend to be more activist and
public enjoyment that might otherwise be developed for
private gain. Now there is a New Third Sector. It seeks confrontive than previous third sector groups, but
largely to change the institutions which cause the abra- this does not really account for the wide variety of
sions. It no longer seeks only to respond to the needs or activities in the expanded arena of third sector
problems of the dispossed and ignored.... The New
organizations - that arena, according to Etzioni,
Third Sector is concerned with reform and social transfor-
mation rather than merely service.5 where "efficiency and expertise from the business
world are being combined with public interest,
Levitt argues that New Third Sector organiza- accountability, and broader planning from govern-
tions differ markedly in goals, composition, and ment."8 Let's briefly explore Etzioni's character-
tactics from the Old Third Sector. First, there is ization of the third sector.
the difference in purpose. As implied in the above Etzioni was one of the first scholars to draw
passage, he sees New Third Sector organizations as academic attention to the third sector issues.
seeking not merely redress of social inequities (as Reflecting on the variety of organizational forms
did Old Third Sector organizations), but reform which are being experimented with in the execu-
and revolution of the social institutions which tion of domestic missions, Etzioni noted:
spawned those inequities. Members of New Third
All of these may be seen as attempts to find the
Sector organizations "are not so much intent on appropriate vehicle through which to conduct the social
solving their own problems as on defining and as well as the economic "business" of mature capitalism.
solving the problems of others."6 These developing forms are mainly in the third sector.
Levitt recounts multiple examples of the suc- Some are created out of a mix of private business and
governmental elements. Others take the form of voluntary
cess of New Third Sector organizations, ranging in
organizations (e.g., Red Cross or League of Women
focus from corporate responsibility to prison Voters) and the non-profit corporations (e.g., the Ford
reform. He projects that the emergence of New Foundation).9
Etzioni goes on to cite the value of identifying

Committee concludes the following:
these organizations as third sector not only be-
This emerging partnership is more than a contractual
cause they differ significantly from both dominant
sectors, but also because reference to the ways relationship
in between buyer and seller of services. Funda-
mentally, it offers a new means for developing the innate
which they are different has become so convoluted
capabilities of a political democracy and a private
in the literature. (Characteristic of the difficulty in
enterprise economy into a new politico-economic system
writing about these organizations prior to labeling
capable of managing social and technological change in
them as third sector organizations is a description
the interests of a better social order.... The government-
business relationship is likely to be the central one in the
of the children's television workshop - "legally
last third of the twentieth century.1
CTW is a public rather than a private nonprofit
foundation, the essential difference being that A
it second
is form of cooperative endeavor arises
not only supported by government, but also gets when the government creates third sector organiza-
additional income from the sales of shows."10) tions by fiat. In this case, the government essen-
Etzioni cites as examples of third sector bodies tially
the brings into being a public corporation to
student loan program, the National Aeronautics
perform selected functions. The U.S. Postal Ser-
and Space Administration, the Postal Service,
vice and Amtrak are current examples of third
Amtrak, private universities, voluntary hospitals,
sector organizations created by government fiat.
Comsat, and Fannie Mae. His primary concernFinally,
is there exists a set of public corporations
with the emergence of these organizations that
and have become increasingly "privatized" and
their potential for performing domestic missions indiffer in some respect from the U.S. Postal
thus
the 1970s. He infers that there is much to be Service and Amtrak. COMSAT and the Federal
learned from examination of the third sector, but
National Mortgage Association (Fannie Mae) are
restricts that learning to the service of domestic
well-known examples of privatized third sector
missions. organizations. They are privatized in the sense that
Etzioni recognizes the contributions of volun- their stocks are held by investors who exercise
teer and nonprofit organizations, but he feels the some of the rights shared by stockholders in other
real potential of the third sector lies in that area private corporations (whose stocks, of course, are
where the differences between the public and publicly traded.)1 2
private sectors are becoming blurred through Etzioni's definition of the third sector embraces
cooperative efforts of government and business. In a visible and vital range of organizations virtually
essence, he adopts a "convergent" definition of ignored by Levitt. In essence, Levitt sees the third
the third sector as opposed to Levitt's "divergent" sector composed of "divergent" organizations in
model. Etzioni believes that there are at least three that these organizations set themselves apart from
broad areas of cooperation or convergence that established organizations and either perform sepa-
define the activities of third sector organizations. rate functions or confront other public and private
One area involves the government in partnership organizations. We, on the other hand, agree with
with the private sector. For example, under a Etzioni and feel the most important development
recent law, U.S. doctors are being asked to set up in the third sector is coming as a result of
Professional Standards Review Organizations "convergent" trends in our post-industrial society,
(PSROs) to monitor the care given under federallytrends which lead to cooperative efforts at solving
supported medical programs. This partnership withproblems among all sectors of society. What we see
the medical profession creates a third sector emerging today, which indeed could be another
organization but asks the partners (the doctors inform of the New Third Sector, are a group of
this case) to exercise autonomy over the function organizations - or more correctly, a group of
being prescribed by law. Other examples of this "transorganizations" - which operate in a highly
partnership arrangement are the many cooperativeinterdependent environment, one characterized by
efforts between public and private organizations to Harlan Cleveland as a "web of tensions" which
solve problems associated with urban renewal blurs the traditional distinctions between public
projects. This is perhaps the most rapidly growing and private organizations.1 3 Some have called
arena of third sector activity; so much so, that its these organizations "multi-organizational con-
significance has even been noticed by the well-joins" or "urban enterprises"l4 - in any case,
known business group, the Committee for Eco-they transcend our traditional notions regarding
nomic Development. In a recent report, the organizational types, and particularly our tradi-
tional notions regarding management theory and common, a phenomemon labeled by Andrew
practice. What is needed at this time is a modelGunder Frank as "goal ambiguity." Futhermore,
which reflects the broad range of third sectoraccording to Frank, this goal ambiguity leads to a
activities and also identifies the pragmatic chal- behavioral pattern among managers which he
lenges to managers in these organizations. defines as "conflicting standards of behavior." In
general, these twin phenomena emerge as an
Toward a Model of Third organization itself evolves into new forms. For
Sector Organizations example, when private and public organizations
cooperate to perform common functions, they
Studies of the third sector by Etzioni and must at least superficially interface their respective
Levitt represent the most thorough work to datemanagement systems. Under these circumstances,
on the role and relevance of third sector organiza-according to the Frank model, managers will likely
tions in society. Upon reading these works, onefind themselves operating in an environment of
would be hard pressed to deny the importance ofgoal ambiguity and conflicting standards. In this
the impact of third sector organizations now andcase, the process of interfacing has led to these
in the future. However, from an organizationalnew organizational characteristics. Let us take a
closer look at these two characteristics of third
standpoint, Etzioni and Levitt reveal very little
about the internal workings of third sector organi-sector organizations.1 5
zations and the implications therein for their Studies of both private sector and public sector
public and private counterparts. Our intentionorganizations traditionally assume, explicitly or
here is to complement the works of Levitt and implicitly, well-defined and non-ambiguous goals
Etzioni by exploring third sector organizationsand non-conflicting performance standards among
from the standpoint of organization and admini-managers. However, in third sector organizations,
stration theory, and to discuss the consequences of
goals are characteristically ambiguous, resulting in
our findings for organizations in both the publicconflicting standards of conduct for organizational
and private sector. Our model is suggestive and members. Frank suggests that processes of decision
intended to be exploratory at this time - we do, making in environments of goal ambiguity and
however, feel it begins to capture the uniqueconflicting standards are different from those in
characteristics of third sector organizations. organizations characterized by goal unanimity and
Upon first examination, the third sector is non-conflicting
a standards. His analysis of large-
confused and chaotic organizational arena. As onescale organizations in many socialist countries,
examines what we are here calling third sector which operate much like a third sector organiza-
organizations - Amtrak, the Postal Service, thetion, supports this notion and led us to the
Pennsylvania Railroad, Lockheed Aircraft, the Redstructuring of our analysis of third sector organiza-
Cross, private universities, etc. - there does not tions. We believe that as organizations begin to
appear to be a common denominator. What does converge around new structures, that is, as private
NASA, an organization or "conjoin" created byorganizations become delimited by public de-
Congress because it was believed that privatemands and public policy, we will see the emer-
capital was unavailable or unsuitable for its pur- gence of goal ambiguity as perhaps a major feature
poses, have in common with Lockheed and Penn and challenge to effectiveness of third sector
Central, organizations which have asked the gov-organizations. In order to be more specific about
ernment to step in to rescue their failing enter- these challenges, let us explore some of the likely
prises? Furthermore, what do private universities,consequences of goal ambiguity in organizations of
whose students receive tuition rebates from the the future. The following table addresses many of
state government for attending these universities, these issues.
and whose research efforts are primarily supported In Table 1 we have utilized the conceptual
by federal government grants, have in common framework endorsed by Frank. In this framework,
with a corporation formed by a municipal govern- Frank distinguishes between two "ideal types" of
ment or a conglomerate of real estate developers organization and management systems. The Weber-
to recondition the downtown area of a major ian managerial tradition is one familiar to us all
southwestern metroplex? and essentially characterizes organizations in terms
Upon closer examination there is a character- of the Weberian perspective on bureaucracy. The
istic which most third sector organizations share in conflicting standards model of Frank essentially
characterizes organizations in terms of Frank's

be supportive of one another and therefore the
perspectives on goal ambiguity. As with any idealorganization is expected to commit itself to
types, we by no means suggest that we areachieving most or all of its stated goals. In essence,
describing an actual picture of reality; rather, this
we goal system is a highly rationalized process
utilize this approach in the Weberian tradition which
of members inside the organization internalize
drawing dichotomies for the purpose of identi-
as their primary managerial function.
fying the broad parameters of major trends inIn organizations defined by conflicting stand-
ards, or, in our model, most third sector organiza-
society. With this caveat in mind, let us briefly
discuss the major tenets of this analysis. tions, the goal system is quite different. Here goals
are ambiguous, quite often not compatible with or
supportive of one another. These organizations
Organizational Goal System
define their future more in terms of general
As we can see in the first three cells of our directions or "thrusts." Furthermore, the goal
matrix, there are vast differences in the goal setting process is often highly politicized since
system of the two ideal types. In the Weberian external non-members of the organization exert
model, goals are well-defined and determined pressure on the goal setting process in this environ-
before action and thus become the directions ment. Thus, there is little distinction between
around which the organization will commit resour- means and ends and there can be little effort at
ces. In this environment, all goals are thought to rationalizing the process. In essence, the entire
TABLE 1
TWO CONTRASTING IDEAL TYPES
OF ORGANIZATIONAL ANALYSES
Organizational Nature of Goal Setting Goal Achievement Type of Organiz

Characteristics
haracteristics oals Process Process Rationality
Ideal Type
Weberian P 1. Well-defined, 1. Rational means- 1. Rational means-ends pro- 1. Formal and func-
Mana- u specific, time ends process where cedures. tional
gerial L S goals are enunciated
Analysis C before acting
T
& O 2. Goals are defined 2. Organization commits to 2. Management func-
P R achieving most or all tions and processes
I
R S goals are rationalized
AA 3. Internal members of 3. Little conflict between

T organization set goals official and operative
E goals
Conflicting 1. Ambiguous 1. Flexible process- 1. Ends and means become 1. Informal and sub-
Standards goals-goals goals are defined indistinguishable stantive
Analysis stated in terms during and evenafter

of "thrusts," acting
"domains," 2. Goals are defined and 2. Organization exercises 2. Management func-
"directions."
T discovered choice in deciding which tions and processes
H These may be are individualized
goals to achieve from
I mutually in- time to time and mem- around existential
R
D
compatible ber to member characteristics of the
S
(one goal does situation.
E not support
3. Internal members and 3. Demands of the situa-
C other goals)
T external non-mem- tion will determine if
0 bers are a part of the goals are to be satisfied-
R
goal setting process goal displacement and
replacement characterize
the organization
4. High degree of conflict
between official and op-
erative goals
TABLE 1, continued
Type of Planning Performance Change Organization and

, „ ,. Performance Change
and Policy- Eval
, ,Evaluation n Management
Characteristics
Making System Characteristics
Weberian P
U
1. Formal, rational 1. Performance is a 1. Resistance to change 1. Stable, change resist-
Mana- B analytical, and function of goal leads to intermittent ant, bureaucratic
gerial L S comprehensive achievement and revolutionary organizations
AnalysisC C
E change
& T
0 2. Specific goal- 2. Summative evalua- 2. Organization-domi- 2. Limited open system
P R oriented planning tion procedures nant relationship perspective of man-
RS
RI procedures with environment- agement-little or no
V Organization changes questioning of organi-
A the environment zational legitimacy
E
3. Formal and function-

al superior-subordi-
nate relationships
4. Rationalized manage-
ment procedures-
PPBS, PERT, MBO,
etc.
5. Bureaucratic execu-
tives-planning, goal-
oriented perspectives
Conflicting 1. Contingency, 1. Performance is a 1. Adaptative-coping 1. Changing, polycen-

Standards incremental function of adapting perspective leads to tric, and pluralistic
Analysis planning to and creating evolutionary, con- organizations
change stant, and creative
change
T
H
I
2. General domain, 2. Formative evalua- 2. Dialectical relation-
2. Widespread open
R direction, or tion procedures ship between organi- system perspective
D thrust-oriented zationsand environ- of management-con-
S procedures ment-both the stant questioning of
E organization and the organizational legiti-
C
T environment change macy
0
R
S 3. Performance stan- 3. Consociate superior-
dards may be mutu- subordinate relation-
ally conflicting (the ships-all members of
achievement of one the organization
goal does not lead to exercise high degree
the achievement of of choice
others)
4. Performance is relat- 4. Process-oriented man-

ed to overall success, agement procedures-
not the achievement action research, OD,
of specific goals etc.
5. Existential executives
-information gather-
ers, and feed-back
oriented
In organizations where there is a relatively

goal system is very contextual in that a high degree
of choice in deciding which goals to achieve is goal-setting environment, there is a greater
stable
likelihood that the particular organization is oper-
exercised by many people throughout the organi-
ating under the directions of its official goals.
zation at any one point in time. In this manner
Where
goals are often defined during periods of action, as this environment is not stable, as is the case
for
a response to the demands of a changing situation,most third sector organizations, then there is a
highasdegree of probability of conflict between
not before the action takes place. We can see,
official and operative goals. In this situation, the
did Frank, that third sector management systems
actual performance of the organization will reflect
operate in an environment that virtually precludes
the
the effective use of many of the formal and highlystandards of the operative goals rather than the
official
rationalized management tools and procedures. Or, goals. Again, these operative goals will be
more
as Harold Leavitt says, we are seeing the beginning ambiguous, more situational, and more
of the move "beyond rationality" in managementreflective of individual goals than will their official
behavior today. 6 counterparts. All this is to say that goal ambiguity
One final difference in these two analyses and its systemic managerial implications is perhaps
the primary characteristic of third sector organiza-
should be clarified at this point. Charles Perrow
tions.in
has enunciated a perspective on goal systems
complex organizations which is relevant to our
Planning and Performance Evaluation Systems
discussion of third sector organizations. Perrow
distinguishes between official and operative goals,
In the next three cells of the matrix we project
a distinction which seems to have validity for
an the
extension of the characteristics described
goal system which characterized third sectorabove,
or- particularly as they relate to organizational
ganizations. Official goals are the general purposes
planning and performance evaluation. As before,
of the organization as put forth in the charter,
in the Weberian model, we see that the orientation
annual reports, public statements by key execu-to planning is bounded by formal, rational, and
tives, and authoritative announcements by the
analytically comprehensive systems. This system
supporting political bodies. These goals are vague
will usually be centralized in nature, thus reflec-
and general and are open ended with regard to ting
twoWeber's notions about the inevitability of
important factors which influence the behaviors of
hierarchical systems in bureaucratic organizations.
members in the organization. One, they typically
One would expect to find the planning process in
this
do not set priorities among multiple goals, and, inenvironment geared toward analytically stipu-
the absence of priorities, they have little to lating
say the specific objectives and strategies assoc-
about decisions which must be made among iated with consensus-based goal statements.
alternative ways of achieving official goals. Two, Corresponding to this approach to planning, we
the official goals are silent about the unofficialfind a system of performance evaluation which is
goals pursued by groups and individuals within thedirectly linked with at least the rationale of the
organization. Perrow uses the concept of operative planning system if not with the planning system
goals to describe these two critical features. "Opera-itself. That is, performance evaluation is also a
tive goals designate the ends sought through the rational procedure in which individual perfor-
actual operating policies of the organization. mance is based on one's achievement of specifi-
They tell us what the organization actually iscally stated goals, objectives, strategies, etc. In this
trying to do regardless of what the official goalsenvironment, we often characterize the evaluation
say are the aims."' 7 Operative goals are a productsystem as "summative" as opposed to "forma-
of the decisions, personnel practices, and alliancestive."'8 Summative evaluation systems evaluate
of members of the organization as they go about performance at the end of a specific period of time
their work, and are generally not found in theby summing the total activities of the individual or
formal literature and communication of the organ-program being evaluated. Summative evaluation is
ization about its goal orientations. In third sectora formal process and reflects the bias of the "year
organizations, the operative goals are quite often end evaluation," or the bias which tends to view
in conflict with the official goals, and this in turnevaluation in terms of an activity that is carried on
leads to conflicting standards of performance foronly during designated periods of time. Formative
member behavior. These conflicting standards aresystems, on the other hand, see evaluation as an
most evident at the managerial level. ongoing, almost daily process in which individuals
receive constant feedback on their performance to

of Hegel, this is a "dialectical" relationship in that
be inputted to their continued development.
both the organization and its environment are
Under this system, managers assume thatlinked
the together in an interacting process that
situation of constant change necessitates a contin-
results in change to both parties. Change here is
uous process of evaluation rather than a time-
more constant, more evolutionary, and more
specific process. Formative evaluation processes
supportive of changes in other sectors of society.
should characterize third sector organizations,
As a result of this orientation to change, we can
since their environment is one of constant flux. make a number of generalizations regarding the
Finally, standards of performance under this sys- managerial system in these environments. The
tem, according to Frank, are conflicting in nature Weberian model rests on the assumption of stable
in that behavior toward the achievement of one and somewhat formal managerial procedures.
goal may not be supportive of the achievement of Goal-oriented, task-specific, rational procedures
other goals - it may in fact be conflicting. In the such as PPBS, PERT, MBO, etc., are often found
Weberian model, of course, it is assumed that there in these organizations. Third sector organizations,
is no conflict here and behavior toward the on the other hand, are more oriented toward
achievement of one goal supports the achievement
responsiveness to contingencies and thus reflect a
of other goals. "process" orientation toward management. For
In third sector organizations the evaluationexample, through the use of the applied behavioral
system is linked to a contingency-based, incremen-
sciences, many third sector organizations attempt
tal form of planning. This type of planning system
to create a highly flexible management system
identifies general "thrusts" or "domains" for built around temporary project groups, collegial
organizational directions, assuming that there will
management, etc. The widespread use of organiza-
be a variety of behavioral and program paths tion development, particularly the action research
appropriate for moving the organization in a
model of OD, are examples of this trend and are
desired direction. The planning process in this very popular in the third sector.
environment is far more decentralized and indivi- The Weberian model assumes a limited open
dualized than in the Weberian model and is systems perspective, allowing very little tolerance
characterized as being multi-hierarchical or poly-
for formal or informal examination of the goals
centric in nature. It again reflects the more and the legitimacy of the organization. This is, of
informal management procedures which seemcourse,to a corollary to their response to change,
be associated with organizations that are moving
since change is seen as a challenge to the efficacy
into environments that are more uncertain than and even the legitimacy of the organization. By
those which they once found familiar and predict- contrast, the environment of most third sector
able.
organizations constantly raises the question of
organizational legitimacy. This comes often in the
Differing Management Systems
form of external challenges to the goals of the
Finally, in the last two cells of the matrix, we organization, but also comes in the form of an
summarize some of the differences that character- acutal challenge to the need for the organization
ize the managerial environment in the two models. to survive. At the International Institute of Man-
As regards the general topic of change, we have agement in Berlin, a number of scholars are
known for some time that most bureaucratic beginning to collect data on organizational survival
organizations resist change, preferring to change and death, under the assumption that planned
their environment rather than changing their or- organizational death may become a characteristic
ganization and their organizational responses. This of our post-industrial society. It should be noted
"domineering" relationship with the environment that many of the organizations being studied in
has been a feature of organizational life that has Berlin are third sector organizations.
been the subject of the confrontation tactics Finally, a few words about the managers
associated with Levitt's New Third Sector organi- themselves in their different environments. Weber
zations. In the third sector of Etzioni, we see a himself characterized the nature of the bureaucrat
different pattern emerging. Here, the organization- in his early writings. Above all, the bureaucrat is a
al environment is one of constant change and the very functional person, a person who sees prob-
organization itself assumes the posture that it will lems in terms of goal-oriented solutions. This
change along with its environment. In the language person operates effectively in a hierarchical organi-
zation where functions and performance are de- examples discussed by Leavitt in his book. In
fined by the structural characteristics of the general, these organizations have a relatively
organization and by formalized superior- low degree of goal ambiguity since they more
subordinate relationships where policy making is often than not become what a small group of
somewhat removed from policy implementation. people want them to become. That is, volun-
The third sector counterpart figure to the bureau- tary organizations reflect the values, goals,
crat is difficult to label, but to some degree fits the aspirations, etc., of the people who initially
definition of the "existential executive."'9 The constituted the organization. In this type of
existential executive is a facilitator, an information organization, administrators might be character-
gatherer, a person who thrives on giving and ized as mere "superintendents," since their
receiving feedback. This type of executive operates discretionary authority is often limited to
effectively in unstructured environments where implementing the desires of the people who
policy making and implementation are constantly founded the organization. Small, community
linked in a decentralized organization. A key oriented, voluntary hospitals are perhaps the
theme for the existential executive is enabling best examples of this type of third sector
others throughout the organization to exercise a organization. Certainly charitable organizations
high degree of choice and responsiveness. and service groups would also be examples of
We recognize that we have perhaps harshly this organizational type.
overstated our case in this table by drawing 2. Administrative organizations. When third sector
dichotomies of organization and management be- organizations begin to expand their scope of
havior. Our purpose in drawing the polarities of activity, and, most importantly, survive for a
the Weberian model and the third sector model number of years, they tend to adopt the
was to more clearly illustrate the properties of this characteristics of other bureaucratic organiza-
unique organizational arena. We firmly believe that tions. When this happens, according to Perrow,
third sector organizations are on the horizon of their organizations evolve beyond the control
our future industrial society. Even in those organi- of their founding fathers and thus develop an
zations that might be more traditionally classified administrative apparatus much like service or-
as private or public, we can see many third sector ganizations in the public sector. The administra-
characteristics either within the organizations tors become "bureaucrats" and the skills of
themselves, or certainly within the environment of professional management became far more crit-
these organizations. In this regard the model may ical than they were in the voluntary organiza-
speak effectively to the changes that are confront- tion. These organizations will attempt to opera-
ing organizations of all types as they move beyond tionalize goal-oriented management systems,
their respective traditions. What some of these new and, for a while at least, they find themselves
formats might resemble is important for consider- operating within an environment of goal con-
ation here, and it is to this matter we now turn. sensus. This goal consensus results from the fact
that professional administrators are actually the
Types of Third Sector Organizations power brokers in these organizations, and they
structure and manage the organization in terms
The framework outlined by Charles Perrow in of bureaucratic values and goals. The Farm
his work on goal ambiguity is useful in identifying Bureau Federation, which began as an organiza-
types of third sector organizations. Although tion to lobby for the interest of American
Perrow did not specifically cast his framework in farmers, may now be a good example of this
terms of third sector organizations, we believe type of third sector organization, since it not
that, with a few modifications, his conceptual only responds' to the interests of farmers, but
schema serves as a useful, descriptive framework. also lobbies for other causes in support of the
His schema includes a description of four different investment assets of the organization. Farmers
types of organizations as they reflect varying would probably agree that the Bureau remains
degrees of goal ambiguity. His four types are as an effective lobbying agent for their cause, even
follows:2 0 though it has definitely evolved beyond a mere
1. Voluntary organizations. Voluntary organiza- lobbying organization for the agriculture com-
tions constitute the traditional type of third munity.
sector organization and they are the specific 3. Professional organizations. In professional or-
ganizations we begin to see the emergence of Implications For Management

the problems associated with goal ambiguity
and conflicting standards. In essence, it is aSymposia issues of this journal not only at-
struggle between two cultures-the culture of tempt to describe the present, but they also are
the administrators on the one side versus the designed to "futurize" the research agenda of the
culture of the professionals on the other side. area treated. We therefore offer the following
Administrators tend to emphasize the values of tentative conclusions regarding third sector organi-
functional processes-how to get the job zations as a research agenda for scholars and
done-whereas the professionals tend to empha- practitioners of management, as well as implica-
size the value endemic to their profession. In tions for their current activities.
this environment, administrators are quite often 1. One implication of the emergence of new
thought to be "housekeepers" in that most of forms of third sector activity is, as Harlan
the substantive decisions in the organizations Cleveland has noted, the ever-increasing demands
are made by the professional staff. Arts organi-
on all executives to become "Public Executives."
zations are perhaps the best example of this In speaking about the blurring of public and
type of third sector activity, since we quite private, Cleveland says the following about organi-
often find a rather intense struggle going on zations in this environment:
between the arts director and his staff and the
They will be manned, these new style public-private
corresponding administrative staff of the organ- horizontal systems, by a new breed of men and (increas-
ization. The Public Broadcasting Corporation ingly) women. I call them the Public Executives, people
would be another example of this phenomenon. who manage public responsibilities whether in "public" or
4. Multiple organizations. Multiple orgnizations "private" organizations.21
represent the organizational environment with We agree with Cleveland that this will characterize
the highest degree of goal ambiguity and both the private and the public sectors; we also
conflicting standards. These organizations gen- believe that the convergence of functions and
erally bring together under an umbrella struc- responsibilities in society today will make this
ture many diverse groups, functions, values, phenomenon even more inevitable in third sector
goals, etc. These are the organizations desig- organizations. This raises important questions
nated by Etzioni as the precursors of a new about the education and career development of
kind of third sector activity, and they are the future managers.
ones which formed the analytical basis of 2. One of the lessons gleaned from the work of
Frank's model. They are quite often multi- Frank is what we call the "need for organizational
organizations and thus represent a convergence learning." When organizations are confronted with
of functions and goals, and are thereby con- goal ambiguity, they are usually unable to rely
fronted with the problems of goal ambiguity. upon tradition as a knowledge base for perform-
There are many examples of multiple organiza- ance. Thus, they must begin to build into their
tions, but NASA, the TVA, and Amtrak are processes the capability to learn by seeking infor-
perhaps the best known examples of this type mation and feedback. Private organizations have
of third sector activity. had a small advantage here since they have a
We have now completed a discussion of the market system that often imposes learning upon
types and characteristics of third sector organiza- their organizations. In general, public organiza-
tions. Perhaps we need to bring these two discus- tions have not been as effective as their private
sions together. In Table 1 we briefly described the counterparts in learning from their environment
characteristics of third sector organizations; in the and making the necessary adjustments as a re-
above discussion we then developed a schema sponse to this knowledge. In any case, as organiza-
around the types of third sector organizations. tions become increasingly characterized by goal
This matrix is thus intended to illustrate that the
ambiguity they must improve their skills in seek-
differential degree of "ideal-type" characteristics ing, receiving, and giving information and feed-
found in third sector organizations results in back.
different "types" of third sector organizations as 3. Management in most third sector organiza-
well. Together, these two conceptual models begin tions is becoming what we call "interface" man-
the process of clarifying the boundaries of the agement, or "transorganizational" management. In
arena for third sector organizations. his recent provocative book, Frederick C. Thayer
postulates that transorganizational processes will indeed be a strategy of reform heretofore limited
characterize the most important future environ- by our notions of public and private sectors.
ment of management. As Thayer states, 5. Perhaps as a corollary phenomenon to the
There is nothing mysterious about the word "trans- potentials of transorganizational processes, we can
organizational." It refers to the innumerable occasions see the beginning of the possibility for greater
when individuals from different organizations or sub- organizational pluralism in society. The emergence
organizations work together to solve an existing prob- of the third sector gives us some insight into the
lem.22
process of creating opportunities for institutions
Transorganizational processes, represented perhaps building around complex problems. We begin not
by the NASA example, essentially revolve around with our present institutions, but instead with a
the ability of diverse organizations to cross artifi- problem-we then constitute a "conjoin" or a
cial boundaries and coalesce around commonly "transorganization" in order to effectively cope
shared problems and goals. The traditional notion with this problem. The task for managers is thus
of organizational sovereignty will give way to what one of entrepreneurship of a different type-an
Harlan Cleveland has referred to as "interlocking entrepreneurship designed to build a coalition of
webs of authority and power." Interface manage- organizations all sharing a common goal and
ment will thus be characterized by more horizon- purpose. This may sound very complex and
tal, collegial processes, more interactions across apolitical and therefore unrealistic; we do however
organizational boundaries, and more dialectical find numerous examples of these kinds of efforts
organizational structures-that is, structures which in community development and urban renewal
both change the environment and are in turn projects throughout the country.
themselves changed by the environment. 6. Managers in international environments will
4. Third sector organizations contain within likely become more familiar with third sector
their raison d'etre a reform model that is also problems and organizations than their domestic
transorganizational in nature. It is a cooperative
counterparts. The reason for this is simple-third
model, one based on common approaches to sector organizations in industrial countries as well
problem solving among diverse groups. Take, for as nonindustrial countries outside the United
example, the case of NASA. The key to the States are numerous indeed. In fact, it is quit
successful completion of the NASA Appollo proj- unlikely that many projects today in developmen
ect was in its ability to effectively organize a administration are going to be implemented i
variety of organizations around a specific function. anything other than the third sector. Most devel
In essence, they created a cooperative model of oping countries now simply refuse totally privat
organizing government facilities, third sector or- efforts of development, instead requiring a stron
ganizations, and private corporations around a interface between public and private endeavor
well-defined and commonly shared goal. We cite Likewise, in most industrial countries, publi
this example not to speculate on the technical policy so pervades the economic activities of
implications of NASA's programs for other domes- organizations that we can predict with some
tic problems. Rather, we believe the NASA exam- security that third sector activities will likely
ple illustrates an "organizing" principle which can become far more important in the very near
be used as a model for third sector change and future. In fact, our research to date indicates tha
reform strategies. For instance, what if we applied third sector activities are far more common and
the NASA model to some urgent domestic prob- more advanced in most countries outside the
lem-heroin addiction, for example. Imagine what United States. We expect this trend to continu
an effective attack could made on heroin addiction and we see no reason why its impact will not als
if government funds, hospital staffs, community be felt within this country.
groups, and local businesses got together to tackle 7. We should be very open and cautious about
the problem under a well-coordinated and well- one of the negative potentials associated with thir
financed system. The same holds for pollution sector activities-namely the opportunities fo
control, crime reduction, and consumer protec- corruption, mini-Watergates, conflicts of interes
tion.23 Through transorganizational processes, we etc. To many in this country, when one mention
could, perhaps for the first time, bring to bear the coming together of public and private inter
upon a problem the diverse skills and resources ests, and particularly where organizations ar
housed in a variety of organizations. This would formed around these interests, the response i
visions of cost overrides, unethical contracts,7. Ibid., p. 103.

8. See Amitai Etzioni, "The Third Sector and Domestic
machine politics, conflicts of interest. These prob-
lems are real and they constitute perhaps theMissions," Public Administration Review (July/Au-
gust 1973), pp. 314-327.
legislative agenda for the future as well as the
9. Ibid., p. 315.
agenda for individual ethics and organizational
10. Linda Francke, "The Games People Play on Sesame
social responsibility. Our recent history wouldStreet," New York Magazine (April 5, 1971), pp.
suggest to us that if managers don't begin to26-29.
internalize a set of social ethics based on the 11. This quote was taken from the excellent article by
Frank H. Cassell, "The Politics of Public-Private
common good of all people, then we are likely to Management," in Max S. Wortman, Jr., and Fred
relive these past few years. The enticements of the Luthans (eds.), Emerging Concepts in Management
third sector will indeed be a part of our organiza- (New York: Macmillan Publishing Company, 1975),
tional future-whether or not we utilize this trend pp. 43-58.
12. Etzioni, op. cit., pp. 314-327.
for the benefit of all is likely to depend on the
13. See Harlan Cleveland, The Future Executive (New
values endorsed and espoused by managers in these York: Harper & Row, Publishers, 1972).
organizations. 14. Two articles are of interest here. George S. Dunbar,
8. Finally, we should like to state again that we "The Relation of Local Government Structure to
feel people should study the third sector not Urban Renewal," in Jewel Bellush and Murray Haus-
simply because it represents a new mix of old knecht (eds.), Urban Renewal: People, Politics, and
Planning (Garden City, N.Y.; Anchor Books, 1967),
institutions. More importantly, we need to ex-
pp. 181-201; and Joan Cannon Feast, "The Multi-
amine the environment of third sector organiza- organizational Conjoin as an Administrative Collabo-
tions because the environment that led to the ration: Development of the Concept and Application
emergence of this trend is the very same environ- to the Golden Gateway Redevelopment Project,"
ment for all organizations. We have noted that unpublished doctoral dissertation, Graduate School
of Public and International Affairs, University of
third sector organizations are characterized by goal
Pittsburgh, 1969, pp. 135-138.
ambiguity, conflicting performance standards,
15. Andrew Gunder Frank, "Goal Ambiguity and Con-
value differences, polycentric authority structures, flicting Standards: An Approach to the Study of
dialectical change strategies, etc. We might add, as Organization," Human Organization (Winter
most of our readers will confirm, that most 1958-59), pp. 8-13. The authors are indebted to
Wesley Bjur for bringing Frank's work to their
organizations today are beginning to be character- attention.
ized by these criteria, which speaks to the need for
16. This scenario by Leavitt was presented at a recent
their exploration and examination. For us, the symposium at the School of Business Administration,
third sector provides a unique perspective on these Southern Methodist University, March 19, 1975. It
emergent organizational conditions, and in these will also appear in a forthcoming article to be
published in the California Management Review.
pages we hope to have passed on our enthusiasm
17. See Charles Perrow, "The Analyses of Goals in
for the exploration. Complex Organizations," American Sociological Re-
view (April 1967), pp. 194-208.
Notes
18. See Michael McGill, "Assessing the Effectiveness of
Organization Effectiveness Improvement Programs,"
forthcoming in Organization and Administrative
Sciences.
1. See particularly the work of Constance Smith and 19. See Anders Richter, "The Existentialist Executive,"
Anne Friedman, Voluntary Associations (Cambridge, Public Administrative Review, Vol. 30, No. 4 (July/
Mass.: Harvard University Press, 1972). August 1970), pp. 415-422.
2. Theodore Levitt, The Third Sector: New Tactics for 20. Perrow, op. cit., pp. 194-208.
A Responsive Society (New York: Amacom Press, 21. Cleveland, op. cit., p. 14.
1973), p. 7. 22. See Frederick C. Thayer, An End to Hierarchy! An
3. Ibid., p. 49. End To Competition! (New York: New Viewpoints,
4. Ibid., p. 61 1973), p. 12.
5. Ibid., p. 71. 23. This example was cited in Etzioni, op. cit., pp.
6. Ibid., p. 76. 314-327.
SEPTEMBERJOCTOBER 1975

McGill - Management in The Third Sector - 1975

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Management in the Third Sector

Author(s): Michael E. McGill and Leland M. Wooten

MANAGEMENT IN THE THIRD SECTOR

Michael E. McGill and Leland M. Wooten, Southern Methodist University

As early as Weber's "Ideal Type," observers private

Etzioni goes on to cite the value of identifying

characterizes organizations in terms of Frank's

Organizational Nature of Goal Setting Goal Achievement Type of Organiz

AA 3. Internal members of 3. Little conflict between

Analysis stated in terms during and evenafter

Type of Planning Performance Change Organization and

3. Formal and function-

Conflicting 1. Contingency, 1. Performance is a 1. Adaptative-coping 1. Changing, polycen-

4. Performance is relat- 4. Process-oriented man-

In organizations where there is a relatively

receive constant feedback on their performance to

ganizations we begin to see the emergence of Implications For Management

visions of cost overrides, unethical contracts,7. Ibid., p. 103.

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