Joining forces, fortunes, and futures: Restructuring and adaptation in nonprofit hospice...

Joining Forces, Fortunes,and Futures

Restructuring and Adaptationin Nonprofit Hospice Organizations

Julie Pietroburgo, Stephen P. WernetNonprofit organizations operate in tumultuous times charac-terized by constrained funding, increased competition, andgreater demand for social services. Existing bases of intangibleand tangible assets often are insufficient to fulfill service mis-sions. These organizations appear to be responding by joiningforces and restructuring to better accommodate diminishedresources. Relatively little is known about the reorganizationstrategies being employed.

The study described in this chapter examined the phenome-non of organizational restructuring among nonprofit hospiceorganizations. In particular, it identified the factors that propelnonprofits to pursue restructuring as a strategic solution, theelements that impede such restructuring efforts, and how organi-zations that pursue and implement restructuring differ from thosethat do not. The study found that an organization’s relative place-ment along a continuum of political and economic strength isdeterminative in the outcome of its restructuring efforts. Thosethat take affirmative steps operate from a position of economicstrength and exhibit independence in governance and decisionmaking; those that do not are impeded by internal political factors.

CHANGES PROMPTING NONPROFIT RESTRUCTURING emanate fromthree fronts: economic, competitive, and political. On the eco-nomic front, public funding has become less reliable. Salamon

(1999) notes that after a decade and a half of rapid growth, govern-ment social welfare spending entered a period of retrenchment in thelatter 1970s and the 1980s and only partially rebounded in the 1990s.At the same time, the proportion of financial support providedthrough charitable or philanthropic contributions has declined. Evenagencies that have experienced significant revenue growth havefound their costs rising faster than their revenues (Hammack, 1998).

The competitive environment for nonprofit organizations also ischanging. Born in an era of explicit voids in governmental social ser-vice programs, many charitable organizations historically maintaineda near monopoly in serving a particular need, territory, and populace.

NONPROFIT MANAGEMENT & LEADERSHIP, vol. 15, no. 1, Fall 2004 © Wiley Periodicals, Inc. 117

During the 1980s and 1990s, increased societal demands on charita-ble entities to fulfill the human and social services needs of citizensresulted in a dramatic expansion in the number of nonprofit organi-zations (Salamon, 1999). Nonprofits have come to overlap in ser-vices, territories, and missions, and frequently compete against othersin the nonprofit and for-profit sectors (Boris, 1999).

Finally, the political front also presents new challenges for thesector. Public policy toward nonprofits has been aptly described asconfused, with government simultaneously crafting policies thatpromote and restrain their efforts (Boris, 1999; Weisbrod, 1988).The level and direction of funding support frequently is altered. Thegrowing recognition of costs associated with privatization is prompt-ing government to scrutinize the favored treatment that nonprofitorganizations have received in the past (Ferris and Grady, 1989).Instability in the political arena results in uncertainty, confusion, anddiscontinuity in the provision of nonprofit services.

Faced with these mounting pressures, nonprofit organizationshave sought to make adaptations to better confront contemporarychallenges. These adaptations may involve internal or externalrestructuring of the organization. Internal restructuring impliesrealignments in organizational governance, decision-making struc-tures, and internal resource allocations in order to better addressexternal contingencies (Pfeffer, 1982). Conversely, some organiza-tions may choose to restructure through building new external rela-tionships and aligning with others in order to assure better access tocritical resources (Arsenault, 1998).

Kohm, La Piana, and Gowdy (2000) have conceptualized therange of external restructuring alternatives being employed by non-profits as progressing from collaboration through alliance to inte-gration. Collaboration involves arrangements whereby there is nopermanent organizational commitment, decision making continuesto reside with the individual organizations, and a low degree of for-mality and structure are attendant. Examples are joint fundraising orpublic relations campaigns. Alliance entails formalized arrangementsthat are agreement driven and involve shared decision making for theforeseeable future. They include administrative consolidations (wherespecific functions are mutually supported by the participating orga-nizations) and joint programming (involving the shared provisionand management of common programs and services). Integrationrequires changes to corporate control and structure and creation ofa new organizational entity. Integrations commonly pursued includemergers, the establishment of management service organizations, andparent-subsidiary structures.

Several studies have examined the factors propelling these typesof external restructuring activities. In particular, the motivations, activ-ities, and outcomes of organizations engaged in collaborative andalliance activities have received considerable attention (La Piana, 1994;McCormick, 2001; Arsenault, 1998). Increased competition and the

118 PI E T R O B U R G O, WE R N E T

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desire for greater efficiency are among the factors that others havediscussed as motivations for such restructuring efforts (Kohm, LaPiana, and Gowdy, 2000).

Despite their inherent legal, structural, and logistical complica-tions, integrations (or mergers as they are often described) havegained interest in the literature and in practice (Alexander, 1999).Wernet and Jones (1992) note that mergers among nonprofits aregrowing as a strategy for expansion particularly where resourcescarcity and environmental uncertainty are prevalent concerns.Others have suggested that factors motivating mergers relate to accessto more reliable funding, increased operational efficiency, building ofpolitical strength, expanding of market share, and enhancementof service quality (Schmid, 1995; Singer and Yankey, 1991; Golenskyand DeRuiter, 2002). The availability of resources, the dominantdecision-making style in the organization, and recommendations byfunding bodies also may be key (Golensky and DeRuiter, 2002;Taylor, Austin, and Caputo, 1992). McCormick indicates that merg-ers have the potential to become a favored organizational tactic fornonprofits just as they were for the for-profit sector in the 1980s and1990s (2001).

Theoretical FrameworkAn emerging body of literature has examined strategic managementactivities in nonprofit organizations (Stone, Bigelow, and Crittenden,1999); many researchers debate the merits of selection forces oradaptive strategy in explaining organizational change (Pfeffer, 1981,1982; Shafritz and Ott, 1996; Scott, 1992; Hannan and Carroll, 1992;Hannan and Freeman, 1977). Selection theory suggests that changesin organizations occur because of the operation of the “invisiblehand” of selection forces working on those organizations (Schmid,1992). Among the selection forces that may be crucial in organiza-tional transformation are the degree of market competition, densityof the market niche, and the strength of structural, technical, infor-mation, cultural, political, and other impediments to change. Con-trasted to selection, adaptation theory holds that managers orcoalitions within an organization survey the environment for oppor-tunities and threats, devise strategic responses, and proactively mod-ify organizational structure and practice. Organizations adapt to theenvironment by managers’ developing strategies necessary to acquirevital resources, manage costs, and protect organizational status(Galaskiewicz and Bielefeld, 1998; Schmid, 1992). As an example ofselection forces, a nonprofit organization facing the entry of new,formidable competition in its field may take no action and find itsmarket position diminish to the point of eventual agency demise.Conversely, an adaptive approach would find a similarly situatedorganization crafting marketing or pricing solutions to better meetthe new competitive threat.

JO I N I N G FO R C E S , FO RT U N E S, A N D FU T U R E S 119

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Galaskiewicz and Bielefeld (1998) argue for an integrated theo-retical approach that addresses the complexity of organizations andchange. In many respects, resource dependency and political economyaptly fill an integrative role by acknowledging the dual contributionsof selectivity and adaptation in explaining organizational change andby incorporating elements of both theoretical perspectives.

Resource dependency suggests that while externally constrainedthrough their dependence on the environment for vital resources, orga-nizations will attempt to manage these dependencies through organi-zational activities and adaptive strategies (Pfeffer and Salancik, 1978).Dependent organizations are seen as altering their organizational struc-tures and goals in order to acquire the capital, personnel, clientele, rawmaterials, and social legitimacy needed to survive (Pfeffer, 1982). Polit-ical economy aids in explicating these critical resources and empha-sizes the impact of interactions between economic and political forces,structures, pressures, constraints, and exchange relationships operatingin the internal and external environments. These interactions areregarded as shaping the direction of organizational change. The exter-nal political environment comprises the organization’s network ofstakeholders whereas the internal polity includes the board and man-agement structure, governance policies, and informal decision-makingand influence processes within the organization. The external economyfocuses on the industry structure, the markets, and the degree ofcompetition. Conversely, the internal economy is the internal systemof production processes and procedures employed by the organization(Zald, 1973).

When resource dependency is combined with political economy,understanding of the process of organizational change is enhanced.Figure 1 depicts a nonprofit organization’s political economy as com-prising distinct resource bases operating in the internal and externalenvironments that, at any given time, are in the process of expand-ing or contracting in line with competitive, economic, and politicalforces. The contraction of one resource base often produces oppor-tunities, challenges, and demands within another resource base. Withthe diminution of resources in one base and increased reliance on theresources of another, resource dependencies shift. Managers attemptto manage these dependences, achieve balance in the resource bases,and regain internal control through adaptive strategies. One man-agerial alternative involves linking with other organizations tostabilize dependency patterns.

Yet restructuring is not the ultimate answer or result for all orga-nizations confronting altered environments. Confronted by a varietyof inertial forces in their internal and external environments, someorganizations opt for the status quo. In some cases, this can jeopar-dize organizational survival when resource dependencies deepen andthe external economic and political resource bases contract. In othersituations, organizations can continue to function without negativelong-term implications resulting from inaction.


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With these theoretical perspectives as a foundation, the purposeof this research was to answer two questions. First, how do organi-zations that engage in restructuring differ from those that do not?Through this question the researchers sought to understand the vari-ations existing within the political economy and decision-makingcapacities of organizations that lead to different restructuring out-comes. Second, what are the factors that compel and impede restruc-turing action? The purpose was to examine those organizations thatattempt to partner and to add to the still rather limited body ofknowledge concerning factors having an impact on restructuringactions.

Research DesignThis study employed a hypothetical construct for nonprofit restruc-turing that rests on the interrelationship of three independentvariables: economic resource base, political resource base, anddecision-making capacity. The study also proposed the existence ofone dependent variable—the organizational decision to restructure.Three levels of the dependent variable were suggested:

1. Restructure: the organization considers restructuring and followsthrough to implementation

2. Consideration: the organization considers restructuring butultimately does not take such actions

3. No consideration: the organization never considers restructuring

The research framework suggested that the decision to restruc-ture, or to consider restructuring, is inversely related to the strengthof an organization’s political and economic resource bases. Further,the framework proposed that the decision-making capacity of theorganization would determine whether an organization restructuresor maintains the status quo in the face of diminished political andeconomic resources. Political and economic resource bases were oper-ationalized as weak, moderate, or strong based on the depth ofresources as perceived by the respondents in each political economyquadrant; that is, census and referral levels, sufficiency of staff, vol-unteer and financial resources to meet the demands of the market,levels of donative support, staff stability, community support, and soforth. Decision-making capacity was characterized as adaptive, pas-sive, or reactive based on respondents’ views of past organizationalresponses to external and internal contingencies.

Triangulation entailing the use of multiple data sources was usedin the project (Patton, 1990). This afforded the researcher the oppor-tunity to test for multiple theoretical explanations and to eliminatecompeting explanations of the phenomenon under investigation. Thestudy employed semistructured and open-ended interviews with non-profit executive directors and board presidents. Cross-case analysis


The decision torestructure, or

to considerrestructuring, isinversely relatedto the strength ofan organization’s

political andeconomic

resource bases

offered the advantage of preserving rich detail of the cases while iden-tifying analytic themes from which to build theories (Yin, 1994).Document review was used to obtain specific data further describingthe internal and external environments and decision-making capac-ities of organizations. Such data were retrieved from agency annualreports, newsletters, brochures, financial statements, and other publicdocuments.

Description of SampleNonprofit hospice organizations were selected as the sampling framefor this study. The hospice movement is representative of many ofthe distinctive ideological and structural characteristics of the broadernonprofit sector. Introduced in this country in 1978, hospices arosefrom volunteer origins rooted in a mission of charitable care for thedestitute dying. In 2002, more than 3,200 hospice programs existedthroughout the United States, and over 885,000 terminally ill patientsreceived care from hospice organizations. New hospice programsare being organized at an average rate of 100 to 150 per year (Bolingand Lynn, 1998) with 76 percent functioning as nonprofit entities(National Hospice and Palliative Care Organization [NHPCO],2003). Hospices operate with a novel mix of public funding,volunteer manpower, professional guidance, and community-basedcharitable support.

Like other nonprofit organizations, hospices are confronting amultitude of economic, political, and competitive pressures that giverise to consideration of restructuring. Hospices receive over $1.5 bil-lion dollars a year from Medicare reimbursements (Hoyer, 1998) andrealize, on average, 81 percent of their annual revenues throughMedicare and Medicaid plans (NHPCO, 2003). Hospices are findingtheir financial positions threatened as the federal government seeks toreduce funding for end-of-life care. A 2001 report on the cost of rou-tine home care in 1999 for Medicare hospice patients found that thecost of daily care was 10 to 20% more than Medicare reimbursementlevels (NHPCO, 2003). Simultaneously, the political environment forhospices has grown more complicated and less supportive as the fed-eral government has tightened the criteria for hospice enrollment,requiring greater justification and clinical documentation to supporta patient’s terminal diagnosis. In addition, the government has soughtto change Medicare and Medicaid programs from primarily fee-for-service to managed care reimbursement (Mahoney, 1997; Meier,1997). At the same time, competition between providers of end-of-life care has intensified with both the emergence of national for-profitgroups and the development of hospice units in hospitals, nursinghomes, and home health care companies (Beresford, 1997).

Within the sampling frame, nine nonprofit hospices operating inIllinois, Michigan, or Missouri were selected for study during the periodof January through June 2002. These organizations provided a diversesample relative to demographic and operational characteristics, as well


Hospices arefinding their

financialpositions

threatened asthe federal

government seeksto reduce funding

for end-of-lifecare

as political and economic environments. Four served predominantlyrural areas, one was primarily focused in a suburban area and fourserved combined urban and suburban areas. Four had budget sizes ofless than $1 million and an average daily patient census of twenty-fiveor less, and five had budgets of over $1 million and a census of overtwenty-five. Four of the hospices had been in existence for ten years orless, and five had operated for more than ten years. The regulatory envi-ronments for these hospices ranged from a limited to moderate degreeof oversight activity as exhibited by the frequency of audits and reviews.

Criterion sampling was employed with participating hospicesselected based on their fit within one of three categories. Within thethree hospices selected from each state, one had been involved inrestructuring, one had considered but chose not to restructure, andone had not considered restructuring. In the case of all organizations,the form of restructuring either undertaken or considered involvedintegration with another hospice or home health care entity. Interviewsat each hospice were conducted with the executive directors and boardpresidents. The hospice executive directors were interviewed throughface-to-face meetings at the hospice offices, whereas the board mem-bers were interviewed via telephone contacts. It should be noted that,as with any case study research, the findings are limited by the natureand size of the sample and, in this case, by the type of respondentsinterviewed; that is, those in executive and board positions.

Data AnalysisData analysis was evolving in design and approach. The cases wereanalyzed through an iterative process (Miles and Huberman, 1994).As key patterns emerged, the data were reduced to isolate and illus-trate prominent factors. To aid analysis, data were presented in textand tabular form (Spradley, 1979). Componential analyses involvedthe development of paradigm worksheets and the identification ofdimensions of contrast across cases and data. In this way, differencesand similarities along factors of political economy and decision-making capacity were more easily isolated (Yin, 1994). Through case-oriented comparative methods, causal analysis, interpretive analysis,and concept formation were also applied to the limited number ofcases studied (Ragin, 1987). The goal was to identify the differencesthat were responsible for contradictory restructuring outcomes inparallel cases.

Findings and DiscussionTwo research questions were addressed in this study.

Research Question 1: How Do Organizations ThatRestructure Differ from Those That Do Not?The prevalence of selection forces, adaptive strategies and resourcedependencies in directing organizational response were examined


and three categories of organizations with distinct profiles emerged:the protected, the planners, and the drivers.

The Protected: Organizations That Did Not Consider Restructur-ing. The protected were agencies sustained through a complex webof organizational dependencies that afforded vital financial, opera-tional, and political resources. Compared to organizations that con-sidered or actually did restructure, these organizations operated inthe most resource-dependent position. The protected tended to beorganizations embedded within and protected by a larger health carestructure and were buffered from many external financial pressures.The considerable stability and strength of existing dependencies elim-inated many incentives to restructure. As long as existing depen-dencies were unaltered, their organizational needs were well satisfied.Although their financial statuses were regarded as generally secure,they recognized their critical dependency on the status and supportof their sponsoring organization:

We already know we lose money for the hospital. When wewere doing the 2001 budget review, we looked at patientcosts and they were $162 per day and we are only reim-bursed (by Medicare) at about $95. It is a true commitmenton the part of the hospital to do hospice care. I suppose oneof these days someone will come down on us. But if it hasn’thappened yet, maybe it won’t.

We are a department of the hospital. Our funding is fairlystable, but the financial challenges are great. The fact thatwe’re with the hospital makes us fortunate. But as hospitalrevenues go down, they will have less money to supportprograms like hospice.

Given their significant reliance on other entities and passivity inaddressing change, selection forces in the environment had a crucialbearing on outcomes for these organizations. There was limitedconcern about the adequacy of financial resources. Their economicstability, coupled with their protected position, contributed to theirambivalence toward any restructuring options.

Founding or second-generation executive directors whose focustended to be on daily operations rather than broader, strategic issuesheaded these hospices. Strategic planning was frequently carried outby other components in the larger system. Hospice issues wereaddressed only as necessary by their governing bodies and althoughunderrepresentation of their interests was an occasional concern,the executive directors felt their organizational needs were generallywell accommodated within the governance structures.

All of these organizations were located in rural areas and theircommunity positioning was based on being the “hometownprovider” of end-of-life care. Community support of their efforts was


The protectedtended to be

organizationsembedded withinand protected bya larger healthcare structure

and were bufferedfrom many

external financialpressures

largely through word of mouth, yet they struggled to promote publicand physician awareness of the hospice philosophy of care. Thesehospices viewed competition as either nonexistent or of a civilvariety, and there was no perceived need to partner with others. Infact, partnering was viewed as potentially aligning them with inferiorprograms: “There is no real opportunity for partnering here. AmI going to advertise with another hospice? No. I’m not going to rideon the coattails of another hospice. It can only hurt. People want tobe taken care of by their own. Hospices coming in from 75 milesaway are just not going to fly.”

There was little expectation of self-sufficiency and considerablereliance on the safety net of a sponsoring organization. Two of thehospices had strong financial backing from hospital systems;the other had the support of a public health department. In additionto financial backing, these hospices were able to take advantage ofother personnel, billing, compliance, and legal services of the spon-soring organization at reduced costs, in addition to sharing staffpools. Although stretched in handling the daily demand for services,these hospices were able to readily accept patients that other pro-grams saw as “high cost” because of the secure funding streamsprovided by their sponsoring organizations.

The Planners: Organizations That Considered But Did Not Restruc-ture. Of the three categories of organizations, the planners occupiedthe most tenuous position as a result of limited resources and fewdependencies. These organizations had no established relationshipswith sponsoring organizations from which they could draw ongoingadministrative, financial, or political support. Although restructuringwas considered to bolster their positions, their lack of external eco-nomic and political support hindered efforts to go beyond planningto active pursuit and implementation of a restructured arrangement.Within these organizations, a continuing struggle between adaptivecapacity and environmental constraints was being waged, leading torepeated considerations of the restructuring option without any affir-mative steps.

The planners tended to be hospices with a preference for plan-ning and envisioning their future. In each case, the organization hada formal, active process for identifying and assessing prospectivealternatives. Strong executive leadership was credited with enablingthe organization to “see outside the box.” All of these hospices wereheaded by second-generation (or later) executive directors whowere recognized as capably directing their respective agencies.However, one organization admitted that although it excelled atplanning, it was less successful in the implementation stage.

The planners found ample justification in the external polity andeconomy for restructuring. For these organizations, competition wasrecognized as a genuine threat, and the perceived competition residedin two or three local, comparable programs. Census levels were


The plannerstended to behospices witha preferencefor planning

and envisioningtheir future

constrained by the number of competing programs. Further, thesehospices were concerned with the awareness and standing of theirorganizations in the communities. Community support for these orga-nizations as expressed in donative dollars and volunteer assistance wasseen as insufficient. In addition, these hospices perceived a good dealof public confusion over agency identity, and they frequently strug-gled for recognition within their health care systems. Respondentscomplained of referral sources having conflicting allegiances.

However, despite factors that would impel restructuring, theplanners had not taken any significant steps. Past collaborations hadbeen limited to low-involvement, community education efforts. Inte-grations were attempted but failed. In the case of one organization,a promising merger opportunity was later determined to be an adap-tive strategy holding little financial or operational benefit. In the end,differences in governance philosophies of potential partners andstruggles over visibility and positioning also served as impedimentsto any significant restructuring actions. Board opposition to restruc-turing efforts tended to be strong.

At the core, our board could not find a way to include theother hospice at the level that the other hospice wanted tobe included. Both of our boards were incredibly arrogantabout who we are. At the end of the day, they were sayingthere was no way this other hospice could come in as anequal partner. They viewed the other hospice as not being ofequal status. It was absolutely a governance issue.

We talked very seriously to another hospice about merging.They initiated the discussions. We thought it made sense ifwe had one hospice in town rather than three. Some of theissues that impeded the merger were name and who wouldhave administrative control.

Although the planners maintained their financial viabilitythrough diverse fundraising efforts, all struggled to survive in chang-ing economic and political environments. In one instance, there waslimited support from another organization in the form of sharedbilling and administrative services, but there was an overridingexpectation of hospice self-sufficiency for all the organizations. Suc-cessful grant efforts had enabled some service expansion. However,demand for services was growing, and shorter lengths of stay andreimbursement reductions were continuing concerns.

The Drivers: Organizations That Restructured. The drivers wereadept at crafting independent responses and moving others insupport of their initiatives. Though affiliated with other organiza-tions from which they drew some resources, the drivers consistentlyexhibited a great degree of self-sufficiency and were not reliant upon


others in charting their organizational course. Adaptive capacitieswere generally well developed within these organizations. Whenconfronted with environmental opportunities or threats, the driverswere organizations that had proactively pursued restructuring andviewed such steps as strategies necessary for continued extension oftheir hospice operations and philosophy.

Organizational founders were leading all of these agencies. Thepresence of a strong entrepreneurial leader with a mission of organi-zational growth was seen as critical to success. These leaders articu-lated a predisposition to act rather than intensely reflect onalternative courses of action. As one executive director put it: “Weare proactive in that we have gone out and started these new hospiceprograms. . . . When the existing hospital system bought us, the hos-pital administrator was not keen on my ideas, so I went over his headand took it to the administrator of the main campus and he thoughtit was a great idea.”

The governing bodies were not a source of great support andgenerally were hands-off in their oversight of the agencies. However,board disinterest was not viewed as an impediment to organizationalprogress. The staff was accustomed to taking independent action withlittle board intervention. As long as the organizations were financiallysolvent and complying with regulations, there had been little needfor board involvement. There was an expectation of hospice self-sufficiency, and hospice managers had been innovative in identifyingways to fulfill that expectation.

The drivers tended to be hospices in which competition was seenas pervasive, varied, and presenting an invigorative challenge.Although these organizations depicted the environment as havingbecome “too competitive” and advocated some industry consolida-tion, they did not view competition as a threat. Rather, these organi-zations frequently reached out to competitive agencies and even feltan obligation to help developing programs. Joint education efforts,collaborative planning of long-term care facilities, and coalitions toform consolidated managed care contracts were among recent part-nering initiatives. These organizations also had worked to pass sup-portive legislation and obtain public financing. Community backingcould be seen through the extensive media endorsements and strongdonative support they received.

At the same time, the drivers were not without economic pres-sures. Two were faced with the very real, financial imperative of hav-ing to discontinue specific components of hospice care if they didnot find some economic stability through restructuring:

Why bring these partners in? We believed that we would behealthier as part of a system rather than independent. Oursurvival rested on having a larger program. I don’t think hadwe structured ourselves any other way would we havesurvived having two major referral sources leave.


Though affiliatedwith other

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drew someresources, the

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exhibited a greatdegree of self-sufficiency andwere not reliantupon others incharting theirorganizational

course

The county commission told us “you need to be out on yourown.” The merger that we engaged in was with the healthdepartment. Finances really drove this merger. Had we notmerged we likely wouldn’t be here now.

The third agency viewed restructuring as a way of growing theorganization’s service territory and furthering its charitablepurpose: “I visited a hospice in Quebec in 1974 and from that visitI started to envision all of this. As we’ve added programs over theyears, sometimes the administrators have thought I was crazy, butI didn’t care.”

Yet on the whole, the drivers operated from a stronger economicposition than organizations that only considered such action. Theseorganizations had achieved some measure of independence throughtax dollars, donations, and fundraising. Careful management of finan-cial and operational resources was a high priority in these organiza-tions. The ability to share staff between hospice and home care orbetween different hospice sites was seen as crucial to operationalefficiency.

Rankings of organizations along political economy factors illus-trate the variations in resource bases across restructuring response.Although similarity existed on internal economy factors, the organi-zational profiles of the protected, planners, and drivers differed alongthe other three factors of internal polity, external economy, and exter-nal polity. These differences and the relative positions of organiza-tions within these quadrants were important in explaining theresultant restructuring action.

Internal Economy. All nine organizations indicated they facedchallenges associated with hiring qualified staff and acquiring thetechnology necessary to manage the administrative matters associatedwith delivering end-of-life care. All sought to manage such challengesthrough flexible staff arrangements, assignment of multiple roles topersonnel, and, in some cases, through the use of the broader


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Figure 2. Political Economy Across Restructuring Types

resources available to them through sponsoring organizations.Though all organizations suggested there was room for operationalimprovement, none indicated that weakness in this area significantlythreatened organizational viability.

Internal Polity. For all organizations, the internal polity was seenas relatively strong as exhibited by fervent missions, consistent val-ues across the staff and board, and few issues of power distributionand legitimacy. However, the locus of their strength in this quadrantvaried across organizational types. For the protected, strength camefrom a secure position within a sponsoring system: “We have alwayshad the hospital system behind our hospice, which means that Ihaven’t had to worry about making payroll as have my friends whorun independent, community-based hospices.”

For the planners, strength resided in the propensity of the orga-nization to plan and envision its own future: “Our CEO has beenvery visionary. She got us to start thinking we may have to changewho we are, what we are, and what we look like.”

For the drivers, internal polity strength was based in a biastoward action and in the innovative and independent manner inwhich challenges were approached: “We determined early on thatour success was dependent on some external changes. So we went tothe state and developed a state organization that helped develop staterules and regulations. We went on to help form the national model.”

External Economy. Differences existed in the relative strengths ofthe organizations in the external economy. The drivers and protectedorganizations were strongest on these factors. The drivers wereviewed as strong due to their own fundraising and fee-based efforts.The protected organizations attributed their strength to the financialbacking of a sponsoring organization. Being embedded within a largeroperational system provided a buffer against external economic pres-sures. The planners struggled to achieve stability in referral sourcesand census levels, and those struggles were reflected in more tenu-ous financial positions: “We have had to struggle to be a provider ofchoice. To be a stand-alone agency in this day and age and not havethe automatic referrals from a hospital system is very risky.”

External Polity. Significant differences existed between the orga-nizations along the external polity continuum. The drivers wereproactively involved in the community and industry associations andfrequently assumed leadership positions in end-of-life care initiativesat the local and state levels. The protected enjoyed a strong base ofcommunity support that tended to buffer them from competitivepressures: “We’re local and because we’re local, the patients and fam-ilies want us. Here it is word of mouth and so many connections withfamily and friends which determines our success.”

The planners faced significant competition and had difficulty indifferentiating their services among the field of competitors: “There isa lot of community confusion. Competition can be a good thing butit also has been confusing to people who tend to view all hospices asthe same.”


Research Question 2: What Factors Compel and Impede Restructuring Action?Table 1 explicates the factors that compel and impede restructur-ing. The data suggest there is no one factor that explains adaptation.Rather a complex interaction between several variables determineswhether or not organizations will restructure.

Restructuring Consideration. The search for invariance betweenthese nine cases leads to a conclusion that three factors are key towhether an organization does or does not consider restructuring.First, the degree of governing autonomy, as measured by whether anorganization acts as an independent entity or within a sponsoringorganization, has some bearing on the restructuring decision. Orga-nizations that operate as independent entities are more likely to con-sider restructuring, whereas organizations that exist within a largerstructure are less inclined to do so. Unencumbered by layers of gov-erning authority and responsible for their own organizational fate,the planners and drivers seek their own solutions.

Two other factors also are critical: the degree of competition andthe level of resource dependency. First, the planners and drivers oper-ate in environments where competition between organizations isrobust with impacts realized in referral rates, census levels, charitablecontributions, and other measurable areas. Competition cannot beignored without risking organizational decline. Joining with othersoffers the prospect of expanded resources, enhanced credibility, andadditional referral sources to better address competitive challenges.

Related to this, the level of resource dependency has an impacton whether an organization considers restructuring. Organizationsthat consider restructuring operate in an autonomous manner withfew resource dependencies. In the case of the drivers, this autonomyis regarded as a desirable state enabling them to consider and act onrestructuring opportunities without the obstructions of other stake-holders. For the planners, an independent state is an adverse, albeitinescapable, operational reality that has contributed to some survivaluncertainty. In both cases, these organizations are relatively self-sufficient and draw upon their own internal resources in craftingcoping strategies.

Restructuring Action. Three factors, the strength of existing eco-nomic resources, the entrepreneurial nature of the director, and theavailability of compatible partners, point to why organizations moveforward to actually restructure. First, those that restructured (thedrivers) describe their economic positions as strong and point to theirindependent and diversified revenue streams as the source oftheir stability. They pursue organizational restructuring as a way tofurther solidify their economic bases, and a secure financial positionhas contributed to their attractiveness as a restructuring partner.Second, they are led by founding executive directors who describethemselves and their actions as entrepreneurial. These directors havehad a history of charting an independent course in shaping their


Competitioncannot be ignored

without riskingorganizational

decline

Three factors,the strength of

existing economicresources, the

entrepreneurialnature of the

director, and theavailability

of compatiblepartners, point

to whyorganizationsmove forward

to actuallyrestructure

Tab

le 1

.F

acto

rs C

omp

elli

ng

and

Im

ped

ing

Res

tru

ctu

rin

g

Fac

tors

of C

onsi

dera

tion

Fac

tors

of A

ctio

nIm

pedi

men

ts

Gov

erni

ngD

egre

e of

Res

ourc

eLe

ader

ship

Com

pati

ble

Eco

nom

icD

egre

e of

Boa

rdA

uton

omy

Com

peti

tion

Dep

ende

ncie

sE

xper

ienc

ePa

rtne

rsR

esou

rce

Bas

eIn

volv

emen

t

Th

e P

rote

cted

Hos

pice

ASp

onso

red

Low

Mod

erat

e1s

t ge

ner

atio

nN

oSt

ron

gL

owH

ospi

ce B

Spon

sore

dL

owH

igh

1st

gen

erat

ion

No

Stro

ng

Mod

erat

eH

ospi

ce C

Spon

sore

dL

owH

igh

2nd

gen

erat

ion

No

Stro

ng

Low

Th

e P

lan

ner

sH

ospi

ce D

Inde

pen

den

tH

igh

Low

2nd

gen

erat

ion

Yes

Mod

erat

eH

igh

Hos

pice

EIn

depe

nde

nt

Hig

hL

ow2n

d ge

ner

atio

nN

oW

eak

Hig

hH

ospi

ce F

Spon

sore

dM

oder

ate

Mod

erat

e2n

d ge

ner

atio

nN

oM

oder

ate

Mod

erat

eT

he

Dri

vers

Hos

pice

GIn

depe

nde

nt

Hig

hL

ow1s

t ge

ner

atio

nY

esSt

ron

gL

owH

ospi

ce H

Inde

pen

den

tH

igh

Mod

erat

e1s

t ge

ner

atio

nY

esSt

ron

gM

oder

ate

Hos

pice

IIn

depe

nde

nt

Mod

erat

eL

ow1s

t ge

ner

atio

nY

esSt

ron

gL

ow

operations and the broader hospice industry structure. Restructur-ing is in line with this proactive predisposition. Finally, the drivershave been able to identify compatible partners with complementarymissions, values, and cultures, thereby facilitating collaborative activ-ity. Whether due to their dogged pursuit, the advantage of geographicplacement, or some other factor, the drivers have successfully iden-tified other agencies that share their fundamental philosophies andare willing and able to partner.

Restructuring Impediments. Finally, one factor emerged as a finalimpediment to restructuring actions. This related to the level of boardinvolvement in restructuring decisions and, ultimately, board oppo-sition to such actions. The planners had boards that were activelyinvolved and stood in the way of partnering arrangements. Despiteample reasons for and opportunity to restructure, board recalcitranceoften thwarted the efforts of management.

ConclusionSeveral interesting findings emerged in this study that build uponprevious research in the area of nonprofit strategic management.Although case-oriented studies such as this have recognized limita-tions due to the size and nature of the sample, the findings are use-ful in elucidating the dynamic factors that differentiate organizationsthat join forces from those that do not.

First, this study supports the view that organizations do indeedundergo structural changes deriving from their contact with theirenvironments. However, as suggested by Galaskiewicz and Bielefield(1998), the manner and form of organizational transformation, or inthis case restructuring, cannot be conveniently explained throughone theoretical perspective. The transition from one organizationalstate to another involves a complex interaction between variousfactors operating in the internal and external political and economicenvironments of an organization.

In the cases reviewed in this study, the external environmentsencountered by the three groups—the drivers, the planners, and theprotected—were clearly different. The external environment forthe protected was one of little immediate or substantial threat ofan economic or competitive nature. The protected were bufferedfrom economic pressures, yet they also wielded little power to shapetheir environments. Selection forces were dominant in the externalenvironment of the protected organizations, and the environment(in the form of a sponsoring organization) had the decisive influenceon whether and in what form the organization would continueto exist.

In contrast, the external environments for the planners pre-sented more immediate and proximate economic and resource chal-lenges. Competition was significant, financial backing was tenuous,and stakeholder support was limited. As suggested by resource


dependency theory, the planners sought to stabilize dependency pat-terns by linking with other organizations.

Finally, for the drivers, the external environment also was tur-bulent as exhibited by the entry of new market competitors anddiminished public funding. However, adaptation theory is moredescriptive of the environmental response of the drivers. These orga-nizations relied upon their internal adaptive capacities to proactivelyshape and influence their external environments, thereby securingtheir future existence. They were in a position to either capitalize onrestructuring opportunities that were presented or create many oftheir own. Though dependent on others for valuable resources, theyhad learned to successfully create and manage their resource link-ages in ways that assured growth. Organizations that restructuredhad the propensity to act, innovate, and embrace the new environ-ment of competition. They were able to act upon a strategic visionand positive prospects.

Second, this study confirms and builds on understanding of thefactors in the internal environment of organizations that have bearingon the restructuring action of an organization (Kohm, LaPiana, andGowdy, 2000; Arsenault, 1998; McCormick, 2001; Golenskyand DeRuiter, 2002). If viewed as a continuum from inaction to con-sideration of restructuring to restructuring, various internal factorsare determinant at different points. The hallmarks of organizationsthat do not contemplate restructuring related to their embeddedplacement within a larger system and the general paucity of suitableand useful partners available to them, as well as the depth and secu-rity of their resource dependencies. In addition, these organizationswere distinguished by their focus on daily rather than long-termstrategic matters.

Hallmarks of organizations that consider restructuring are theirself-sufficiency in operations and finances, proclivity to plan, inabil-ity to implement, and ongoing struggle for recognition and fundingsupport. Although those that only considered restructuring had someuseful resource dependencies and capable leaders, they often lackedthe economic and political bases necessary to find, attract, andachieve successful partnerships.

Hallmarks of the organizations that restructure involve the exis-tence of an entrepreneurial leader, the availability of compatible part-ners, and economic stability. The existence of an entrepreneurialleader with a strategic vision enabled these organizations to act inde-pendently and with resolve. Further, partners were accessible, will-ing, and attractive as strategic allies in furthering organizationalmissions and industry positions. In addition, these organizationswere different from the planners and protected in their positions ofeconomic strength. Compared to those that did not restructure,restructuring organizations tended to have larger budgets, morestable fiscal and volunteer resources, stronger referral bases, and


Organizationsthat restructured

had thepropensity to act,

innovate, andembrace the newenvironment of

competition. Theywere able to actupon a strategic

vision andpositive prospects

greater demand for their services. Unlike earlier studies that foundrestructuring to be a survival tactic when resources are diminished(Wernet and Jones, 1992), the experience of these agencies suggeststhat restructuring is an avenue for continued growth. The motivationfor restructuring was not driven by the prospect of organizationaldemise, but rather by an objective of further bolstering the organi-zation’s already solid economic status.

Finally, the study confirmed the findings of earlier research thatimpediments to restructuring arise from internal polity factors(Kohm, La Piana, and Gowdy, 2000). Some organizations had amplereason for and opportunity to restructure, but issues of mission,culture, values, and governing philosophy impeded action. Internalopposition to restructuring trumped all other factors, leaving orga-nizations stalemated, frustrated, and mired in repeated attempts torestructure. Lack of board support for restructuring was a frequenttheme. If key decision makers or resource providers did not supportrestructuring even in the face of sufficient justification, the organi-zational restructuring was unlikely to occur. This failure to endorserestructuring appeared to emanate from an organization’s embeddedor protected status, or from an inability or unwillingness to addressresource insufficiency.

In the end, the import of internal polity and the dynamics of anorganization’s external economy emerged as critical to restructuring.This research points to the need to understand both internal oppo-sition and the dynamics of converting opposition to support as thefocus for future work in this area.

JULIE A. PIETROBURGO is an assistant professor in the Department of Pub-lic Administration and Policy Analysis at Southern Ilinois UniversityEdwardsville where she teaches public and nonprofit budgeting, fundrais-ing, marketing and public relations. Dr. Pietroburgo worked for fifteenyears for Southwestern Bell Corporation in the area of government rela-tions and strategic planning.

STEPHEN P. WERNET is Professor of Social Work and Public Policy Stud-ies at Saint Louis University. He is an educator and researcher in the fieldof nonprofit and social work administration.

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Internal oppositionto restructuring

trumped all otherfactors, leavingorganizationsstalemated,

frustrated, andmired in repeated

attempts torestructure

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