Int. J.

of Human Resource Management 17:10 October 2006 1707 –1725

Strategy and HRM in nonprofit

organizations: evidence from Canada

Kunle Akingbola

Abstract Unlike other sectors, human resources (HR) of nonprofit organizations cannot
be replaced with investment in physical capital. Moreover, the importance of HR has been
further heightened by changes in the operating environment of the sector. Using the Miles
and Snow (1978) strategic typology, this paper explores strategic HRM in public service
nonprofits by examining the importance attached to HRM based on their strategic types.
The results of a survey of 79 nonprofits and 7 case studies suggest that strategic HRM was
not evident in nonprofit organizations. Defenders, analysers, and prospectors were not
different from reactors in the importance they attach to recruitment, compensation and
labour relations. However, training was found to be more important among defender than
prospector nonprofits. The lack of alignment between HRM and strategy highlights the
need for nonprofits to find a way to address their HR capacity challenges and enhance
effectiveness of strategy.

Keywords HRM and strategy; nonprofit organizations; nonprofit HRM; strategy;

nonprofit strategy; strategic change.

Introduction
This paper examines the relationship between strategy and HRM in nonprofit
organizations. Specifically, the paper draws on the Miles and Snow (1978) strategic
typology to explore the importance of HRM based on the strategy of nonprofit
organizations. In other words, is the importance attached to HRM consistent with strategy
or is there an indication of strategic HRM in nonprofit organizations?
Miles and Snow (1978) explained strategy based on how organizations respond and
adapt to three main problems: entrepreneurial, engineering and administrative. These
problems have HRM undertone. Entrepreneurial problem must assess the knowledge and
skills available in the organization and society. In the context of nonprofits, decision
about the services to provide must consider whether employees and volunteers possess
the required competencies. Engineering problem impacts upon job design, which for
nonprofits, include effective mix of employees and volunteers to provide services. With
emphasis on efficiency and reduction of uncertainty, the administrative problem requires
HRM to incorporate practices that enhance employee knowledge, skills and contribution
to the goals of the organization (Rodwell and Theo, 2004). For nonprofits, this means
attaching adequate importance to HRM as an integral part of corporate strategy.
Miles and Snow (1978) proposed four strategic types: defender, analyser, prospector
and reactor. Except for reactor, which Miles and Snow did not consider to be viable in
the long run, each strategic type has matching HRM practices (Miles and Snow, 1984).

Kunle Akingbola, OISE, University of Toronto, 252 Bloor Street West, Toronto, Ontario, M5S
1V6, Canada (e-mail: oakingbola@oise.utoronto.ca).
The International Journal of Human Resource Management
ISSN 0958-5192 print/ISSN 1466-4399 online q 2006 Taylor & Francis
http://www.tandf.co.uk/journals
DOI: 10.1080/09585190600964350
1708 The International Journal of Human Resource Management
Their strategic typology is an appropriate framework for exploring HRM vis-à-vis
strategy in nonprofits because it underscores the importance the three viable strategies
must attach to HRM. The corresponding HRM practices for the Miles and Snow strategic
types are discussed below.
Miles and Snow’s typology is particularly relevant to nonprofits because originally it
was used in a nonprofit hospital setting as part of Snow’s doctoral dissertation. Although
hospitals are outside the scope of this study, their nonprofit context is relevant. In
addition, the typology has been operationalized and extended in other studies (Brown and
Iverson, 2004; Hambrick, 1983: Zajac and Shortell, 1989).
Strategy is gradually becoming a feature of management in nonprofit organizations
(see Brown and Iverson, 2004; ACENVO study cited in Courtney, 2002). More than
ever, nonprofit managers have come to realize that their strategy could improve
performance and ensure the survival of their organizations. Similarly, research literature
on nonprofits is increasingly acknowledging the need for strategy to reflect the unique
operating environment of the sector (Akingbola, 2005; Backman et al., 2000; Courtney,
2002; Stone et al., 1999). However, while some of the factors necessitating the
emergence of strategy such as, the need for efficiency, professional delivery of services, a
diminishing volunteer base, are connected to HRM (Hall et al., 2003; Smith and Lipsky,
1993), the connection between HRM and strategy has not been explored in the literature.
Moreover, except for the recent report series by the Canadian Policy Research
Networks (Hall et al., 2003; McMullen and Schellenberg, 2002; McMullen and
Schellenberg, 2003a, 2003b), which reviewed working conditions and HRM practices of
nonprofit organizations, empirical study of HRM in the sector is scarce. Thus, not much
is known about HRM in nonprofits (Rodwell and Teo, 2004; Rondeau and Wagar, 2001).
In this research, HRM is used to describe the systematic management of interrelated
functions such as recruitment, compensation, labour relations and training with an
overall objective of attaining organizational goals (Belcourt et al., 2002). Similarly,
although this paper recognizes the broader class of nonprofits, it focuses on public sector
nonprofits (Quarter et al., 2003). These are nonprofit organizations that provide services
to the general public rather than members, are not directly controlled by the government,
depend on volunteers to support employees in the provision of services, rely on revenues
from such sources as private donors and government grants/contracts.

HRM and nonprofits

HRM is of utmost importance to nonprofits from three perspectives. First, the personal
services provided by nonprofits mean that these organizations cannot replace employees
with investment in physical capital. In most cases, employees are the services and are the
single most important asset of nonprofits (Barbeito and Bowman, 1998; Hall et al., 2003).
Second, more than in other organizations, employees of nonprofits are attracted and
are motivated by intrinsic factors such as a belief in the organization’s mission,
opportunity to actualize individual values, and participation in decision-making.
(Brandel, 2001; Brown and Yoshioka, 2002; McMullen and Schellenberg, 2003a). These
factors are important in the recruitment, retention and motivation of nonprofit employees
(Brown and Yoshioka, 2002). Third, due to the need for professional delivery of services
and accountability requirements of the new funding environment, employees are
arguably the most critical stakeholder in the strategy of nonprofit organizations.
However, these same factors highlight some of the challenges of HRM in nonprofits.
It could be argued that nonprofit employees are more likely to experience job dissatisfaction
if: (a) they perceive that their organization is not achieving the public good that attracted
 Akingbola: Strategy and HRM in nonprofit organizations 1709
them; (b) the mission is de-emphasized or derailed by other exigencies; (c) the espoused
values are inconsistent with those in use in the organization. The increased accountability
requirement has been identified as a source of stress and job dissatisfaction among child
welfare employees (Howe and McDonald, 2001). Similarly, Peters and Masaoka (2000)
found that disgruntlement among employees, particularly relating to lack of participation in
the decision-making process contributed to increased unionization in nonprofits.
HRM impacts and is impacted by the context within which it exists (Belcourt, and
McBey, 2000). For nonprofit organizations, on one hand, there is a desire to do more of
what they already do. On the other hand, there is pressure to become more effective and
efficient (Barbeito and Bowman, 1998). This has resulted in drastic changes in the
operating environment of public sector nonprofits over the past two decades (Hall and
Banting, 2000; Reed and Howe, 1999; Smith and Lipsky, 1993). Because human
resources are the primary asset of nonprofit organizations (Barbeito and Bowman, 1998),
the need to adapt to change and the pressure to do more is intricately linked to HRM.
From the above, the need for strategy and HRM in nonprofit organizations is more
important than ever. The new operating environment requires nonprofits to recruit and
retain qualified employees, determine and provide required training, and to have
relatively competitive compensation and benefits. These requirements must be appraised
on a continuous basis and must be related to the plans and objectives of the agency
(Pynes, 1997). Specific HRM practices are reviewed below.

Recruitment
Recruitment is crucial for nonprofit organizations. Selected candidates must not only
possess the knowledge and skills required in the positions for which they are recruited,
but they must also buy into the mission of the nonprofit. Although it is generally not a
condition of employment, the mission of nonprofits plays a significant role in attracting
and retaining employees (Brown and Yoshioka, 2002). Recruitment is, therefore, a major
HRM and strategic function for nonprofits.
Since nonprofits offer a relatively different workplace, some of the competencies they
require to meet the challenges of their operating environment are unique to the sector.
Nonprofit managers have to focus not only on basic management functions such as
budgeting, planning, decision-making, supervision and leadership, but they must also learn
to work with volunteer board members, advocacy groups and other stakeholders. Herman
and Heimovics (1989) identified the following competencies as essential for tackling the
critical events occurring in nonprofit organizations: developing new programmes;
collaborating; fundraising; establishing when programmes decline; managing; lobbying;
responding to employee actions; relating with government officials; leading accreditation
efforts; interacting with the board and developing and recognizing employees.
The increased dependence of public sector nonprofits on government funding and the
change from grants to contracts (or project-based) funding (Akingbola, 2004; Smith and
Lipsky, 1993), impacts recruitment and selection. McMullen and Schellenberg (2003a)
reported that the percentage of staff that was recruited both on temporary contracts and
part-time in 1999 was significantly higher in the nonprofit than the for-profit sector, a
trend they attribute to funding pressures. The rapid turnover of staff makes it difficult to
integrate recruitment with other functions such as compensation.

Compensation
Barbeito and Bowman (1998) identified three components of reward systems: economic,
social and psychological. They posited that social and psychological factors are powerful
1710 The International Journal of Human Resource Management
motivators that nonprofits could explore to enhance their competitive advantage.
Intrinsic reward is the core socio-psychological return employees derive from working in
a particular type of organization. Studies have pointed to the importance of intrinsic
reward in the compensation of nonprofit employees (Brown and Yoshioka, 2002:
McMullen and Schellenberg, 2003a: Pynes, 1997). Since nonprofit employees tend to
perceive their work as an opportunity to serve the community, help people in need or
contribute to a worthy cause, they are more likely to be value oriented and be attracted to
the sector because of mission and values (Brown and Yoshioka, 2002: McMullen and
Schellenberg, 2003a). In other words, they are attracted and motivated by the intrinsic
reward offered by nonprofits. This factor underscores the importance of intrinsic reward
as an essential component of nonprofit HRM strategy.
However, compensation generally is low in nonprofit organizations (Barbeito and
Bowman, 1998; Brandel, 2001; Handy and Katz, 1998; McMullen and Schellenberg, 2003a).
McMullen and Schellenberg reported that the average earnings of managerial, professional
and technical/trades categories of nonprofit employees are lower than those of their
comparative categories in the other sectors. Barbeito and Bowman (1998) explained that the
difference in salary increases as the position moves from the clerical to the managerial level.
At the managerial/ professional level, Barbeito and Bowman reported that nonprofits pay
about half of what other sectors pay (also see McMullen and Schellenberg, 2003a).
The comparatively low pay in nonprofit organizations is a major HRM and strategy
concern. Although Handy and Katz (1998) suggest that nonprofits offer low pay in order
to attract managers who are committed to the mission, the low pay impacts upon the
development and retention of competencies required to provide essential services
(O’Connell, 1992). The adverse effect of low pay extends beyond turnover of current
employees; nonprofits are not able to attract qualified candidates for vacant positions
(McMullen and Schellenberg, 2003a).
Compared to other organizations, nonprofits have different compensation challenges.
But the need to highlight its importance to strategy is not different from that found in
other sectors of the economy.

Training
Training impacts the performance of organizations (Betcherman et al., 1997; Saks et al.,
2000). For most nonprofits, training is engrained in the very process of actualizing the
values and mission they set out to achieve. Raising awareness, the starting point of most
nonprofit organizations, involves training. Training thus impacts the link between
employee aspirations and the mission of nonprofits (Pynes, 1997). Even loosely
organized nonprofits often use training to get their message across. As a result, mission-
based training is often the only formal HR function in these organizations. Moreover,
compared to other sectors, managers in nonprofits have a positive attitude towards
training (Beattie et al., 1994 cited in Beattie, 2002).
Beyond the basic requirement for training in nonprofits, other factors have
accentuated its importance. Foremost among these factors is the change that nonprofit
organizations have been experiencing over the past two decades, particularly, the need to
be adaptive, innovative and strategic in this era of government contract funding (Reed
and Howe, 1999; Smith and Lipsky, 1993). Similar to for-profit organizations, it is this
adaptability that makes nonprofits competitive in the funding process. From a HRM
perspective, the organization inevitably has to embrace continuous learning. Innovation
means change, and change brings new skills requirements which, in turn, underscore the
importance of a training and a learning culture (McMullen and Schellenberg, 2003b).
 Akingbola: Strategy and HRM in nonprofit organizations 1711
The challenge of training for nonprofit organizations remains constant. According to
Osborne (1996, cited in Beattie, 2002), the following are some of the challenges faced by
the nonprofit sector with respect to HRD (training): (a) the changing environment and the
context of nonprofit organizations; (b) the changing pattern of social and community
needs; (c) the diversity and distinctiveness of the nonprofit sector; (d) the rise of the
contract culture and managerialism; (e) the importance of equal-opportunity and anti-
discriminatory practices. Training is essential to the effectiveness and survival of nonprofit
organizations.

Labour relations
Where employees are unionized or covered by a collective agreement, labour relations is
an integral part of strategy and HRM in nonprofits. Bearing in mind that nonprofits tend to
be value driven and attract employees who have identified with their values (Brown and
Yoshioka, 2002; Handy and Katz, 1998), unionization may be an advantage or a
disadvantage.
Unfortunately, research is scarce on labour relations in nonprofit organizations. The
available literature tends to focus on hospitals and other quasi-government agencies such
as schools, colleges and universities, which McMullen and Schellenberg (2002) termed
Quango. However, there are indications that unionization may be growing in the
nonprofit sector. A recent report based on the Statistics Canada’s 1999 Workplace and
Employee Survey (WES), indicates that 40 per cent of employees in nonprofit
organizations were covered by a collective agreement (McMullen and Brisbois, 2003).
Together, the challenges in recruitment, compensation, training and labour relations
and the changing operating environment of nonprofits stress the need to examine the
importance nonprofits attach to HRM based on their strategy. As noted above, if
nonprofits intend to attract, retain and motivate the highly skilled professionals required
to facilitate adaptation to the continuously changing environment, they must create an
effective strategy aligned with HRM practices.

Strategy and human resource management

Irrespective of their theoretical perspective, most authors agree that HRM must be
aligned with the strategy of organizations (Al-Arkoubi and McCourt, 2004). Beyond the
‘know-how’ literature (Courtney, 2002), studies have posited that HRM must be aligned
with the strategy of the organization (Lengnick-Hall and Lengnick-Hall, 1988; Miles and
Snow, 1984; Schuler, 1992; Schuler and Jackson, 1987). The second feature of this
strategic HRM argument is that there is a positive relationship between strategic HRM
and organizational performance (Huselid, 1995; Rodwell and Teo, 2004). This position
complements the literature that suggests that HR is one of the few sources (others are
organizational learning and culture) of competitive advantage, which cannot be imitated
(Pfeffer, 1994; Senge, 1990). As a result, HRM is an essential strategy for competitive
advantage (Rutherford et al., 2003).
Similarly, other authors have suggested that since employees implement strategy, the
outcome of strategy depends significantly upon the behaviours, views, feelings and
attitudes of these individuals (Becker et al., 2001; Burton et al., 2004). Lengnick-Hall
and Lengnick-Hall (1988) argued that, if an organization adopts strategic HRM – the
alignment of HRM to organizational strategy – it means that strategic outcomes and
effectiveness depend significantly on HRM.
Schuler and Jackson (1987) explored the link between competitive strategies and HRM
practices. They suggested that there are three major strategies organizations can use to
1712 The International Journal of Human Resource Management
gain competitive advantages: (1) innovation strategy; (2) quality enhancement strategy;
and (3) cost-reduction strategy. They concluded that firms seeking competitive advantage
could enhance effectiveness by linking HRM with the chosen competitive strategy.
In terms of strategic change, it is essential that employees embrace change. When
employees fail to buy into or identify with a justification for change, it is very likely that
they will resist or be lukewarm towards the change (Connell and Waring, 2002). In this
context, the role of HRM is to ensure that the internal environment of the organization is
amenable to change and learning (Truss et al., 2002). Strategic change initiatives must,
therefore, address the challenges of the external environment as well as the internal
climate (Burton et al., 2004; Purcell, 1999); that is, the HRM of the organization. Thus, it
is expected that change in strategy should simultaneously be undertaken with change in
HRM (Schuler and Jackson, 1987).

Miles and Snow

Miles and Snow (1984) offers a distinct approach for assessing the relationship between
HRM and strategy (Ogbonna and Whipp, 1999). Similar to other researchers, they posit
that HRM is an integral part of strategy. However, Miles and Snow (1984) demonstrate
the link between the two by illustrating the HRM system that fits three of their four
strategic types. The four types of strategy proposed by Miles and Snow (1978) are:
(1) defenders, organizations with narrow product strategy; (2) analysers, organizations
that operate in two-market domains, one domain is relatively stable and the other is
changing; (3) prospectors, organizations that continuously explore market opportunities
and experiment with different response to change; and (4) reactors, organizations that
rarely change their strategy except when they are forced to.
Defenders embrace a ‘building human resources’ strategy with emphasis on internal
development of HR, promotion, recruitment mainly at entry level, extensive training and
compensation based on organizational hierarchy. Prospectors emphasize ‘acquisition
human resources’ and continuously acquire and redeploy HR at all levels. Formal
training is limited, however HR are redeployed to different management and technical
assignment to enable skill development and flexible assignment on an as-needed basis.
Analysers combine the acquisition and building of human resources strategies of
defenders and prospectors. Recruitment and training are mixed because they develop and
acquire skills, but compensation is similar to that of defenders (p. 48).
In nonprofits, prospectors, analysers and defenders will likely choose HRM practices to
be an important part of their strategy. This is because their HRM will be aligned with their
respective strategies (Miles and Snow, 1984). Defender nonprofits would ensure that their
HRM focus includes retention, reward for quality and efficiency, training and internal career
development, characteristics that reflect their emphasis on efficiency of current services.
In prospector nonprofits, the HRM focus would consist of constant attraction,
development and redeployment of human resources. Similar to their strategy, there will
be rapid turnover in human resources. Analyser nonprofits will adopt HRM practices
similar to defender nonprofits in the stable service domain. HRM in the changing funding
domain would consist of flexible team design, skill development, extensive training and
mixed recruitment and selection techniques (Miles and Snow, 1984). Reactor nonprofits,
by contrast, will be inconsistent in their strategy. They will ascribe a lower level of
importance to HRM practices as part of their strategy and future direction.
Miles and Snow (1978) posit that prospectors, analyzers and defenders are equally
viable in the same environment. Thus, it is expected that the level of importance of HRM
functions such as recruitment, training, compensation and labour relations would be
 Akingbola: Strategy and HRM in nonprofit organizations 1713
consistent with the strategic types of nonprofits. Similarly, one would expect that when
a nonprofit organization changes from one strategic type to the other, for example from
defender to analyser, at a minimum, some of the HRM practices will change to reflect the
new strategy. Thus, we propose the following:
Proposition 1: The level of importance of (a) recruitment; (b) compensation; (c) training; and
(d) labour relations; will be consistent with strategy, that is, high or moderate for
defender, analyser and prospector nonprofits.

Proposition 2: Nonprofits will adjust their recruitment, staffing and training practices
simultaneously with a change in strategic type.

The study
The study combines both quantitative and qualitative methods using an equivalent status
design (Creswell, 1998). It is expected that the confluence of methods would enhance our
understanding of the research propositions (Tashakkori and Teddlie, 1998). Due to the
small size of most nonprofits in Canada (McMullen and Schellenberg, 2002), HRM is
either rudimentary or nonexistent in these organizations. In fact, it has been suggested
that smaller organizations tend not to have a written contract of employment (Lowe and
Schellenberg, 2001). This explains the large number of missing data and the use of
simple rather than advance measures and statistical tests. The study aims to understand
the level of importance of HRM in nonprofits through their strategy.

Data
Organizational participants in this study were drawn from a sample of nonprofits in one
of five Canadian provinces – Ontario, British Columbia, Alberta, Nova Scotia and
Quebec based on the criteria of the study: (a) two or more employees; (b) at least two
years of operations; (c) minimum budget of $150,000; (d) human services for the general
public; and (e) have some form of human resource management function. Using
purposive sampling (Rudestam and Newton, 2001; Sommer and Sommer, 1997),
executive directors were selected as individual participants because they are most likely
to have information about HRM and knowledge of the operating environment. An initial
502 nonprofits were contacted, however, 270 were confirmed as participants based on
additional information on human resource management function In total, 148 completed
surveys were returned, 121 in English and 27 in French. Due to the significant number
of missing data and blank responses in the returned surveys, 69 surveys were deleted.
A total of 791 surveys were adequately completed and analysed.
The qualitative research design consisted of seven case studies of nonprofit
organizations to explore the research questions in greater depth (Sommer and Sommer,
1997) Specifically, the case studies enhanced the nuances of the research questions
based on the individual and unique experience of the nonprofits (Sommer and Sommer,
1997).

Measures
Strategy Adapted from Zajac and Shortell (1989), the measure asks executive directors
to identify (on a seven-point scale) the strategic dimensions of their nonprofit
organizations five or more years ago (see Appendix 1). Points 1 and 2 on the scale were
classified a defenders; 3, 4 and 5 as analysers; and 6 and 7 as prospectors. D category
represented reactors. These are organizations that did not fit on the scale and thus lack a
1714 The International Journal of Human Resource Management
consistent strategy (Zajac and Shortell, 1989). The same scale was used to measure
current strategic dimensions. As noted by Zajac and Shortell (1989), their hospital
classification device is similar to the original instrument developed by Miles and Snow
(1978).

Validation of strategy Consistent with Zajac and Shortell (1989), the self-reported data
on strategy provided by the executive directors were validated by examining the number
of new diversified services introduced over the period. It was expected that prospectors
would introduce the highest number of services followed by analysers, with defenders
introducing the lowest number. The test confirmed our expectation F (2, 69) ¼ 3.29,
p , .05, however, defenders introduced more services than analysers. While this does
not invalidate the Miles and Snow (1978) typology, it could be an indication of the
challenges of applying business models to fit the unique operating environment of
nonprofits (Akingbola, 2005).

Level of development and importance of HRM The measure (Barrette and Carrière,
2003) asked executive directors to rate how developed and important HRM functions are
to their organization’s long-term success (on a six-point scale), from 1 (this is not one of
our activities) to 6 (this is a highly structured and developed activity in our organization:
substantial resources are allocated, and major financial investments are made). The
specific HRM functions examined are: recruitment; compensation; training and labour
relations.

Change in HRM For this study, this measure focuses on the adjustment in recruitment
practices, staffing and training. Respondents were asked whether they had changed/
modified their recruitment practices (Yes, No and Not Applicable), level of temporary
contract staffing (Unchanged, Increase and Decrease), and type of training offered to
employees (Yes, No).

Control variable The control variable for the study was size, defined as the number of
employees in nonprofit organizations. Since most nonprofits are small (McMullen and
Schellenberg, 2002), size is an important organizational factor that could affect HRM.
The ANOVA revealed a non-significant result, F (3, 75) ¼ .50, p ¼ .68. The result of the
one-way ANOVA indicates that size (number of employees) is not different based on the
strategic types of nonprofits. The relationship between size and strategic types as
examined by h́2, was weak, with strategic types accounting for 2 per cent of the
dependent variable.

Data analysis An analysis of variance (ANOVA) was conducted to test proposition 1,

proposition 2 was examined using a Chi-square test.
The qualitative data from the in-depth interviews and obtained documents were
analysed extensively to elicit themes that were specific to the research propositions.
The existence of documents on strategy and the annual report enhanced the examination
of the research propositions.

Results
Although reactors are considered to have inconsistent strategy (Hambrick, 1983; Miles
and Snow, 1984), organizations that adopt this strategy are included in the analysis
because of the unique operating environment of nonprofits. For example, reactor strategy
 Akingbola: Strategy and HRM in nonprofit organizations 1715
could be ideal for nonprofits with stable and secure funding (see Akingbola, 2005). The
quantitative and qualitative data are examined for each proposition.

Quantitative results
Proposition 1 The first proposition examined the level of importance of recruitment,
compensation, training and labour relations in terms of the strategy of nonprofits. The
ANOVA indicate that there was no significant difference in the level of importance of:
(a) recruitment F (3, 74) ¼ 1.30, p ¼ .28; (b) compensation F (3, 75) ¼ 1.98, p ¼ .13;
and (d) labour relations F (3, 73) ¼ .78, p ¼ .51; among nonprofits based on their
strategic types. In other words, these HRM practices were not more important among
prospectors than analysers, defenders or reactors.
However, the ANOVA on the importance of (c) training suggest that there was
significant difference among nonprofits in terms of their strategic types F (3, 75) ¼ 4.48,
p , .01. The relationship between strategic types and training, as examined by ?2, was
strong, with strategic types accounting for 16 per cent of the dependent variable. The
Scheffe˛ post-test indicates that there was a significant difference between the means of
defender and prospector nonprofits, but no significant difference between either of the
two types and analyser or reactor nonprofits. Defender nonprofits showed a greater
importance of training in comparison to prospector. The means and standard deviations
for the four strategic types are reported in Table 1.

Proposition 2 The second proposition asks whether nonprofits will adjust their
recruitment, staffing and training practices simultaneously with a change in strategy.
A Chi-square test of independence was conducted to examine the relationship between
change in strategic types and change in recruitment, use of temporary staff, and training.

. Change in recruitment and change in strategic types: The two variables, change in
strategic types and change in recruitment practices each had two levels (Yes and No)
and were found not to be significantly related, Pearson x2 (1, N ¼ 71) ¼ .34, p ¼ .56.
The results suggest that changes in strategic types and change in recruitment are
independent.
. Use of temporary staff and change in strategic types: The two variables were change
in strategic types with two levels (Yes and No) and use of temporary contract staff
also with two levels (Increase and Decreased/Unchanged). They were not
significantly related, Pearson x2 (1, N ¼ 70) ¼ .17, p ¼ .68. The results suggest
that change in strategic types and use of temporary staff are independent.

Table 1 Description of strategic types and HR

Labour
Recruitment Compensation relations Training

M SD M SD M SD M SD
Defender 3.70 1.34 3.30 1.64 3.56 1.81 3.10 1.52
Analyser 4.41 1.29 4.21 1.28 4.00 1.45 4.06 1.26
Prospector 4.71 1.40 4.24 1.56 3.81 1.72 4.76 2.15
Reactor 4.20 0.84 5.00 0.71 4.80 0.45 5.00 0.71
TOTAL N 78 79 79 79
1716 The International Journal of Human Resource Management
. Change in training and change in strategic types: The two variables, change in
strategy and change in the type of training nonprofits offer to employees each had
two levels (Yes and No). The variables were not significantly related, Pearson x2
(1, N ¼ 70) ¼ 1.25, p ¼ .26. The results suggest that changes in strategic types and
change in the type of training nonprofits offer to employees are independent.

Qualitative results
As indicated above, interviews were undertaken and relevant documents were reviewed
to examine the propositions. A breakdown of the enterprises in the study is shown in
Table 2.

Proposition 1 HRM was relatively important among the case studies, but there was no
major difference based on their strategic type. Among the five nonprofits that identified
their strategic type as analyzer, two did not have a designated HR staff and one of the two
did not have any apparent HR strategy.
Counselling’s HRM focus was performance management. In an effort to address the
caseload issue raised by the main funder (government), the agency developed service
standards, which meant that the performance of case workers was being evaluated
constantly, feedback was provided and discrepancies were promptly addressed. The
executive director explained that: ‘I don’t think that there will be a designated HR staff in
the future because the agency is small and money is hard to come by. I’m the only
manager in the agency.’
Home shares the responsibilities for day-to-day HR functions among its directors and
uses the expertise of volunteer board members, who have background in the field. The
agency sometimes uses the services of external consultants when confronted with
complicated issues. The director explained that Home operates under a collective
agreement with Canadian Union of Public Employees (CUPE), the union that represents
the bargaining unit in the agency. He noted that compensation is covered in the collective
agreement and the direct supervisor performs the recruitment function. Although Home
provides some training to employees, the director acknowledged that the agency does not
spend a lot of money on training. Training is provided mainly when government has
designated funding for it. Home did not have any apparent HR strategy.

Table 2 Descriptions of case study participants

Nonprofit Established Revenue % of revenue Number Union/ CA
2003 ($) from of staff status
government
Counselling 1983 370,000 100 9 Unionized
Community 1969 12 million 80 200 þ Partly
unionized
Youth 1972 2 million ,50 50 None
Home 1982 2.5 million .80 70 Partly
unionized
Disabilities 1950 16 million 85 399 Unionized
Neighbourhood 1985 2.8 million 30 435 (10 regular, None
425 contract)
Relief 1896 5 million 25 54 None
 Akingbola: Strategy and HRM in nonprofit organizations 1717
Training, performance evaluation and recruitment are highly important HR functions at
Community, the third analyser nonprofit. The executive director explained that the agency
employs a coordinator of HR who supports managers in the recruitment and selection
process. An annual training calendar and the process for applying to attend training sessions
are outlined for employees. There is also a performance evaluation process. According to the
executive director, salaries are tied strictly to a government contract. An important aspect of
the strategic plan of the agency is to hire a HR manager within four years.
HRM was important and holds a central place in the strategy of Disabilities and Relief,
the other analyser nonprofits. Disabilities has a designated HR director and
administrative assistant who support management and staff in labour relations; staffing;
compensation; employee benefits; pension; pay equity; (HRIS); attendance and leave
records; employee service recognition and the development of relevant policies and
procedures. In the fiscal year 2002/2003, one of the accomplishments of the HR
department was the completion of a project on interview questions and selection
assessment for prospective candidates. In the strategic planning document, specific HR
challenges were identified as holding the organization back. These challenges include
decision-making at the supervisory and staff level, the need for managers to become
coaches and the fact that supervisors are in the bargaining unit.
Similar to Disabilities, Relief has a designated HR department with a manager, two
coordinators and one administrative assistant. With the added support of the HR
departments at the provincial and national offices, the department provides support to
managers and staff of the agency in recruitment and selection, compensation, employee
relations, training, volunteer resources and health and safety. In terms of strategy, HRM
especially training, performance management and revision of policies and procedures
were aligned. The five analyser nonprofits are not consistent in the importance attached
to recruitment, compensation and labour relations; however, all of the organizations
emphasize the importance of training.
Although Youth identified the defender type as its strategy, HRM was central in the
agency’s strategic initiative. The manager of learning and HR provided support to
management and staff and had responsibility for developing a strategic HR plan. Other
areas of responsibility of the manager include: recruitment and selection; policies and
procedures; training; HRIS; and organizational learning process. A career inventory was
created to be: ‘an important HR planning tool, to look at aggregate strengths and
weaknesses of the HR base, and develop strategic goals for recruitment/development’.
Stressing the level of importance of HRM, the executive director indicated that the
agency planned to establish a fully-fledge human resources department.
One HRM activity apparent in the prospector strategy of Neighborhood was that
almost all the staff are on short-term contracts. The agency did not have a designated HR
staff or department. According to the executive director, because of the need to generate
revenue, the compensation function is important, training is lacking and recruitment has
focused on attracting candidates with professional education.
Together, the case studies suggest that the level of importance of training,
compensation, recruitment and labour relations in the nonprofits were not significantly
different based on their strategic types. Case studies with designated HR staff or
departments generally had more developed recruitment, training, compensation and
highlighted HRM in their strategy. However, training seems to be important in the four
analysers and one defender nonprofit.

Proposition 2 All the nonprofits experienced at least some changes in their HRM
practices. Youth, which changed its strategy from analyser to defender, undertook changes in
1718 The International Journal of Human Resource Management
HRM as part of the strategic planning process. The executive director explained that
the HRM changes were due to the strategic direction, expected growth of the agency,
community needs and government funding. She noted that the change includes emphasis on
recruitment and retention, annual salary and performance review, increased skills and shared
learning among nonprofits. The recruitment and management change role of HRM in
the organization were particularly important to the implementation of the strategic plan. The
new career inventory was developed to identify training needs, serve as HR planning tool,
and assess HR competencies and recruitment needs. The executive director noted that the
agency plans to establish a human resource department.
HRM changes at Community consisted of the development of a displacement process
for non-union employees and the updating of policies. The executive director (ED)
explained that the changes resulted from cuts in programme funding after the change in
provincial government:

We knew that due to changes in government there were going to be programme cuts and we are
an agency where we have many employees who have been around 10 years or more and
employees who are valued ... We developed a committee with the board and we looked at ways
that we could ensure people whose positions were cut could find other jobs with the agency. So,
we developed a kind of bumping. Anyone whose position is cut can bump into another position
of an employee who has been around 2 years or less, and it has to be a position that they are
qualified for.
She noted that the displacement protocol was developed based on feedback from the
survey of employees, but added that the policy for non-union employees was similar to
the collective agreement.
The change in HRM at Relief was part of the overall management change to address the
challenges resulting from the national crisis. The executive director outlined the HRM
change as: (1) the increase in benefits available to employees; (2) increase in training and
development for employee retention; (3) revised job descriptions to be more generic; (4)
adoption of team approach in employee relations; and (5) the introduction of a
competency-based performance evaluation system. He acknowledged that the agency has
not been successful in increasing compensation across the country. Reliefs’ strategy
changed from defender to analyser, thus the change in HRM appears to be consistent with
change in strategy.
Counselling also experienced changes in HRM. According to the executive director, the
agency recognized the need for the staff to reflect the community they serve and decided to
actively implement a diversity policy. Also, the agency introduced a performance appraisal
system, which was an integral part of the accountability measure designed to address the
caseload concern raised by the ministry. The ED explained that prior to the change from a
collective to a hierarchical structure: ‘performance appraisals, supervision didn’t take place.
So you don’t have to meet the staff every 3 weeks, you are not accountable to anyone.’
The ED further explained that benefits have been increased because the agency could
not afford to increase the salary of employees. She cited the fact that Counselling and
the entire community mental health sector did not receive any increase in funding
from the government for over 12 years. However, she indicated that, because the agency
is small and the organization culture is good, Counselling has avoided significant
turnover notwithstanding the change in strategy from defender to analyser.
At Disabilities where strategy changed from reactor to analyser, the HRM change was
a result of what the executive director described as incompetence, low level of
professionalism and adversarial relationship with the union. He explained that in, 1997
the agency had 97 grievances; relationship with the union was confrontational, and this
 Akingbola: Strategy and HRM in nonprofit organizations 1719
was consuming management resources. Thus, the major change in HRM was the
restoration of labour relations, as noted in the annual report:

[The agency] was able to maintain a constructive and positive relationship between management
and its employees. A direct consequence of our actions was the reduction in the number of
grievances to 0 (within a year and a half), which represents for the Association an all time low.
Another change in HRM is the increased formalization of the recruitment process. As
discussed, the HR department developed a screening tool, including questions and tests
for hiring managers in order to improve the selection process and reduce turnover.
Although there were some changes in HRM, Home did not experience extensive
changes. Nonetheless, the changes were consistent with the change in strategy from
defender to analyzer. The director explained that HRM was more organized and that
most of the procedures were written as guidelines. He added that the agency transferred
principles in collective agreement to non-union and management staff. Furthermore, the
director explained that, through collective bargaining, Home has improved the benefits
available to employees. He added that benefits are becoming more expensive, and the
agency is therefore continuously looking for ways to manage the cost.
Another change in HRM the director highlighted is the increased involvement of
programme staff in the proposal process, both for the financial and service plans. This, he
noted, has resulted in the increase of training provided to employees.
Neighborhood‘s recruitment practice was changed to focus on professional education.
This was mainly in the area of social entrepreneurship in which the staff are independent
contractors. Unlike the other case studies, the agency did not to have formal HRM.
Although some of the case studies appear to have experienced change in their HRM
about the same time as their strategy, the changes were more coincidental than
integrated. Moreover, the HRM activities were introduced for the first time and cannot be
considered as changes.

Discussion
The results suggest that the level of importance of recruitment, compensation and labour
relations in the nonprofits is not related to their organizational strategy. These results are
inconsistent with the findings of Miles and Snow (1984) that HRM would reflect the
strategic types of organizations. Prospector, analyser, defender and reactor nonprofits
were not different in terms of importance of HRM to their organization’s long-term
success. However, the results show that the importance of training was different between
the prospector and defender nonprofits.
The findings that change in recruitment practices, use of temporary contract staff and
change in the training offered to employees are not related to change in strategic type are
inconsistent with expectation that change in strategy would be undertaken simultaneously
with change in HRM (Burton et al., 2004; Purcell, 1999; Schuler and Jackson, 1987).
The significant relationship between the level of importance of training, prospector
and defender strategies is consistent with the position of Miles and Snow (1984) that:
(a) a defender strategy would emphasize training and internal career development, which
reflects its focus on improving the efficiency of current services; (b) an analyser would
have a training strategy similar to defender; and (c) a prospector would acquire human
resources and have a limited training programme. The finding underlines the importance
of training as a strategic HRM function in nonprofits.
Further, the finding on training is consistent with the literature, which argues that
training has a central role in nonprofits because: first, it is the link between employees
1720 The International Journal of Human Resource Management
intrinsic motivation and the mission (Pynes, 1997); second, nonprofit managers have a
positive attitude towards training (Beattie et al., 1994, cited in Beattie, 2002); third, the
skills needed to adapt to change accentuate the importance of training and learning in
nonprofits (McMullen and Schellenberg, 2003b); fourth, nonprofits require diverse skill
sets and a range of technical skills (McMullen and Schellenberg, 2003b; Pynes, 1997);
and as a result, nonprofits are more likely to provide training than organizations in the
profit sector (McMullen and Schellenberg, 2003b). This could explain why nonprofits are
likely to integrate training to their strategy.
Given that the level of importance of these HRM functions were not related to the
strategic types of nonprofits, it would be unlikely to expect a relationship between change
in recruitment, staffing and change in strategy. Thus, the findings on Proposition 2 seem
to validate the disconnect that exists between strategy and HRM in nonprofits. However,
the finding that change in training was not consistent with change in strategy suggests
that while training may be important based on strategy, it does not change simultaneously
with strategic change in nonprofits. For example, while skills needed to adapt to change
have heightened the importance of training and learning in nonprofits (McMullen and
Schellenberg, 2003b), it appears the change in training is related to general requirement
rather than strategy. As a result, nonprofit seem not to be matching change in strategy
with change in internal climate (Burton et al., 2004).
One possible explanation for the lack of relationship between HRM and strategy in
nonprofits is that the Miles and Snow framework may not be ideal for nonprofits. Similar to
other management models, which were developed for-profit organizations, there are critical
discrepancies between the framework, the operating environment and the strategic behaviour
of nonprofits. This further highlights the need for a strategic framework that reflects the
operating environment of nonprofit organizations (Akingbola, 2005; Stone et al., 1999).
It could also be argued that the finding of this study is more a reflection of the capacity
challenges of nonprofits in terms of lack of funding for administrative and support function
rather than lack of linkage between HRM and strategy in the sector. First, the inability to
support a designated HR staff or department means there is no HR voice and role in the
strategic process. Six of the seven case studies identified at least one developed HRM
function as part of their strategy, but only three had designated HR staff to implement the
plan. These nonprofits ‘talk about’ HRM and see it as part of their strategy but do not have
the capacity to support its implementation. In fact, as one of the strategic goals for the next
three years, one of the case studies, Community, plan to create a HR department.
Second, another factor related to capacity is the involvement of individuals or groups
outside nonprofits in HRM decision-making (McMullen and Brisbois, 2003). In their
report, one-third of nonprofits reported that staffing decisions are outside the control of
managers and that an external party is involved in other HR decisions. The direct
decision-making power and influence of external parties on HRM in nonprofits is likely
affecting the ability of these organizations to align HRM with strategy. The outside
individuals or groups are unlikely to understand the need to align HRM with strategy, and
if they do, they cannot translate it into day-to-day operations. Thus, external agents could
contribute to this disconnection between HRM and strategy in nonprofits.

Implications
The lack of association between recruitment, compensation and labour relations and
nonprofit strategy types has implications for nonprofit management and effectiveness.
More than other sectors, recruitment is tied directly to the mission of nonprofits.
Employees are attracted, motivated and retained largely through the mission of nonprofits
 Akingbola: Strategy and HRM in nonprofit organizations 1721
(Brown and Yoshioka, 2002), and as McMullen and Schellenberg (2003a) noted,
maintaining the long-term HR capacity of nonprofits requires paying serious attention to
recruitment and retention. Thus, to achieve organizational effectiveness, recruitment must
be aligned with nonprofit strategy.
Similarly, compensation in nonprofits should be aligned with strategy to enhance retention
and motivation. Although pay is low in nonprofit organizations (Barbeito and Bowman,
1998; Brandel, 2001; Handy and Katz; 1998: McMullen and Schellenberg, 2003a), the paid
leave, vacation and comparable benefits (Barbeito and Bowman, 1998; McMullen and
Schellenberg, 2003a) should be highlighted as an advantage of working in the sector.
Nonprofits operating under a collective agreement need to start paying attention to labour
relations because, similar to other HRM functions, it is a critical factor in the effectiveness of
the organization. Managing the relationship with the bargaining unit is a crucial part of HRM
and strategy. This has become more important than ever, as the Statistics Canada’s Workplace
and Employee Survey report suggests an increase in collective agreement coverage
(McMullen and Brisbois, 2003) and anecdotal report of labour disputes in nonprofits.
From the perspective of strategy, a defender nonprofit that is unable to ‘build’ its human
resources because it does not have the capacity to support an effective recruitment,
retention, and compensation strategy is less likely to have a successful corporate strategy.
Similarly, the prospector nonprofit that is unable to ‘acquire’ human resources and the
analyser nonprofit that is unable to ‘allocate’ human resources because they lack the
capacity to support these functions are less likely to actualize their strategic objectives.
This is because HR strategy is integral and must be aligned with the generic or competitive
strategy (Lengnick-Hall and Lengnick-Hall, 1988; Miles and Snow, 1984; Rodwell and
Teo, 2004; Schuler and Jackson, 1987).
The finding that nonprofits are not changing their recruitment practices simultaneously
with change in strategy means that an important bridge to mission is deficient. If recruitment
is not changing with strategy, the nonprofit could be recruiting employees lacking the
requisite knowledge, skills and abilities for the strategy, therefore putting the strategy in
jeopardy. Furthermore, if the change in recruitment practice does not reflect the change in
strategy, nonprofits would be hiring employees who may not embrace their strategic
direction. Under these circumstances, it is possible that employees will not buy into or
simply resist the change in strategy (Connell and Waring, 2002). If nonprofits do not change
their recruitment practices simultaneously with change in strategy, current employees may
experience frustration because their new colleagues are not oriented towards the strategy. If
training is not integrated with a change in strategy, the employees are not being equipped
with the competencies required to achieve their strategic objectives. Also, training is unable
to facilitate the role of creating the enabling environment.
The prevalence of temporary contract staff is a critical factor in determining whether
nonprofits can adopt an effective strategy. Take the scenario of an organization with large
numbers of temporary contract staff, if the nonprofit fails to hire more regular full-time or
part-time staff, the resulting high level of employee turnover could lead to retention
problems and loss of organizational memory (McMullen and Schellenberg, 2003a), factors
that would limit the effectiveness of any organizational strategy. Also, high turnover means
that a nonprofit is repeating the entire cycle of recruitment, placement, orientation and
training (Akingbola, 2004) for each new group of employees, even though staffing is out of
sync with the strategic direction.
It is important to emphasize that the tests of HRM adopted here are exploratory. As
indicated above, most nonprofits in Canada have fewer than 20 paid staff (McMullen and
Schellenberg, 2002) and operate without any form of professional HRM. This constitutes
the limitation of exploring HRM beyond its importance to nonprofit organizations. Thus
1722 The International Journal of Human Resource Management
the results should be interpreted with caution. Nonetheless, the findings seem consistent
with the capacity challenges of nonprofits in terms of lack of funding for administrative
and support functions (Hall et al., 2003).
In conclusion, nonprofits cannot afford to have HRM lagging behind their strategy,
because human resources are their primary assets and, more than in other sectors, they
are not replaceable with other resources. Also, the effectiveness of strategy significantly
depends on the cooperation of human resources. In fact, it could be argued that nonprofits
should develop their strategy based on the competencies of their human resources.

Note
1 Some variables have less than 79 respondents because of missing data.

Appendix 1: Classifying your nonprofit organization (measure of strategy)

Nonprofits in the descriptions that follow are not inherently bad or good. If none of these
descriptions exactly matches your organization, select one that is most similar.

8. Which statement best describes your nonprofit now?

A. The nonprofit provides a relatively stable set of services and concentrates on improving the
efficiency of these services. The nonprofit does not explore funding opportunities outside of its services.
B. The nonprofit maintains a relatively stable base of services while at the same time moving to
meet selected, promising new services. Also monitors the actions of other nonprofits such as C
(below).
C. The nonprofit makes relatively frequent changes in (especially additions to) its set of services.
It consistently attempts to pioneer by being ‘first in’ in new areas of service. The nonprofit responds
rapidly to early signals of community needs and funding opportunities.
D. The nonprofit cannot be clearly characterized in terms of its approach to changing its services.
The nonprofit adopts change after considerable evidence of potential success or when required to by
external factors.Nonprofits A, B and C might be placed on a hypothetical seven-point continuum of
service change as follows (D is outside the continuum):

– – – – – – – – A– –B – – –C

‘Low change’ 1 2 3 4 5 6 7 ‘High change’

Nonprofit D
9. Please rate (indicate number) your nonprofit on the scale 1 to 7 (or rate your nonprofit as D) as it
operated 5 years ago.
– – – – – – – – A– –B – – –C

‘Low change’ 1 2 3 4 5 6 7 ‘High change’

Nonprofit D

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