Developing and validating of a measure of stakeholder culture in the not-for-profit sector

This study develops and validates a measure for Jones et al.'s (2007) four other-regarding stakeholder cultures of corporate egoist, instrumentalist, moralist and altruist in the not-for-profit (NFP) context. Jones et al.'s (2007, p.l37) typology of 'stakeholder culture', defined as "the aspects of organizational culture consisting of the beliefs, values, and practices that have evolved for solving problems and otherwise managing stakeholder relationships", is the most recent development in the organizational ethics literature. Stakeholder culture provides insight into why organizations deal with stakeholders variably and helps predict how organizations make stakeholder-related decisions. Thus, the typology is particularly relevant to not-for-profit organizations (NFPs), which deal with an array of stakeholders (Costa et al. 2011 ; Davison 2007; Murtaza 2012). In Australia, the recent establishment of the sector's regulator, the Australian Charities and Not-for-profit Commission (ACNC), resulted in regulatory reforms with enhanced accountability requirements imposed upon NFPs. An appreciation and understanding of NFPs' stakeholder culture will help improve NFPs' accountability to stakeholders. A 33-item stakeholder culture scale was developed deductively by undertaking an extensive literature review (Dees 1998; Dolnicar et al. 2008; Victor & Cullen 1987; 1988) and consulting academic colleagues and NFP personnel. Following a pre-test, 26 items were retained for testing. Mail survey data were collected from top management of 621 Australian NFPs, representing a 71.1% response rate. The sample was divided into two sub-samples for exploratory factor analysis (EFA) and confirmatory factor analysis (CFA). EFA produced a five-factor structure that was overall congruent with Jones et al.'s (2007) classification of the corporate egoist, instrumentalist, moralist and altruist stakeholder cultures. The only departure was that the altruist items were spilt into two factors (i.e., Altruist_client and Altruist_general). CFA examined a four-factor model according to Jones et al. (2007) by combining the sub-factors of the altruist stakeholder culture. Tests and results indicated good model fit, internal consistency, construct validity and predictive validity. The Study has important methodological, theoretical and practical implications. It makes a significant methodological contribution to the literature by developing a scale to measure Jones et al.'s (2007) stakeholder culture for the first time, providing a foundation for future studies to examine the typology. In terms of its theoretical implications, the study shows that Jones et al.'s (2007) proposed moralist stakeholder culture may be interpreted differently in the NFP context, as opposed to the for-profit setting. The study also investigates the relation between top management's values and an organization's stakeholder culture, adding to the literature on the link between personal and organizational characteristics (Hambrick & Mason 1984; Schein 2004). In terms of its practical implications, the stakeholder culture scale can be used by NFP management to resolve ethical issues relating to stakeholders when and where a conflict arises. It will also assist NFPs in fostering a stakeholder culture that will attract and sustain support from important stakeholders. Moreover, the results indicate the predominance of the altruist stakeholder culture in NFPs, which demonstrates that, even in times of regulatory uncertainty and hostile funding competition, NFPs appear to care for their legitimate stakeholders (i.e., clients). Hence, the ACNC, the sector's regulator, may need to consider the altruistic nature ofNFPs in imposing further accountability requirements on the sector. The new reporting and accountability requirements to be introduced should not undermine NFPs' ability to achieve their mission (Laratta 2011).