Fiscal Leanness and Fiscal Responsiveness: Exploring the Normative Limits of Strategic Nonprofit Financial Management

The principles of normative nonprofit financial management instruct organizations to minimize overhead and to remain fiscally lean. Although prior scholarship has addressed many of the unintended negative consequences of normative managerial practices, research has not yet explored the impact of the norm of fiscal leanness on the ability of nonprofits to respond efficiently to their economic environments. This research seeks to address this gap and finds that fiscal leanness appears to inhibit fiscal responsiveness. Results are derived from a panel of 501c3 public charities filing Forms 990 with the Internal Revenue Service (IRS) for fiscal years 2004 to 2011.