3.4 SYSTEMS THEORY
3.4.9 Agency and resource dependency theories
As the discussion on the theoretical framework underpinning the study draws to a close, the researcher wishes to highlight the theories that are important for furthering and deepening our understanding of the complex relationship between the NPO boards and
the government, which is the main stakeholder and represented by the Department of Social Development.
Chait et al., (2018) raise critical questions warranting serious reflection on the role of the boards involved with the non-profit organizations. These are based on the boards’ role as either problematic institutions or catalytic in organizational performance. Compounding board performance in this writing are the dysfunctional boards caused by group dynamics, resulting in toxic relationships, boards that are disconnected, distant and disengaged from the organizations that they lead and boards that do not understand their roles and responsibilities. Two theories are critically important when attempting to discern this dichotomy, the agency theory and the resource dependency theory. These two theories are identified for their relevance to the study and that they are not mutually exclusive, but rather offer complementary characteristics.
Firstly, the agency theory is generally premised on the mutual relationship between the main funder and the agent tasked with implementation of programmes or projects, in other words an implementing agent charged with executing the business strategy of the principal funder. Within the agency theory, the agent is the representative of the principal in a business transaction and is for all intents and purposes expected to at all times represent the interests of the principal and with less regard for the interests of the agency.
Van Puyvelde (2013) writes about the agency theory as a suitable micro-economic framework for analyzing the governance of non-profit organizations within the principal- agent framework. When analyzing this theoretical contribution, the researcher came up with the scenario that as the principal (DSD)-agent (NPO) relationship is present when one party (DSD) contracts another party (the NPO) to perform some service on his/her behalf that involves delegating some decision-making authority to the agent, this relationship is managed through the SLAs and performance targets.
From a practical point of view, the government and the agent organization could have different interests, which is more often than not the case in the state-NPO relationship.
The delegated decision-making to an agent might prove difficult for the principal to verify what the agent is actually doing and whether the agent is representing the principal’s
ethos and values. When the behaviour of the agent is not controlled or restrained, the goals of the principal are unlikely to be fully attained. Therefore, this study looks at the agency theory in relation to the NPOs responsible for the management of the youth development academies and ways in which it can be used to gain a better understanding the intricate relationship that exists between the agent and the principal.
Secondly, the resource dependency theory is based on the provision of funding by an external body. In this case it is the funding that comes from the Department of Social Development to the NPOs that manage the youth development academies. The resource dependency theory is relevant in this study as the researcher explored ways in which the injection of external resources to an organization affect its behaviour. Various writings on the resource dependency theory by authors such as Gazley & Brudney (2007).
Verschuere & De Corte (2014) and Helming et al., (2014) highlight the benefits that grants, subsidies, donations or full funding of the non-profit organizations that the governments accrue in providing services to communities, as well as ways in which the recipient organizations benefit, not only in terms of sustainability but also how they benefit needy communities. While there are reciprocal benefits on both sides of the spectrum, the theorists are also vigilant about the non-linearity of the relationship and benefits thereof. This underscores the argument that raised earlier regarding the complexity theory, where unpredictable behaviour characterizes the relationships between various stakeholders. This contestation is mainly driven by the need by the non-profit organizations to maintain autonomy and the need of the government to determine the mission and agenda, their working, their target groups and performance targets to be achieved. However, organizations respond differently than the resource constraint environments, where dependency threatens autonomy. Drees et al., (2013) highlight the inter-organizational arrangements that result in resource sharing, information sharing, coaching and mentoring one another to improve the delivery of services, suggesting that at times the motives for organizations can be societal acceptance and legitimacy, rather than economic gain.
This self-organizing by institutions underscores the argument raised earlier under complexity theory, specifically within the complex adaptive system, where organizations,
in their response to external environments, spontaneously change their operating systems, strategies and procedures. They adapt to the changing environment by forming alliances and utilizing available resources in a more efficient and effective manner. This is in part by a voluntary adjustment of operating procedures and partially by enforcing change through re-alignment of structures, strategies and performance targets.