fundraising characteristics of nonprofit organizations: an institutional theory perspective cathleen...

Academy of Management - 2011

FUNDRAISING CHARACTERISTICS OF NONPROFIT ORGANIZATIONS: AN INSTITUTIONAL THEORY PERSPECTIVE

Cathleen O. Erwin, PhDAuburn University

S. Robert Hernandez, DrPHRichard M. Shewchuk, PhD

University of Alabama at Birmingham


• Introduction• Study Purpose• Background• Method• Results• Conclusion


Introduction

• Fundraising is a troublesome aspect of management of nonprofit organizations (NPO) (Oster, 1995)

• Charitable contributions increasingly important for nonprofit hospital organizations; considered as “need to have” not just “nice to have” (Cleverley & Cleverley, 2005; Haderlin, 2006; McGinly 2005, 2008)


Introduction

• Studies have begun to provide substantive, objective research to a field characterized by casual acceptance of anecdotal evidence (Lindahl & Conley, 2002)

• Research on fundraising management is limited in comparison to other streams of philanthropic fundraising research


Study Purpose• Study characteristics of fundraising for nonprofit hospital

organizations– Are there distinct groupings of nonprofit organizations based on

the performance characteristics of their fundraising operations?– Are there differences between groups of nonprofit

organizations based on the configuration of the fundraising operation in relation to the organization?

– Are there differences between groups of nonprofit organizations based on maturity as defined by the adoption of an advanced administrative technology?

– Are there differences between groups of nonprofit organizations based upon the legitimacy of the organizations as evidenced by the prevalence of donor types?


Background

• Research indicates that fundraising management varies widely across the NPO sector; it is better to do comparisons among similar types of organizations (e.g., hospitals, museums, …) (Hager, Pollack & Rooney, 2001)

• According to institutional theory, when there is uncertainty about how to achieve or measure outcomes, organizations facing similar environmental conditions will adopt institutionalized beliefs and begin to resemble one another (Herman and Renz, 2008; DiMaggio & Powell, 1983)


• NPOs that are more effective have similar management practices and certain structures and processes that are agreed upon as “best practices” in their field (Sowa, et al., 2004; Herman & Renz, 2008)

• Fundraising performance is a component of organizational effectiveness and performance for nonprofit organizations


Methods

• Association for Healthcare Philanthropy (AHP) survey data, 2003-2008

• Data cleaned; some variables converted (ratio into categorical for cluster analysis; monetary into 2005 dollars)

• Two-step cluster analysis – grouping organizations based on efficiency, productivity and complexity

• ANOVA and Chi-square analysis for between and within group differences in terms of structure, legitimacy and maturity

• Additional variables also examined to assist in developing cluster profiles (e.g., age, size)

• Cluster profiles developed


HypothesesHypotheses

H1 There are distinct groupings of nonprofit hospital organizations based upon the organizational effectiveness and performance characteristics of their fundraising operations.

H2 There are differences between groups of nonprofit hospital organizations based upon the organizational configuration of the fundraising unit.

H3 There are differences between groups of nonprofit hospitals organizations based upon the level of staffing in the fundraising unit.

H4 There are differences between groups of nonprofit hospital organizations based upon the status of the adoption of an endowment fund as a fundraising technology utilized by the organization.

H5a There are differences between groups of nonprofit hospital organizations based upon the level of support received from corporate donors.

H5b There are differences between groups of nonprofit hospital organizations based upon the level of support received from foundation donors.


VariablesConstruct Measure

Nonprofit Effectiveness and Performance(Basis variables used for cluster analysis)

Fundraising cost ratio (expenses/funds raised)Funds per donor (funds raised/# of donors)Funds per (funds raised/# of FTEs)

Complexity Planned gifts (% of total funds raised)

Structure Configuration (Foundation or other)Staffing (FTEs)

Maturity Endowment status (established, not est.)

Legitimacy Corporate support (% of total funds raised)Foundation support (% of total funds raised)


Summary of ResultsHypotheses Supported

(Yes/No)H1 There are distinct groupings of nonprofit hospital organizations

based upon the organizational effectiveness and performance characteristics of their fundraising operations.

Yes

H2 There are differences between groups of nonprofit hospital organizations based upon the organizational configuration of the fundraising unit.

No

H3 There are differences between groups of nonprofit hospitals organizations based upon the level of staffing in the fundraising unit.

Yes(partial)

H4 There are differences between groups of nonprofit hospital organizations based upon the status of the adoption of an endowment fund as a fundraising technology utilized by the organization.

Yes

H5a There are differences between groups of nonprofit hospital organizations based upon the level of support received from corporate donors.

Yes(partial)

H5b There are differences between groups of nonprofit hospital organizations based upon the level of support received from foundation donors.

Yes(partial)


Cluster Analysis – 3 clusters

Funds per FTE

Funds per Donor

Fundraising cost

Planned Gifts1

2

3

Cluster 1Cluster 2Cluster 3

Basis Variables

Terti

les


Cluster One“Very High Performance”

(n=90)

Cluster Two“Moderate Performance”

(n=184)

Cluster Three“Low Performance”

(n=127)

Overall(n=401)

Basis Variables

Funds per $1,494,431 $467,315 $181,104 $608,260

Funds per Donor $7,169 $1,326a $837a $2,522

Fundraising Cost Ratio 0.13a 0.32a .91 0.47

Planned Gifts (%) 5.24%a 6.63%a .07% 4.35%

Hypotheses Variables

Staffing 9.9a 5.80a 4.10 7.56

Corporate Support 13.93%a 18.00%a 25.16% 19.21%

Foundation Support 18.19% 11.36%a 9.79%a 12.52%

Other Variables

Beds 480.13a 417.32a 247.1 377.5

Fundraising Age 18.51ab 19.29a 14.9b 17.72

Cash 52.59% 66.40% 82.72% 67.82%

Pledges 34.11% 18.00% 11.22% 19.90%

Construction 40.04% 24.00%a 17.47%a 25.61%

Equipment 14.82%a 22.65%ab 27.94%b 22.53%

Hospice/Long Term Care

1.28%a 4.96%b 4.02%ab 3.82%

Note: Means that do not share subscripts differ at the p < .05 in the post hoc analyses conducted.


CLUSTER PROFILES


Cluster One• Mature, complex, highly productive, and highly

efficient

• Because of higher productivity levels, lower fundraising cost ratio and higher percentage committed to construction, it is possible that these are well-known, respected organizations that have larger staffs including speciliasts in cultivating major gifts from a well-established donor base in addition to seeking substantial foundation support.


Cluster Two

• Mature, complex, average productivity, and average efficiency

• Similar to Cluster One in many regards, with the exception of level of productivity

• Difference may be attributable to a number of factors such as their environment with lower giving capacity of donors in their geographic area or the focus, ability of fundraising staff to cultivate major gifts or pursue foundation support, or lack of a commitment/corporate culture focused on philanthropy


Cluster Three

• Less mature, less complex, least productive and most inefficient

• Most consistently different from others

• Because of the prevalence of cash gifts and corporate contributions, these smaller organizations located in smaller communities may rely on fundraising through special events and annual fund solicitations


Conclusion

• Study attempts to extend a relatively small but growing body of research on fundraising management

• Introduces a new approach to evaluating fundraising maturity based on adoption of endowment fund

• Preliminary step toward helping nonprofit hospital leader to benchmark with organizations that are truly alike, and to set realistic fundraising goals and expectations for strategic planning


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fundraising characteristics of nonprofit organizations: an institutional theory perspective cathleen...

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