FUNDRAISING CHARACTERISTICS OF NONPROFIT ORGANIZATIONS: AN INSTITUTIONAL THEORY PERSPECTIVE Cathleen O. Erwin, PhD Auburn University S. Robert Hernandez, DrPH Richard M. Shewchuk, PhD University of Alabama at Birmingham Academy of Management

Introduction Study Purpose Background Method Results Conclusion Academy of Management

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) Academy of Management

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 Academy of Management

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? Academy of Management

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) Academy of Management

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 Academy of Management

Methods Association for Healthcare Philanthropy (AHP) survey data, 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 Academy of Management

Hypotheses H1There are distinct groupings of nonprofit hospital organizations based upon the organizational effectiveness and performance characteristics of their fundraising operations. H2There are differences between groups of nonprofit hospital organizations based upon the organizational configuration of the fundraising unit. H3There are differences between groups of nonprofit hospitals organizations based upon the level of staffing in the fundraising unit. H4There 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. H5aThere are differences between groups of nonprofit hospital organizations based upon the level of support received from corporate donors. H5bThere are differences between groups of nonprofit hospital organizations based upon the level of support received from foundation donors. Academy of Management

Variables ConstructMeasure 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) ComplexityPlanned gifts (% of total funds raised) StructureConfiguration (Foundation or other) Staffing (FTEs) MaturityEndowment status (established, not est.) LegitimacyCorporate support (% of total funds raised) Foundation support (% of total funds raised) Academy of Management

Summary of Results HypothesesSupported (Yes/No) H1There are distinct groupings of nonprofit hospital organizations based upon the organizational effectiveness and performance characteristics of their fundraising operations. Yes H2There are differences between groups of nonprofit hospital organizations based upon the organizational configuration of the fundraising unit. No H3There are differences between groups of nonprofit hospitals organizations based upon the level of staffing in the fundraising unit. Yes (partial) H4There 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 H5aThere are differences between groups of nonprofit hospital organizations based upon the level of support received from corporate donors. Yes (partial) H5bThere are differences between groups of nonprofit hospital organizations based upon the level of support received from foundation donors. Yes (partial) Academy of Management

Cluster Analysis – 3 clusters Academy of Management

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 $1,326 a $837 a $2,522 Fundraising Cost Ratio0.13 a 0.32 a Planned Gifts (%)5.24% a 6.63% a.07%4.35% Hypotheses Variables Staffing9.9 a 5.80 a Corporate Support13.93% a 18.00% a 25.16%19.21% Foundation Support18.19%11.36% a 9.79% a 12.52% Other Variables Beds a a Fundraising Age18.51 ab a 14.9 b Cash52.59%66.40%82.72%67.82% Pledges34.11%18.00%11.22%19.90% Construction40.04%24.00% a 17.47% a 25.61% Equipment14.82% 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. Academy of Management

CLUSTER PROFILES Academy of Management

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. Academy of Management

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 Academy of Management

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 Academy of Management

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 Academy of Management

Questions/Comments? Academy of Management