Overview of Nonprofit Fundraising

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Chapter 11 from "Nonprofit Management," Third Edition by Michael J. Worth, https://secure.sagepub.com/protected/worth3e/icfr/intro.htm

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Overview of Nonprofit Fundraising

  1. 1. © 2014 SAGE Publications, Inc.Chapter 11: PhilanthropicChapter 11: PhilanthropicFund-RaisingFund-Raising
  2. 2. © 2014 SAGE Publications, Inc.Importance of Gifts to NonprofitImportance of Gifts to NonprofitOrganizationsOrganizations• Charitable or philanthropic giving is an important sourceof revenue for many nonprofits, though relativeimportance varies among subsectors• Health services organizations -- low reliance• Educational institutions and civic, social, and fraternalorganizations -- medium reliance• Religious organizations and human servicesorganizations -- high reliance• Private giving can often be used to addressorganizational priorities rather than support specificprograms or services• Core operations or capacity building• Building new facilities• New initiatives that lack paying customers or grants
  3. 3. © 2014 SAGE Publications, Inc.Sources of Gifts (2010)Sources of Gifts (2010)• Religion (35%)• Foundations (14%)• Corporations (5%)• Education (14%)• Human Services (9%)• Public and Society Benefit Orgs (8%)• Health (8%)• Bequests (8%)• Arts, Culture, Environ (less that %5)
  4. 4. © 2014 SAGE Publications, Inc.Definitions and DistinctionsDefinitions and Distinctions• Charity and philanthropy• Charity -- giving to meet immediate human needs• Philanthropy -- giving to develop institutions that servehuman needs or enhance human development over thelong run• Fund-raising, development, and institutional advancement• Fund-raising -- an activity undertaken with the goal ofeliciting charitable or philanthropic giving• Development – encompasses fund-raising, but involves amore comprehensive approach to the long-term growth ofan organization or institution• Institutional advancement -- encompasses fund-raisingand development, along with the related activities ofcommunications, marketing, and other programs forconstituent relations
  5. 5. © 2014 SAGE Publications, Inc.Motivations for GivingMotivations for Giving• Corporate philanthropy• Forms of giving• Direct gifts versus corporate foundations• Cash gifts versus gifts-in-kind• Partnerships• Enlightened self-interest• Strategic philanthropy• Foundation giving• Tax-exempt status and minimum giving requirement• Activities generally reflect the interests of the founders• Corporations• Individuals or families• Independent foundations
  6. 6. © 2014 SAGE Publications, Inc.Motivations for GivingMotivations for Giving• Individual donors• Motivations are often more complex and lesscalculated than those of corporations or foundations• Altruistic and egotistic motivations for giving• Motivated by individuals’ nature to help others andimprove the human condition• Motivated by individuals’ desire to obtain somebenefit for themselves (e.g., recognition, socialposition, or control)• Motivational types (Prince and File, 1994)• “Dispositions” or “inclinations” influencing giving bywealthy individuals (Schervish and Havens, 2001)• Controversy over tax incentives
  7. 7. © 2014 SAGE Publications, Inc.Fund-Raising ProcessFund-Raising Process• Identifying priorities and developing the case• Priorities as a product of strategic planning• Case statements• Why should I give to this organization?• Why is this cause more important than othersthat also ask for my support?• Identifying and qualifying prospects• Prospects offer a better-than-average chance ofgiving• Financial ability or capacity to give• Linkage to and interest in the organization• Prospect research
  8. 8. © 2014 SAGE Publications, Inc.Fund-Raising ProcessFund-Raising Process• Cultivating prospects• Developing a relationship before moving to solicit agift• Scale of potential giving as a key factor in theamount of time and attention spent on cultivation• Moves management systems• Soliciting the gift• “Ladder of effectiveness” (Rosso & Associates, 2005)• Considerations in choosing a method of solicitation• Level and type of support that the organizationneeds• Costs and benefits of different methods• Resources available to the organization
  9. 9. © 2014 SAGE Publications, Inc.Fund-Raising ProcessFund-Raising Process• Acknowledging and recognizing donors• Promptness• Individual tailoring• Stewarding the gift and the relationship• Past donors are the best prospects for futuregifts• Two meanings of stewardship• The activities that the organizationundertakes to keep the donor informed andengaged
  10. 10. © 2014 SAGE Publications, Inc.
  11. 11. © 2014 SAGE Publications, Inc.Individual Donor Life CyclesIndividual Donor Life Cycles• Fund-raising pyramid• Dunlops three types of gifts• Regular gifts• Special or stretch gifts• Ultimate gift• Criticism of the fund-raising pyramid• Entrepreneurial donors• Relevance to smaller nonprofit organizations• Planned giving• Bequests• Charitable remainder trusts• Charitable gift annuities
  12. 12. © 2014 SAGE Publications, Inc.
  13. 13. © 2014 SAGE Publications, Inc.CampaignsCampaigns• Campaign method developed by fund-raisers for theYMCA in the early 20th century• Later adopted by higher education institutions andsubsequently by most other nonprofit organizations• Characteristics of campaigns• High priority in the organization• Announced dollar goal and deadline• Defined purposes for which the funds are beingraised• Sequential fund-raising process• Gift solicitation in specific amounts
  14. 14. © 2014 SAGE Publications, Inc.
  15. 15. © 2014 SAGE Publications, Inc.
  16. 16. © 2014 SAGE Publications, Inc.Managing Fund-Raising ProgramsManaging Fund-Raising Programs• Advancement services• Gift recording and acknowledgment• Prospect research• Information systems management• Prospect management• Planning, scheduling, and tracking contacts• Developing strategies for major prospects
  17. 17. © 2014 SAGE Publications, Inc.Fund-Raising Efficiency andFund-Raising Efficiency andEffectivenessEffectiveness• Debate about the costs of fund-raising• Charity watchdog organizations• U.S. Supreme Court• Form 990 and public transparency• Potential problems with putting strict limits on fund-raising costs• Unfair to organizations that are new or controversial• Difficult to determine the true total costs of fund-raising• Attempts to measure efficiency and effectiveness• Cost-per-dollar-raised• Return-on-investment
  18. 18. © 2014 SAGE Publications, Inc.Staff Performance andStaff Performance andAccountabilityAccountability• Problems with evaluating performance solely based on theamount of money each staff member raises• Major gifts rarely result from the work of a singleindividual• Potential to create perverse incentives for fund-raisers• Alternative methods of evaluating performance• Measuring specific activities (e.g., donors visited orproposals written)• Formulas that factor in both activities and money raised• Compensation as a topic of current discussion and debate• Incentive-based compensation• Compensation based on a percentage of gifts raised asunethical behavior
  19. 19. © 2014 SAGE Publications, Inc.Ethical ConcernsEthical Concerns• Fund-raiser behavior• Misleading or dishonest representations• Using donor relationships for personal benefit• Donor behavior• Donating funds that were illegally obtained• Gifts from a company that makes products it knows to be harmful• Gifts from individuals or companies with unsavory reputations• Restricted gifts• Gifts that require an organization to undertake new programs• Donor requests for inappropriate controls or influence• Protecting the privacy of donors and prospects• Growing sophistication of prospect research• Creation and distribution of donor profiles• Reports with information from donor visits or second-hand sources

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