Overview of Nonprofit Fundraising

© 2014 SAGE Publications, Inc.

Chapter 11: Philanthropic Chapter 11: Philanthropic Fund-RaisingFund-Raising


Importance of Gifts to Nonprofit Importance of Gifts to Nonprofit OrganizationsOrganizations

• Charitable or philanthropic giving is an important source of revenue for many nonprofits, though relative importance varies among subsectors• Health services organizations -- low reliance• Educational institutions and civic, social, and fraternal

organizations -- medium reliance• Religious organizations and human services

organizations -- high reliance• Private giving can often be used to address

organizational priorities rather than support specific programs or services• Core operations or capacity building• Building new facilities• New initiatives that lack paying customers or grants


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)


Definitions and DistinctionsDefinitions and Distinctions• Charity and philanthropy• Charity -- giving to meet immediate human needs• Philanthropy -- giving to develop institutions that serve

human needs or enhance human development over the long run

• Fund-raising, development, and institutional advancement• Fund-raising -- an activity undertaken with the goal of

eliciting charitable or philanthropic giving• Development – encompasses fund-raising, but involves a

more comprehensive approach to the long-term growth of an organization or institution

• Institutional advancement -- encompasses fund-raising and development, along with the related activities of communications, marketing, and other programs for constituent relations


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


Motivations for GivingMotivations for Giving

• Individual donors• Motivations are often more complex and less

calculated than those of corporations or foundations• Altruistic and egotistic motivations for giving• Motivated by individuals’ nature to help others and

improve the human condition• Motivated by individuals’ desire to obtain some

benefit for themselves (e.g., recognition, social position, or control)

• Motivational types (Prince and File, 1994)• “Dispositions” or “inclinations” influencing giving by

wealthy individuals (Schervish and Havens, 2001)• Controversy over tax incentives


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 others

that also ask for my support?• Identifying and qualifying prospects• Prospects offer a better-than-average chance of

giving• Financial ability or capacity to give• Linkage to and interest in the organization• Prospect research



• Cultivating prospects• Developing a relationship before moving to solicit a

gift• Scale of potential giving as a key factor in the

amount 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 organization

needs• Costs and benefits of different methods• Resources available to the organization



• Acknowledging and recognizing donors• Promptness• Individual tailoring

• Stewarding the gift and the relationship• Past donors are the best prospects for future gifts• Two meanings of stewardship• The activities that the organization undertakes

to keep the donor informed and engaged• The organization’s responsibility to manage

the gift according to the donor’s intention


Individual Donor Life CyclesIndividual Donor Life Cycles

• Fund-raising pyramid• Dunlop's 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


CampaignsCampaigns

• Campaign method developed by fund-raisers for the YMCA in the early 20th century

• Later adopted by higher education institutions and subsequently 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 being

raised• Sequential fund-raising process• Gift solicitation in specific amounts


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


Fund-Raising Efficiency and Fund-Raising Efficiency and EffectivenessEffectiveness

• 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


Staff Performance and Staff Performance and AccountabilityAccountability

• Problems with evaluating performance solely based on the amount of money each staff member raises• Major gifts rarely result from the work of a single

individual• Potential to create perverse incentives for fund-raisers

• Alternative methods of evaluating performance• Measuring specific activities (e.g., donors visited or

proposals 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 as

unethical behavior


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

Overview of Nonprofit Fundraising

Education

Transcript of Overview of Nonprofit Fundraising