Building a stable base of donors is an essential part of nonprofit management, and one that requires long-term commitment. Whether development efforts are low-key volunteer activities or the fund raising, the integration of fund raising issues into the strategic plan is vital. Identification of stakeholders is a good tool for identifying potential donors. As part of the formulation of a long-range funding strategy, fund raising issues will play an important role.
Fund Raising Defined
There are different definitions of fund raising exist. The majority of researchers explain fund raising as: “a process of soliciting and accepting monetary gifts from individuals, corporations, and foundations by a charitable organization, especially as managed for the organization by fundraising specialists” (Anheier 25). In some cases, fund raising function is referred to as development in some charitable organizations, particularly at colleges and universities. It should be noted here that fund raisers for nonprofit hospitals also prefer to be called development officers; for example, the professional association to which 80% of these practitioners belong is the National Association for Hospital Development (NAHD). In addition, fund raisers for arts, culture, and humanities organizations, such as museums, and for human service organizations, such as the United Way, frequently adopt development to describe their function. Carbone (1989) explains fund raising in educational institutions as “a codeword for a much larger set of concepts, programs and activities associated with . . . translating private resources into the public good” (20). According to Carbone (1989), people who work in fund raising are those who not only raise funds, but also those who “write and edit publications, handle institutional relations” (20).
In other not-for-profit organizations fund raising means: “magnificent business of helping others undertake consequential acts of kindness and generosity” (Panas 1984, cited Anheier 25). In-house fund raisers, on the other hand, are usually involved in the solicitation of gifts. As executors of fund raising programs, internal practitioners ask for private money through various mass and interpersonal communications (e.g., annual, lower level gifts are usually solicited through mass mailings written by the fund raiser and donors are generally asked for major gifts during face-to-face meetings that the fund raiser often participates in alone, or as a member of a solicitation team) (Bobbitt 39).
There are twp main types of gifts in fund raising: unrestricted lower level gifts, restricted lower level gifts; unrestricted major gifts, and restricted major gifts. Generally, the majority of gifts to charitable organizations fall into only two of the four categories: unrestricted lower level gifts and restricted major gifts (i.e., lower level gifts given on a regular basis are primarily unrestricted in their use, whereas larger gifts given periodically are primarily restricted as to how they can be used. the term ‘designated gifts’ is used to refer to unrestricted, annual gifts designated for use by a particular subunit of a charitable organization (Bozzo 47). Although this type of gift is ‘restricted’ in that it must be allocated to the designated recipient, it is unrestricted in how it is used by that recipient. Another type of gift is ‘planned’ gifts. These gifts are major gifts that may be restricted or unrestricted in purpose, but that are commonly considered distinct because they are not outright gifts (i.e., they are gifts whose benefits are deferred through legal and financial instruments, such as wills and insurance policies, until the death of the donor, or whose benefits are increased through tax-saving vehicles, such as gift annuities and pooled income funds) (Bozzo 50-51).
It is important to note that not all nonprofit organizations that have fundraising functions and even fundraising practitioners are charitable organizations. For example, political parties raise millions of dollars each year, often with the help of fundraising specialists, yet gifts to these organizations are not tax deductible. Critics (Oster 1995; Worth 2002) admit that charity best describes fundraising and donor behavior for those organizations that are primarily almonry, and that philanthropy best describes fundraising and donor behavior for those organizations whose goods and services are defined as positive externalities or public goods (e.g., universities, churches, and public television). It can be stated that a charitable act is based primarily on altruistic motives, whereas a philanthropic act includes a greater degree of self-interest.
Fund-Raising and Planning Process
Many not-for-profit organizations often neglect and ignore planning function and importance of strategic planning in fund raising. Researchers admit that a good plan is needed to carry out fund raising activities, and this may be a focus of the planning process. Strategic planning can help not-for-profit organizations to identify and package their needs in a way that will be attractive to potential donors, and will help them to be sure that the needs are funded in the best way possible. Clear statement of purpose is important for fund raising. Most potential donors would be “grabbed” more by the second statement, and feel that their money was supporting a worthy cause (Worth 29). It is difficult to sell or market not-for-profit organizations services without a clear definition of what they are. For public consumption, not-for-profit organizations must have clearly defined statements about their services. An important part of the development of a strategic plan is an examination of the organization’s ability to fund its projects and programs. Not-for-profit organizations invariably rely on donations from outside sources to fund or subsidize their programs and services. The flow of this funding is generally not under the direct control of the organization, and is subject to conditions of the economy, regulatory changes, and the whims of donors. By learning more about potential donors, not-for-profit organizations can secure valuable input into the planning process (Brooks 363). This can assist not-for-profit organizations in determining whether there is a potential for a startup grant for a new service, or in discovering what programs are fundable, and molding their plans to fit that reality.
A long-term fund raising strategy might consist of the development of an annual or regular appeal, giving programs for designated services, and the establishment of a centralized source of information within organizations on local foundations. By learning to tap these sources, not-for-profit organizations may greatly expand their prospects for success. Setting clear-cut goals in the area of development is also possible and desirable within the framework of the long-range plan. While such organizations will undoubtedly take whatever donations they can get, it helps to begin placing some realistic expectations on those donations based on past history, available figures from similar organizations, and the expectations they have for the success of their new approaches. Goal-setting is a good way of measuring the success of plans, and will help not-for-profit organizations to project their needs over a multi-year period. For instance, donations totaling $50,000 can be a measure of success or failure, depending on organizational needs, goals, and the amount of time and money required to raise them (Brooks 363). The development of a strategic plan can also assist organizations in knowing the direction agency will take, which will significantly aid their ability to appeal for funding. Having a clear direction can help not-for-profit organizations convince potential donors of the importance of their part in their efforts, and can help to give them a better idea of what they are funding.
While appealing to the emotions of donors is an undeniable factor in giving, the presence of a well thought-out plan to deal with little children or homeless adults will place their appeal on more solid ground. Especially in an organization geared to crisis management, the emphasis is on responding to immediate issues that impact on the daily operations of the organization (Ciconte 363). In strategic planning, not-for-profit organizations are identifying and dealing with issues that may not be of such obvious or immediate importance. For these reasons, it is especially important to carefully plan each step of the operation to achieve desired results.
While the fund raising needs and activities of organizations are unique and must be addressed as such, fund raising bears a number of fundamental similarities to the marketing strategies and activities mentioned above. In order to effectively raise funds for not-for-profit organizations, they must follow a number of the same steps, beginning with the development of a fund raising orientation (Frumkin, Kim 266). Some research and analysis may also be warranted in the area of fund raising. An effective strategic plan both includes and supports long-range fund raising strategies. As organizations proceed with the development of plans, they should be sure that program development issues receive the attention they warrant (Frumkin and Andre-Clark 144).
Effectiveness of Fund Raising
Because funds come from three primary external sources (i.e., individuals, corporations, and foundations), factors such as tax climate, level of general economic health, corporate profits, and foundation payout regulations can affect fund raising outcomes. In addition or organizational, factors can affect outcomes, as can factors, such as vacancies in fund raising positions. Regardless of such uncontrollable factors, the effectiveness of fund raising practitioners is generally measured by their ability to raise more dollars each year. Related to this confusion is the fact that there is little clarity on the part of fund raising practitioners about the role of public relations in the fund raising process. Researchers (Oster 88-90) came to conclusion that charitable organizations receive gifts that have little relation to short-term efforts to raise funds. Those that report large dollar totals each year are institutions that are generally regarded as large, rich, and prestigious. Therefore, measuring the effectiveness of fund raising by comparing dollar totals is generally misleading and contributes to unrealistic expectations of fund raising practitioners. “Invite special event volunteers, current donors, and community leaders to join the development committee with the specific purpose of raising funds for the organization. Active development committee members are excellent candidates for the board of directors” (Ciconte 363).
In other words, rather than examining environmental variables that may have an impact on gift totals, the researchers hypothesized that differences in dollars raised within governance-and-mission-based types of institutions can be explained best by variables such as fund raising expenditures (i.e., the more an institution spends on fund raising, the more it will raise; and the rate of return will remain steady until an institution matches the highest fund raising outcomes of its peers). Some researchers fail to recognize long-term donor relations, or the impact that historical interdependencies may have on current fund raising totals (Henry 37). In order to help fund raisers move beyond simple gift totals as the measurement of effectiveness, the Pitt researchers outlined a procedure for identifying peer institutions on which to base fund raising potential (Oster 104). More significantly, the five highest ranked elements for raising more private gifts than predicted emphasize the importance of environmental relationships (closeness to community and donors), involvement of senior management (presidential leadership), long-term results (institutional commitment), integrity in programming (commitment to excellence), and commitment to the institution. In other words, fund raising effectiveness is dependent on organizational characteristics that can be related to theories of strategic public relations. For example, Worth (87) stresses that behavioral objectives, such as affecting a giving behavior, are rarely achieved on a short-term basis, but rather are achievable over a longer term. Integrity, which is related to social responsibility, is characteristic of the two-way symmetric model of fund raising. The effectiveness of fund raising is viewed as synonymous with fund indiscriminant dollars at the highest possible rate. Brooks (2004) argue that “scholars talk about efficiency and effectiveness in the production and delivery processes, but rarely in terms of how the nonprofits raise their nongovernmental funds” (365). Although in practice effectiveness is measured by percentage increases in gift totals over previous years, research studies have concentrated on cost-benefit ratios and more recently on fund raising potential. An examination of major work on fund raising potential reveals that the institutional characteristics of size, wealth, and prestige account for half or more of the variance in gift totals. Following Frumkin and Kim (2001): “Nnonprofit organizations that spend more marketing themselves to the donating public do better at raising contributed income than organizations focused upon leaner, more efficient operations. No matter the field of activity, positioning around mission positively influenced the flow of contributions” (266).
Such institutional variables have little value for determining effectiveness of fund raising because they are factors that cannot be controlled by fund raising departments. Because of their emphasis on haste and their preoccupation with big numbers, capital campaigns rarely promote the concept of gift utility. Frumkin and Kim (2001) prove the hypothesis that: “Nonprofit organizations that spend more on fundraising or marketing will have more success raising contributed income than organizations that spend less on fundraising or marketing” (266). Researchers advise charitable organizations, such as colleges and universities, to take a long-term approach to fund raising one that is sustained and concentrates on the utility of gifts rather than large numbers. They implied that fund raising is a social exchange that involves the enhancement and protection of autonomy as related to donor preferences and organizational need.
Fund raising practitioners must look beyond dollar totals when measuring their true contribution to charitable organizations. It should be mentioned that not-for-profit organizations, particularly colleges and universities, are adopting fund raising totals as measurements not only of their fund raising effectiveness, but also of overall organizational effectiveness. Gifts with high degrees of usefulness for a charitable organization will enhance autonomy (e.g., they will help an organization pursue its self-determined goals). In such cases, the fund raising function contributes to organizational effectiveness by raising gifts in support of organizational goals. On the other hand, gifts that have little utility will limit autonomy because organizational goals will be displaced and/or internal resources will be reallocated to purposes other than those determined by the organization. The fund raising function contributes to organizational effectiveness in such cases by refusing to accept gifts that are not in support of organizational goals. Fund raising can also protect autonomy and save a charitable organization money by identifying issues that are not being met through donor relations and bringing those issues to the attention of the organization’s senior management. In other words, fund raisers can identify issues that may create conflict between a charitable organization and its donor publics and counsel managers to change organizational behavior in order to avoid conflict, which may cost the organization money. Charitable organizations should be concerned not so much with fund raising potential, or the cost-benefit ratios of their fund raising departments, the internal measurement of efficiency, but with the impact those private dollars will have on the perceived effectiveness of the institution as measured by the external and internal groups that are concerned with its activities (consumers, employees, legislators, and other donors).
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