Does Fundraising Professionalization Pay?

• DOI: http://doi.org/10.1002/nml.21212
• Date: 01 September 2016
• Published date: 01 September 2016
• Author: Markus Gmür,Diana Betzler

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N M  L, vol. 27, no. 1, Fall 2016 © 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21212

Journal sponsored by the Jack, Joseph and Morton Mandel School of Applied Social Sciences, Case Western Reserve University.

Does Fundraising

Professionalization Pay?

THE IMPACT OF ORGANIZATIONAL FUNDRAISING CAPABILITY

ON A CHARITY ’ S NET REVENUE FROM PRIVATE DONATIONS

Diana Betzler, 1 Markus Gmür 2

1 ZHAW, Zurich University of Applied Sciences , Switzerland

2 University of Fribourg , Switzerland

Although fundraising organizations in the third sector have gone through a progressive

professionalization process, it remains unclear whether this development has led to any

financial benefits. This article focuses on the question of whether or not it pays off for

fundraising organizations to invest in professionalization. The data for this study come

from 165 organizations representing 45 percent of the Swiss fundraising market. We first

propose the term “organizational fundraising capability” as a new construct for measuring

the degree of professionalization and rationalization in fundraising management. We then

analyze its relationship to overall net revenue from donations as well as the growth of net

revenue from donations. Our analysis indicates that, in addition to organizational size

measured by total revenue, revenue share from donations, and expansion strategy, fund-

raising capability makes an important contribution to explaining both an institution ’ s net

revenue from fundraising and the level of increase in net donations. The consequences for

the development of professionalization and rationalization in fundraising are discussed.

Keywords: charity , nonprofit , sector , fundraising , performance , organizational theory

TO WHAT DEGREE IS THE FINANCIAL SUCCESS of a fundraising organization dependent

on the level of its organizational capability to raise donations? Are charity organizations

that strategically and systematically plan fundraising based on market analysis and scientific

methods more successful than those working in a short-term, spontaneous, nonstrategic

fashion?

Despite persistent criticism of the progressive economization of the nonprofit sector and the

related fears that such organizations are losing their philanthropic and social orientation, in

Correspondence: Diana Betzler, School of Management and Law, ZHAW Zurich University of Applied Sciences,

Bahnhofplatz 12, Winterthur 8400, Switzerland. E-mail: bera@zhaw.ch.

We thank various people for their contribution to this project. Special thanks are given to the Swiss watchdog organization for donation-

collecting human service organizations (Foundation ZEWO) and Martina Ziegerer, ZEWO managing director, for the provision of the

data. Furthermore, we thank the School of Management and Law of the Zurich University of Applied Sciences (ZHAW) for their fi nancial

support.

Nonprofi t Management & Leadership DOI: 10.1002/nml

28 BETZLER, GMÜR

practice, the process of professionalization in fundraising management has continued (Hager,

Rooney, and Pollak 2002 ; Tempel 1999 ). Both large and small nonprofits at the international

and local levels are expanding in-house capacity and expertise to carry out systematic fundraising.

These issues increasingly receive attention in the research literature, as our literature review

shows. However, the empirical research literature does not provide any theory-based con-

structs that can be used to map out this multifaceted development of building-up fundraising

capability and to analyze the relationship to influencing and contributing factors. Therefore,

in this article, we attempt to provide such a concept of fundraising capability.

Fundraising capability is a variable designed to measure an organization ’ s capability and

effectiveness in increasing its donation revenue via systematic management of personnel

and processes. The development of the Fundraising Capability Index starts from research on

sociological professionalization (Abbott 1988 ; Caplow 1966 ) and from approaches of ratio-

nalization in organizational theory (Scott and Davis 2003 ; Weber 1980 ).

The first part of this article discusses the development of this concept. This is followed by

the empirical testing of the fundraising capability control variables as well as their effects on

successful fundraising, defined as donations net revenue and net growth of donations. The

empirical analysis is based on data collected from 165 fundraising organizations in Switzer-

land, which in total represent 45 percent of the Swiss donation market (US$1.7 billion).

Determinants of Fundraising Success

A number of determinants of fundraising success have been tested in the fundraising man-

agement research. These management determinants are based on widely accepted knowledge

regarding which systematic methods and competences achieve success in the private market for

donations. This includes, for example, having major donors on the boards of directors, involv-

ing experts in a consulting function, or applying specific fundraising techniques (Table 1 ).

In addition, Lu ( 2015 ) has found that a bureaucratic orientation determines the amount of

government funding. It is important to note, however, that thus far only isolated management

factors have been empirically tested.

However, we found no approach that measures the multifaceted phenomenon of fundraising

capability from the perspective of organizational development using management variables.

In our study, we embedded some of the management variables from Table 1 into a theory-

based, systematic, and integrative concept that measures an organization ’ s capability to carry

out successful fundraising.

Table 1 . Management Variables as Determinants of Fundraising Success

Determinants Studies

Presence of donors on board of directors Betzler ( 2015 ); Hodge and Piccolo ( 2005 )

Involvement of professional fundraising consultants Marudas and Jacobs ( 2010 )

Human resources (management, employees,

volunteers)

Callen ( 1994 ); Hager, Rooney and Pollak ( 2002 ); Proper et al. ( 2009 );

Ritchie and Eastwood ( 2006 ); Sieg and Zhang ( 2012 )

Formalization of structures and processes Chen ( 2009 ); Edwards ( 1994 ); Lu ( 2015 ); Siciliano ( 1996 )

Application of specific fundraising techniques Sargeant and Kähler ( 1999 )