The role of operational expenditures and misalignments in fundraising for international humanitarian aid

• Published date: 01 June 2020
• Author: Laura Turrini,Maria Besiou,Dominik Papies,Joern Meissner
• Date: 01 June 2020
• DOI: http://doi.org/10.1002/joom.1072

RESEARCH ARTICLE

The role of operational expenditures and misalignments

in fundraising for international humanitarian aid

Laura Turrini

1

| Maria Besiou

2

| Dominik Papies

3

| Joern Meissner

2

1

EBS Business School, Oestrich-Winkel,

Germany

2

Kühne Logistics University, Hamburg,

Germany

3

Eberhard Karls Universität Tübingen,

Tübingen, Germany

Correspondence

Laura Turrini, EBS Business School,

Burgstr. 5, 65375 Oestrich-Winkel,

Germany.

Email: laura.turrini@ebs.edu

Handling Editor: Jose Holguin-Veras

Abstract

Funding for international humanitarian aid falls far behind demand for disaster

response, hampering the operations of international humanitarian organizations

(IHOs). One remedy to close this gap is to increase the effectiveness of fundraising

activities for IHOs. This remedy means spending as little as possible in fundraising

activities but, at the same time, still receiving sufficient donations to implement

disaster response programs in response to the needs that arise when disasters occur.

We contribute to the literature by theoretically developing and estimating a concep-

tual framework that links donation behavior to the operations that IHOs aim to

pursue; the framework incorporates operational costs communicated in appeals,

fundraising efforts, and media attention. We argue that effects are not homogenous

across disasters but that IHOs can leverage public attention and disaster and appeal

characteristics, such as operational costs, to increase donations. We test the frame-

workonauniquedatasetfordisasterresponse programs operated by the Interna-

tional Federation of Red Cross and Red Crescent Societies (IFRC), covering

174 disasters to which the IFRC responded between 2010 and 2017.

KEYWORDS

donations, fundraising, humanitarian operations, IFRC, media attention, operational

expenditures

1|INTRODUCTION

When countries are struck by large disasters (e.g., the

Ebola Virus Disease in 2014 in Guinea, the 2013 Haiyan

typhoon in the Philippines, the 2010 earthquake in

Haiti), international humanitarian organizations (IHOs)

immediately respond to implement disaster response pro-

grams. These programs are usually multimillion-dollar

programs (e.g., the International Federation of Red Cross

and Red Crescent Societies –IFRC –, the organization

that we study, asked donors for more than 85 million

Swiss francs to respond to Typhoon Haiyan) and typically

cover a broad range of activities, including procurement,

asset management, and logistics (van Wassenhove, 2006).

While large IHOs usually rely on special emergency

funds to finance the initial disaster response, they imme-

diately start raising donations to fund their relief opera-

tions, indicating that the IHOs reach out to many

potential donors who might have only limited informa-

tion about the relief programs that they are asked to

donate to (Parsons, 2007); for example, potential donors

might not be fully aware of the severity of the disaster,

the required assistance, and the efficiency of the IHO.

This limited information creates an information

Received: 27 March 2018 Revised: 30 September 2019 Accepted: 5 November 2019

DOI: 10.1002/joom.1072

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any

medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

© 2019 The Authors. Journal of Operations Management published by Wiley Periodicals, Inc. on behalf of The Association for Supply Chain Management, Inc.

J Oper Manag. 2020;66:379–417. wileyonlinelibrary.com/journal/joom 379

asymmetry problem (Akerlof, 1970; Parsons, 2007). Further,

decision makers might lack the motivation, opportunity

and ability to process all relevant information (Siemsen,

Roth, & Balasubramanian, 2008), for example, because they

are approached by multiple IHOs for support of numerous

programs. To address the information asymmetry and

increase the motivation, opportunity and ability to process

relevant information, many IHOs rely on fundraising activi-

ties. In these fundraising activities, defined as “the manage-

ment of relationships between a charitable organization

and its donor publics”(Kelly, 1998, p. 8), IHOs reach out to

potential private and institutional donors

1

through advertis-

ing and other activities (e.g., electronic communication and

phonecalls).Hence,thegoalof these activities is to raise

donors' awareness of specific programs and to convince

them to contribute to a given appeal. To this end,

fundraising activities critically rely on budget appeals,

which are documents that describe the impact of the disas-

ter and the organization's plan to respond. Essentially, in

these appeals, IHOs outline in detail the activities and the

total amount of money required.IFRC,seekingfulltrans-

parency, includes a detailed description of the categories

that they are planning to spend the money on, such as oper-

ational expenditures (logistics, asset management, and pro-

curement of food or shelters

2

) or other types of

expenditures, such as support or indirect costs.

A key challenge that IHOs face is that demand for

humanitarian aid exceeds the donations that they receive

(Jahre & Heigh, 2008; Wakolbinger & Toyasaki, 2011), and

this gap is growing (Stumpf, Guerrero-Garcia, Lamarche,

Besiou,&Rafter,2017).Further,theamountofdonations

that IHOs will receive to cover expenditures following their

appeals is uncertain. Against this background, it is impor-

tant to understand the impact of factors that affect the dona-

tions that IHOs receive, such as the fundraising and budget

appeal characteristics (Burkart et al., 2016). The relevance of

this challenge is underscored by the feedback that we have

received in discussions with the IFRC management. Its

managers have emphasized how the topic of this investiga-

tion is critical, given that there is an increasing push to

become more strategic in their fundraising allocations: “it

wouldbeimportantforustomakemoreconsciousdeci-

sions about fundraising”, stated an IFRC employee from the

finance department during one of our visits.

A core tenet of this article is that the structure of the

budget put forward in the appeal is a signal of the priori-

ties pursued by the IHO in a given program. These priori-

ties in turn might or might not be in line with the donors'

preferences regarding the types of operations that should

be run by IHOs, affecting the amount of donations that

the IHO receives. For example, Eftekhar, Li, van

Wassenhove, and Webster (2017) found that operational

performance (the ratio of the total operational cost spent

on projects to the total expenditures) significantly affects

institutional donations. At the same time, according to

van Wassenhove (2006), donors seem to show a lack of

understanding of the importance of specific operational

activities, such as logistics or asset management, while in

contrast, seeming to be eager to fund procurement-

related activities. An empirical assessment of this conjec-

ture, however, is still lacking, and Starr and van

Wassenhove (2014) noted that the interplay between

fundraising and operations represents an important

research topic. Therefore, in our first research question,

we consider the role of these three key operational expen-

ditures included in budget appeals:

RQ1 How do specific operational priorities and the

corresponding expenditures affect donations to disas-

ter response programs?

IHOs, to efficiently allocate fundraising resources,

must have reliable knowledge about what renders

fundraising more or less effective, yet surprisingly little is

known about the factors that affect the effectiveness of

IHOs' fundraising activities (Burkart et al., 2016).

Previous research has focused primarily on the direct

effects of fundraising activities (e.g., Eftekhar et al., 2017),

butithasnotsystematicallyanalyzedthefactorsmoderating

the effects of fundraising activities (i.e., making fundraising

more or less effective). One critical process that coincides

with IHOs' fundraising activities is the public attention that

disasters receive. The literature has used the term “CNN

disasters”for disasters that garner a large amount of media

attention (Starr & van Wassenhove, 2014). This media atten-

tion increases donors' awareness (Besiou, Pedraza-Marti-

nez, & van Wassenhove, 2014) and offers a large amount of

visibility, which both donors (ECHO, 2009) and IHOs

(Wakolbinger & Toyasaki, 2011) desire. While the literature

has provided some evidence of a relationship between dona-

tions and public attention (Eftekhar et al., 2017; Waters &

Tindall, 2011), it is unclear towhatextentpublicattention

actually helps IHOs in their fundraising activities, that is,

whether IHOs can leverage public attention to maximize

funding or to minimize fundraising efforts.

Similarly, previous research has not assessed how IHOs'

operational priorities, which we described above, hurt or help

fundraising effectiveness. This issue is particularly important

against the background that better tailored fundraising poli-

cies could increase fundraising effectiveness without increas-

ing costs (Ryzhov, Han, & Bradi

c, 2016), therefore allowing

IHOs to allocate more resources on their operations. In this

article, we study whether IHOs can leverage the interplay

between fundraising and operational priorities to maximize

donations. To the best of our knowledge, this topic has not

been studied before, leading to our second research question:

380 TURRINI ET AL.

RQ2 Which appeal (e.g., share of operational costs) and

disaster characteristics (e.g., media attention) moder-

ate the impacts of fundraising activities on donations

to disaster response programs?

To complement our analysis of operational activities

and the interplay with fundraising, we seek to understand

how IHOs set their fundraising budgets. Previous research

has rarely analyzed the potential factors that impact this

decision, although it might inform us regarding the extent

to which the behavior of the IHO and potential donors are

aligned. Hence, our third research question is:

RQ3 To what extent do the operational priorities and the

disaster characteristics affect the fundraising budget?

To address our research questions, we propose a con-

ceptual framework of how operational expenditures

impact fundraising and donations and how they interact

with IHOs' fundraising activities and public attention.

We focus on institutional donors, which make up approx-

imately 75% of all donations to humanitarian aid world-

wide (Global Humanitarian Assistance, 2017) and 99% of

the donations of the IHO that is focal to our study. In

addition, previous research has emphasized that institu-

tional donors consider different factors when making

their funding decisions (Eftekhar et al., 2017;

Nunnenkamp & Öhler, 2012). We test our empirical

framework using the case of the International Federation

of Red Cross and Red Crescent Societies (IFRC).

Through this research, we contribute to the humani-

tarian operations literature by studying the impacts of

three key operations types and their corresponding

expenditures on donations and by assessing how

fundraising expenditures, media attention, and the share

of operational expenditures interact in their effects on

donations. Additionally, we shed some light on how

IHOs set the levels of their fundraising efforts depending

on the appeal and disaster characteristics.

The remainder of the article is organized as follows. We

present our framework and hypotheses in Section 2.

Section 3 describes the data and methodology used. Here,

we also outline our identifying assumptions. We then pre-

sent the results of our analysis in Section 4 and discuss our

conclusions and directions for further research in Section 5.

2|CONCEPTUAL FRAMEWORK

We propose a conceptual framework of how humanitar-

ian organizations and donors respond when a disaster

occurs. Figure 1 displays the framework, and it highlights

two key processes (displayed in bold font in the frame-

work) that involve IHOs and donors: (a) when a disaster

occurs, IHOs decide on the composition of their budget

appeals and, in particular, also their fundraising budgets;

and (b) in response to these fundraising activities, donors

decide whether and to what extent to support a given

disaster response program.

This article seeks to shed light on these processes and

their relationships. Our discussion commences with

understanding the drivers of donations.

2.1 |Drivers of donations

Humanitarian organizations depend on donations to

operate their programs. Several conceptual studies have

provided insights into what can drive donations in the

context of disaster response. Burkart et al. (2016) con-

ducted a literature survey on the funding-humanitarian

supply chain interface; one of their conclusions is that

more empirical research is needed to determine the

drivers of donors' behaviors.

Donations

Logistics

Procurement

Operational

expenditures

Media attention

H7 (-)

Fundraising effort

Asset

H2 (+)

H3 (-) H4 (+)

H5 (-)

H1

Procurement >

Logistics/Assets*

H6

Procurement >

Logistics/Assets*

(-)

H

Control variables

indicates that the effect of procurement is expected to be stronger than the effect of logistics or assets, respectively

indicates an interaction

*

FIGURE 1 Conceptual

framework

TURRINI ET AL.381