Classifying and Comparing Fundraising Performance for Nonprofit Hospitals

By Erwin, Cathleen O. | Journal of Health and Human Services Administration, Summer 2013 | Go to article overview

Classifying and Comparing Fundraising Performance for Nonprofit Hospitals


Erwin, Cathleen O., Journal of Health and Human Services Administration


INTRODUCTION

As Pfeffer and Salancik (1978) stated simply, "The key to organizational survival is the ability to acquire and maintain resources (p. 2)." For the nonprofit organization (NPO), charitable contributions of time, money and materials are the defining source of revenue even though contributions may not be the principal or largest source of revenue (Moore, 2000). Smaller NPOs may rely upon donations to sustain their operations, while larger NPOs, such as universities and hospitals, typically use donations to enhance program offerings and to assist with capital projects among other uses. Among nonprofit hospitals, the strategic role of fundraising has become a more frequent topic of conversation for hospital executives and boards, with more hospitals considering charitable donations as "need to have" rather than "nice to have" (Haderlein, 2006a, 2006b) as a means for enhancing financial resources in an environment characterized by rising costs, shrinking reimbursements, and limited access to capital (Egger, 2000; Cleverley and Cleverley, 2005; Hall, 2005; Swayne, Duncan, and Ginter, 2006; McGinly, 2005, 2008).

Managing a NPO can be more difficult than running a profit-making organization (Drucker, 1978). For many nonprofits, fundraising is one of the most troublesome aspects of management (Oster, 1995). This is due in part to increasing competition among nonprofits (Kaplan, 2001), a lack of enthusiasm for fundraising among executive directors and board members (Oster, 1995), and the light it sheds on the struggle over the mission and future direction of the organization that is often exacerbated by the various stakeholder groups (Oster, 1995; Pfeffer and Salancik, 1974; Salamon, 1996). It is also difficult for nonprofit managers to determine how much of their resources should be allocated toward fund-raising activities (Thornton, 2006).

Fundraising is a management function unique to the NPO (Burlingame, 1997) that is seen by NPO chief executives as a crucial element of NPO management (Herman and Heimovics, 1989) and is a vibrant, innovative and highly professional industry (Andreoni, 1998). The use of fundraising staff is common, but much fundraising is still conducted by executive directors, volunteers and board members as well as by external entities like federated campaigns, support organizations and fundraising firms (Hager, Rooney, and Pollak, 2002). Researchers suggest that because of NPO heterogeneity, it is more useful to differentiate among different types of nonprofit organizations and to conduct comparisons within an organizational field among those that are similar in important ways (e.g., nonprofit hospitals) (Weber, 1994; Herman and Renz, 2008; Scott, 1995, 1987). For instance, Hager, Pollak, and Rooney (2001) found that organizations in different nonprofit sub-sectors had different overhead and fundraising efficiency suggesting that comparisons not be made across the nonprofit sector and that it is more useful to reduce the nonprofit sector to the sub-sectors.

Because industry and market averages are quite broad, identifying and comparing groups of organizations is useful for managers and scholars in strategy formulation and performance evaluation (Ketchen, Snow and Hoover, 2004; Marlin, Ritchie, and Geiger, 2009). This study proposes the use of organizational effectiveness and performance measures for fundraising to identify groups of nonprofit organizations as a method of classifying organizations for performance evaluation and benchmarking that can be more informative than commonly used characteristics such as organizational age and size. In essence, it will enable a comparison of "apples to apples" based on performance. Using cluster analysis, this study identifies performance groups of nonprofit hospitals and hospital foundations that are based on measures of productivity, efficiency and complexity, and develops a general profile for each cluster that can be utilized by practitioners for evaluating their organization and benchmarking with organizations with similar performance characteristics. …

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