Nonprofit Fundraising Strategy and Public Policy Ethics

Introduction and Strategic Framework

The role of the nonprofit organization has transformed in many ways as society and its inherent values also change and evolve. The ability to create an organization with purpose and a sense of greater duty is what makes the nonprofit sector such a unique and important facet of society. The purpose of this essay is to address a situation in which a recommendation is needed to determine the best approach to raising funds for a hypothetical nonprofit agency.

The background of this case involves selecting between two fundraising methods to improve and increase community services. This general situation is encountered by most nonprofit organizations and provides a solid foundation for discussing ideas and principles inherent within the public sector. The first option imposes a user fee on individuals who currently request assistance. The second option involves planning a fundraising dinner targeting the affluent community, including politically connected individuals and several members of local government.

To help determine the best approach, this essay suggests that, if possible, a combination of both approaches is preferable. In the absence of that option, however, it is best to pursue Option 2 — the fundraising dinner. To explain this recommendation, this essay compares and contrasts the two options across four qualities integral to nonprofit organizational success: budgetary considerations, political aspects, the public's perspective, and ethical alignment.

Before addressing the specifics of this situation, it is necessary to introduce the fundamental importance of strategic thinking in nonprofit management. The idea of strategic outlook within the nonprofit sector must be addressed by all members of the budgetary staff in order to establish a correct framework within which to operate and explore.

Frumkin and Kim (2001) elaborated on the importance of strategic positioning and its financial benefits. They wrote: "For organizations that work with disadvantaged populations or that seek to provide a service for free or at a subsidized price, contributed income is often a critical ingredient in their financial strategy. Today, there are few entirely donative or entirely commercial nonprofit organizations. In the face of a tight market for contributions, many nonprofits have attempted to alter and diversify their funding bases from predominant reliance on contributions toward a more balanced approach that includes earned income."

This evidence suggests that a combination of both options may work best in this particular situation, but only if the strategic outlook dictates that such a strategy can be accepted and practiced throughout the organization. While Option 1 represents a bottom-up approach, Option 2 reflects a top-down approach in which funds flow downward toward the intended population. It is this budget director's view that a synthesis of the two options would be preferable; however, in the absence of such strategic guidance, Option 2 remains the better choice for raising funds while maintaining allegiance to organizational values.

Regardless of which option is selected, the strategic outlook of the nonprofit organization is paramount. Subtasks and missions must reflect the purposes implied in the organization's creation and function. Nonprofit management differs fundamentally from other sectors in that these purposes guide the larger strategy — not merely the act of raising funds as a solution to a problem.

Budgetary Considerations

Fiscally, Option 2 provides greater budgetary flexibility for the aims of the organization. As budget director, it is my intention to look after both the short-term and, more importantly, the long-term well-being of this organization. By directing fundraising efforts toward the more affluent and politically connected, it becomes clear that a higher ceiling exists and that more opportunities may arise to grow the organization's efforts in more economical and efficient ways.

Bray (2005) suggested that individual supporters can provide a wealth of resources in a more financially sound manner than attracting grant or government money. He wrote: "From a practical standpoint, recruiting individual supporters is particularly worthwhile, because their donations come with very few strings attached. While a grant from a foundation or the government may yield your organization a lump sum of tens or even hundreds of thousands of dollars, such grants can come with enough restrictions to significantly hamper your work and paperwork requirements that you may find gobble up precious staff time." Fewer administrative burdens result in a more economical and financially fertile organization — one that can maneuver with greater freedom, choice, and creativity.

While both options seek to attain resources from individuals in some fashion, Option 2 is still preferable due to the flexibility it affords donors who simply wish to give without further obligation. Option 1 inherently attaches more administrative complexity to the operation, as service recipients influence how resources are managed and distributed. While this collective ideal has its merits, it is not the most economic manner of operating a nonprofit of this type.

That said, financial considerations are only a portion of the larger picture. Kaplan (2001) reinforced this point: "Success for nonprofits should be measured by how effectively and efficiently they meet the needs of their constituencies. Financial considerations can play an enabling or constraining role, but will rarely be the primary objective" (p. 353).

The recommendation of Option 2 rests heavily on the political dimensions of both this organization and the general nature of public management and philanthropy. Organizations are inherently political, and each organization's success depends on the ability of its leadership to align objectives and goals with the political forces that provide supplemental support toward those ends.

Political Aspects of Fundraising

By hosting a fundraising event, Option 2 operates on sound and reasonable assumptions. Higgins and Lauzon (2003) suggested that the event-based fundraising approach is prudent in situations like the one this organization faces. They wrote: "It is often in the preparation of events, as well as participation in them, that personal networks are enhanced and a sense of community engendered. Because nonprofit organizations serve to connect citizens and organizations within a community, successful events can facilitate a celebratory function, promote social cohesion and inclusion for volunteers, staff and participants, and bring together a cross section of the community on behalf of an important community purpose" (p. 363).

The inclusion of government representatives within the fundraising event adds another dimension in favor of Option 2. Political partnership as a means of achieving nonprofit aims is well-documented. While Option 1 addresses the politics of the individual seeking services, this scattered approach is not efficient. Engaging one or two state senators in a focused and direct presentation is a better use of political resources than the diffuse requirements inherent in Option 1.

Option 2 is also better aligned with research on why people give to nonprofit organizations. People contribute for various reasons: to meet critical societal needs, to give back in appreciation, out of spiritual conviction, or to achieve personal results such as tax benefits or social recognition. Vesterlund (2006) noted that "a number of factors may reverse the prediction that an increase in a donor's contribution causes those of others to decrease. In particular, the prediction is sensitive to social norms, the extent to which we may interact with the donors again, the characteristics of the nonprofits' output, the benefits from the giving, the uncertainty regarding the quality of the charity, and the status of the contributors" (p. 573). Political awareness of this environment is therefore key to achieving fundraising success.

Option 1, while overall deficient in comparison to Option 2, appears to resonate more strongly with the quality of citizen participation and public perception. As noted earlier, a combination of both options is preferred in the larger scheme of things. Option 1 does not meet the full range of qualities required for organizational success the way Option 2 does. In this dimension, however, the public does benefit from participating in their own empowerment and contributing directly to their own challenges.

Citizen participation may be defined in several ways, such as paying taxes and obeying laws. Voluntary participation that transcends the normal duties of citizenship creates a sense of community that has concrete, practical benefits and can positively impact the community as a whole. By involving the community in the budgeting process, this sense of togetherness can be amplified beyond what Option 2 alone can achieve.

Ebdon and Franklin (2006) suggested that, although the study of citizen participation in nonprofit budgeting remains limited, there are benefits to developing models that examine the relationship between citizens and their participation in such organizations. They wrote: "Participation can be very useful in educating the public about key trade-offs and gaining valuable input from citizens about their priorities and preferences. Working with them to make these connections encourages citizens to participate in a more knowledgeable fashion rather than simply demand that their fire station or library remain open without tax increases or service cuts" (p. 444).

Public Policy Case: Electronic Waste Legislation

To best understand what this scenario presents, it is necessary to identify and discuss all the important issues in this case before arriving at a clear conclusion about the appropriate next steps. By gathering all relevant information and weighing it within the larger context, a sound public policy response should emerge.

The interdisciplinary nature of public administration underlies the challenges faced by any legislative initiative. Legal, political, business, and economic considerations are all important factors in maintaining the balance that creates a harmonious environment — and whose disruption causes stress, contempt, and aggression. The hidden dimensions of discretionary powers also create a gray area within public administration that resonates strongly in this case.

Dahl (1947) recognized this problem early on, explaining that "one might justifiably contend that it is the function of a science of public administration, not to determine ends, but to devise the best means to the ends established by those agencies entrusted with the setting of social policy" (p. 3). Another way of framing public policy is that it is merely a process or cycle of events, not the endgame of any particular goal or objective. Understanding public administration from this vantage point establishes the lens through which the aforementioned problem must be examined.

The specific problems described in this case require a policy analysis to help derive an appropriate response to the negative circumstances arising from the recycling program. A practical approach to policy analysis begins by identifying the problem. The harm occurring in the developing nation to which waste is being shipped is indirectly creating political problems domestically. The social pressure to become environmentally friendly has displaced the resulting harm onto the workers of a poorer country who voluntarily perform this work.

In conducting a policy analysis, it is also necessary to understand where loyalties and duty reside within the context of the organization and its public mandate. Walters et al. (2000) explained that "a persistent criticism of policy analysis is that it undermines basic democratic institutions and processes by replacing public participation with expert analysis. Many decision makers shun broader participation because of the complexity of an issue or the cost, uncertainty and delay often associated with public involvement."

When determining the best decision in any policy analysis, the legislator must recognize who they represent and which interests are paramount. A useful guide here is Public Choice Theory. This theory applies the same principles economists use to analyze market behavior to the study of people's actions in collective decision-making. As Shaw (2002) explained: "Because legislators have the power to tax and to extract resources in other coercive ways, and because voters monitor their behavior poorly, legislators behave in ways that are costly to citizens. The emergence of public choice economics reflects dissatisfaction with the implicit assumption, held by Keynesians, among others, that government effectively corrects market failures."