Arts Donors Not Impressed By Organizational Efficiency

September 13, 2016       Andy Segedin      

Are supporters of arts and culture organizations driven more by organizational performance or fundraising efficiency? The answer might be neither, according to a report conducted by researchers Mirae Kim of University of Missouri and Cleopatra Charles of Rutgers University – Newark.

Kim and Charles based their report, published in Public Performance and Management Review, on 2013 Cultural Data Project data, which is made up of organizations from 11 states and the District of Columbia. The roughly 1,800 organizations in the dataset that had at least two years worth of observations were used, with numbers cut down further based on use of audited financial reports and organizations that did not have figures for key data sets such as expenses, revenue and website visits.

The researchers entered with two hypotheses. The first, that performance outcomes including total number of event attendees, total website views and number of free tickets – accessing diverse audience sets – led to donor support. The second was fundraising efficiency, or cost to raise a dollar, resonated with donors.

Neither hypothesis found much support in the data, however.

“Philanthropic culture has long emphasized greater accountability of nonprofit organizations, often creating strict measures that can impact how a nonprofit operates,” said Kim, an assistant professor at the University of Missouri’s Truman School of Public Affairs, via a release. “However, we found that arts nonprofits that perform better according to philanthropic standards are not necessarily rewarded with more contributions from individual donors.”

Increased attendance and web traffic, other variables remaining constant, actually led to decreases in donations, according to the report. A 10-percent geometric mean increase in attendance, for instance, resulted in a contributions decrease of 0.72 percent the following year – driven primarily by decreases in foundation support as opposed to individual or corporate giving. A theoretical explanation offered in the report posits that improved performance might make an organization appear less in need of support.

Financial efficiency results, too, provided results contrary to common perception. A 10-percent decrease in efficiency — the fundraising cost need to raise a dollar – resulted in a 0.72% increase in contribution amounts — a result, again, driven primarily by foundation giving behaviors.

“This finding is counterintuitive and provides no support for the prevailing assumption that donors view high costs of raising funds negatively,” the report reads. “The results show that donors to arts and cultural nonprofits, especially foundation funders, reward rather than punish nonprofits that spend more to raise a dollar of donation.”

The authors note in the report that the findings are limited in number and scope to a selection of arts and cultural organizations and that it is based on the assumption that donors make informed decisions about which organizations to support.

Further research, they say, is needed to examine the relationship between information donors are given and regard to performance outcome measures. “…the findings of this study reiterate that the nonprofit sector desperately needs further empirical research to help it resolve some of the philanthropic culture’s expectations that hamstring individual organizations’ efforts to succeed,” the study states.