New research challenges nonprofit advice on donor loyalty
Researchers from ESMT Berlin and the University of Colorado Boulder published findings in Production and Operations Management regarding how humanitarian organizations should manage their funding sources.
Focused groups need new donors
The study analyzed twenty years of grant data covering more than 3,300 humanitarian nonprofits. Focused organizations concentrating on a single service saw each additional new donor linked to about 3% higher annual funding. The change amounted to approximately $190,000 for a group that receives the typical annual sample average of $5.9 million. Narrow scopes leave these groups exposed when donor priorities shift away from their specific services.
Diversified groups benefit from stability
Diversified nonprofits running several programs simultaneously faced higher coordination costs but gained flexibility across different activities. For them, the same shift in donor mix was associated with about 3% lower funding overall. Stable donors help keep these coordination costs low for organizations managing education and health programs. Interviews with nine fundraising managers worldwide confirmed that long-term donors manage the complexity of running many programs.
Context of shrinking aid budgets
The findings arrive as USAID shuts down and nations like the U.K., France and Germany cut humanitarian aid budgets. In this vital period, charities fight more fiercely than before for a diminishing fund. Managers described adapting their fundraising approach rather than changing their core services to attract necessary money. The researchers advise starting with the organization's own profile before deciding on donor strategies.
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