care, obedience, and loyalty relative to fundraising responsibilities.2 What are the tax benefits for the various types of gifts?
3 What must organizations do to comply with laws of international philanthropy, donor privacy, and confidentiality?
Application Exercises
1 Visit the NASCO website (www.nasconet.org.) to learn about applicable laws in your state relative to fundraising. Is your organization in compliance?
2 Review the federal laws that govern fundraising. Does your board review the IRS 990 form with its questions and schedules that disclose fundraising‐related information? Identify your organization's type: public benefit charity, supporting organization, member benefit organization, or private foundation. If your organization is a public benefit charity, does it pass the public support test? Does your organization comply with the rules for gift substantiation and disclosure?
3 Review a written acknowledgment that you received for a gift. Does it include all the required elements?
CHAPTER FOUR THEORY IN FUNDRAISING
By Ruth K. Hansen
Philanthropic giving has attracted many theorists, but research on fundraising has been less tied to theory. This chapter first discusses the role of theory in fundraising practice, and then examines several theories that have been used to explain aspects of fundraising.
After completing this chapter, readers will:
Understand how theory contributes to fundraising practice.
Be able to explain how fundraisers function as boundary spanners in open systems, and the dynamics of resource dependence.
Understand the implications of gift theory, reciprocity, and social exchange in the relationships among the donor and the organization, the organization's clients, and the fundraiser.
Appreciate the role of self‐identities, moral identities, and social identities in giving and the implications for fundraising.
Consider how fundraisers can use symbolism and principles of dramaturgy to help the organizations, clients, and causes resonate persuasively with donors.
Theory's Role in Fundraising Practice
Until recently, fundraising has primarily been learned through practice (Duronio and Tempel 1997). How can theory clarify and improve the practice of fundraising? And what is the role of theory more generally? Maxwell (2013) offered two metaphors for understanding how theory is more than abstraction. Theory can operate as a spotlight, isolating and highlighting facets of an idea (or a practice) or enhance understanding of that idea or practice. Theory can also provide a framework to organize thinking about complex ideas, processes, or systems. Collecting evidence without some idea of how it fits together results in a jumble. Theories can be the hooks on a wall that let us place each item in relationship to others and see patterns, which may similarly help people understand what is happening and apply those insights. Maxwell (2013, 49) called this second metaphor a coat closet.
Let's add a third metaphor. A collection of theories unattached to situations is like a closet full of clothes on hangers – each may be individually well crafted, but while they hang there, they are disconnected, not fulfilling their purpose. If piled on all at once, their purposes are muddled, the potential splendid function of each obscured by the indiscriminate invocation of all. The thoughtfully styled individual selects an item (or items) appropriate for the purpose. Similarly, a collection of theories is not enough, but the perceptive selection and application of a theory activates its functional value.
This chapter provides a “closet full of spotlights.” Rather than a single unified theory of fundraising, it draws on several theoretical approaches that offer diverse ways of thinking of fundraising, each of which may prompt examination of specific aspects and new insights about what we're doing.
Theoretical Approaches
The rest of the chapter introduces theoretical approaches that have been used to explain aspects of fundraising practice – what is happening, how it happens, and why. It begins by addressing macro systems theory, boundary spanning, and resource dependence. Next, it shows how gift theory and reciprocity apply to fundraising. Then, it describes the identification theory of care and how social identity theory contributes to philanthropic choices. Finally, it shows how a dramaturgical approach and symbolic interactionism can be helpful in understanding fundraising.
The Big Picture: Systems Theory, Boundary Spanning, and Resource Dependence
Systems theory provides a fundamental theoretical base for understanding fundraising (Kelly 1998; Tempel 1991). An organization that isolates itself from its environment can be considered a “closed system.” One that is influenced by social and economic trends and needs, and exchanges resources within its community is an “open system.” Simply put, charities do not exist in isolation. They exist within an environment and interact with that environment (Scott and Davis 2006). Typically, strong fundraising programs thrive in relatively open systems (see Chapter 11).
Individuals who raise funds for an organization function as boundary spanners, linking the organization with important resources in the external environment (Kelly 1998). Boundary spanners are essentially diplomatic liaisons who work to align the interests of those within and those outside the organization. Fundraisers seek to develop financial resources for an organization through cultivation, solicitation, and stewardship activities. They also listen to the interests and concerns of potential donors and look to find good linkages with the organization's mission. By interacting with potential donors on behalf of their organizations, fundraisers perform an important boundary‐spanning role.
Resource dependence theory explains why fundraising occurs and suggests some common organizational dynamics. The theory states that for organizations to survive, they must acquire necessary resources, and maintain their supply (Pfeffer and Salancik 1978). This means that organizations are not wholly autonomous in their financial decision‐making but rely on their environment for various resources. The greater an organization's dependence on voluntary contributions, the more volatile its revenue environment is (Carroll and Stater 2009), and the more likely it is to devote its time and personnel resources to developing financial resources (Heimovics, Herman, and Jurkiewicz Coughlin 1993; Hodge and Piccolo 2005; Nonprofit Research Collaborative 2015). This illustrates the importance of skilled fundraising.
Dependence on others leads to power considerations. When funding is scarce, the charity is more vulnerable to the demands of prospective funders, which may affect the organization's decision‐making autonomy. For instance, nonprofits that receive relatively high levels of government funding are less likely to have nonprofit boards that strongly represent their client constituents (Guo 2007). This dependence dynamic is also seen in an increasing focus on donor‐centered philanthropy, particularly for major donors (James III 2016c). If a donor (or grantor) is providing significant financial support, they may be keenly interested in affecting the design and administration of that program or the organization as a whole, and less attentive to the needs of the community or
