Strategic Positioning and the Financing of Nonprofit Organizations: Is Efficiency Rewarded in the Contributions Marketplace?

This article addresses the question of whether operational efficiency is recognized and rewarded by the private funders that support nonprofit organizations in fields ranging from education to social service to arts and beyond. Looking at the administrative efficiency and fundraising results of a large sample of nonprofit organizations over an 11 year period, we find that nonprofits that position themselves as cost efficient - reporting low administrative to total expense ratios - fared no better over time than less efficient appearing organizations in the market for individuals, foundations, and corporate contributions. From this analysis, we suggest that economizing may not always be the best strategy in the nonprofit sector.