Case studies of Swedish Non-Profit

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Master Thesis

HALMSTAD

UNIVERSITY

Master's Programme in Strategic Entrepreneurship for International Growth with specialization in

International

Case studies of Swedish Non-Profit

Organization’s (NPO) fundraising process

-Adaptation of Balanced Scorecard Business Model for fundraising success

Independent Project in Business Administration, 30 credits

Halmstad 2020-05-31

Maitrayee Roy

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Halmstad University

School of Business and Engineering

Master's Programme in Strategic Entrepreneurship for International Growth with specialization in International Marketing

TITLE OF DISSERTATION

Master Thesis on

Case studies of Swedish Non-Profit Organization’s (NPO) fundraising process - Adaptation of Balanced Scorecard Business Model for fundraising success

Independent Project in Business Administration, 30 credits

Final Seminar Date:

May 26, 2020

Author:

Name: Maitrayee Roy

Supervisor: Professor Klaus Solberg Söilen

Examiner: Professor Ulf Aagerup

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Acknowledgements

The author would like to express their deepest appreciation to the supervisor professor Klaus Solberg Söilen for his valuable guidance and encouragement towards the completion of thesis paper. The author would also like to show her gratitude to Navid Ghannad, Susanne Durst, Hélène Laurell, Venilton Reinert, Svante Andersson, professors of Halmstad University throughout two years’ Master programme.

Finally, special thanks are given to parents and friends for their enormous support and inspiration.

Halmstad, May 2020 Maitrayee Roy

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Title: Case studies of Swedish Non-Profit Organization’s (NPO) fundraising process - Adaptation of Balanced Scorecard Business Model for fundraising success

Abstract

The purpose of this study to review of Business Model elements of Non-Profit Organization (NPO) to discuss non-profit marketing activities and fundraising performance indicators that contribute fundraising success. To prepare this paper, two Swedish non-profit organizations i.e. Sverige för UNHCR and Svenska Röda Korset has been chosen as the sampling organization. This paper is descriptive study, qualitative approach and case study method. Data is mainly collected from the annual reports and their official Websites. The literature review covers Business model elements concept by Drakulevski & Nakov (2014); The Business Model Canvas (BMC) by Osterwalder and Pigneur (2010); Building Block of Business Model by Osterwalder, A. (2004); Niven’s Modified Balanced Scorecard model for non-profit organizations by Kwokwah Yeung & Connell (2006); and the theoretical model of the relationship between marketing activities and the fundraising performance by Cacija, L.

(2014). The main findings of the paper are as follows:

• Proposed Fundraising Framework

• Nonprofit Marketing mix analysis.

• SWOT analysis.

• Nonprofit Marketing Implementation.

• Financial performance by ratio analysis.

The theoretical contribution of this paper is to show the interactions among different business model elements adapting with Balanced Scorecard model elements as success factors leads to marketing activities and fundraising key performance indicators of NPO. The practical contribution of this paper is to show key performance indicators measurement by ratio analysis that will be useful to managers, board members for their better strategic marketing decisions.

Lastly, an empirical verification of the proposed fundraising framework is recommended to analyze in other non-profit organizations in another countries and cultures for future research.

Keywords- Fundraising, Non-profit organization, Business Model Elements, Balanced Scorecard Model, Non-profit Marketing

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List of Tables

Table 1: Business Model Elements by various authors ... 5

Table 2: The four business model pillars ... 9

Table 3: Key performance indicators by Financial Ratios of the Nonprofit Sector ... 12

Table 4: Human Resource Management scenario of Sverige för UNHCR... 22

Table 5: Donor’s contributions to UNHCR ... 24

Table 6: Human Resource Management scenario of Svenska Röda Korset ... 26

Table 7: Donor’s contributions to IFRC and ICRC ... 28

Table 8: Key Performance indicators by Ratio analysis of Sverige för UNHCR ... 49

Table 9: Key Performance indicators by Ratio analysis of Svenska Röda Korset ... 50

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List of Figures

Figure 1: Balanced Scorecard performance system ... 7

Figure 2: Niven’s Modified Balanced Scorecard ... 8

Figure 3: Theoretical model of a relationship between marketing activities and the fundraising performance ... 11

Figure 4: Framework for the analysis (authors’ elaboration) ... 15

Figure 5: SWOT Analysis of Sverige för UNHCR ... 42

Figure 6: SWOT Analysis of Svenska Röda Korset ... 45

List of Charts

Chart 1: Sources of fundraising vs. amount of fundraising of Sverige för UNHCR (in SEK) (Year 2014-2018) ... 23

Chart 2: Sources of fundraising vs. amount of fundraising of Svenska Röda Korset (in SEK) (Year 2014-2018) ... 27

Chart 3: Days cash on hand in Liquidity ratios- Sverige för UNHCR ... 51

Chart 4: Months of Spending in Liquidity ratios- Sverige för UNHCR ... 51

Chart 5: Savings Indicator Trendline in Operating ratios- Sverige för UNHCR ... 52

Chart 6: Contributions and Grants Trendline in Operating ratios- Sverige för UNHCR ... 52

Chart 7:Fundraising Efficiency Trendline in Operating ratios- Sverige för UNHCR ... 53

Chart 8: Program Service Trendline in Spending Ratios- Sverige för UNHCR ... 53

Chart 9: Management and General Trendline in Spending Ratios- Sverige för UNHCR ... 54

Chart 10: Fundraising Expense Trendline in Spending Ratios- Sverige för UNHCR ... 54

Chart 11: Days cash on hand in Liquidity ratios- Svenska Röda Korset ... 55

Chart 12: Months of Spending in Liquidity ratios- Svenska Röda Korset... 55

Chart 13: Savings Indicator Trendline in Operating ratios- Svenska Röda Korset ... 56

Chart 14: Contributions and Grants Trendline in Operating ratios- Svenska Röda Korset ... 56

Chart 15: Fundraising Efficiency Trendline in Operating ratios- Svenska Röda Korset ... 57

Chart 16: Program Service Trendline in Spending Ratios- Svenska Röda Korset ... 57

Chart 17: Management and General Trendline in Spending Ratios- Svenska Röda Korset ... 58

Chart 18: Fundraising Expense Trendline in Spending Ratios- Svenska Röda Korset ... 58

List of Annexures

Annexure 1:Summary of Proposed Fundraising Framework ... 68

Annexure 2: Income Statement of Sverige för UNHCR ... 78

Annexure 3: Balance Statement of Sverige för UNHCR ... 79

Annexure 4: Income Statement of Svenska Röda Korset ... 80

Annexure 5: Balance Statement of Svenska Röda Korset ... 81

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Abbreviations

BMC Business Model Canvas BME Business Model Elements BSC Balanced Scorecard

BSBM Balanced Scorecard Business Model

FRII The Agency for Volunteer Fundraising Organizations ICRC The International Red Cross and Red Crescent Movement

IFRC The International Federation of Red Cross and Red Crescent Societies KPIs Key Performance Indicators

Mkr Million Kronor

NPO Non-Profit Organizations SEK Swedish Krona

SIDA Swedish International Development Cooperation Agency UNHCR United Nations High Commissioner for Refugees

WWII World War II

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1

1. Introduction

1.1 Background

The concept of Fundraising defines the activities of raising money with following up people or organizations with the purpose of supporting an aid on contributions of charity i.e.

education, health, shelter, microfinance, rights of refugees, etc. and providing with life-saving relief and creating solutions for a secured future. According to Hommerová & Severová (2019, p. 181) “Fundraising can be viewed as a systematic activity aimed primarily at raising financial resources for the activities of either an organization or an individual. From another point of view, fundraising can be viewed as a science that deals with the motivation to do good and the conviction of people that money is not everything.” Jungbok, H. (2015, p. 2) states “Fund-raising is one of the most important business tasks for nonprofit organizations in order to operate the organization. Among other things, segmenting the donor market is considered core marketing application area for fund raising- task. Several studies are found in the areas such as identifying the donor behaviors compared to that of non-donors, segmenting the donor market etc.”

In recent, the number of non-profit organizations (NPOs) increases at Sweden every year resulting in difficulties to raise the fund for functioning the charity activities in the long run.

The purpose of this study to review Business Model elements of Non-Profit Organizations (NPO) to discuss Swedish NPO’s non-profit marketing activities and fundraising performance indicators that contribute to fundraising success. The sources of fundraising of NPOs are important to understand the business model of NPOs, how it works in marketing area and contribute in NPO’s financial performance. Though there is no classification of fundraising sources in NPOs. Hommerová & Severová (2019) states that categorization of sources of funding of non-profit organizations is divided into three parts (i) Public funding (i.e. domestic sources (state administration, local authorities) and foreign sources (European Union; (ii) Nonpublic funding (foundations, corporate donations); and (iii) Donations from individuals (Income from the NGO’s own activities, the organization’s own activities, membership fees, income from lotteries and games of chance, advertising and public collections. Cacija and Najev (2013, pg-61) state “sources of funding can generally be divided into four main sources:

donations of individual donors, donations of profit entities, for-profit and non-profit foundations; income generated by own activities and income from the partnership with the private sector.” C. Batti (2014) found out two categories for sourcing of funds or resources (i) Conventional Individual philanthropy, Private foundations, corporate agencies, government and foreign development agencies; and (ii) Non-Conventional Means Membership fees, businesses, income-generating activities, Prizes/Awards.

This chapter presents the background of the relevance, originality and currency of the research questions based on prior literatures and articles to demonstrate the knowledge gaps i.e. the purpose of the thesis paper.

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2 In Sweden, Swedish Collection Control (Svensk Insamlings Kontroll) is a nonprofit association check on NPOs with 90 accounts on an annual basis, ensures standards of the collection and grants of public fundraising of NPOs. They also ensure public fundraising satisfactory with reasonable costs, appropriate marketing activities used in fundraising. ("Om Svensk Insamlingskontroll | Svensk insamlingskontroll", 2020) There are four hundred thirty-three (433) active Non-profit organizations under Swedish Collection Control in Sweden. Among them, some of the largest non-profit organization are Cancerfonden, UNICEF, Läkare Utan Gränser, UNHCR, Svenska Röda Korset and many others. ("90-konton | Svensk insamlingskontroll", 2020)

1.2 Problems identification and discussion

During for few decades, many researchers have provided theories on the corporate- NPO collaborations. There are no theoretical fundraising models that is considered one of the major activities of non-profit organizations. Besides, from the earlier research articles, it has not researched on the interfaces and the interaction between the different business model elements.

As Wirtz, B. (2016, p. 51) mentions “There is another area of research that has so far been neglected concerns actors & interactions in the context of business models.” Relating to the subject matter, this paper will discuss about interactions between Business Model elements of NPOs as fundraising success factors. Cacija and Najev (2013, p. 73) mentions “The problem with a lack of theoretical fundraising models and their adjustment with the known marketing theories prove the need for future researches which would explain the impact of marketing activities on fundraising success.” Another author Jungbok, H. (2015, p. 5) states “Among many other future research opportunities in nonprofit marketing strategies, the research for multinational charities can be the feasible research subject. What kind of marketing strategies nationally operated charities such as Red Cross or Organizations under United Nations (UNICEF etc.) use and how do they apply those same strategies to the different countries?

Another possible research could be what the elements to success in business venture are. In other words, when nonprofit organizations increase its income through profit making business venture, what is the key for the success of this venture.”

Based on the prior research investigation and problem identification, the following research questions can be discussed for understanding NPO’s non-profit marketing activities and fundraising performance indicators for the overall fundraising process:

RQ1. What are the essential success factors in the context of business models used in NPOs management practice?

RQ2. What are the non-profit marketing activities in fundraising carried out by NPO?

RQ3. What are the fundraising performance indicators contribute to the improvement of nonprofit strategic marketing?

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2. Literature review

The chapter presents the literature overview of Business Model of the Non-profit organizations, Business Model elements, Balanced Scorecard Model of Non-profit organizations, Fundraising Success Factors as interfaces and interactions of Business Model elements used in NPOs management practice, Marketing activities of non-profit organizations, and Fundraising success of nonprofit organizations. Furthermore, an overview of the theoretical Model of relationship between marketing activities and the fundraising performance has been presented. Finally, a new fundraising framework is developed to carry out the case analysis.

The literature review concentrates on works concerned with elements and components of Business Models related with Non-profit organizations (NPOs). A basic outline of the literature on Business Models has been highlighted to contextualize as review of the importance to understand essential success factors of Business Models used in NPO management practice.

For further studying of Non-Profit Organization’s (NPO) fundraising process through integration with non-profit marketing activities for effective donor orientation and long-term donor relationships, a balanced score card, is used to analyze the actors and interactions of the elements of the business model deriving the theoretical framework of essential success factors of Business Models. For deeper understanding, Business Model elements and components by Drakulevski & Nakov (2014); The Business Model Canvas (BMC) by Osterwalder and Pigneur (2010); Building Block of Business Model by Osterwalder, A. (2004) will be used to strengthen the subject.

2.1 Business Model elements of the Non-profit organization

The Business Model presents a conceptual framework showing how to organize the value creation of a company and ensure profitability. Business model is a vast thing presenting a detailed plan including mission, strategy, business process, customers, organizational structure, offering strategies, supply and chain procedures, operational activities and so on.

Business model is applicable both in profit and non-profit organizations. Many authors have been worked in this area earlier times. Regarding Business Model of non-profit organizations, Perić, M. et al. (2017) mentioned that business model is a presentation of process showing core value propositions for customers, precise value network configuration to provide that value to lead continuous sustainability. In fact, business model is a step-by-step process of the non- profit organization’s strategic choices for creating sustainability, contributing value within a value network (Drakulevski & Nakov, 2014; Wirtz et al. 2016; Perić, M. et al. 2017). By definition, Business Model elements are defined as standard parameters describing organizational role in planning and implementing in an integrated way both on the organizational and the departmental level in order to aim for proper determination and combination of relationship and inter-dependence of each actor’s interaction leading success factors of non-profit organizations. Drakulevski & Nakov (2014, p. 38) states “The fundamental logic of the business model is finding out the key value-adding resources and capabilities and integrating them in accordance with the organizational strategy, structure,

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4 systems and human resources.” The significance of business model elements can be understood by reviewing the previous research. To illustrate this significance, Perić, M. et al.

(2017) defined six identified major categories as business model elements through affinity diagram namely value proposition, value network, value capture, resources, processes, and strategic elements. These six categories are also the finding from the other literature provided by Drakulevski & Nakov (2014); Osterwalder, A. 2004; Osterwalder and Pigneur (2010).

Osterwalder, A. 2004; Osterwalder and Pigneur 2010 specified nine business model elements started with value proposition, target customer, customer handling/distribution channel, customer interfaces/relationship, value configuration, capability/ core competency, partner network, cost structure, and revenue model. The Business Model elements help to develop an overall business function in every stage. This applies to non-profit organization. Measuring essential success factors depends on the level of interactions of business model elements that are missing in earlier literature. However, from the theoretical perspective, to answer the essential success factors in the context of business models used in NPOs management practice, the elements of Balanced Score Card are aligned with Business Model elements for the purpose of showing the interfaces and the interaction between the different business model elements and components.

Table 1 presents definitions of business model elements provided by Drakulevski & Nakov 2014; Osterwalder, A. 2004; Osterwalder and Pigneur 2010.

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5 Table 1: Business Model Elements by various authors

No. Element of Business Model

Drakulevski & Nakov (2014, p. 38)

Building Block of Business Model by Osterwalder, A. (2004, p. 43)

The Business Model Canvas (BMC) by Osterwalder and Pigneur (2010, p. 16) 1 Value proposition “An overall view of the

company’s bundle of products and services.”

“A Value Proposition is an overall view of a company's bundle of products and services that are of value to the customer.”

“Value Propositions are based on a bundle of products and services that create value for a Customer Segment.”

2 Target customer “Segments of customers a company wants to offer value to.”

“The Target Customer is a segment of customers of a

company wants to offer value to.”

“Customer Segments are the groups of people and/or organizations a company or organization aims to reach and create value for with a dedicated Value Proposition.”

3 Customer

handing/distribution channel

“Various means of the company to get in touch with its customers.”

“A Distribution Channel is a means of getting in touch with the customer.”

“Channels describe how a Value Proposition is communicated and delivered to a Customer Segment through communication, distribution, and sales Channels.”

4 Customer

Interfaces/relationship

“Kinds of links a company establishes between itself and its different customer

segments.”

“The Relationship describes the kind of link a company establishes between itself and the customer.”

“Customer Relationships outline what type of relationship is established and maintained with each Customer Segment, and they explain how

customers are acquired and retained.”

5 Value Configuration “Arrangement of activities and resources.”

“The Value Configuration describes the arrangement of activities and resources that are

“Key Activities are the most important activities an organization needs to perform well.”

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6 No. Element of Business

Model

Drakulevski & Nakov (2014, p. 38)

Building Block of Business Model by Osterwalder, A. (2004, p. 43)

The Business Model Canvas (BMC) by Osterwalder and Pigneur (2010, p. 16) necessary to create value for the

customer.”

“Key Resources are the most important assets required to offer and deliver the previously described elements.”

6 Capacity/core competency

“Competencies necessary to execute the company’s business model.”

“A capability is the ability to execute a repeatable pattern of actions that is necessary in order to create value for the customer.”

7 Partner network “Network of cooperative agreements with other companies necessary to efficiently offer and commercialize value.”

“A Partnership is a voluntarily initiated cooperative agreement between two or more companies in order to create value for the customer.”

“Key Partnerships shows the network of suppliers and partners that bring in external resources and activities”

8 Cost structure “Monetary consequences of the means employed in the business model.”

“The Cost Structure is the

representation in money of all the means employed in the business model.”

“Cost Structure describes all costs incurred to operate a business model.”

9 Revenue Model “A way a company makes money through a variety of revenue flows.”

“The Revenue Model describes the way a company makes money through a variety of revenue flows.”

“Revenue Streams result from a Value Proposition successfully offered to a Customer Segment. It is how an organization captures value with a price that customers are willing to pay.”

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2.2 Balanced Scorecard Model of Non-profit organization

The reason of the inception of the balanced scorecard is to fulfill the purpose of designating, evaluating and measuring factors towards organization’s performance. As a matter of fact, the Balanced Scorecard model is the measurement tool of financial performance of an organization. Initially, Kaplan and Norton (1992) introduced this balanced scorecard model and presents a transformation framework from tangible assets to intangible assets. Moreover, this model helps to forecast the future financial performance projection (Chavan, 2009). The perspective Kaplan and Norton (1992) developed strategies for managing an organization’s intangible assets include customer relationships, innovative products and services, high-quality operational functions, skills and knowledge enhancement of the workforce, technological advancement and the optimistic organizational climate that encourages innovation, decision- making, problem-solving, and improvement. As Martello et al. (2016, p. 62) states “The Balanced Scorecard is based upon the cause-and-effect relationships of the financial and non- financial measures derived from the organization’s strategy.” Chavan (2009, p. 396) mentions

“A Balanced Scorecard is a format for describing the activities of an organization through a number of measures for each of the four perspectives.” Chavan (2009) illustrated a simpliﬁed balanced scorecard that is shown in figure 1.

Figure 1: Balanced Scorecard performance system

Source: Chavan (2009, p. 397)

It can be said that the balanced scorecard model of profitable organizations consists with financial, customer, internal business processes, and learning and growth provided by (Kaplan

& Norton (1992); Chavan 2009; Martello et al. (2016). But with changing time, Niven’s Balanced Scorecard model for non-profit organizations by Kwokwah Yeung & Connell (2006) introduced a framework applicable for non-profit organizations. Kwokwah Yeung & Connell (2006) has discussed Niven’s Revised Balanced Scorecard Model (2003) that is applicable for

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8 non-profit organizations. This model is focused on non-profit organizational customers and various stakeholders, i.e. donors, fund/service recipients, and volunteers. This model shows the relationships among five elements as illustrated in figure 2. The elements of the revised balanced scorecard are financial, customer, internal processes, and learning and growth is shown as follows:

Figure 2: Niven’s Modified Balanced Scorecard

Source: Niven’s modified BSC Model (2003) by Kwokwah Yeung & Connell (2006, p. 28) From literature perspective, this paper has been inspired from the theory of Niven’s modified BSC Model (2003) by Kwokwah Yeung & Connell (2006). To discuss about Strategy as balanced scorecard model, Kwokwah Yeung & Connell (2006, p. 28) mentions “Strategy is at the core of the scorecard system for non-profit organizations. Most non-profit organizations have a difficult time developing their strategies. Many statements of strategy amount to little more than detailed lists of programs, corresponding to their funding sources.” Financial is one the elements of balanced scorecard model. The financial element of Niven’s Revised BSC (2003) by Kwokwah Yeung & Connell (2006) put two prioritized questions i.e. (i) non-profit organization’s appearance to their shareholders; and (ii) Customer’s value addition while controlling costs. Another author, Martello et al. (2016, p. 68) states “In a not-for-profit organization the emphasis is significantly different from that of a for-profit organization. The financial perspective might include a maximization of funding from outside sources instead of profit, or maintenance of fiscal stability.” When talking to financial matter, customer becomes another important element in the balanced scorecard. Back to Niven’s Revised BSC (2003) by Kwokwah Yeung & Connell (2006), customer is seen an important element by thinking two major questions (i) Non-profit organization’s perspectives on customer; and (ii) Non-profit organization value profit-creation for customers. Martello et al. (2016) also defined about this element in his research work. Martello et al. (2016, p. 68) states “Customer perspective is defined as the strategy for creating value and differentiation from the perspective of the customer.” After financial and customer elements, the internal process gives a boost as another

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9 balanced score model element. In the internal process element by Niven’s Revised BSC (2003) by Kwokwah Yeung & Connell (2006), it is focused on what business process must NPO needs to excel to satisfy customers on budgetary constraints. Regarding internal process, Martello et al. (2016, p. 70) states “The internal process perspective involves the determination of the internal processes that will best affect the customers as well as the process improvements that will affect the financial objectives. In improving internal processes, there should be a connection between the overall strategy and the improvements. There should also be a determination of how the strategy is to be measured.” Lastly, in the employee learning and growth element by Niven’s Revised BSC (2003) by Kwokwah Yeung & Connell (2006), it tells about meeting ongoing demands. Martello et al. (2016, p. 70) states “The fourth category of the balanced scorecard is the learning and growth perspective, which has been identified as the foundation of any strategy. The learning and growth perspective involve a determination of employee capabilities and skills, technology, and a corporate climate needed to support a strategy. The human resources, technology and organizational climate must be aligned with the strategies within the other three perspectives giving the organization linkages among the four perspectives.”

As because this paper is focused on non-profit organizations. Niven’s revised balanced scorecard model has been adapted to integrate into business model elements.

2.3 Balanced Scorecard Business Model: Essential Success Factors as interfaces and interactions of Business Model elements used in NPOs management practice

There are two different models integrated and considered as fundraising success factors as interfaces and interactions used in NPOs management. Salgado et al. (2015, pg-270) mentioned “The Balanced Scorecard (BSC) stands as a reference in the strategy definition and orientation of an organization, being closely related to its business model.” Kwokwah Yeung

& Connell (2006, p. 26) claimed “Due to the non-profit nature of the social service sector, the financial focus of the BSC conflicts with the mission-oriented nature of the non-profits.”

Osterwalder, A. 2004 suggested a framework of four business model pillars based on Balanced Scorecard inspired by Balanced Scorecard approach by Kaplan and Nortan (1992) and Business Management literature by Markides (1999). Table 2 presents a framework addressing the four areas in a business model, Balanced Scorecard approach by Kaplan and Nortan (1992) and Business Management literature by Markides (1999).

Table 2: The four business model pillars Business Model

Ontology Osterwalder, A.

(2004)

Building Block of Business Model by Osterwalder, A. (2004)

Balanced Scorecard (Kaplan and Nortan

1992)

Business Management

literature by Markides (1999) Product Value proposition Innovation and

Learning perspective

What?

Customer Interface Target Customer Distribution Channel Relationship

Customer perspective Who?

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10 Business Model

Ontology Osterwalder, A.

(2004)

Building Block of Business Model by Osterwalder, A. (2004)

Balanced Scorecard (Kaplan and Nortan

1992)

Business Management

literature by Markides (1999) Infrastructure

Management

Value Configuration Capability

Partnership

Internal Business perspective

How?

Financial aspects Cost Structure Revenue Model

Financial perspective Source: Osterwalder, A. (2004, p. 43)

Chavan (2009, p.398) mentions “Each business unit in the organization develops its own balanced scorecard measures to reﬂect its goals and strategy.” The nature of the goal and strategy is different between profit and non-profit organizations. Hence, Niven’s modified Balanced Scorecard Model (2003) by Kwokwah Yeung & Connell (2006) for Non-profit organizations that has been adapted into business model elements i.e. Balanced Scorecard Business Model as key success factors in terms of NPO perspectives.

2.4 Marketing activities of non-profit organizations

Non-profit marketing activities depends on integration of proper workout of Balanced Scorecard Business Model. Non-profit marketing activities help to connect donor, volunteers and corporates towards the fundraising success. Cacija, L. (2014, p. 138) “The purpose of marketing activities in nonprofit organizations is to perform tasks necessary to achieve the desired exchange level with target markets, i.e. key stakeholders for the implementation of all nonprofit organizations in order to fulfil the mission and goals achievement with, certainly, successful fundraising included.”

In this paper, theoretical Model of relationship between marketing activities and the fundraising performance by Cacija, L. (2014) has been undertaken to answer the marketing activities in fundraising carried out by NPOs and the fundraising performance indicators contribute to the improvement of nonprofit strategic marketing. This theoretical model builds the relationship between marketing activities and fundraising performance of NPO. The non-profit marketing activities in fundraising is built up with three pillars, i.e. (i) analysis; (ii) planning; and (iii) implementation. At first, to do analysis of the non-profit marketing analysis, the marketing mix has been adopted. The marketing mix is the concept by Kotler, 1994 of analyzing 4 Ps- Product, Price, Place, and Promotion. Coming to non-profit marketing planning, SWOT analysis has been undertaken to conduct the case study analysis. Lastly, non-profit marketing implementation has been analyzed through observation of the marketing activities conducted by the selected NPO. In the non-profit marketing implementation, some authors worked on this digital fundraising namely Smith, C. (1999); Hart, T. (2005); Blery et al. (2010); Sargeant, A.,

& Shang, J. (2017); Yoo, S., & Drumwright, M. (2018). Social media as part of public relation in marketing activity is supported by work of the authors by Dolnicar & Lazarevski (2009); D.

Verciˇ cˇ et al. (2015); N.M. Lee et al. (2015); Čater, & Fux (2018).

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11 Related with the theoretical aspects for social media of NPO, Barbara Čater, & Patricia Fux.

(2018) illustrates the importance of Social media offering non-profit organizations a new, convenient, non-expensive, and wide accesses mode of communication to spread their messages, increase awareness and connect with donors, fundraisers, government agencies, and corporate organizations. In a way, social media is one of the recent marketing activities to strengthen relationships with existing donors, fundraisers, government agencies, and corporate organizations. D. Verciˇ cˇ et al. (2015) states that social media is the tools of public relations, as an appropriate marketing strategy by Non-profit organizations needs to nurture for developing a long-term donor relationship in the fundraising marketing activities. Additionally, another author Dolnicar, S., & Lazarevski, K. (2009) tells about the priorities of marketing activities for public relations that connects to develop the activity of image building/positioning. Regarding Event fundraising, main authors have been worked namely Webber, D. (2004); Inoue (2015); Sargeant, A., & Shang, J. (2017) talks about the donor’s donation intention is positively associated with non-profit organization’s event satisfaction, contributions, and belongingness at the event. An integrated theoretical model (Figure No. 3) Cacija, L. (2014) shows a dynamic approach between marketing activities and fundraising performance in NPO. This model starts with control and organizational learning. This drives NPO into marketing activities. Developing and maintaining long-term relationship with donors has been built up by various marketing activities through analysis, planning and implementation. Finally, this ends up with fundraising performance of the NPO. Cacija, L.

(2014, p.140) states “The main purpose of this approach is the creation of an integrated theoretical model and derived models of feedback, as a basis for future complete system dynamic modeling of the observed phenomena.”

Figure 3: Theoretical model of a relationship between marketing activities and the fundraising performance

Source: Cacija, L. (2014, p. 140)

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2.6 Fundraising success of nonprofit organization

After marketing activities, it becomes necessary to know the fundraising performance of NPO. The creativity, effectiveness and efficiency of marketing activities needs to be monitored and measured. Many authors have worked in this area and delivered their valuable thoughts into it. Hence, Cacija, L. (2014, p. 67) states “There are two approaches to the organizational assessment of fundraising performance: (i) Assessment of the financial perspective, related to the (relative) effectiveness of fundraising activities in the context of resources spent versus the amount of funds raised; (ii) Assessment of the relationships with key stakeholders, related to the efficiency of the organization and the rational use of funds, as perceived by the key stakeholders.” Assessment of financial perspective, ratio analysis, trend analysis, benchmarking can be acting as fundraising performance indicators contribute to the improvement of nonprofit strategic marketing. According to Bedia Atalay, Ali Haydar Güngörmüş, & Ender Boyar. (2017, p. 181) “The Effective and efficient management of non- profit organizations aiming at providing social benefit to the society, solving social problems and contributing to the welfare of the society is possible by obtaining and interpreting them correctly. Ratio analysis can be used for a healthy and reliable financial analysis. Ratio analysis is a common method used in measuring companies' financial performance.”

Ratio analysis results presents about Key Performance Indicators (KPIs). Hence, Cashwell, K., Copley, P., & Dugan, M. (2019, p. 52). States “Financial management standards help a not- for-profit monitor its budget, cash flow, resource utilization, and revenue sources.”

Furthermore, fundraising performance measurement of Non-profit organizations can be done by ratio analysis suggested by Chabotar, K. (1989); Bedia Atalay, Ali Haydar Güngörmüş, &

Ender Boyar. (2017); Cashwell, K., Copley, P., & Dugan, M. (2019). The following table 3 presents the formula of the ratio analysis used for key performance indicators of nonprofit organizations across of three categories i.e. Liquidity ratios, operating ratios and spending ratios:

Table 3: Key performance indicators by Financial Ratios of the Nonprofit Sector Key performance

indicators by ratios

Formula Definition

Liquidity Ratios

Days cash on hand : (Cash+ Cash equivalents) / [(Total expenses-

depreciation expense)/365)

Days an organization can depend on its cash and liquidity assets to fund operations

Months of Spending : (current assets-current liabilities+ temporarily restricted net assets)/ [(Total expenses-depreciation expense)/12]

Months of cash availability to cover their expenditure

Operating Ratios

Savings Indicator : (Revenue-Expenses)/Total Expenses

Measures an increase or decrease in the ability to add to its net assets.

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13 Key performance

indicators by ratios

Formula Definition

Contributions and grants

: Contributions & grants revenue / Total revenue

Measures other organization's support as the portion of total

revenue to operate funding activities Fundraising efficiency : Fundraising expenses/Total

contributions (Other than Government grants)

Measures how much a non-profit organization can provide revenue contribution from fundraising activities or expenses

Spending Ratios

Program service expense

: Program services expenses / Total expenses

Measures the spending relationship between program services expenses and total expenses

Management expense : Management and general expenses / Total expenses

Measures the spending relationship between management expenses and total expenses

Fundraising expense : Fundraising expenses / Total expenses

Measures the spending relationship between fundraising expenses and total expenses

Source: Cashwell, K., Copley, P., & Dugan, M. (2019, p. 54)

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14

2.8 Proposed Framework

Proposed Fundraising framework with adaptation of Balanced Scorecard Model into Business Model elements integration with non-profit marketing and financial activities for fundraising success.

This chapter provides an integrated theoretical framework which is developed on previously presented theoretical insights. The conceptual framework is created with the purpose to conduct analysis and answer the research questions of this thesis. The proposed fundraising framework is to understand the marketing practices by the Non-Profit Organization i.e. Sverige för UNHCR and Svenska Röda Korset, the case study method of this paper leading the ultimate output of the fundraising success. This framework is divided into two parts namely (i) Adaptation process and (ii) Tasks process in order to reach the fundraising success of a non- profit organization.

(i) Adaptation process

Each NPO has their specific mission and objectives. In order to reach the mission and objectives, the fundraising framework is proposed to adapt the Balanced Scorecard elements (BSC) into Business model elements (BME), combinedly is called Balanced Scorecard Business Model (BSBM). The unique thing of this model is to show the interfaces and interactions of Business Model Elements (BME). Logically, each business model elements interacts with each-other to reach the NPO mission and objectives. This interaction of each business model elements through Balanced Scorecard elements leads the Task 1: Marketing activities. Different relevant marketing activities develop and maintain long term relationship with donors. Proactive marketing activities leads donor orientation and retention towards a positive fundraising success. The fundraising framework is shown in figure no. 4.

In the model, the balanced scorecard business model 1 (BSBM1: strategy) is the first element where Non-profit organizations works on a plan of important various activities with having communication of customers. Related to this, the balanced scorecard business model 2 (BSBM2: Customer) consists with Target Customer (BME1), Customer handling/distribution channel (BME2), and Customer interfaces/relations (BME3) of Business Model elements. The interactions of Business model elements (BME1-BME3) moves forward to the next business model elements i.e. Value proposition (BME4), Cost structure (BME5) and Revenue Model (BME6). These business model elements are under balanced scorecard business model 3 (BSBM3: Financial). Keep this in mind, all the communications of Business model elements are two-way communication that means each element depends on other element’s functions.

As an interaction process, now, the interactions of Business model elements (BME1-BME6) moves forward to the next business model element i.e. Capacity/core competency (BME7).

This business model element (BME7: Capacity/core competency) is under balanced scorecard business model 4 (BSBM4: Employee learning and growth). This capacity interacts with the non-profit organization’s internal process. The balanced scorecard business model 5 (BSBM 5: Internal process) is adapted into Partner network (BME8). Therefore, it can be said that the balanced scorecard elements have been adapted into business model elements to clarify the interfaces and interactions as essential success factors.

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15 (ii) Tasks process

Task 1: the tasks process starts with marketing activities of NPO. In terms of non- financial goals, the marketing activities of NPO conducts with strategy, planning and implementation.

A detailed strategy, proper planning and timely implementation of marketing activities leads a developed and well-maintained long-term relationship with donors.

Task 2: In terms of financial goals of NPO, financial assessment is required to indicate an overall fundraising performance.

Fundraising key performance indicators determines strategic marketing decisions.

Figure 4: Framework for the analysis (authors’ elaboration)

Adaptation BSC into BME in NPO: Balanced Scorecard Business Model (BSBM)

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16

3. Methodology

This chapter illustrates on the relevance of chosen methods to answering the research question, the description of and arguments for the chosen methods. This applies to the selection method, data collection method, and analytical method to create awareness of the strengths and weaknesses of the chosen methods.

3.1 Research Philosophy

Fundraising denotes social interaction of others and try to determine the interactions, intentions, motives of others and it becomes vital for directing marketing activities. From this point of view, the marketing activities of Non-profit organization, can be understood as an ongoing interaction process where fundraising plays a vital role towards donor’s intention to donate i.e. development and maintenance long term relationship with donors. The relevancy of this research problem with an epistemological point of view as human beings i.e. organizations, donors as active, their interaction through websites creates a platform to create and re-create of their social reality. In this view, the aim of research problem is related to the dynamic social reality that needs to be analyzed, monitored, evaluated and understood from new perspectives.

The paper brings a fundraising framework that relates to theory development. The significance of theory development in organizational and management research is connected with building new theory, contributes a new idea in the publication process and encouraged by norms that enrich the field. The creation of theories and frameworks has limitations to illustrate empirical research in reality. As a result, the new theories can’t able to investigate core suggestions and the proposed theories fells into risk. Considering all these boundaries, the theory development, management and organizational research can put a contributing progress if concerned researchers dedicate more attention to theoretical refinement time to time. To do so, the research philosophy is to conduct research that identifies the boundaries and limitations of earlier theories and produce a new framework. Related to this, this paper addresses a new fundraising framework based on two concepts i.e. (i) Drakulevski & Nakov (2014); The Business Model Canvas (BMC) by Osterwalder and Pigneur (2010); Building Block of Business Model by Osterwalder, A. (2004) and (ii) Niven’s Modified Balanced Scorecard of Non-profit organizations by Kwokwah Yeung, A., & Connell, J. (2006). In a true sense, this framework is an integrated model of two prominent concepts towards marketing activities that eventually leads a developed and well-maintained long-term relationship with donors in order to progress theoretical aspects in Non-profit marketing management and Non-profit organizational research. Hence, the research philosophy of this paper encourages conducting qualitative research on two case studies to test the validity of the proposed fundraising framework.

3.2 Research Purpose

This paper is qualitative research on case studies of NPOs. The research purpose of this study is in-depth understanding of fundraising process and theory building on fundraising framework. Sachdeva (2009, p.182) states “The purpose of qualitative research is based on researcher immersion in the phenomenon to be studied gathering data which provide a detailed

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17 description of events, situations and interaction between people, things, providing depth and detail.”

3.3 Research Methods

As MOHAJAN (2018, p. 26) states “Research methodology indicates the logic of development of the process used to generate theory that is procedural framework within which the research is conducted.” The purpose of this study to review of Business Model elements of Non-Profit Organizations (NPO) to explore Swedish NPO’s non-profit marketing activities and fundraising performance indicators contribute fundraising success. As research method, this study is carried out through descriptive type of research. According to Habib et al. (2014, p.8) “Descriptive research is used to identify and obtain information on the characteristics of a particular problem or issue.” As Kuada, J. (2012, p. 42) states “The aim of descriptive research is to provide a description of a particular problem under investigation. That is, the project provides a clear picture of the issues investigated.”

3.4 Choice of Research Methods

The preference of reference methods is chosen through the qualitative method. The qualitative method is an analysis process to explore a social or human problem. In this paper, the research question tells about the essential success factors in the context of business models used in NPOs management practice, non-profit marketing activities in fundraising carried out by NPOs and the fundraising performance indicators contribute to the improvement of nonprofit strategic marketing denotes social problem. Kuada, J. (2012, p. 93) states “The term qualitative method is generally used to represent a wide variety of data collection methods.

These include ethnography, participant observation, in-depth interviewing, and conversational interviewing.” MOHAJAN (2018, p. 24) mentions “Qualitative research comprises of the following methods: logic, ethnography, discourse analysis, case-study, open-ended interview, participant observation, counseling, therapy, grounded theory, biography, comparative method, introspection, casuistry, focus group, literary criticism, meditation practice, historical research, etc.”

3.5 Data collection Methods

As data collection method, the data is collected to accomplish the output for the objective of the study. This study is descriptive and qualitative type of research. Therefore, secondary data is analyzed to develop the paper. The collection of secondary data has been analyzed sources of Websites of Non-profit organization, various research reports and articles are prepared by research scholars, universities, etc., books of various authors, handbooks, thesis, magazines, and newspapers, university online library, technical and trade journals, annual reports, public records and statistics, historical documents, and other sources of published information. The secondary data is gathered from various bibliographic databases (i.e. OneSearch). The reason of selecting OneSearch database due to it is a Halmstad University’s own online database that contains resources from Emerald, IEEE Xplore, Inderscience publishers, Francis Online, SpringerLink, Web of Science, Willy Online Library, and others. In a nutshell, secondary data is used in this paper as empirical data. Secondary data

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18 is collected through literature research through Scorpus, Web of Science, Google Scholar and Websites of NPOs.

3.6 Case Analysis

MOHAJAN (2018, p. 33) defines it as “A case study is usually a study of a single case or a small number of cases. Depending on the purpose of the study, the cases are quantitative or qualitative research; the researchers choose the design. These are in-depth examinations of people or groups of people. These are one of the first types of research to be used in the field of qualitative methodology. The case method has its roots in sociology and has been found to be especially valuable in practice-oriented fields, such as, management, public administration, psychology, history, education, and medicine.” Regarding benefits of single case study, the cost of conducting the research in non-expensive and time-consuming compared than multiple case studies. But at the same time, a researcher can conduct their analysis with accuracy using multiple case studies and develop a new qualified theory. The researcher develops an understanding of the exploring subject with multiple case studies. In this paper, two independent case studies approach has been utilized and represented by the Non-profit organization Sverige för UNHCR and Svenska Röda Korset. The reason for selecting these two case studies is due to the size of the organization, location of the NPO, the membership under Svensk Insamlings Kontroll, their success and international presence. The researcher considers that the results coming from a theory-testing case study to come into final conclusions. In this regard, MOHAJAN (2018, p. 34) states “Theory-testing case studies is defined as the studies that assess the validity and scope conditions of single or competing theories.” The validity of the selection of NPO is the time-period of involvement on the various market activities.

Moreover, it can be said that this case study can provide essential lessons learnt from their experience. Fundraising is a concept where a non-profit organization has developed and maintained relationships mainly with donors, fundraisers, private companies to carry out their marketing activities through websites, brand management and social media. The concepts of business model elements and balanced scorecards under Non-profit organizational culture is to give clarity and strengthen the solutions of the research problem. The business model elements by Drakulevski & Nakov (2014) consist with value proposition, target customer, customer handling/distribution channel, customer interface/relationship, value configuration, capacity/core competency, partner network, partner network, cost structure and revenue model.

Niven’s Modified Balanced Scorecard model for non-profit organizations by Kwokwah Yeung, A., & Connell, J. (2006) tells about mission, strategy, customer, employee learning and growth, financial, and internal process. The fundraising framework is drawn to integrate these two elements of two prominent concepts. This relates NPO marketing activities to lead fundraising performance.

3.7 Data Analysis

Habib et al. (2014, p.57) states “Descriptive analysis is used for collecting the demographic information of respondents and estimates their proportion in terms of frequency and percentage and mean and standard deviation. Inferential analysis is used for testing the research hypothesis, i.e.., null hypothesis and alternative hypothesis. Different statistical tools

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19 can be used for descriptive and inferential analysis. The most commonly used tools are Excel, SPSS (Statistical Package for Social Sciences), AMOS (Analysis of Moment Structures), and LISREL (Linear Structural Relations).” This is descriptive research, qualitative methodology and case study analysis. Data analysis has been conducted by the tool of Excel. Ratio analysis and Trend analysis is calculated by Excel in this paper.

3.8 Time Horizon

According to Sachdeva (2009, p. 177) states “Case study does not use large samples or a right protocol to examine a limited number of variables, case study methods involve an in-depth, longitudinal examination of a single instance or event: a case. They provide a systematic way of looking events, collecting data, analyzing information, and reporting the results. As a result, the researcher may gain a sharpened understanding of why the instance happened as it did, and what might become important to look at more extensively in future research.” This research paper maintains time horizon as longitudinal examination due to preference of case study method.

3.9 Extent to research interference

This paper focuses on case study analysis and tries to develop a conceptual framework.

This framework is developed by reviewing business model elements connected with marketing activities analysis and financial performance assessment. In terms of case study research interference, Sachdeva (2009, p. 177) states “Case study research means single and multiple case studies, can include quantitative evidence, relies on multiple sources of evidence and benefits from the prior development of theoretical propositions. Case studies should not be confused with only qualitative research and they can be based on any mix of quantitative and qualitative evidence. Single-subject research provides the statistical framework for making interferences from quantitative case-study data. The case study is a research approach, situated between concrete data taking techniques and methodologic paradigms.” In this paper, the statistical framework for qualitative case-study of two NPO’s data is taken secondary information from annual reports, official websites.

3.10 Ethical Issues

As ethical issues of using secondary data, Yardley et al. (2014, p.106) states “the feasibility of conducting a secondary analysis depends on the research goal, the type of data, and the availability of contextual information. The secondary analysis might help to evaluate generalizability of qualitative findings.” The data collection of the thesis has been conducted by information of secondary data i.e. is reliable, trustworthy, user-friendly and facilitates the purpose of the research question. The findings of ratio analysis and trend analysis are derived from the facts and figures of secondary data collection. The ratio analysis and trend analysis are analyzed in the tool of Excel with the prescribed formula. Therefore, there is no chance of biasness of data misinterpretation.

As Widdowson (2011, p. 32) mentions “Confidentiality is an issue in case studies, as large amounts of detail about the client's life may be published, thus compromising the client's anonymity. Sufficiently disguising the case without obscuring significant or important factors and details can be difficult. Ethical case study research involves inviting the client to read and

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20 comment on the finished case study, giving the client the opportunity to request that certain information be removed, and obtaining the client’s consent for the case to be published.”

Overall, it can be said that the data collection is based on available information that is provided by organizations and no misinterpretation of any facts and figures in the results of this research.

This research has no ethical issues about the use of data from websites and no harm to the non- profit organizations.

3.11 Validity

This thesis paper has been prepared with a logical flow from the research questions to the conclusion so that the reader can understand the importance of conducting this research.

The first step in this research has been conducted by gathering knowledge through websites about the condition of Swedish Non-profit organizations. In parallel, literature review has been studied to support the concerned topic of this paper. This helped to construct the research questions to fulfill the purpose of the paper. It is a suitable way to identify connections relationships business model elements adapted the elements from balanced scorecard model can provide a more sophisticated integrated framework for effective donor orientation and long-term donor relationships on the fundraising success. According to Sachdeva (2009, p.

177) “Random samples emphasizing representativeness will seldom be able to produce this kind of insight; it is more appropriate to select a few cases chosen for their validity.” Mark Widdowson. (2011) also found out that case selection is conducted by following two strategies namely (i) random selection and (ii) information-oriented selection. The issue of case selection for this research paper held on random selection with proper sampling criteria are: (i) the organization is a non-profit organization; (ii) The location of NPO should be at Sweden; and (iii) the membership should be Svensk Insamlings Kontroll.

Considering all sampling criteria, Sverige för UNHCR and Svenska Röda Korset has been considered for the sample case study analysis. The findings of the research paper present the scenario of the Swedish NPO’s marketing activities and their fundraising process linked with the theoretical perspectives for their validity.

3.12 Reliability

The reliability of the paper depends on valid data, proper sampling and relevant literature review in a scientific way. In terms of validity of the information, at first the data has been collected through NPO’s website, their report, strategic plan and guidelines. All that information is accurate and updated. In that sense, there is no fear with wrong and backdated information. The advantage is this, there is no restriction to use that information from the organization. Secondly, the decision of the sampling is considered on factors of the size of the organization, membership of the Swedish NPO authority, their salient functions and international presence. A case study of two NPOs has been preferred for carrying out this paper.

Moreover, the NPO selection is reliable due to the demand as future research work of the earlier literatures. Lastly, this paper connects the reliability to the reader by its presentation of authentic data, appropriate case selection and tries to conclude with a proposed fundraising framework- a way of forward of the NPO’s marketing activities linked to fundraising success i.e. demanded by prior literature studies.

Case studies of Swedish Non-Profit

Master Thesis

UNIVERSITY

Master's Programme in Strategic Entrepreneurship for International Growth with specialization in

International

Case studies of Swedish Non-Profit

Organization’s (NPO) fundraising process

-Adaptation of Balanced Scorecard Business Model for fundraising success

Independent Project in Business Administration, 30 credits

Halmstad 2020-05-31

Maitrayee Roy

TITLE OF DISSERTATION

Supervisor: Professor Klaus Solberg Söilen

Examiner: Professor Ulf Aagerup

Acknowledgements

Abstract

Table of Contents

List of Tables

List of Figures

List of Charts

List of Annexures

1. Introduction

2. Literature review

3. Methodology