EXPRESS: Focused versus Diversified Nonprofit Organizations: Aligning Operations Strategies with Donor Types

Nonprofit organizations (NPOs) typically adopt either a focused or diversified operations strategy to deliver their services. While the operational implications of these strategies are well studied, their effects on fundraising outcomes remain unexplored. We argue that NPOs operating under resource constraints face a fundamental tradeoff between operational efficiency and funding uncertainty, and that aligning operations strategy with institutional donor relationships can improve fundraising outcomes. We propose a compensatory alignment framework: focused NPOs benefit more from new donors who help reduce funding uncertainty, while diversified NPOs benefit more from stable donors who help maintain operational efficiency. We test this framework in the high-stakes setting of humanitarian emergency funding, where NPOs have limited financial resources to operate and conduct their fundraising campaigns. We use panel data on over 3,000 global NPOs from 2000 to 2020, combining grant-level donation records with organizational and donor characteristics. Results from a dynamic panel model support the proposed alignment: diversified NPOs receive significantly higher donation amounts from stable donors, while focused NPOs receive significantly higher donation amounts from new donors. Interviews with NPO fundraising managers around the world indicate that our empirical findings resonate with practitioners' experience. For instance, focused NPO managers view new donor acquisition as a way to mitigate funding concentration risk, whereas diversified NPO managers emphasize stable donors as a means of managing the complexity of multiple programs. This research advances theory by linking NPOs’ operations strategies to donor engagement and fundraising performance and offers practical guidance to NPO managers.