Overhead aversion: Do some types of overhead matter more than others?

Portillo, Javier E.; Stinn, Joseph

doi:10.1016/j.socec.2017.11.003

Cited by 32 publications

(40 citation statements)

References 15 publications

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“…This stream of experimental studies has grown significantly over the past years and has delivered three key insights. First, experimental studies provide compelling evidence that donors base their giving decisions on overhead ratios once confronted with financial data from more than one organization (Buchheit & Parsons, 2006; Gneezy et al, 2014; Metzger & Günther, 2019; Portillo & Stinn, 2018; Stout, 2001). Within this strand of the literature only McDowell et al (2013) find no statistical evidence that participants integrate financial information into their giving decisions.…”

Section: Background and Prior Literaturementioning

confidence: 99%

“…Second, more recent experimental studies show that the effect of overhead ratios on giving behavior differs depending on various factors, such as comparison scenarios (Van der Heijden, 2013), giving variables (Ryazanov & Christenfeld, 2018), donor characteristics (Newman et al, 2019) or types of overhead (Portillo & Stinn, 2018), and information about other donors (Gneezy et al, 2014). Van der Heijden (2013) finds a “flight to extremes” where only the organizations with the highest and lowest overhead ratio were affected by giving decisions once participants were provided with three organizations to compare.…”

Section: Background and Prior Literaturementioning

confidence: 99%

“…First and foremost, however, nonprofit scholars have long explored the relationship between overhead ratios and giving decisions among private donors. Although a comprehensive stream in the literature provides evidence of a negative relationship between overhead and donation revenue based on archival financial data (Greenlee & Brown, 1999; Tinkelman, 1999; Weisbrod & Dominguez, 1986), scholars have in recent years turned to experimental research methods to clearly isolate a causal effect between cost reporting and giving behavior (Gneezy et al, 2014; Newman et al, 2019; Portillo & Stinn, 2018; Ryazanov & Christenfeld, 2018).…”

Section: Introductionmentioning

confidence: 99%

“…Not only the study by Gneezy et al (2014) but also a number of other experimental studies on the topic rely on student samples (McDowell et al, 2013; Portillo & Stinn, 2018). We conduct an online survey-based experiment with Amazon Mechanical Turk participants ( n = 660), and test if (a) the amount of overhead expenses impacts individuals’ giving likelihood and giving amount and (b) how information about an anonymous donor covering overhead influences giving decisions.…”

Section: Introductionmentioning

confidence: 99%

“…This is not only valuable to assess the validity of previous findings but it also allows nonprofit scholars to more confidently inform practitioners about research implications. Second, we contribute to the growing number of experimental studies investigating the relationship between financial efficiency ratios and giving (Gneezy et al, 2014; Newman et al, 2019; Portillo & Stinn, 2018; Ryazanov & Christenfeld, 2018).…”

Section: Introductionmentioning

confidence: 99%

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If Someone Else Pays for Overhead, Do Donors Still Care?

Charles

Sloan

Schubert

2020

The American Review of Public Administration

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To better evaluate the effectiveness of overhead-free donations on giving behavior, we seek to further investigate the robustness of the findings from Gneezy et al. using a nonstudent population. In an online experiment, we test whether (a) the level of overhead costs affects giving decisions and whether (b) overhead aversion disappears once donors are informed that an anonymous donor has already covered all overhead costs. Results show that donations decrease as overhead spending increases when donors have to pay for overhead. However, unlike the original article, we find mixed results when someone else covered overhead costs. Participants exposed to a nonprofit with a 33% overhead ratio where overhead was already covered still displayed overhead aversion. However, this aversion disappeared at a high overhead ratio of 67%. The overall results remain unchanged after controlling for demographics. Our results hold important implications for nonprofit organizations who must find a careful balance between appealing to donors for short-term financial gain and addressing the need to alter skewed donor expectations toward financial efficiency in the long run.

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Section: Background and Prior Literaturementioning

confidence: 99%

Section: Background and Prior Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

If Someone Else Pays for Overhead, Do Donors Still Care?

Charles

Sloan

Schubert

2020

The American Review of Public Administration

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Layoffs during a pandemic: Results from an experiment on the management practices of nonprofit organizations and business firms

Russell,

Frisone,

Frumkin

2023

Nonprofit Mgmnt & Ldrshp

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Given the challenges of the COVID‐19 pandemic, both business and nonprofit organizations were forced to respond quickly with regard to organizational operations, resources, and workplace safety. The pandemic offers a unique context through which to examine how the public perceives organizational responses to unexpected crisis situations and whether they view them as socially responsible. Using a mixed experimental design, this study investigates the influence of organizational decision‐making during COVID‐19 on the public's perceptions of the organization. It also examines whether the type of organization—nonprofit or for‐profit—influences these perceptions and the willingness of participants to support the organization either by purchasing the product or donating to the organization.

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A processing fluency perspective on overhead aversion: How much is too much?

Allred

Amos

2023

Journal of Philanthropy and Marketing

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Overhead aversion has afflicted the nonprofit sector in recent decades. Yet, questions remain regarding how high is too high from a donor perspective and at what level overhead expenses just "feel right." Using processing fluency as a theoretical foundation, the central purpose of this research was to investigate whether a nonprofit overhead ratio fluency level exists that significantly reduces both donation likelihood and nonprofit perceptions. Results from two studies show that a 25% overhead ratio appears to be the proximate ceiling regarding what fluently fits within a potential donor's schema for acceptance. Overhead ratios exceeding this threshold tended to decrease donation likelihood and nonprofit perceptions in a relatively stable manner. Moreover, the 25% threshold seems most relevant to human and animal causes and not as relevant to arts and cultural nonprofits such as museums. The results suggest that donors have a preconceived overhead ratio limit. Nonprofits that exceed that threshold are in danger of deterring donors. If nonprofit overhead ratios

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Overhead aversion: Do some types of overhead matter more than others?

Cited by 32 publications

References 15 publications

If Someone Else Pays for Overhead, Do Donors Still Care?

If Someone Else Pays for Overhead, Do Donors Still Care?

Layoffs during a pandemic: Results from an experiment on the management practices of nonprofit organizations and business firms

A processing fluency perspective on overhead aversion: How much is too much?

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