News and analysis
June 02, 2010

Donors Value Charity Research, but Few Seek It Out, Report Finds


Most people say they care about supporting effective charities over mediocre ones, but they don’t necessarily have the appetite for research that could help them sort the good from the bad.

That’s one of the findings of a new study of donors conducted by Hope Consulting, a firm in San Francisco. Based on a poll of 4,000 people and on interviews with donors, the study was supported by the Aspen Network of Development Entrepreneurs, the Metanoia Fund, and the Rockefeller and William and Flora Hewlett foundations.

Researchers surveyed donors with incomes over $80,000 to determine how to encourage charitable giving and channel more money to effective nonprofit groups.

What they found is that few people investigate the performance of nonprofit organizations. While 85 percent said that a charity’s performance is very important, only 35 percent conducted research on giving and just 2 percent gave based on a group’s relative performance.

“There’s not a lot of demand for a very complicated scoring system,” said Greg Ulrich, one of the study’s researchers. “We need to meet people where they are.”

Fund raisers and groups that provide donors with information on charities ought to provide relatively simple information in the areas people care about, including how their gift will be spent, he said. The researchers also suggested that foundations interested in directing more money to high-performing groups conduct a media campaign on smart giving or create Consumers Digest-style reports on effective charities.

“If we want to change the paradigm, we have to create the impression that not all nonprofits are equal,” said Mr. Ulrich.

Most donors reported that they were satisfied with their charitable giving, with one exception being how frequently they were asked for money.

Only a quarter said they would consider switching their support to different charities if those groups improved in the areas the donors care about. Just over a third said they would be willing to give more if the charities they support improved their performance.

Because donors are so loyal, fund raisers ought to spend more time on younger people who are less likely to have made decisions about which groups to support, the researchers said.

The study also identified six types of donors based on their motivations for giving.

The most common among them was the “repayer” (someone who gives to groups that have helped him or her or people the donor cares about), followed by the “casual giver” (a person who donates to well-known groups or through a workplace-giving program).

People’s motivations varied little by gender, age, andor income level, suggesting that fund raisers ought to tailor their appeals to fit a donor’s reasons for giving rather than demographics.

“It’s a different approach than thinking high-income people are very different, and we need to appeal to them in different ways,” said Hope Neighbor, founder of Hope Consulting.

In addition to examining why and how people give, the researchers examined how to encourage support for groups that operate outside of the United States.

About a third of the donors polled said they give overseas.

Those internationally -minded donors tended to be slightly more engaged than the average donor. For example, 44 percent of those who give abroad said they conducted research before making a gifton their gifts, compared with 35 percent of other donors.

Meanwhile, barriers to international giving tend to be hard to overcome. Sixty-four percent of respondents said local issues should be solved before international problems, and 60 percent were concerned about corruption or fraud.

One lesson for international groups is that they should focus on those donors who already give abroad, according to the researchers.

In addition to investigating charitable giving, the study assessed people’s interest in making financial investments that seek to advance social or environmental causes.

Very few people polled (13 percent) said they have ruled out so-called “impact investing,” while 48 percent said they are either very interested or somewhat interested.

Individuals are most interested in investing in companies that focus on achieving financial returns while doing good, but roughly a third of people also expressed interest in loaning money to charities or, entrepreneurs in poor countries, and investing in companies that prioritize solving social problems ahead of financial returns.

The study, Money for Good: The U.S. Market for Impact Investments and Charitable Gifts, will be available on the Hope Consulting Web site.