December 19, 2011

How We Can Get More Money to Deserving Charities

In this difficult economic climate, it is more important than ever to make sure we understand why people give—and to ensure that hard-earned dollars get to the nonprofits that deserve them the most.

What we know is puzzling: Nine out of ten donors say they care about nonprofit performance, yet few actively take steps to ensure they are giving money to high-performing nonprofits, according to “Money for Good,” a study of 4,000 donors conducted by Hope Consulting in 2010. Only three out of 10 people do any research before giving. And only three out of 100 conduct research to find the nonprofits that outperform others.

To figure out how to change the equation and get more money to the top groups, we realized we needed to ask an additional set of questions. So GuideStar and Hope Consulting surveyed more than 5,000 individuals, 800 philanthropic advisers, and 700 grant makers over the past year.

We found that many of those people do want better information—particularly when it comes to the effectiveness of organizations. Indeed, while two-thirds want to know whether a nonprofit is making an impact, that is the greatest unmet need and the area for which they find quality information hardest to find.

Aside from information about a nonprofit’s impact, donors want to know how a group uses its money, whether it’s legitimate, and more about its mission. In essence, donors are looking for the full picture of an organization.

One of our most surprising findings is that the vast majority of donors, advisers, and grant makers preferred more comprehensive ratings (like one would see in Consumer Reports) to “simple” ratings like badges and seals of approval.

And while they say they want an independent rating service that provides information on charities, their behavior suggests that they don’t yet know much about where they can get it. A minority of donors use sites like GuideStar or Charity Navigator, despite the fact that more than 50 percent say that is how they want to get information. Currently, the majority of donors who conduct research learn about charities from nonprofits themselves.

While we now know what donors are looking for—what types of information, in what format, from what sources—the new research reinforces just how difficult it is to change donor behavior.

For many individuals, their emotional connection to a cause is what matters most, and that gets in the way of a focus on performance. Donors (and advisers and grant makers) are also incredibly loyal, with more than 80 percent of money going to the same organizations year over year. What’s more, most donors are satisfied with the current research process. With the exception of a desire to know more about a nonprofit’s impact, donors are relatively satisfied with how they decide what groups to support.

Despite these challenges, we do think that better information, especially on effectiveness, presented in transparent formats and delivered by trusted sources can potentially shift up to $15-billion to the most deserving organizations.

While individuals provide the bulk of that money, we found that philanthropic advisers are increasingly influential and motivated by the desire to recommend effective charities. Getting that information to them, as well as to community foundations and donor-advised funds, could also help donors think more about focusing their giving on charities that can do the most good with their money.

So what can a nonprofit do to get a share of any of those billions? Here’s what the research suggests.

Promote your results. Donors want to know how nonprofits are evaluating their progress, and they like seeing the information presented it a consistent format. One approach they like is called Charting Impact, a project started by Independent Sector, BBB Wise Giving Alliance, and GuideStar. Nonprofits can create reports on the Charting Impact site by answering five easy questions. Smart organizations will fill these in now, mention them in year-end mailings, feature links to the reports on their home pages, and get everyone on the staff to include a link in their e-mail signatures.

Focus on outcomes. While the news media and other sources have taught donors to focus on overhead and other such issues, we know from our research that donors are interested in learning more. Nonprofits can shift the conversation from administrative costs to impact by emphasizing how they are achieving their missions. They must tell compelling stories and share hard data about the changes they are making in the world.

Tell your story. Take every opportunity to provide information about your accomplishments in places where donors will see it—especially on your Web site, which is the first place most donors go. Show off your ratings from other parties, such as those from charity watchdog and evaluation sites.

Connect to your audience. Even for donors taking a more critically informed approach, giving remains for the most part an emotional experience. It is therefore as important as ever for you to know and to understand the motivations of your donors.

Follow-up. More than anything else, donors want to ensure that nonprofits are using their donations appropriately. Showing donors how you have used their money will help you involve them in your cause and motivate them to consider repeat gifts.


Bob Ottenhoff is president of GuideStar and Greg Ulrich is director of Hope Consulting.