During the past few months, many foundation leaders have called on philanthropic organizations to change their practices in pursuit of racial equity, including directing more resources to Black-led organizations. But these important efforts leave out a critical funding source for nonprofits: major individual donors.
Research released Monday our organizations found that wealthy donors are in a unique position to provide reliable and flexible funding for community-based organizations but are frequently stymied by ingrained philanthropic practices that lead them away from giving to these groups.
The good news is that these donors often provide exactly the type of support that could benefit community-based nonprofits: multiyear, unrestricted funding with minimal administrative burden. But our interviews with 34 major donors, whose annual giving ranged from $13,000 to $5 million (with a median value of $100,000), found that they typically rely on personal experience and networks to identify which groups to support. As a result, a vital funding opportunity is lost for organizations that aren’t already plugged into wealthy donor networks.
Most of the donors we spoke with reported spending little time researching organizations to give to and instead relied on personal connections and recommendations of family and friends. In order to make a larger gift, donors said they needed to have a belief in the organization’s mission, a relatively longstanding relationship with an entity, some type of personal connection with the mission or the organization itself, confidence that the nonprofit was well run, and trust in its leadership.
Why Causes Get Left Out
While these approaches are convenient and comfortable for donors, they are also problematic. From a behavioral-science perspective, using trust in leadership as a criterion for giving carries the risk of implicit bias. Most people judge traits like competence within microseconds based on factors such as ethnicity and socioeconomic status. We typically like people simply because they are similar to us or are familiar in some way. Using emotional criteria such as trust or likeability to make decisions about giving can create barriers to building relationships with nonprofit leaders of different races or backgrounds at organizations not already supported by major donors or high-profile foundations.
The result is that community-based organizations whose work falls outside of donors’ personal networks or experiences have less opportunity to cultivate relationships that lead to significant donor support. Multiple studies from organizations such as Echoing Green, the Bridgespan Group, Open Impact, and Building Movement Project have found that community-based nonprofits whose missions are focused on social change lack the networks and resources to engage deeply with donors, which affects the amount of funding they receive. The problem is particularly acute for organizations led by people of color.
While our research uncovered areas in significant need of improvement among major donors, we also found encouraging practices. Most notably, major donors tend to give unrestricted funding to nonprofits, allowing them the flexibility to use the money as they see fit, including on overhead.
We had hypothesized that donors would prefer to see their money go directly to programs and services and might be reluctant to support operating costs, but our interviews with eight nonprofit leaders revealed the opposite. All reported they had little trouble raising unrestricted funding from individual donors. In turn, the donors we spoke with largely recognized that nonprofits need strong operations to deliver quality programs and consequently often gave unrestricted funding.
Wealthy donors have the potential to be key allies to local organizations meeting critical needs and driving racial-equity movements. But these donors need to intentionally take steps to reach beyond their comfortable giving bubbles. Here’s what they should do to get started:
Look beyond personal networks to find and fund organizations that directly serve people of color. Seek out introductions to nonprofit leaders working on issues related to racial equity. Build relationships with those organizations by attending online events (or in person when allowed again) or by doing volunteer work.
Build relationships with people of different backgrounds and identities. Join social or professional groups with diverse memberships or take part in professional development opportunities that draw a diverse crowd.
Listen and learn from community leaders and activists of color. They are closest to the issues and are in the best position to define the problem, identify opportunities, and shape solutions. Follow them on social media; take part in conferences or events where they are speaking; follow the outlets that are amplifying their voices.
Consider supporting a philanthropy organization that connects donors and nonprofits. Examples include the Groundswell Fund, Solidaire Network, and Headwaters Foundation for Justice, all of which use donated funds to make grants to organizations working on racial equity. These organizations, often referred to as intermediaries, can also connect donors to community organizations in need of funding and provide guidance on the amount to give.
Continue giving unrestricted funding and making multiyear pledges. These gifts are the most valuable to nonprofits because these donations can be invested where organizations see fit and provide a source of predictable revenue.
Educate other donors about the importance of giving to community-based organizations. Donors who are passionate about a particular nonprofit led by a person of color should share that passion with other donors in their network and encourage them to support the organization as well.
Donors who want to support racial justice need to recognize how their own unconscious behavior may influence their decisions about which organizations they trust to do this work. They need to reach beyond their networks, seek diverse voices to inform their philanthropy, and give more to community-based organizations serving people of color. Now is the time for individual major donors to do things differently.
The authors’ research was supported by the Fidelity Charitable Trustees’ Initiative.