Fundraising, part 2: Givers’ psychology seen as key

By Todd Cohen

Equipping fundraising professionals with research-based tools to help them be more effective in their work is key challenge for the giving sector, says a leading fundraising expert.

And fundraising research needs to take a much closer look at why givers give, says Adrian Sargeant, the Robert F. Hartsook Professor of Fundraising at the Center on Philanthropy at Indiana University.

One scholar who is looking at the psychology of fundraising is Jen Shang, an assistant professor at Indiana University who was one of the first recipients of the doctoral degree in philanthropy the school offers.

Shang, who is married to Sargeant, focused her dissertation on public-radio fundraising appeals.

She found that public-radio listeners who phoned their stations during on-air appeals and were asked to give an amount equal to what some of the most generous givers had given the previous year gave 10 percent more on average than they otherwise would have given.

And when the person fielding the call indicated the gender of the person making that higher-level gift the previous year was the same as that of the current caller, the size of the caller’s gift increased by 30 percent.

“It’s because people are not giving in a vacuum, they’re giving in a social context,” Sargeant says. “You’re giving them information about someone else like them, so they’re giving to match that amount.”

And gender, the characteristic tested by Shang’s research, represents only one identity that any given giver has, Sargeant says.

What is important for nonprofit fundraisers is to understand “what identities are important to your donors and prompt those,” he says.

“We know that when you do that, it increases giving, people feel better about their giving when you’ve linked it to an identify you care about,” like being an environmentalist or a dog owner, he says. “If you have a strong sense of identity, you feel good about giving because that’s been prompted.”

Public trust

Public trust, or the lack of it, also is a key factor in charitable giving, Sargeant says.

While Americans overall tend to give more each year, the percentage of Americans who give is declining, Sargeant says, a decline he attributes to erosion in public trust.

Fundraising scandals related to the misuse of funds given to address victims of the 9/11 attacks were partly to blame for that erosion of trust, Sargeant says, as is the fact that roughly 40 percent of nonprofits claim on the Form 990 annual reports they file with the IRS that they spend nothing on fundraising.

“Those sorts of claims tend to educate the public that it’s somehow achievable that everything they give can be applied to the cause and not be spent on fundraising,” he says.

“What we need to do is educate them on the realities of how modern nonprofits operate,” he says. “That’s a way to build public trust and confidence in the sector. You have to be open and honest about how things work. Why hide it?”

Next: Research-based training urged

Fundraising, part 1: Scholar calls for improvement

By Todd Cohen

While they generally do a good job involving their boards in fundraising, securing major gifts and planned gifts, and focusing their fundraising on their donors, U.S. charities get only an average grade overall in their fundraising, a leading fundraising scholar says.

“I would probably give it a ‘C’,” says Adrian Sargeant, the Robert F. Hartsook Professor of Fundraising at the Center on Philanthropy at Indiana University. “There is a whole range of thing we’ve done very badly and it’s masked because people in the U.S. are very generous and getting more generous.”

Nonprofits do a terrible job retaining donors, raising money online and securing bequest pledges, Sargeant says.

The fundraising profession also lacks a mechanism for learning from the latest research, which in turn generally has failed to study why people actually give and what would spur more giving, he says.

And nonprofits typically focus their fundraising on the “transactional” strategies and tactics of raising money, Sargeant says, rather than on givers, the causes they care about, and the way fundraisers treat them.

“We’re too hung up on the mechanism,” he says. “Donors are interested in solving problems and making a difference, and whether you call it an annual fund or a capital campaign is irrelevant. We need to organize around what interests donors.”

Marketing perspective

Sargeant, who is believed to hold the only endowed fundraising chair in the world, brings to his research a marketing perspective.

After holding marketing jobs in the business world, he decided he wanted to teach at the university level.

So he enrolled in the master’s program in business administration at Heriot-Watt University in Edinburgh, where he did research for the YMCA of Scotland on its declining supporter base.

“And I’ve been hooked ever since,” says Sargeant, who later received a doctorate in marketing from the University of Exeter.

“Fundraising for me is a form of marketing,” he says.

In comparison, he says, fundraising in the U.S. typically has a public-relations perspective.

Fundraising research

In fact, he says, research on fundraising has tended to focus on the economics of fundraising, such as the impact of tax rates on giving, or who gives and how much they give, and also has drawn on the psychological or sociological perspectives of why people give.

“There needs to be more work in the domain of philanthropic psychology,” he says.

“That’s important because one thing we need more research on is growing the pie,” he says. “We live in a time when a smaller proportion of American society is giving, the giving base is declining,” he says. “There is still a lot more we need to know about donor retention and what we can do practically to improve rates of attrition.”

Research is needed to explore fundraising opportunities that have not been tapped fully, including bequests, online giving and the use of social media, Sargeant says.

“All of these things are potential audiences we can grow,” he says, “and research that helps fundraisers do that is really key.”

Next: Givers’ psychology seen as key

Recession creating ‘new normal’ for giving

By Todd Cohen

The economic crisis is spurring new thinking in the giving sector, with givers and giving organizations looking for innovative ways to increase the impact of their giving.

That is the view at The Philanthropic Initiative, a 20-year-old nonprofit consulting firm based in Boston that has provided strategic philanthropic advice to 200 to 300 individuals and organizations, and facilitated over $1 billion in giving.

With 30 percent of philanthropic wealth “sucked out of the system” because of the recession and failure of the capital markets, individual givers, foundations and corporations are taking a hard look at the way they give and the causes they support, says Ellen Remmer, an 17-year TPI veteran who was named its president a year-and-a-half ago.

The recession has triggered self-scrutiny in the giving sector about the nature of philanthropic leadership and the role of strategic collaboration and partnerships, she says, and has created greater willingness to move beyond financial contributions.

“That imperative is incredible now with fewer resources,” Remmer says.

Jim Coutre, vice president at TPI, says corporations, in particular, are looking for ways to “embed” giving into their organizational culture, increase the involvement of their employees in their communities, and step up their giving in other countries in which they do business.

Remmer says the recession also has prompted givers and giving organizations to pay more attention to the operating needs of nonprofits.

“They’re being forced to look very deeply into how nonprofits are achieving the mission or not,” she says.

Foundation trustees, for example, traditionally “haven’t been that smart about understanding balance sheets and the finances of nonprofits,” she says.

But now, she says, “they really need to understand that,” as well as nonprofits’ need for working capital, and to be “thinking practically about how to sustain the mission.”

The recession, which is creating a “new normal” for the giving sector, represents a rare opportunity for nonprofits to develop new ways to work together “to accomplish the mission, as opposed to institutional survival or preservation,” Remmer says.
Nonprofits are “starting to suspend their egos,” she says. “And the donors are listening.”

Donors are being “more flexible and more willing to give operating support,” she says. “They’re really trying to understand nonprofits better, and become more attuned to the challenges for nonprofits. The best of the best funders are giving more for strategic planning and to do reflection and encourage those kinds of collaboration.”

And with government evolving to cope with the economic crisis, she says, givers and giving organizations are talking more with government about how to work together, and government is more open because of the decline in its resources.

“We’re poised for some interesting changes in the field,” Remmer says.

Recession offers lessons for giving sector

By Todd Cohen

The giving sector quickly needs to become a learning sector.

An urgent task for nonprofits and giving organizations is to understand the connection between their recession damage and the way they do business.

By recognizing and addressing internal flaws that put them at risk, charities can better equip themselves to carry out their missions.

So charities must be brutally honest about their operations and the changes they need to make to fix their finances.

And the financial pain in the charitable marketplace has been serious.

According to recent reports:

* Overall giving in the U.S. is down.

* The value of foundation assets has plunged.

* Financial reserves at nonprofits in the District of Columbia are inadequate.

* Most foundations burned by Bernard Madoff had boards that were too small and probably too homogenous.

* Most nonprofits say they are under serious financial stress.

* Nonprofits are taking tougher steps like layoffs and programs cuts to cope with the recession.

No one can predict the ups and downs of the economy, but nonprofits and giving organizations owe it to their donors and constituents to be prepared.

No magic formula exists for survival. So instead of desperately accepting philanthropically-correct trends and feel-good gimmicks, often peddled by consultants and trade groups that are in the business of promoting themselves and often are dependent on big foundations’ support, nonprofits and giving organizations should tap the knowledge and common sense of their own boards, staff, supporters and constituents.

What truly matters is an organization’s mission, not what a hired hand or big funder preaches.

And advancing the mission requires smart, committed staff, board members and volunteers who can and will work together; listen to and communicate clearly and honestly with one another and their funders, clients and partners; keep their operations and goals clear, simple, realistic and focused; take calculated risks when they make sense; and learn from their mistakes.

Nonprofits and giving organizations are in business to address the symptoms and causes of social and global problems.

Those problems often are complex and interconnected, and typically get fixed slowly through a step-by-step process, often with missteps, that requires commitment, vision and a willingness to listen and adapt.

By learning from the mistakes that made them more vulnerable to the current economic crisis, nonprofits and giving organizations can equip themselves to be more effective in running their operations and programs, and fulfilling their mission of making our communities better places to live and work.