A Necessary Partnership: Charities and Donors

How do you keep a donor amidst rising economic concerns?

A few days ago, Congress reached an agreement on a $789 billion stimulus plan, although it doesn’t appear that a final plan will include philanthropy measures some charitable organizations were hoping for. The faltering economy is making an already challenging job even more difficult for nonprofits.

Already, the best nonprofit organizations make huge impacts while operating on shoe-string budgets. Now, some face an increasing battle as they deal with reductions in corporate philanthropy, erosion of endowments and the tightening of purse strings as individuals fight job losses, pay reductions and mounting financial pressure.

That’s why it is more important than ever for charities to cultivate trust among donors (potential and existing). It is not only good sense, but critical business practice, for a charity to cultivate total donor confidence that charitable gifts will be used efficiently and effectively.

In recent years, donor confidence has begun to lag as a whole. A Harris Interactive survey found that 59% of those surveyed were concerned about the percentage of funds being used for administrative purposes instead of being put to “real use.” A 2006 study by Princeton Survey Research found that only 15% of those surveyed expressed a great deal of confidence in non-profit organizations.

As a report by NBC News explained, “The doubts matter, because average Americans are just as critical to the health of U.S. philanthropy as Warren Buffet and Bill Gates.” If it mattered that much then, before the economy began to crumble, it matters even more now.

With tightening budgets and increasing needs for our services, how can nonprofits face the daunting task of courting donor loyalty and satisfaction? We share a few of our tips:

  • Practice increased disclosure of program costs and uses of funding. Post the information online in an easy-to-find place.
  • Give donors a greater opportunity to give to specific causes, programs or campaigns. Donors will be attracted to the opportunity to fund specific items.
  • Dedicate more time to evaluating the impact you have-stressing results, not activities-and reporting that information publicly and to individual donors.
  • Focus on what actually happened. A good example is the March of Dime’s “History of Success,” which highlights results of its campaigns, research and advocacy work.
  • Have active boards that require rigorous financial reporting by management, and recruit board members with accounting and legal backgrounds.
  • Be supportive of efforts by national nonprofit associations to create efficiency standards and self-policing processes for the nonprofit community.
  • Make transparency and accountability part of the organization’s “brand promise,” then live up to that promise.

Perhaps the simplest first step is to acknowledge donors. A recent study by the Urban Institute showed nearly 50% of donors feel so underappreciated or ignored by the charities they benefit that they withdraw their support after just one year.

This failure in donor relations is one that we cannot afford. Collectively, we must place greater emphasis on communicating with donors on a regular basis – not just by sending more information, but by having real, engaging conversations and giving heartfelt “thank yous” for their generous support.

American donors are extremely generous – $300 billion given in 2007 alone – but they want to know where their money is going and what it is doing.

Those charities that recognize that need, and make transparency, accountability, and stewardship a critical part of their fund raising strategy, will succeed at the expense of those who don’t.

Have other tips as a donor or a charity? Share them with us.

-Steve

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2 Comments

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2 responses to “A Necessary Partnership: Charities and Donors

  1. Well stated Steve…too many unanswered questions about where the funds are used for any charity makes everyone wonder about every charity.

  2. Pingback: Reaching Out « A Voice for Children

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