By Dr. Gilles Gravelle
2007 was a record year for charitable giving in the US at nearly $350 billion. The recession of 2008 triggered a three-year decline of 10.9% in giving. By the end of 2018, total giving had risen to $427.27 billion. As it turns out, tax reform resulted in an increase of 17.25% over 2017. People had more money to give to their favorite charities.
While the 2008 recession’s 10.9% drop in giving may not seem very large, many nonprofits felt the pain of a combined $38.15 billion reduction in income. Now with the looming effects of the COVID-19 pandemic on the US economy, nonprofit leaders are once again bracing themselves for a decline in charitable giving. One source (Bloomberg.com) states we now have a 53% chance of entering a recession. Other sources (BOA[i], ISEF[ii]) say we have already entered a recession. According to a recent study by the Institute for the Study of Global Economics and Finance, if the pandemic is stopped by June or July, then we may see a fourth quarter recovery. There is certainly cause for nonprofit leaders to be concerned about a new recession creating a decline in donations among donors.
Keeping Your Donors Engaged During a Recession
During the 2008 recession, the decline in donor income came with a reduction in how much they could give to nonprofit causes. The average donor gives to 4 to 5 causes. This was a time when many donors began to consolidate their giving. They started by taking a fresh look at the organizations they supported to determine where their reduced giving should go and where it should no longer go. In fact, by consolidating they were able to maintain the same level of giving to some of their organizations while cutting out others. How did they decide which cause to continue supporting and which ones to discontinue?
COSIM 2009 Panel on Nonprofit Funding
At the 2009 COSIM conference on Cross-Cultural Partnerships, I participated in a panel discussion on the recession and mission agency funding. A large number of agencies had reported a decline in income following the 2008 recession. Even so, a small number of agencies reported steady income. Two reported increased income. One of those was The Seed Company (see About the Author, below). Three major factors emerged during the panel discussion that apparently influenced donors on their giving consolidation choices. These factors were later confirmed when I conducted an informal survey of a small sampling of high net worth givers who had consolidated their giving. The three factors that kept donors engaged with a cause were:
1. They knew the kind of impact the cause was producing in clear and tangible ways.
2. They had good relationships with the organizations because of regular quality personal reporting.
3. The organizations had transparent management and accountability practices, making them trustworthy.
How Does Your Organization Compare?
Many nonprofits could pass the test for number 3. However, how well would they do with number 2? How often do they communicate with their donors? Are the communications personal, inspiring and confirming? As a result, do their donors feel a strong connection with their cause?
Unfortunately, most nonprofits struggle with what current philanthropy research shows is the most important reason for giving. This has to do with impact. We are not talking only about numerical impact. Rather, this is about documentable change in people’s lives and situations. Anecdotes and one-off stories help, but they don’t provide the kind of proof that keeps people engaged. Doing regular impact evaluation of the people you serve and the situations you are working to improve can go a long way in keeping donors engaged, especially during economic recessions, not to mention acquiring new donors.
Impact Evaluation is Not That Hard
Doing impact evaluation is not as hard or as expensive as you think. A small investment in time and funds can produce a significant return on donor income. To understand how to do impact evaluation, see my book So What? Answering a Donor’s Toughest Question. The book is a simple guide for doing qualitative evaluation and donor impact reporting.
Now is a good time to strengthen these critical areas of reporting so you don’t find yourself on the outside of donor giving consolidation.
i https://www.cnbc.com/2020/03/19/bank-of-america-says-the-recession-is-already-here-jobs-will-be-lost-wealth-will- be-destroyed.html
ii Terry O’Neil. Global Economic Outlook 2020: Democratizing Information and Advancing the Frontiers of Economic Thought. Part II. Institute for the Study of Global Economics and Finance (ISEF).
2018 Charitable Giving Soars Thanks to Tax Reform. March 25, 2020. Insidecharity.org. https://www.bloomberg.com/graphics/us-economic-recession-tracker/ https://www.inc.com/samira-far/heres-why-128-dollars-is-average-online-donation-amount.html https://brigada.org/2009/03/22_1513.
GILLES GRAVELLE is a missions innovation strategist with Seed Company. He is also a nonprofit consultant specializing in impact messaging and evaluation. He volunteers as a Barnabas Group Orange County fundraising coach and has given seminars on impact evaluation, donor messaging and marketing. He has written two books on innovation in mission funding: The Age of Global Giving and So What? Answering a Donor’s Toughest Question.
READ OTHER ARTICLES IN THIS ISSUE:
An Interview with Dr. Frank Quiambao
An Interview with Oli Thordarson
by Stephanie Rizzardi
by Aaron Anderson
by Yaron Gamburg