From The Chronicle of Philanthropy, May 24, 2021
As America begins to reopen and the economic forecast brightens, many people in the nonprofit world are hoping that after the tumult of the past year, we are about to usher in a permanent change in the way donors give.
After all, we’ve seen foundations and very wealthy individuals take more risks and provide the flexible, multiyear funding nonprofits have long sought. At the other end of the donor spectrum, a Chronicle of Philanthropy survey found that giving to well-known megacharities skyrocketed in 2020, powered by smaller donors.
Little has been said, however, about the habits of midlevel donors — and yet they are the ones who have the potential to provide the steady stream of dollars nonprofits need to ensure that our recovery leads to real and lasting change. Training our sights on people who earn $100,000 to $200,000 a year — about one-fifth of Americans — is especially important given recent forecasts that suggest many wealthy donors are already returning to their old ways as the pandemic recedes.
Development officers have long known that people at those income levels may represent only a small percentage of an organization’s supporters but give an outsize amount of money. They also are prime candidates for making significant gifts following a financial windfall or through bequests.
Still, the lack of data about their giving patterns and motivations has stalled cultivation efforts. To fill that gap, I worked with Cal Halvorsen, assistant professor at the Boston College School of Social Work, to commission a study of 1,260 Americans age 35 and older who gave a total of $2,000 to $20,000 in 2019. People filled out the survey in April 2020, a month into the pandemic, responding to questions about their giving in 2019.
Our respondents gave a higher share of their income (1.9 percent) than the national average — and an impressive 40 percent of those earning under $100,000 (41 percent of our sample) gave more than $5,000 to charity in 2019.
Many fundraisers consider gifts of $10,000 to be a significant threshold; 38% of those who earned $100,000 to $200,000 (44 percent of our sample) exceeded this amount in 2019.
Almost all the donors had maintained or increased their giving levels over the past five years. More than half of those giving more than $10,000 annually had increased their giving in 2019.
Our donors are loyal: When asked about their most significant gift of 2019, more than two-thirds had been supporting the same organization for more than five years. Nearly two in five said their satisfaction with their giving was a “10 out of 10” (four in five gave a score ranging from 8 to 10). Moreover, 88 percent would give even more if their satisfaction levels increased even further. And most would allocate a portion of any future financial windfall to charity.
Lack of Focus on Effectiveness
Generosity and loyalty are extremely important, but it’s crucial to ensure that donors are steering their money to the organizations that are making a difference.
Yet we discovered a disquieting disconnect between midlevel donors’ high satisfaction levels and their knowledge about the actual impact of their donations. Respondents strongly believe the organizations they support should “do a good job of demonstrating effectiveness,” show “good leadership,” “meaningfully engage with the individuals and communities [they] serve,” and “identify real opportunities to make change.” But they do not apply these criteria to their own philanthropic decision making.
Given how much time individuals generally spend researching big-ticket purchases likes electronics and vacations, we could assume that midlevel donors spend equivalent amounts of time learning more about the organizations they are supporting with gifts of similar value. Yet two-thirds of our respondents spent less than an hour on research before donating, and one-third spent less than 15 minutes. Only a third compared charities before giving. Even in the highest annual donation category of $20,000, well over half spent less than an hour studying where to give. And fully a third of respondents were not aware of the impact of the principal organization they supported.
Those midlevel donors who bothered to conduct research relied on the organization’s website (60 percent), online searches (48 percent), information from family or friends (43 percent), or charity evaluation websites such as Charity Navigator and Candid’s GuideStar service (38 percent). But almost two-thirds did not contact organizations (even among the largest donors, who gave more than $15,000, only 61 percent made contact). When we asked why, close to half said they simply “knew they wanted to support the organization.”
Indeed, half the midlevel donors said “a lot” or “all” their giving went to charities with which they had a personal relationship. So, if personal relationships replace due diligence, would volunteering lead to more interest in understanding impact? Most of our donors volunteered at least once per year, half at least once a month, and almost a quarter at least once a week. But there was no correlation between volunteering and more thoughtful giving.
Where They Give
Our midlevel donors gave to different institutions than small donors or the wealthy typically do. They favor fewer megacharities than smaller donors but give less to universities and hospitals than America’s wealthiest.
Two-thirds donated to disaster relief, almost half responded spontaneously to fundraising appeals. However, 37 percent focused their donations on their place of worship, far more than the national average of 29 percent. This group of donors was more aware of impact but spent even less time on research (almost half spent less than 15 minutes).
We also asked whether they considered making their contributions through community foundations, giving circles, donor-advised funds, or bequests. And we probed whether they supported initiatives other than traditional programs and projects.
Many of the donors had heard of those approaches, but few used them. Less than a quarter knowingly gave to advocacy and communications campaigns or to fund the basic operating costs of a charitable organization. Most troubling, nearly 90 percent said it was important that “the smallest possible portion of [their] donation” go to overhead.
Putting Relationships Over Results
Thus, we found our midlevel donors to be generous and deeply caring, but contentedly apathetic, basing their philanthropic decisions on relationships rather than results. Our conclusions suggested that little has changed since the 2015 Money for Good study by the Camber Collective, which found that “most individual donors are emotional, irrational, and personal. … Finding a high performing nonprofit is not the primary goal nor the number one desired outcome.”
At a time when a third of America’s crucial local community-based organizations may face closure, when Black, Indigenous, and people of color-led organizations are still chronically underfunded, thoughtful and effective support for the organizations doing the most good is more important than ever. How can midlevel donors be equipped with the tools and incentives needed to transform their giving habits?
Wealth Advisers Could Be Key
We were pleased to find that more than two-thirds of donors were “somewhat” and “very interested” to learn “how to select the most effective nonprofits.” Of the “very interested,” 81 percent would favor an online course or webinar, and 51 percent would attend a workshop offered by their financial or legal adviser.
Indeed, advisers hold the key to donor education. In recent years, wealth advisers have grown increasingly aware of the beneficial effects of discussing philanthropy with clients, although this focus has been primarily on high- and ultra-high-net-worth individuals and families. But midlevel donors also consult advisers: Although 80 percent of our 1,260 respondents had assets under $1 million, the same proportion has financial or legal advisers with whom more than two-thirds discuss philanthropy at least occasionally.
Advisers need to be supported with more low-cost educational products that are enlightening, engaging, free of jargon, and specifically targeting midlevel donors. The nonprofit world sorely needs this loyal and generous pool of midlevel donors to find and support organizations that do the most good. They are poised to give more if fundraisers and wealth advisers provide greater motivation. I invite all those who care about more thoughtful and effective giving to take on this challenge.