Does 100% Of Your Donation Hurt or Help Charity?
I am not a believer that program to support ratios reflect efficiency, effectiveness or impact. But unfortunately, it is a measure that is all too commonly used. One way that organizations have tried to go around this, is to use language that states, “100% of your donation goes to (program/impact/field/etc.)”. Two of my favourite organizations that I respect and admire, charity: water and One Day’s Wages, use this strategy. The thinking is, if donors are concerned about how much of their donation is “eaten” by overhead then let’s just remove that possible barrier by covering those costs with other donations. The logic is sound. The thinking is good. Very good even. I believe people are naturally charitable and want to give so our role as fundraisers is to remove all possible barriers stopping them from doing so and then ask for money. So this “100%” strategy is very much in line with my fundraising beliefs. So why, you might ask, am I not a supporter or use this technique myself and does it hurt or help charity?
I want to present you with four reasons why but first one big caveat. I truly admire Eugene Cho from One Day’s Wages and Scott Harrision from charity: water (as well as their talented team). This is not a post to take shots at them in any way. In fact, I’m a huge supporter and believe them to be great organizations. Not because of the “100%” strategy but rather because of their compelling mission, focus on transparency, openness to partnerships, willingness to invest in design, marketing and “coolness” and overall effective approach to ending poverty and providing water. Okay, on to the four reasons why I’m not a supporter of this strategy/technique/ploy:
1. It is a marketing tool, not a business model.
It’s not that 100% of donations to such organizations don’t go to programs, I believe they do. And it’s not that organizations aren’t intentional about how they fundraise and use this strategy. They are. It’s more or less a matter of semantics however. As long as an organization has enough unrestricted funding to cover its overhead costs then it can use the 100% donation language as well. Many nonprofits have enough unrestricted funding to do this and could use that language tomorrow if they wanted. It’s a way to market themselves and their mission to be more appealing to donors who do not know how it is possible. The assumption is these organizations may not have overhead expenses and are somehow more effective because of it and it’s just not true.
2. Distorts the conversation (that we shouldn’t be having in the first place).
Because so many donors look at overhead ratios they may be more likely to give to these “100%” organizations. The 100% doesn’t mean that they are not spending money on overhead but in fact are covering those costs with other restricted donations or using unrestricted funds to pay for their overhead. So now when a donor is comparing who to give to based on ratios (which is completely misguided in the first place) they will say 100% or 85%? And 100% should win in that context even though it says nothing of efficiency, effectiveness or impact still. In fact, it is using the donors lack of knowledge to persuade them into giving or feeling more comfortable to give. So the “100%” answer actually answers the wrong question with an inaccurate answer.
3. It isn’t the best way to make an impact with your donation.
As Dan Pallotta points out in his “You Say You Want Impact” post on HBR to truly leverage your donation and get that “multiplier effect” where your investment is used beyond its initial dollar amount is to actually invest in overhead. In people. In marketing campaigns. In fundraising projects. In infrastructure. In so much as those investments will help the organization raise more funds for the mission then that is absolutely true. When you give to a program, the value of your donation is the exact amount that you gave (for the most part, some models, like microfinance, do actually multiply program donations). $100 to feed a child in Zambia is just that, $100 to provide food for a child in Zambia. If you gave $100 to a fundraising project, say to a high school kid to raise funds at her school, that could turn into $500 which could feed 5 children in Zambia. charity: water will seek out individuals to give to cover the overhead costs and those are the truly savvy donors. They understand what their donations allow the organization to do and what they can accomplish because of it. Shouldn’t we offer THAT opportunity to the masses as well?
4. It perpetuates the overhead myth.
This is the biggie. The whole reasoning behind the strategy is to separate overhead from program so donors can give directly to programs. This only magnifies the crippling idea that overhead (staff salaries, marketing, fundraising, etc.) is NOT part of the nonprofits business and mission. Intentionally or not, it is saying, “we (charities) should not be spending money on overhead and that’s why we aren’t asking you to” and it’s false. We need to spend on these areas so we can be effective. And two of my favourite organizations, who both use the “100%” language, actually spend a decent amount on things like events, websites, marketing and fundraising because they know it is what is required to have a successful organization!
Summary
Overall, I think the “100%” donation language is a great short term fix and workaround for donors who are asking the wrong question in regards impact. As a fundraiser I see the appeal and how it allows for greater scale and funding. As someone who cares about the future of fundraising and charity is where I have my reservations. Instead of focusing on short term solutions, I’d like to see great, young, energetic and quality organizations like charity: water and One Day’s Wages use their powerful voice to help educate donors, especially the next generation of donors, that any donation to them is part of their mission. And not just any donation but perhaps the most important donation for their continued and future success.
