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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.

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  • Liz

    Hey Brian. Thanks so much for your post and I agree with a lot of what you’ve said.

    I work for a non-profit called Building Tomorrow and I think we’re on the same page. We believe that young people have an enormous power to create social change and so we provide them with the opportunity to do just that. The students we work with here in the States raise money to fund the construction of schools in Uganda. We’ve seen students do amazing things.. like raise $30k out of thin air.

    However for “overhead” costs we ask for donations – on our website and during annual events – to help the infrastructure of Building Tomorrow (BT) so that we can continue to be this outlet for the generation of young people who want to change the world. Our promise to students is 100% of what you raise goes towards construction of schools. BT’s overhead even covers some of our program costs in Uganda – like experimenting with new building technologies and funding the staff.

    So BT provides that 100% option to students and young people wanting to make a difference – while also approaching other donors and saying this is what these students can produce, will you support them by supporting Building Tomorrow.

    I think one reason why this issue has come up is because of online donations and making sure you’re representing how the donation will be used correctly. Now it is so common for non-profits to say $60 buys this or $100 buys that… but if it actually buys overhead or even the item and overhead people freak out and think they’re being cheated. Again its the mistrust that non-profits aren’t using their money wisely which is insane in my opinion, especially smaller non-profits can get buy on budgets that would shock the government or big businesses… I do however think that mistrust is hard to answer and is probably why people have turned to the 100% donation language.

    Thanks again for your post and I look forward to more discussions!

    Liz
    Building Tomorrow
    http://www.buildingtomorrow.org

  • bradyjosephson

    Liz- thanks for the thoughtful post. Really like what you are doing at Building Tomorrow. I worked for a start-up nonprofit working in Zambia and know how needed educational infrastructure is to countries like Uganda. So keep it up!

    In terms of getting students involved, the 100% promise makes a lot of sense so good for you for knowing your audience and helping remove barriers so they can take action for you. And I agree that the 100% language came to be because of mistrust and lack of clarity on the charity end. Media attention to charity ratios certainly did not help the situation however.

    You might already do this, but what about if you told students why it is even possible for their funds to go 100% to the ground. My issue with 100% is that it conveys a message that is not the best for the future of charity and fundraising so anything we can do help educate the next generation of donors I’m all for.

    Again, thanks for the comment and for all your work with Building Tomorrow!

    – Brady

  • Rich Johnson

    Brady-great post. Well thought out and articulated ideas. Do you see a way of using the 100% language with “young” or “early” donors and gradually moving them towards becoming more “savvy” donors (as you put it) who are willing to give to overhead/infrastructure over time? Or is it better to try to educate donors about management ratios (Program – G/A – Fundraising) right from the start? If you recommend the latter, how do you suggest charities like ours compete with the compelling message of orgs like Charity Water and ODW? Thanks for your insight.

    Rich Johnson
    CEO
    http://www.sparkventures.org

  • bradyjosephson

    Thanks for the comment. There’s really two parts of my answer; the first coming from the perspective of what is, in theory, best for charities and the sector. The second comes from the perspective of what is, in reality, best for charities (like Spark) and their success.

    In Theory: the 100% should not exist and be used because of the reasons in the post. So even to encourage young donors, while it will be more appealing, doesn’t get at the real issue. It’s sort of like a nicotyne gum. Helps to curb the craving but doesn’t get to the actual addiction itself.

    In Reality: using the 100% language makes sense, especially with smaller level gifts and to attract new supporters. Liz (comment below) from Building Tomorrow (you guys should talk) does this with their college students. It helps put organizations like Spark and Building Tomorrow on somehwat level footing with the charity: water’s and ODW’s of the world. IF this is the route taken though, I’d like to see a lot more time and energy spent on the donor education so they know WHY their donations can be 100% and HOW charities, and fundraising, really works.

    Hope that helps a bit. Good luck!

  • Liz

    Hey Brady,

    (Also just realized I called you Brian earlier – not sure where I got that. So sorry!)

    This is only part of what your discussing but its something that interests me personally and I think Building Tomorrow does this without it being talked about that much.

    Teaching philanthropy and how a charity and fundraising works.

    I started with Building Tomorrow when I was in college and learned how to host a fundraiser without cutting into the amount raised with too much “overhead.” The college chapter I was a part of made the promise to attempt to take the 100% language Building Tomorrow says to students and pass it on down to our donors. So part of my job when I was on the executive team for the chapter was to apply for grants and funding to cover the cost of our fundraisers and “operating costs” so that when we told potential donors 100% of what we raise today will help build a school – that would be completely true.

    Not all 20 chapters of Building Tomorrow have committed to this model, but it is something that I think students can learn by hosting events and fundraising. They start to see what it takes to actually raise money and perhaps get a better idea of why donating to operating costs isn’t necessarily a bad thing.

    Building Tomorrow again is committed to the 100% language for our student leaders. And from that commitment, I personally learned more about fundraising, grant writing, and overhead by hosting Building Tomorrow events during college, than I ever learned in a class.

    Thanks again for the discussion!

    Liz
    Building Tomorrow
    http://www.buildingtomorrow.org

  • bradyjosephson

    Thanks for the reply Liz (and no worries on calling me Brian… I’ve been called worse!). You make a great point, and Rich also touches on it, that the 100% can be used as a tool that can help educate a new or young donor about charity and philanthropy. That I really do like and agree with.

    As long as young donors and students are learning accurate lessons. Fundamentally, the 100% language makes the distinction, no matter how you frame it, that donations made to overhead, salaries, buildings, marketing, etc. are NOT part of the cause (otherwise we would not need the 100% langauge at all) and that’s what is potentially damaging. A donation for fundraising IS a donation to help fund school facilities in Uganda. The connection just is not as clear. That’s what I think we need to move towards.

    Then charities (like yours, like Spark Ventures, like mine, like others) can invest in what is best for their end constiuents in the short, medium and long-term whether that be a marketing campaign, water wells or a school.

    I think we are all pretty much on the same page here. Thanks for the discussion as always and keep recruiting and educating those college donors!

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