There’s been an interesting discussion going around about the effectiveness of donors and philanthropy in business development.
It was sparked off from a recent UK report which indicated that only 40% of donors are interested in creating a new national charity rating scheme, while 68% said that this sort of rating scheme would not affect their giving decisions.
Is Social Impact Important to Donors At All?
Check out these really intriguing blog posts. All of them actually refer to each other, so the topic is very much worth a read:
- Sean Stannard-Stockton – Do Donors Care Whether Nonprofits are Any Good?
- Nathaniel Whittemore – Do Donors Care About Impact? Not Really
- Sasha Dichter – Do philanthropy bloggers care about donors?
Social Impact vs Personal Impact
I was actually drawn to the discussion by Nathaniel’s post where he expresses his own explanation about the Uk report findings. Overall, his view is that several donors (especially individuals) give money on the basis of a trust in their peers and community who also give. In light of this, their personal impact occurs at the time of giving, and donors seem to care less afterwards about the impact of their donation. Of course, this does not explain all of donors, but in the majority of cases, perhaps this is true, especially for many individual donors.
The important thing to recognize here is not that people are un-interested in impact; it is to recognize that when people give with a desire to be part of a community, or reinforce their investment in friends, the emotional satisfaction they get from their gift — their personal impact, you could say — is immediately gratified at the moment of giving.
Additionally, Nathaniel writes:
Basically the point is that when people become emotional invested in a cause shared by a friend or a community, they take on faith that there is impact. This is why it doesn’t surprise me to to see that 68% of people wouldn’t really listen that much to independent assessments. Evolution has spent a million years helping us have good instincts about the people we let into our lives, but now we have to trust a report from people we’ve never met?
Donors: Their Peers, Trust and Emotions
I, myself, am currently very involved in the humanitarian and development sectors – in organizations that do rely on donors and donations. In my job and life, monitoring and performance assessments are a significant part of achieving social impact and achieving goals. It is very much second nature to me, in my opinion, to always look for the social impacts and to consider the performance indicators of social programs.
Nevertheless, I do have a number of close friends and family, who while they donate, are not directly involved in monitoring and social impact assessments on the day-to-day basis. They do have other lives outside of the social impact field. Their minds and focus are often directed towards other things – and that’s how it is with many people who are individual donors on the side of their full-time job.
From my own experience, I have seen others and even sometimes myself, basing donation decisions on emotional aspects. For example, I’ve seen donors (from individal donors to institutional donors) choosing to provide funds to projects that give them more of a positive emotional response (eg. helping happy, smiling children) rather than a neutral or no response (eg. building a road to help economic infrastructure).
I think that’s something that social leaders need to acknowledge and consider – that there is a human dimension in giving decisions, and it plainly involves emotions. Of course emotions are not the only factor, but it is nonetheless, an important one.
Who Cares About a Charity Rating Scheme?
So how could a national charity rating scheme help the ordinary person to donate to an effective charity or organisation?
Simply, it could help ordinary people to save time when they want to donate. Most importantly, it could also help people make informed decisions about their donation decisions.
On the other side, a charity rating system would also increase transparency and accountability of charities and social organizations. In my opinion, this is highly significant.
While Sean, Nathaniel and Sasha had focused more on the emotional explanations of the report’s findings, I would argue that a charity rating system would still be useful and helpful. If not for the donors themselves, it could help keep charities on track, in terms of keeping them accountable and perhaps even encouraging innovation and competition against set benchmarks and against other charities who have similar social missions.
From External Rating Systems To Internal Nonprofit Leadership
Overall, I agree with Nathaniel’s final observations that:
I think the real culture shift is to get nonprofit leaders to recognize the intense responsibility they have for constantly improving impact.
It may be dangerous to rely solely on creating emotional buzzes in donors in order for your social enterprise to succeed. Sasha had concluded that this discussion is really about all of us wanting to build “an ever-improving, ever-more-dynamic field of philanthropy that brings about large-scale, positive social change.”
Personally, I think that while a national charity rating system could encourage improved accountability and effectiveness for charities, the major responsibility of improved social impact lies not merely in such a system. Nor does improved social impact depend whether or not donors are more emotional or rational beings.
Rather, the initiative and responsbility for improved social impact must come from nonprofit leaders and business development advisers.
Get monthly Social Entrepreneur Funding Report by Matthew Alberto in your inboxWant to Learn More About Social Entrepreneurship?
Learn from successful social entrepreneurs.
Click here to be a member of Matthew's Social Entrepreneur Funding Series now!