Three Steps to More Informed Giving

Much of the recent writing on effective philanthropy suggests that donors need to do more research on charities.

We couldn’t agree more—additional research by donors is critical to creating a more effective philanthropic sector, and ultimately to bettering our world. But we also feel that much of the current rhetoric fails to offer fact-based perspectives on what we in the philanthropic sector can do to increase informed giving by donors.

It is true that donors rarely research today. In a 2010 study of 4,000 donors, “Money for Good,” Hope Consulting found that 9 out of 10 donors say they care about nonprofit performance, but only 3 out of 10 donors actually research nonprofits and only 3 out of 100 actively take steps to ensure they are giving money to highest-performing nonprofits.

At GuideStar and Hope Consulting, we want to change that equation and get more money to higher-performing nonprofits. Last year, we surveyed more than 5,000 individuals, along with hundreds of advisors and foundation grantmakers, to learn more about their information needs. This study, “Money for Good II,” found that the primary reasons that individual donors do not research nonprofits are a) because they are familiar with their chosen charities and are inclined to give to the same organizations year after year, and b) because new charities they consider are already well-known, vetted organizations. Further, donors generally believe their charities are doing a good job and are motivated by many factors aside from supporting “the best nonprofit.” All of this makes it difficult to change their research behaviors.

However, the research also showed that there are constructive actions that the philanthropic sector can take to encourage more informed giving.

First, field-builders and information providers can focus on providing information about nonprofits in sectors that donors do tend to research. These include nonprofits working internationally, including international disaster relief work, and those working on health, education, poverty, and children’s issues.

Second, we also learned how nonprofits can best engage donors. We found that before funding an organization, donors want to get the full picture—the nonprofit’s mission, legitimacy, financials, and, most importantly, impact. The vast majority of donors, advisers, and grantmakers also prefer to see more comprehensive ratings (something akin to Consumer Reports) to “simple” ratings such as badges and seals of approval—preferably provided by third-party portals. Few donors know that these portals exist today, although 53 percent of them want to use such sites.

Third, nonprofits need to get information to donors. Donors don’t “shop” for nonprofits. When they research, it is often to validate whether an organization is legitimate and “won’t waste their money.” However, donors who do not research today say that they would be encouraged to change their giving behaviors if respected organizations issued ratings of nonprofits by sector, or if they saw a media report on an organization they support or are considering supporting. Nonprofits can also help themselves by sharing information on their impact and effectiveness on their website, third-party portals, and solicitations.

These research findings present a wonderful opportunity for the philanthropic community to better connect with donors by providing more—and better—information about their organizations. At the same time, it’s an opportunity to encourage donors to do meaningful research and ultimately fund the most impactful nonprofits

We know this won’t happen overnight. For many individuals, the emotional connection to a cause is what matters most. But we estimate that it is possible to influence about 5 percent of donations each year, which could shift as much as $15 billion in charitable donations. That could make a significant difference in supporting the work of high-performing organizations.

Read more stories by Bob Ottenhoff & Greg Ulrich.