The .02% Preferred

Posted by Laura Otten, Ph.D., Director on October 12th, 2018 in Thoughts & Commentary

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Another interesting study from GreyMatter, this one about the kinds of nonprofits donors prefer.  GreyMatter asked 1000 American donors, a “demographically representative” sample, to name their favorite charity, excluding places of worship.  They then researched all named nonprofits to understand the profiles of the favored ones.

The most astonishing—and terribly disappointing—finding is that this group of 1000 diverse Americans named only 289 different nonprofits as their most favorite.  That is a mere .02% of the 1.6 million nonprofits in the country.  More than half (54%) named one of the top 20 nonprofits[1], and more than a third (36%) named one of the top five organizations.  Given these numbers, it is no wonder that the average incomes of these organizations, as reported on their 990s, was $1.1 billion, with the median (half of the incomes below this figure, half above) income of $399 million.  The only conclusion that can be made from these figures is that Americans give to the big, well-known—which does not equate with effective—nonprofits.

Additional data confirms this:  only 5% of respondents named as their favorite nonprofit an organization with incomes of under $1 million.  Given that the vast majority of American nonprofits have budgets under $1 million, those nonprofits garnering the label of “favorite” are not the local, community-based nonprofits, the ones enriching the communities, and their residents, where we live and work.  To further substantiate that, 60% of respondents favored organizations working globally, with only 2% favoring organizations that work only outside this country, and 60% favoring those who work within and without.  But only 14% of the respondents favored an organization working locally.

Preferences varied with different factors.  For example, those who gave less money prefer the larger organizations, which generally are those that work regionally, nationally and/or internationally, while those who give more money prefer the smaller organizations, many of which will be local nonprofits.  Those who identify as Christian and those who are politically conservative, are more likely to favor larger organizations ($1 billion or more); those who identify with non-Christian faiths and those who are liberals are split evenly between the large and the “small” (under $50 million), while those who do not claim a faith prefer the smaller organizations.  Religion, political identification, children at home, sex of the donor, also influence donors’ choice of a favorite charity.  Christians, conservatives, households with children living at home, and males all prefer nonprofits that work globally or just overseas.

Of course, GreyMatter asked about overhead.  And while almost 50% of the respondents name a favorite charity that had an overhead ratio over 20%, the average overhead ratio for the favorite charities was 18.5%.

Interestingly, the number one reason (32%) an organization was identified as a respondent’s favorite was because of their results.  Trust, at 28%, was second.  Ironically, though, the results of these top 20 mega institutions to which donors point are, more often than not, are, in fact, the successes of their local affiliates, their on-the- ground work force located in, and tied to, the communities they are serving.

Thus, we see local “chapters” of most of the national organizations, from American Cancer Society to Feeding America to the Red Cross to Goodwill, doing the work at the local level, with people from the community for that community.  These aren’t national organizations but rather a very large web of local nonprofits.  Whether they recognize it or not, donors who give to the mega organizations because they “trust” them and like their results, are trusting the results that are produced on the ground in their own communities.  But they aren’t giving to them.

The fact that donors’ behavior seems to embrace the dominant thinking of this country—that bigger is better—reveals donors’ failure to understand nonprofits in general and that which powers the success of nonprofits in particular.  Nonprofits’ success and value should never be judged as is done with for-profits—by the size of their bottom line.  Thus, supporting the bigger nonprofits does not mean that donors are supporting the most successful nonprofits—those nonprofits that deliver on their promised mission and do so with integrity.

Nonprofits’ success—and, thus, their worthiness to receive anyone’s donation—must be determined by a combination of how well they are achieving their promised impact, supported by well-constructed, hard data, and how well they use their money to achieve that success.  This is true regardless of how large or small a nonprofit is, whether it works locally, regionally, internationally, or wherever, and regardless of its particular mission.  We should and must be preferred because we deliver a promised, and desired, impact, and do so with financial integrity.

[1] Here are the top twenty organizations, in alphabetical order:  ALSAC/St. Jude; American Cancer Society; American Heart Association; American Humane Society; ASPCA; American Red Cross; Disabled American Veterans; Doctors Without Borders; Feed the Children; Feeding America; Goodwill Industries; Guiding Eyes for the Blind; Planned Parenthood; The Salvation Army; Samaritan’s Purse; Save the Children; UNICEF; United Way; World Wildlife Fund; Wounded Warrior Project.

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