Study Finds Strategy for Nonprofit Organizations to Triple Donations

3 min

“I want to help a kid’s education, or cancer research — whatever it is that I’m giving money to. I don’t want to pay for the CEO’s salary.”

That’s what behavioral economist Uri Gneezy said this week to KPBS News to explain the sentiments of many donors. I hate to hear this because I know the majority of people working in the nonprofit sector make financial and personal sacrifices to continue working for a cause they believe in.

These anti-overhead attitudes are frustrating, but researchers as the University of California, San Diego may have found a way for development professionals to raise more money while addressing this problem. The study, authored by Elizabeth A. Keenan, Ayelet Gneezy, and Uri Gneezy, was included in the October 31st publication of Science.

Gneezy’s team sent fundraising letters on behalf of an unnamed nonprofit to 40,000 Americans. Each person received one of four different appeals.

• A simple ask for donations
• An appeal to build on $10,000 in seed funding
• An appeal saying donations would be matched dollar-for-dollar up to $10,000
• A letter saying that an existing $10,000 in funds would be used to cover overhead and the recipient’s donations would go entirely to programming

The last appeal was the clear winner. While the frequently-used matching strategy garnered $12,210, the no-overhead appeal brought in $23,120.

Interestingly, a related experiment by the researchers suggested that donors were more concerned with whether their money went to overhead, as opposed to the charity’s overhead rate in general.

Perhaps then, it is not that donors resent the operating costs of organizations, but that they simply feel more satisfied imagining their money going directly to the cause. In other words, they know staff need to be compensated and office expenses are inevitable, but it’s more romantic to imagine their donation saving lives.

While many donors understand the necessity of overhead, this study shows that creating an opportunity to give directly to programs could lead to greater fundraising results. Uri Gneezy advises charities to ask large donors and philanthropists to put forth a donation to cover overhead in order to take advantage of the effects his experiment saw.

“If I could sit with someone who wants to give $5 million, I could tell them, ‘Look. Give this $5 million to cover overhead and then you’ll get a multiplier,’” he said.

Most organizations don’t have people lining up to give $5 million, but development professionals can still approach philanthropists or sponsors with this strategy. It may be an even more effective alternative to donation matching.

One encouraging trend, noted in the 2012 Bank of America Study of High Net Worth Philanthropy, is that many wealthy donors are already supporting charities’ general operations.

By recruiting donors who have supported general operations in the past, nonprofits could be successful in attracting funds to cover operating expenses. They can then use this contribution to offer donors a chance to give solely to programs.

Of course, this probably isn’t an option for all of your fundraising efforts, it could be a powerful tool to leverage in select campaigns. Consider which of your donors would be amenable to making the initial contribution and reach out to them. You can even start the conversation by citing the research above.


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