How big is your donor?

Along with the World Cup (depending on the team, of course), we celebrate fund raising achievements. We look at results and trends from last year and partly with a sigh of relief and hope for this year: in 2013 in US charitable giving was at the same level it was before the financial crisis and in UK there was an £800m increase in donations. So, why we shouldn’t do better this year? In reality we should also ask ourselves if this is the result of more people giving or if we are simply fishing in the same pond with a lower offer. Mark Astarita, the fundraising director of British Red Cross and outgoing chair of UK Institute of Fundraising, simply put it “Over 30 years of professional fundraising have we grown the pie, are more people giving? I’m not so sure.” And Ken Burnett argued that the actual costs of acquisition with typical low retention rates are not sustainable and charities would be stupid if they don’t take action to avoid eating their seed corn.

I think this deserve a serious discussion on this blog and in the next conferences and congress. I would like to explore this issue from another angle of the pyramid, the major donors or HNWIs. My question is: are we increasing the donations from wealthy people as part of increasing the overall giving? Are big gifts and major donations very specific in nature and appropriate even if you are not a university, a hospital or a museum?

I think there are various myths, misconceptions or challenges in the way charities think and engage with High Net Worth individuals (HNWIs), and many of these assumptions are among the reasons why many of the richest people haven’t yet given substantially or to the level of their possibility or capacity.

Get on the list? The first assumption, especially when you look at the list of top 100 richest people in a given country, is to assume that the millionaires and billionaires are potentially the right target for a donation to your organization, provide you match with interest to your cause, potential to give and a link with a peer to your charity. Far from true, in fact many of them don’t give at all or not in a significant way. Or they simply don’t give to your organization and will never give. In a significant article, Ruth Mccambridge, editor in chief of Non Profit Quarterly, explains that the million dollar gifts (gift f $1 million and more)  constitute less than 10% of the overall giving in US. With the exception of 2006 -when Buffett made his commitment to Gates Foundation –  they represents 5-8% of the overall giving. In addition rich people give to big institutions and in many cases these institutions are their own programs and foundations. Because they don’t trust many of the NGOs as they are today.

% of $ million gifts on the overall giving – Giving USA

Even in Asia, where the highest number of HNWIs living today and where will be in the future, the giving is far from correlated to their wealth. For instance, Yu Pengnian, a rich real estate billionaire in Hong Kong, gave his entire fortune of $ 1.2 billion to his foundation and not to local or international NGOs or to government after experiencing slow capacity to deliver and corruption. Significantly, two recent major commitments in Asia for health- from Tahir in Indonesia and from Le Van Kiem in Vietnam – are toward a match gift and investment from Bill Gates, a peer offer and not a professional fundraiser appeal.  You can criticize the simplistic approach of Carlos Slim, one of the wealthiest men in the world, but when he said “trillions of dollars have been given to charity in the last 50 years, and they don’t solve anything” he expressed a feeling shared from many HNWIs from Silicon Valley to Singapore.

Waiting for Godot. A second obstacle limiting non profit organizations in engaging with HNWIs is the over reliance on a specialist. Granted that, like in many other fundraising areas you need people with specific experience; this is the only area where many NGOs are stuck with the search and recruitment of the right person/profile. The assumption is that you need somebody with the right skills AND the portfolio of contacts, although often offering not a very competitive salary. With the result that the search is going on forever and the charity never start a major donor program with the excuse that they don’t have the right person or hiring a not so good candidate. I worked with so many organizations where the major donor function was merged with that of corporate fundraising (assuming they are the same thing) or relegated with the legacy department or with the more fancy ‘leadership giving’ branch. The reality is that you need your senior management and board, as well as the entire organization, to get serious and engaged with major donors and there is no Mr. Godot that can produce any magic. The best and more lucrative major gifts are achieved often by a peer, a volunteer, a program person or a campaigner and not by the MD specialist/manager.

Patience. We know the theory and the practice. To get a significant donation or investment from a wealthy person could take years. 2-3 year at least to get the first donation according to various benchmarks. I know very few organizations – outside university and hospitals and museums – that have the vision and the courage, as well as the resources, to wait for so long. I still remember the case of a very large INGO where a donor was giving regularly a very limited amount but was very insistent in requesting to meet the CEO and to visit the projects in the field. The organization didn’t care or have too much time for him especially because received other relevant institutional grants from governments and foundations. Until a staff member alerted the management saying “Wait, this is the son of one of the wealthiest person in US!” The donor went on the field, met with senior leadership and this resulted in a $50 million commitment afterward and $100 million invested in other parallel projects. I don’t know many organizations that have such a luck or patience to wait and invest in a demanding HNWI.

I just want a cheque. The most challenging assumption is in the very essence of the “big gift” or major donor definition. The basic mantra is to move the donor through a number of steps or engagements and asks towards a substantial gift (major or big gift). While this is legitimate, it lacks to recognize the changing nature of the donors, especially the new generation of HNWIs. For these donors a cheque or a donation is a limited and somewhat old fashioned way of engaging with a cause. Philanthropic giving is just one of the ways they have and not even the most significant. They clearly like to use their entire portfolio, assets and skills including financial investments and loans as well direct involvement in solving and scaling up solutions.  In the last World Wealth Report from Capgemini 15% of HNWIs clearly indicated that they would like make investment choices with a clearly objective to create positive social impact along with giving to charities. Impact investing is estimated to represent an opportunity for charities over the next decade between $400 billion and $1 trillion. When I did a session at the IFC on impact investing together with Credit Suisse and how this can represent a huge opportunity for the non profit, the feedback I received was a mix of indifference and “it is too complicated for us, we just need a donation.”

Global giving. Finally, while it is true that most of the giving and investment in charities of HNWIs start at home, increasingly many of them are global citizens and would like to donate and invest in causes around the world, doesn’t matter where they are located. Several universities and museums successfully managed to attract major donations globally, but you would be amazed to see how many causes and organizations – from animal sanctuaries to human rights projects – can and will receive donations from HNWIs from the Gulf to Hong Kong, from Mumbai to Bogota’. If only we ask properly and we create the conditions for them to give and invest.

When I work with boards and staff around the need to engage with HNWIs, I usually say that we have two options. Looking at them as they grow in number and wealth and keep calling them “rich bastards” or trying to engage with them but changing our paradigms and assumptions. And to do that we need to start changing our very own definitions and assumptions.