Good donors, bad donors

In a series of though provoking articles, the New York Times asked prominent philanthropists and scholars to discuss the status of contemporary giving and charities. Peter Buffet (son of Warren Buffet and Chairman of NoVo foundation) argued against the “conscience laundering” (in his own words “feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity”), while  the bioethicist Peter Singer made the case for “effective altruism” where giving to prevent 1,000 people from losing their sight from trachoma has in his view much better impact (or “do the most good” as he wrote) than contributing the equivalent amount to a museum. Finally a piece on the New Yorker suggested that the fifty most generous philanthropists in the U.S. – who gave a combined $7.7 billion to charity in 2013 –  spend less on causes having to do directly with poverty alleviation than on other more sexy or selfish causes. The categories that got the greatest amounts of funding from the fifty highest givers in fact were colleges, universities and museums.

Is there is such a thing like bad donors and good donors in nature? Giving to certain causes makes a donor less or more valuable? This reminded me about a discussion years ago after the Tsunami, when there was a concern among fundraisers that the so called “emergency donors” were not “good donors” because it was difficult to convert them into more regular and unrestricted supporters.

Fundraisers are supposed to shape and influence the charitable giving so they are contributing in setting the agenda and the priorities to which donors give. But who is deciding what cause is most relevant or deserve more funding: the actual needs in terms of statistical magnitude, the donors and their desires or the fundraising machinery and the charities? A traditional economist would answer that is the tradeoff between demand for charitable giving to certain causes and supply of recognized and trustable organizations offering a product for that demand.  Obviously, like many things in real life, charitable giving is more complicated. However, donors always are in search of what/who needs the most and since decentralized fundraising like crowdfunding ($2.7 billion raised worldwide) is a growing modality of giving the quest for what is the most relevant cause or in need the most of  my money  will continue and expand in the future.

I was thinking about this when I arrived in the Philippines few days after the super Typhoon Haiyan. I thought I was on a relatively simple mission because I was supposed to raise money for women and girls affected by the typhoon Haiyan. The need was overwhelming: 270,000 pregnant women, 1,000 women giving birth every day, out of which 15 % experiencing complications including risk of death and no emergency obstetric care available in all affected areas. Not to mention the violence and risk of trafficking for many girls. But the priorities and the fundraising appeals for this emergency were set around other legitimate lifesaving and urgent interventions like providing food, water and shelter. Therefore making the case for women (or for others like elderly or disabled people) was extremely difficult and the resources raised were significantly lower than the need. Obviously the lack of budget, capacity to invest in fundraising and the brand awareness can also have an effect on which priority raised more funds,  but the question remains on who is deciding what is more urgent or what deserve more funds: the donors and their desire to help, the humanitarian fundraising machine or the actual beneficiaries and their needs? Historically some crisis like 9/11 or Katharina attracted much more resources in comparison of the people affected than situations like Syria, South Sudan or Central Africa Republic.

The question of which cause or need deserve the most is also at the center of concerns of philanthropists and HNWIs in India were I spent the last few weeks. India is the first and only country in the world that has recently approved a law that mandate companies to invest 2% of their net profits to Corporate Social Responsibility. 16,200 companies are qualified and is expected that this law will produce estimated $2 billion annually in CSR spending. Listening and talking to major CEOs and philanthropists like Nadir Godresh and Harsh Mariwala looks very clear that they have their CSR as well as their personal philanthropic priorities and preferences. What is unclear, however, is if there are enough charities and NGOs able to respond to their desires and investments (a gap in absorption capacity it is expected in spite of 3 million NGOs in the country) and if the CSR spending will address all the needs of a country with 270 million people living in poverty, 840 million people don’t have sanitation services and 128 million lack safe water and 70% of women experience sexual and domestic violence.

I don’t think there is such a thing like a good or a bad donor. Donors give for a variety of reasons and it is the mission of charities and NGOs to intercept and convert these reasons into support and resources for our causes. What I think this discussion illustrates however is the need for a much clear understanding on why donors give and what can we do better as fundraisers. And I think there are two key factors to make fundraising winning today.

The most important winning factor in fundraising today is impact. Donors want to see (and participate in) tangible transformations, while I think most of our fundraising is still focusing too much on needs and problems and the response a donations can help but not much on impact. One of the advantages of community foundations and museums to which HNWIs give is that donors can be closely involved with how their gifts are directed, while maintaining the privacy. I am not sure all charities and NGOs are set up for this.

The second key element is the power of emotions, something we know well in theory but we use too little in practice. There are not good donors or bad donors but only emotional donors. As Dan Ariely said when I interviewed him last year “when we think or we feel emotionally we are compelled to act and become extremely generous but when we think about it our emotions are muted”.

So fundraising is about how we get emotions ignited or how we can trigger donors to act even when they don’t feel. And doesn’t matter if they are good or bad donors.