Conventional wisdom says donors do not want to provide operating support to nonprofits. But Jeff Brooks of Donor Power Blog thinks maybe donors just want some power to decide. In his post following up on Kiva’s supply & demand problem, Jeff suggests that maybe Kiva should give donor/lenders the option to provide operating support (an idea I suggested to Kiva founder Matt Flannery, but which he says he’s not interested in).
One organization that handles this well is DonorsChoose. They add an optional “fulfillment fee” of 15-25% to donors’ gifts, which donors can pay or not. As their How It Works page says:”Donors’ inclusion of the fulfillment fee is essential to the existence and success of DonorsChoose.org. Thankfully, 90% of our contributors choose to include it, and income thus earned allows us to continue our work.”
The magic that Kiva is missing out on here is giving donors the power. You just might be amazed at how open-minded, helpful, and flexible donors will be when you put the reins in their hands.
I have a different take on Jeff’s note than Sean has. For me, as Jeff emphasizes in the first part of his post, the issue is effectiveness, and Guidestar and others uninentionally obscure this by encouraging an overhead-is-evil fallacy. What’s important is effectiveness at a reasonable cost. That’s what thoughtful donors want; I don’t believe they’re interested in dictating (within reasonable limits, of course) how much money goes to keep the building heated. It’s about results. I work at the United Way of Massachusetts Bay and Merrimack Valley, and we are one of relatively few major social investors that has made a principled commitment to operating support. But, at the same time, we are results-driven. It works like this: the organizations we invest in are accountable for producing results, and we have a full set of metrics for that, but the use of the money is unrestricted. If the organization chooses to use the money to upgrade their accounting system, that’s OK with us as long as they deliver on the promised target and their results are proportional to our investment.
There is broad agreement that general operating support is the most valuable financial resource nonprofits can get, and that it takes a healthy organization to achieve results. Unfortunately, relatively few funders honor the idea in practice.
I don’t believe that donors really want control over how nonprofits spend money either (and I’ve advocated against restricted grantmaking for some time). I was reacting more to Jeff’s point that donors want to provide operating support (conventional wisdom says they don’t).
“We have meet the enemy, and they are us.” Pogo
It’s not so much that “conventional wisdom” says that donors don’t want to provide operating support, the non-profit sector has spent the last fifty years training donors that “all overhead is bad” and “program dollars are good”, and now complains about how hard it is to get unrestricted funding.
An area that is often overlooked, that does produce unrestricted dollars, are workplace giving campaigns. My particular expertise is the Federal government’s workplace giving program, the Combined Federal Campaign which has raised more than $1.2 billion of unrestricted funds in the past five years, and 97% of the funds are designated to specific charities.
Bill Huddleston, CFC Expert
It is interesting to think how the reframing of giving might affect donor perceptions on these issues.