How To Donate $50,000 or More Without Making Things Worse
No one wants to make a charity worse off, especially those who are giving large donations. Yet this is exactly what Dale was afraid he was doing.
Dale was a successful business owner in Portland, Oregon. His consulting business had done very well, and he was donating considerable amounts of money to the nonprofits in his community. But as his giving increased, he noticed an alarming trend. The more he gave, the more the organizations he supported seemed to depend on his giving. He loved these charities and their causes — that’s why he gave to them! But his gifts were unusually large and he knew they wouldn’t last forever. What would happen if he wanted to stop his giving? Could his good intentions actually be doing more harm than good?
Is it possible that some donations, particularly major gifts, make charities worse off?
An Unintentional Cycle
Those giving $50,000 or more to a single organization may face this common issue. Donors give with the intent of helping an organization make an impact on a cause they feel passionate about. Larger gifts like these have the ability to move the needle much more than sending $1,000 to 50 different charities.
What begins with excitement, however, can turn to frustration as:
- Charities return expecting additional gifts.
- Donors unintentionally find themselves in a pattern of giving they feel pressured to maintain.
- Charity staff feel insecure when an organizational budget (their salary) is tied too closely to a few key donors.
- Rather than becoming more sustainable, charities become more dependent on their major donors.
Of course, some donors are happy to and willing to continue making large donations to the same charity year after year. Those who get frustrated, though, may even become disillusioned and eventually stop supporting an organization altogether.
On the charity’s side, there is usually not frustration, but fear. An over-dependence on a few major donors for a significant part of an organization’s budget can lead to an annual funding uncertainty, and it can add an element of anxiety to strategic planning.
Getting Better at Giving
Bill High sees this all the time. As president of National Christian Foundation – Heartland, he’s helped thousands of major donors. As he’s watched hundred of millions of dollars go out to charity, he’s noticed the donors themselves are usually the unintentional source behind such frustrations. “The issue is that the givers themselves aren’t engaged enough with the charities themselves,” he says. He notices several common pitfalls major donors make:
- Givers don’t understand the outcomes they hope to achieve with their gift.
- They don’t communicate their desires or intentions to the charity.
- They don’t follow up to measure whether their objectives were met.
He recommends several strategies to avoid creating an unhealthy reliance on your major donations:
1.) Give a “Capacity Building Grant.”
I’ve argued elsewhere that giving to overhead is a meaningful way to have an impact. But large gifts can often be put to better use by designating their use. A Capacity Building Grant equips the organization to grow their mission in some way. Examples of what a Capacity Building Grant could pay for:
- Hiring a grant writer
- Commissioning a consulting study
- Hiring a key executive
- Facilities improvements or upgrades
- Providing the match for a matching program
The goal behind these types of gifts is that the organization is left considerably better off after the gift than before it. What is the charity’s plan to replace that income or grow their income because of this gift or series of gifts?
2.) Discuss your intentions ahead of time.
It may seem awkward at first, but charities appreciate clear communication about donation intentions. When you clearly delineate whether this is a one-time gift or whether you plan to give similarly in the future, you allow the organization to plan ahead accordingly. It’s common for major donors to commit to a three year initiative, for instance. Are there any criteria that will determine ongoing giving? Identifying a clear start and finish to your donations helps the organization know how to be wisest with those resources.
3.) Be cautious when giving more than 10% of an organization’s budget.
I once worked with a couple whose annual giving to a charity added up to more than 90% of the organization’s budget. They believed deeply in the cause, but this should generally be avoided. When particular gifts are a large percentage of an organization’s income, they should be designated for specific projects like new buildings.
4.) Follow up about the results.
After a gift has been given, ask the charity about its progress. This is a challenge for most, because donors don’t generally know what kind of outcomes they should be interested in. If you don’t know, ask the nonprofit’s leadership. By engaging with and learning from charity staff, donors become more knowledgeable and the staff are held more accountable. You will only know if your gift was successful if you figure out the metrics that define success. “You have to be engaged enough to know what outcomes you want.” Bill High says. “If you don’t know, ask the charity before you give for a proposal for how they’d use it.”
5.) Consider contributing gifts of time and talent in addition to treasure.
Many nonprofits would welcome the expertise and engagement of their larger donors in other capacities. You might ask about committee or board opportunities, or a hands-on volunteer role. Not only does this build on your relationship with the nonprofit, it allows the organization to see your value — not simply the value of your donations.
Remember our friend Dale in Portland? He became so passionate about this issue that he created Mission Increase Foundation to help organizations become more sustainable in their fundraising. Learning more about how your dollars are used might change the way that you do your giving at a fundamental level.
Giving major gifts responsibly can be challenging, but it doesn’t have to be frustrating. By staying engaged with your nonprofits and entering into a learning process together with them, your philanthropy will mean more.< Back to Updates