AMERICAN PHILANTHROPIC, LLC the Quest for Community Donor Response Theory in Successful Nonprofits Jeremy Beer and Matthew Gerken National Catholic Development Conference 2015 Annual Conference and Exposition September 15, 2015

WHY DO WE NEED A “DONOR RESPONSE THEORY”? 2 How we approach development is driven by the KIND OF RESPONSE we are trying to elicit from donors. The response we try to elicit depends on what we think MOTIVATES donors. So what does motivate donors? Why do they give?

THE NEW CONVENTIONAL WISDOM 3  Donors primarily give out of (enlightened) SELF-INTEREST  Donors are driven by a desire for a GOOD RETURN ON THEIR INVESTMENTS  Donors prioritize giving to organizations that can DEMONSTRATE EFFECTIVENESS AND IMPACT—they look at the data, and give accordingly. And if donors aren’t motivated to give for these reasons, they ought to be! This moral assertion lies at the core of the Effective Altruism movement, for instance.

RESULTS REPORTING 4 THIS NEW CONVENTIONAL WISDOM HAS BEGUN TO PERMEATE THE NONPROFIT WORLD.  Charity Navigator now gives more stars to nonprofits who show that they are working to measure their impact.  The president of Charity Navigator, Ken Berger, says the nonprofits who do this will “find it easier to attract funding than charities that don’t… This is what many donors are and will be looking for.”  Stars increasingly linked to an organization’s ability or willingness to engage in “results reporting.”

RESULTS REPORTING CONTINUED 5  Is that true?  Should we be redirecting more of our scarce resources toward strengthening our impact-measurement capacity?  Should we be prioritizing programs whose impact is more easily measured?

RESULTS REPORTING CONTINUED 6  Should we be making great efforts to impress donors with quantification?

MONEY FOR GOOD 7 MONEY FOR GOOD IS THE NAME OF A MAJOR 2010 STUDY.  “Only 35% of donors ever do any research, and almost three- quarters of these spend less than two hours at it.” Philanthropy expert WILLIAM SCHAMBRA summarizes its stunning findings:  “Among those who do research, only 24% regard outcomes as the most important information.”  “Of those who do research, the overwhelming majority—63%—use it only to… confirm that the group they’ve already chosen isn’t a total fraud.”  “Only 13% use the research to actually help them choose between multiple organizations, i.e., to make decisions about which is comparatively the better performer.”  “The upshot is that only 3% of donors give based on the relative performance of charities.”

MONEY FOR GOOD CONTINUED 8 Money for Good found that 16% of donors could be classified as “IMPACT GIVERS.” 84% of donors are NON-IMPACT GIVERS, or “heart” givers. But many do not actually choose between charities based on what they can discover about differential impact—hence the 3% number reported on the previous slide. These donors give based on religious conviction, local or place-based commitments, or personal ties. We might call them IDENTITY OR MEMBERSHIP GIVERS. IMPACT NON-IMPACT

THE NEW CONVENTIONAL WISDOM ANALYSIS 9 IN SUM, THE NEW CONVENTIONAL WISDOM IS UNWISE.  Expect “heart” giving to continue. It is in line with what we know about human nature from modern psychology and sociology, from history, and from the Judaic and Christian theological traditions.  There is no data-driven reason why a development professional or nonprofit leader should buy the hype about impact giving.  People don’t give based on a robotic calculation of where their dollar will go the farthest.

HUMAN PSYCHOLOGY 10 WHAT WE KNOW ABOUT HUMAN BEINGS THAT RELATES TO CHARITABLE GIVING: Money for Good suggests precisely that donors use their giving as a way to achieve belongingness, build an identity, and become more closely connected with others—not, primarily, as a way to solve social problems or change the world.  BELONGINGNESS may be the most fundamental psychological need of all.  IDENTITY and PARTICIPATION are classified as among the most fundamental psychological needs by several major psychological schools of thought.  Research reveals that SOCIAL CONNECTEDNESS may be the most important factor in determining human happiness.  Sociological theory suggests that in practice even we Americans inevitably are embarked on a QUEST OF COMMUNITY.

DONOR RESPONSE THEORY (DiRT) 11 The fundamental premise of DiRT is that to be successful, we must approach donors as they actually are, not as we might wish them to be. DIRT IS A SINGLE, SIMPLE FRAMEWORK TO ORGANIZE OUR THINKING ABOUT MULTIPLE FUNDRAISING DIMENSIONS: |1| What kinds of requests can we make of our donors? |2| Where does each type of ask put the focus? |3| What response does each type of ask tend to generate? |4| What type of relationship does each kind of ask tend to foster? |5| How strong are the resulting donor relationships?

12 DONOR RESPONSE THEORY CHART LEAST ORGANIZATION TRANSACTIONAL WEAK SUCCESSFUL ORGANIZATIONS MOST MISSION RELATIONAL STRONG SUCCESSFUL ORGANIZATIONS

13 DONOR RESPONSE THEORY CHART LEAST ORGANIZATION TRANSACTIONAL WEAK SUCCESSFUL ORGANIZATIONS MOST MISSION RELATIONAL STRONG SUCCESSFUL ORGANIZATIONS

14 DONOR RESPONSE THEORY CHART LEAST ORGANIZATION TRANSACTIONAL WEAK SUCCESSFUL ORGANIZATIONS MOST MISSION RELATIONAL STRONG SUCCESSFUL ORGANIZATIONS

15 DONOR RESPONSE THEORY CHART LEAST ORGANIZATION TRANSACTIONAL WEAK SUCCESSFUL ORGANIZATIONS MOST MISSION RELATIONAL STRONG SUCCESSFUL ORGANIZATIONS

16 DONOR RESPONSE THEORY CHART LEAST ORGANIZATION TRANSACTIONAL WEAK SUCCESSFUL ORGANIZATIONS MOST MISSION RELATIONAL STRONG SUCCESSFUL ORGANIZATIONS

DONOR RESPONSE THEORY CHART 17 LEAST ORGANIZATION TRANSACTIONAL WEAK SUCCESSFUL ORGANIZATIONS MOST MISSION RELATIONAL STRONG SUCCESSFUL ORGANIZATIONS

DOES THE THEORY HOLD UP? 18 OUR ANECDOTAL EXPERIENCE WITH MORE THAN 150 NONPROFITS SUGGESTS THAT IT DOES:  Direct-mail appeals that ask prospective donors to join in a community dedicated to a common, external mission perform better than emergency, organization-centric, or self-interest appeals.  Donor clubs drive increased giving because they provide an opportunity for participation and contribute to identity- building.  Organizations that invest in relationship-building via meetings with donors and donor prospects grow faster and are seen as more effective by their peers.

SUPPORTING DATA 19 AMERICAN PHILANTHROPIC RECENTLY SURVEYED 100 NONPROFIT ORGANIZATIONS ABOUT THEIR FUNDRAISING PRACTICES AND OUTCOMES:  FINDING A: more meetings translates to faster growth.  FINDING B: more meetings and more communication is associated with higher donor retention rates.  FINDING C: organizations regarded by their peers as the most effective invest more heavily in donor cultivation. especially house-file mailings and meetings.  FINDING D: the more you communicate—the more you mail and meet, but not necessarily ask, the higher your average gift size from individual donors.

DiRT AND THE CATHOLIC TRADITION 20  HENRI NOUWEN: “We have misserved our donors if “we have not given them an opportunity to participate in the spirt of what we are about. We may have completed a successful transaction, but we have not entered into a successful relationship.” Our goal: to help build the Kingdom of God by creating a community of love…”  POPE BENEDICT XVI: “The essence of love and the essence of charitable organizations are intrinsically connected. The efficacy of an organization lies precisely in how it successfully models Christ’s love of all.” DiRT urges us to approach donors as collaborators in a community jointly working toward some good, not as mere investors in a social technology. It urges us to think in terms of communio.

DiRT AND CHRISTIAN CHARITY 21  SECULAR PHILANTHROPY has since its inception been thought of as primarily a tool for social change.  CHRISTIAN CHARITY is different: it is how we witness to God’s superintending love and our relationship as brothers and sisters. Social change flows downstream from that. DiRT goes to the heart of the difference between secular philanthropy and Christian charity.

THE TAKEAWAYS 22 WHEN IT COMES TO DEVELOPMENT, THINK “THE QUEST FOR COMMUNITY.” THINK COMMUNIO. | 1 | Donors as impact investors is more hype than reality. | 2 | Your goal is to make your organization a part of your supporters’ innermost identities; to become part of who they are. | 3 | Donors respond best when you act as if the premise of Christian charity—that we were made by, in, and for love— were true!