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the truth about zero fundraising costs

February 01, 2010 |

We spent some time last week with one of our favorite people. She’s brilliant, wise and a terrific nonprofit marketing strategist. The discussion turned to fundraising for Haiti. We’re all in the business, so the discussion went deep and to the details very quickly. One of the topics that we batted around was the phenomenon of charities using: “100% of your gift will go to XYZ” strategy to raise money.

It was a sparky discussion.

The centerpiece of the discussion was inspired by the “100% of your gift goes to Haiti” as seen in recent fundraising efforts. You’ve seen it, too. The tactic isn’t restricted to Haiti. Many NPOs used marketing language like that following the Tsunami and other natural disasters. You can even find situations where the “100% of your donations goes to the field” hook is used to attract donors for non-disaster fundraising.

Here are a few of the big points from our discussion.

First the good stuff: what a nifty idea to put 100% of your donors’ donations exactly where it should go. 100%! No sleazy fundraising consultants taking fees. No ferret-eyed accounting people getting a salary. No printers wanting to get paid for printing the UrgentGram that brought in all the donations. None of that…every penny of every dollar going to help hurting desperate men, women and children. Nothing but good with that.

Here’s the problem: if it’s true then it may not be good for all donors.

Let’s imagine that 100% goes to the field.

Suppose $100,000 comes in for Haiti relief and 100% of those dollars actually arrive (literally or figuratively) in Haiti. That means other donors who didn’t give to Haiti actually had the fundraising expenses and admin costs DOUBLED on their donations. Why? Because someone has to pay for fundraising. Someone has to pay for administrative costs. And believe me, admin costs in a disaster are not insignificant. Funny what a hassle it is to doing banking when all the infrastructure in a country is gone. But let’s ignore admin costs for this discussion because maybe that could be viewed as part of the actual work on the ground and only deal with fundraising.

Here’s what happened when the Haiti earthquake happened. NPOs called their agencies/consultants and began implementing disaster plans. Prepositioned direct mail launched. Websites were repurposed and focused on Haiti. Email blasts began going out. Social media was deployed. Mobile giving lit up. Money began pouring in and fundraising costs were incurred. Period. No way around it.

Let’s examine the easy one: direct mail. Say the charity did something amazing and convinced their printer and ad agency to donate their time, expertise and paper. All that the charity paid for was stamps. So, who paid for the stamps??? If 100% of the donations went to Haiti, then OTHER donors of the charity paid. No way around it. And I have to tell you, I really doubt everyone but the US Post Office donated their time. So there were big, big bills that were associated with getting relief to Haiti.

Who paid if 100% of the donations went to Haiti?

Other donors.

Those expenses had to come from their giving. And with a few exceptions I’ll list below, other donors paid. (And even in the exceptions, other donors are paying…)

That means that if a nonprofit has a fundraising expense of 12% typically…with 100% of the donations going to Haiti…then some donors ended up footing the bill for this “free” fundraising. Before Haiti, for every dollar they were giving to the organization, 88 cents went to what they expected it to. With the “100% to Haiti” strategy in play, the non-Haitian donors “dollars to the field” may have became 76 cents or less… So no matter how you look at it, some donors pay for other donors to have all of their donations go to the field.

All I’m saying is that what seems like a wonderful thing in a simplistic view isn’t the same when you think about the realities of nonprofit management. 100% to the field might not be a terrific as it sounds. (Even though it is a terrific fundraising hook!).

There are some exceptions to this situation.

  1. Sometimes a foundation or a major donor will agree to underwrite the fundraising costs in a situation like this. They know they’re footing the bill for the fundraising.
  2. Other times, ministries associated with churches will have the church underwrite the fundraising. Again, that’s another situation where the people paying the fundraising bill for Haiti are aware of what is happening.
  3. Sometimes the NPO’s board will allocate special funding from a discretionary fund to pay for the Haiti fundraising (this isn’t quite as clean as the other exceptions, since those dollars probably came from donors at some point but that’s splitting hairs).

I know why the 100% goes to the field-thing happens. It is seductive. Seductive for the donor. Seductive for the nonprofit trying to help in a terrible disaster. Seductive for the strategist trying to help raise dollars to save lives in Haiti. But like many things seductive, the temptation should be resisted. What donors think is happening, isn’t what is happening. And that doesn’t build relationships. Which isn’t the way to go.

Your organization must tell donors the truth, not just tell them what they want to hear. And not just the “truth” but also tell them the implications. I know, I know, it’s hard. But authenticity builds relationships and relationships will result in more donations than fundraising techniques alone.

OK, that’s the way our discussion went. Now it’s your turn. What do you think about “100% goes to the field” strategy? How does your organization deal with these kind of issues? Can you think of any ways around this problem? What’d I miss? As always, I want to hear what you think.

Also, this is Monday and so it’s time for a Good Job Monday shout out. We’ll give a Good Job Monday shout out to Bruce Karr who runs The Farm in Snohomish, WA. See this article for details of the amazing work Bruce is doing in his community. The photos in the article are worth a thousand words! Good Job Bruce!


Steve Thomas
Partner, Oneicity


(photo credit: bp6316 is alive)

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20 Responses to “the truth about zero fundraising costs”

  1. I can see where the 100% approach may be irresistable. Crisis situation, need the funds fast, other orgs are doing it, the ends justify the means, it’s technically the truth, for these particular funds… and it works. Yes, there are plenty of ways to rationalize it. I do wonder if there will be a long-term negative effect on donor relationships, and if nonprofits will find they need to keep upping the ante in non-crisis times as well. Donors would be forgiven for wondering why it can’t be 100% all the time, wouldn’t they? Or if not 100%, then at least some larger percentage than it is at present. It’s easy, from the outside, to forget about fundraising costs.

  2. Great point!

    I understand why it’s compelling. I’d LOVE it if organizations said WHY 100% of the gifts were going to Haiti.

    Wouldn’t it be great to know a foundation is covering the admin costs? That would be giving people what they want AND educating them on the reality that overhead of some sort is necessary.

    I hadn’t thought about the unintended consequence of the admin on other gifts being effectively double.

    While I agree, and while I see the dangerous direction Rebecca rightfully wonders if appeals like this would go, what do you think? Will organization’s be “punished” by donors for being more upfront about admin costs?

  3. Steve Thomas says:

    @Rebecca — thanks for your thoughts. And I am grateful that you mentioned the possible negative effect on the long-term relationship with a donor. Fundraising is never free, is it?
    Glad you stopped by.
    st

  4. Steve Thomas says:

    @Marc–it would be great for 100% of every gift to always go to the field or to the program. It’s all those admin and fundraising costs that are real. Boy, it is a slippery slope isn’t it. Thanks for contributing–and just so you know–100% of your comment goes to the blog. There are no admin or fundraising costs here!!! (Couldn’t resist).
    st

  5. Pamela Grow says:

    Perhaps the public needs to be better educated to the realities of running a nonprofit.

    In his post Equal Rights for Fundraisers (http://blogs.hbr.org/pallotta/2009/09/equal-rights-for-fundraising.html) Dan Pallotta said it far more eloquently than I ever could: “Without fundraising there are no programs.”

    Yes, the “100% goes to the field-thing” is seductive to donors. Also very, very unrealistic.

  6. “Free” is never really free is it? I applaud this line of thinking and encourage you and the causes you consult with to focus on building relationships with their donors, and making sure they are solid with the value they add in connecting donors with good work! Those are connections donors can’t make on their own.

  7. Deborah Gohrke says:

    Good conversation about an imperative topic-the cost of doing business, even if your in the business of doing good.

    “No ferret-eyed accounting people getting a salary.” YEAH! We like the doe-eyed ones…or the dewy-eyed ones wondering how to pay for admin costs after the “100% of your donation goes to Haiti” campaign.

  8. Steve Thomas says:

    @Pamela–Thank you for stopping by. Seductive and unrealistic are sadly part of the fundraising world. How do we educate the public when watchdog organizations focus on ratios but don’t help educate people?
    st

  9. Steve Thomas says:

    @Al–Free isn’t free! I’m going to quote you on that. Tricky because there’s a lot of conversation out there about the need to “give” yet, free is tough to do because it isn’t. Keep ‘em coming!
    st

  10. Steve Thomas says:

    @Deborah–I’ve never seen a doe-eyed accounting person! Can’t wait. Boy am I going to hear from my accounting friends. The dollars counts and who counts the dollars matters.
    st

  11. Social comments and analytics for this post…

    This post was mentioned on Twitter by oneicity: The truth about zero fundraising costs. http://bit.ly/cJWgjY [Very provocative post. Love to know your thoughts.]…

  12. […] This post was mentioned on Twitter by Rebecca Leaman, katyaN4G, Pamela Grow, Sean Powell, Hoots and Thomas and others. Hoots and Thomas said: The truth about zero fundraising costs. http://bit.ly/cJWgjY [Very provocative post. Love to know your thoughts.] […]

  13. Peter Drury says:

    I *love* that you raised this topic. It is one of my all time favorite conundrums (sp?) in the nonprofit leadership & fundraising sphere! I agree with you — and with several respondents above — that there is misleading info embedded in the “100%” pitch. In and of itself, there are ways it can be viewed as “harmless” — but I believe that we all should be telling the truth about nonprofit infrastructural needs.

    I *strongly* suggest reading Stanford Social Innovation Review’s 2009 article, “The Nonprofit Starvation Cycle” on this point. One of my favorite parts of the article (there are many) is where they show the equivalent infrastructure costs in varied industries (e.g., biotech, manufacturing, software, retail…) and that gives you a pretty good feeling for what “normal” is when it comes to the operational infrastructure required to run a healthy organization. I also think that the Harvard Business Review’s 2008 article, “Delivering on the Promise of Nonprofits” (or something like that) is also very much on point with this post.

    The ways we “value” nonprofits has longstanding errors & omissions, and I’ll happily buy anyone a beer (or soda) to discuss the misleading complexities of the 100% pitch and the fundraising efficiency ratio. I don’t think either is irrelevant or wrong — but I do believe they exist in a *context* that if it is not discussed is both wrong (for the sector) and disingenuous (for the sustainability of an org’s fundraising needs over time).

    I love your blogging. Great work at Oneicity!!! Keep it up.

  14. I too recognize the appeal of saying 100% of donations are going directly to the people who need them. Like many of you, I worry about the trust relationship with the donor and reinforcing to donors that fundraising can be cost free. “The Nonprofit Starvation Cycle” is an excellent article if you haven’t read it yet.

    I’m hearing that we would like educated donors, who understand the infrastructure needs and costs of our organizations, and with whom we can have an authentic and trusting relationship. What would have to happen for that to create that reality?

  15. Pamela Grow says:

    One thought, Nancy, would be to incorporate it directly into an individual organization’s stewardship/communications plan. Tell your donors that keeping them informed and raising money bears a price tag, that, despite in-kind gifts, operations require a price tag.

  16. Steve Thomas says:

    @Peter–thanks for the reminder about the Starvation Cycle. There could be an entire series on the “misleading complexities” in fundraising (boy do I like the way you write). There’s a ton of tricks and weirdnesses in the accounting.
    Thanks for stopping by, you make us smarter.
    st

  17. Steve Thomas says:

    @Nancy–thanks for bringing relationships in to the conversation. We’re sure that if a donor has a real relationship with an NPO, then they want to know the whole story. And handled properly, fundraising expenses are logical and reasonable to informed donors.
    st

  18. Steve Thomas says:

    @Pamela–the “weird complexity,” to use Peter Drury’s phrase, of GIK maybe the most difficult to convey to a donor. Organizations will need to carefully deal with it. Are any of you aware of NPOs with active GIK programs who help their donors understand the leverage and implications provided by Gift In Kind donations?
    st

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