I once heard a quote that went something like: “Trust takes years to build, seconds to break, and forever to repair.”
If you’ve ever felt betrayed, this sounds on point. It’s true in life, and it’s true in the nonprofit sector.
All it takes is an occasional report of mismanaged funds at a nonprofit to create shockwaves of mistrust, affecting the entire sector. From the public’s perspective: If one organization is so flagrantly and irresponsibly squandering money, aren’t they all? Perception is king when bad things happen, regardless of the reality that the majority of nonprofits do their work with integrity.
It’s not entirely surprising that a Chronicle of Philanthropy poll shows donor trust levels have been roughly steady since 2002, when Professor Paul Light from New York University started studying donor confidence. Not much has changed.
But why don’t donors trust more?
Donors make gifts to help solve problems. Their trust is directly tied to how well they think an organization uses their gifts. Without evidence that their gifts actually did make a difference, donors come to view “waste” as anything not directly benefitting programs. This perceived waste can be investment in staff salaries, fundraising expenses, or other core operating costs, which become vilified as “overhead”—rather than appreciated as necessary and strategic investments toward fulfilling the mission.
Enter the charity validators. Charity Navigator and Better Business Bureau’s Wise Giving Alliance created a framework to help donors measure how much they should trust individual charities. These are familiar tools in modern life. We all use external validators every day. Want to check out a new restaurant? What does Yelp say? Interested in a new blockbuster movie? How many Rotten Tomatoes did it get? Looking to purchase anything on Amazon? What did other buyers say about the product? Donors navigating the sea of 1.8 million U.S. nonprofits want the same types of tools to inform their decisions. In fact, 54 percent of donors who participated in that Chronicle poll said they prefer charities who get good ratings by validators like Charity Navigator or the Better Business Bureau.
It’s understandable. But often the unintended consequence of measuring nonprofit worthiness is a fixation on financials—which we know is only one part of the story. This skewed vision means donors tend to reward “lean and mean” organizations, keeping us all tied endlessly to the Overhead Myth.
How do we assure supporters that our nonprofit is trustworthy?
Answer the universal question every donor asks: “Did my gift make a difference?”
Nonprofits on average lose more than 60 percent of their donors each year because they haven’t figured out how to make their donors feel valued. Good donor engagement involves a regular calendar of touchpoints, updates, and communications that highlight stories of success, progress, results, and even failures and challenges. Donors want to see, feel, and touch the impact their gifts are having. You are most likely already doing it without defining these activities in that way: annual reports, newsletters, special webinars hosted by your key program leadership, holiday and birthday cards are all ways to enhance relationships with your donors. But are you telling donors how much you were able to do because of them? Charting Impact, an initiative of GuideStar, the BBB Wise Giving Alliance, and Independent Sector, can help you focus on these exact questions.
Talk about total organizational impact.
Stop distinguishing between overhead vs. program expenses. It’s a hard habit to break, I know. But it’s so important!
Get rid of pie charts that break down your organization’s costs. They only perpetuate the focus on “indirect v. direct” costs. In fact, your programs couldn’t possibly exist without “indirect” expenses such as accounting, legal, fundraisers, etc. Instead, celebrate your successes and be honest about your challenges and how you are addressing them. Show donors that you are doing good work with visible results. Quantify your results and impact both in numbers and stories. Then “administrative” costs fit within a broader context of organizational effectiveness. It becomes more about what good outcomes cost.
Use the “validators” framework to measure your organization’s operational success.
To quote Ronald Reagan, “Trust but verify.” Validators aren’t going anywhere. Donors will keep turning to them for guidance. And, believe it or not, the validators want a strong nonprofit sector filled with high-performing organizations that focus on effective leadership and operational results, regularly monitor performance, and make course corrections when necessary. In fact, part of Charity Navigator’s rating formula evaluates these very aspects of fiscal management, operational excellence, and good governance. Understand how these areas are measured and reported on your 990, and ensure you have systems in place to perform at your very best.
As in life, in nonprofit work there’s no quick and easy route to trust. It is earned, and must never be taken for granted. When we recognize the challenges we face in building and sustaining it, and we prioritize trust in all we do, our relationships with our supporters flourish.
Barbara O’Reilly, CFRE, has 25 years of fundraising experience at major nonprofit organizations including Harvard University, the National Trust for Historic Preservation, Oxford University in England, and the American Red Cross. She has experience developing successful relationships between donors and nonprofits through annual funds, capital campaigns, major gifts from high net-worth individuals and corporations, direct mail, and stewardship.