November 8, 2012; Source: Markets for Good

On the Markets for Good blog, a consultant named Greg Ulrich asks whether more and better information on, about, or from nonprofits will improve the behavior (presumably, Ulrich means choices) of individual charitable donors. His firm, Hope Consulting, has data on whether donors do research on nonprofits they give to, whether they want better information on nonprofits, and whether they will use data to guide their choices if they do get it.

Ulrich’s blog posting cites data which is drawn from Hope’s Money for Good research, conducted in partnership with Guidestar, and funded by the Bill & Melinda Gates Foundation, the William and Flora Hewlett Foundation, and an entity called Liquidnet.

The study data indicate that only one-third of donations are researched, and that research is generally geared not to pick the best nonprofit, but to give the donor some assurance that the grant won’t be wasted. Most of the researched situations sprang up in cases where the donor doesn’t have a personal connection to the potential nonprofit recipient or where the nonprofit is not a “brand name.”

Ulrich’s research findings suggest that donors have an appetite for more and better information, despite the current low utilization rates. For example, in dealing with the data presented by Hope’s partner in this research, Guidestar, Ulrich states that when donors were shown more information on a Guidestar page about a particular nonprofit, “activity increased 44% and donors felt like they had a much better sense of the organization’s performance.” Concerning the Charity Navigator platform, Ulrich’s research team found more donor activity when additional information was added to Navigator’s “Top 10” lists or when “Top 10” lists were created for specific causes; as an example, he cited the “Top 10” non-university education charities as the kind of cause-specific list that generates more donor click-throughs.

Nonetheless, despite the researchers’ testing of modifications to charitable information platforms, there were elements of the research that raise additional questions beyond whether donors want and would use more information. The question is, “What are donors looking to do?” Foundations, the study data showed, are looking for nonprofits with greater impact than others. Donors are looking for the legitimacy of the nonprofit they’re considering giving to and for assurances that their donations will be used as the donor intends.

While the researchers found that donors, donor advisors, and foundations all basically want the same kind of information on the nonprofits they might support, they differ on the sources they would rely on and trust. Among individual donors surveyed, 48 percent would turn to information from an “evaluation” organization doing Consumer Reports-types of reviews and 47 percent would look for information from a certification organization such as the Better Business Bureau. For foundations, those proportions are 27 percent for CR-types of reviews and 24 percent for BBB-types. Thus, it would appear that foundations are somewhat more jaundiced than most donors and advisors about the evaluation organizations. Moreover, 80 percent of foundation respondents say they would look to information directly from the nonprofit as a source, compared to 32 percent for individual donors and 47 percent among donor advisors. Give foundation grantmakers credit for being interested in encouraging nonprofits to make their best case, as opposed to the tendency to rely on third parties among donors and advisors.

Disappointingly for us, only seven percent of foundation respondents and 11 percent of donor advisors look to information on nonprofits from the media even though, in many cases, it is the media—not the raters, evaluators, or regulators—that are finding good nonprofits or calling out the miscreants (think of Chris Mortenson’s Central Asia Institute or the U.S. Navy Veterans Association of the fictitious “Bobby Thompson”).

There’s a cultural divide among donors regarding the information that they want. Donors (70 percent) and donor advisors (69 percent) rank the percentage of a nonprofit’s dollars going to overhead as their most preferred information. That’s not even on the foundation grantmakers’ top ten, reflecting their more nuanced appreciation of the diversity of nonprofits. Rather, far and away the top information desired by foundation grantmakers are the nonprofit’s program description, its program objectives, and its intended outcomes—items that aren’t on the donors’ or advisors’ top ten lists. Perhaps this is because foundations are engaged in philanthropy while donors are largely engaged in charity, the former suggesting a more deliberative approach to the allocation of dollars. But one wonders whether donors and advisors have been acculturated to looking for an algorithm to guide their charitable giving based on indicators (such as overhead) that may be of questionable relevance when it comes to large swaths of nonprofits.

Regardless of the value of giving donors more information, we hope donors also remember to give nonprofits a chance to make their own case for support, too.—Rick Cohen