Monday, October 17, 2016

Don't Dilute Your Impact

A Letter to the Future Donors of America

I meet a lot of caring young people who want to change the world. They're fresh on the scene, filled with energy and optimism.  It's inspiring, even to someone as old and jaded and cynical as I. So I've mostly refrained from saying anything that would dampen their enthusiasm. I'm just grateful that someone is willing carry on when I'm done working in nonprofits. The last thing I need to be doing is quashing that potential. I learned a huge lesson when I questioned why my now-23-year-old daughter wanted to support invisible children overseas in her sophomore year of high school.  "Don't you know that there are suffering kids in your own community you could actually help?" I asked her, like I was some kind of Charity Grinchy-Scrooge.  I don't know what was wrong with me. I think I had just read an article about overwhelming Child Protective Services caseloads and I was feeling helpless. She was sad and it was pointless, and so I learned. 

However, recent events compel me to speak up now.  Young people today are the future donors of tomorrow and there is an important concept they need to carefully consider:

Don't dilute the impact of your time and money in the charitable sector. 

Right now young people have more time to give and they're eager to do so.  They volunteer at the food bank, read to kids in classrooms, and make robots with middle-schoolers on weekends.  According to The Millennial Impact Report , 70% of those surveyed volunteered at least 1 hour to a cause they cared about.  But even more amazingly, the report also found that 84% of young people are donating.  In a world filled with stories of crushing student debt, this is truly wonderful news.  Presumably, they wouldn't want the hard earned dollars they give to charity and the time they spend volunteering to be wasted.*   If they're not careful though, it will be, so I have some advice. 

First, don't start your own non-profit.  I know how it feels to be passionate about a cause, wanting to make a difference. But at least once a week I hear that someone wants to start a new nonprofit, and I cringe.  Until about 6 or 7 years ago, I was like most people who thought that starting a nonprofit seemed like a reasonable thing to do. People who want to do that are usually motivated by the identification of an unmet need and the willingness and desire to address it. But chances are that there is already a nonprofit out there that's struggling to address that need and could really use some help. Starting a competing nonprofit will actually hurt both enterprises by diluting the resources each acquires. The temptation is strong, and I can hardly blame anyone for trying.  Millennials look out at the world and all its problems and wonder why the hell we couldn't figure anything out.  Youthful energy and optimism kicks in and the next thing they know they are applying for 501 c 3 status.  For anyone who has pondered/is pondering this path, consider these 2 facts: 

In 2008, I read a book called "Billions of Drops in Millions of Buckets," that created a huge shift in the way I thought about how charity works.  Not a week goes by since then that I don't think about this book in the course of my work in the nonprofit sector. The book's author, Steve Goldberg, describes a phenomenon he calls "funding fragmentation" that results when nonprofit funding is spread too thin across too many organizations thereby diluting its impact.  For example, if you raised $10,000 and wanted to help a lot of organizations, you could give $100 to 100 nonprofits.  But have you really helped any of them?  What can they really do with $100?  But if you gave 1 nonprofit - one you really believed in and that you knew did really great work, the full $10,000, chances are they could achieve something meaningful. 

My first a-ha moment while reading this book was around that $300 BILLION DOLLARS being spent EVERY 365 DAYS.  It's a whopping understatement to say that's a lot of money.  You'd think that we could make more progress with $300 billion dollars being used every 365 days.  You'd think we could solve a few problems.  You certainly can see why young people today might be a bit frustrated.  I think this is one of the factors that leads me to my second point:  

Be careful of the choice and freedom to donate to any organization.  All signs point to the fact that millennials really want to try to solve complex social problems.  But their giving practices demonstrate a lack of awareness of the dangers of funding fragmentation that could lead to dilution of impact.  A huge contributing factor here is the millennial's desire to donate to any organization they choose.  This also seems very reasonable on the surface.  For example, young people are moving away from employer giving campaigns because they feel too limited by the charity choices in these campaigns. The Millennial Impact Report notes that as few as 11% of young people are donating through their employer.  This is leading more and more employers to "open up" their campaigns, and increase the number of charities employees can choose to give to.   

In traditional giving campaigns, employees are offered a choice of several charities to give to through payroll deductions.  The charities are vetted through the employers themselves or organizations such as the United Way.** The benefit to this is that employers and employees can feel secure that the organizations they are investing in are good stewards of the donations.  The downsides were an over-reliance on overhead percentages as an indicator of charity effectiveness and diminishing donor confidence.  Millennials became skeptical of the vetting and increasingly felt limited by their choices.  They wanted to become personally involved in the organizations they were donating to and do the vetting themselves.  And as the number of nonprofits began to drastically increase, so did their choices.  Again, this all seems very reasonable from an individual's point of view.  But dilution of impact in this scenario is pretty much inevitable.  In my community for example, the United Way vets between 60 and 70 nonprofit organizations each year.  It raises over $50 million dollars, a majority of which goes to those nonprofits. For years, local employers have been inviting the United Way in and encouraging employees to give to these 60-70 charities.  As these employers get more and more feedback from younger employees that they want more freedom of choice to donate, they are opening up their campaigns to more and more nonprofits.  There are over 1,500 nonprofits in my community.  You can do the math.***

Because I don't like to present a problem without at least offering a potential solution, here are my suggested focus areas going forward:  
  • Since there are too many nonprofits already - focus on mergers, collaborations, collective impact efforts and reducing duplication of services.
  • There is a lot of money out there - focus on the huge challenge of demonstrating effectiveness through performance metrics so we know how to spend it to get the outcomes we need.  This is so much harder than it looks.****
Good luck!  I believe in you! 
*This is where many readers will expect me to go on about overhead and administrative costs, but since that measure has been thoroughly debunked, I don't have to waste anyone's time with it.  

**For the sake of transparency, my nonprofit is a United Way agency.  

***Before anyone accuses me of trying to limit any more nonprofits from becoming United Way organizations, let me dispel that assumption.  I am all for freedom of choice - but the United Way can't vet 1,500 nonprofits and no one would benefit if they tried to.  We need a new model, that moves the needle. 

****Interesting article I recently read on outcomes.  

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