Episode 1: Why People Give
Why do people give? Listen to this week’s podcast to learn more about what motivates your donors.
EPISODE 1 – WHY PEOPLE GIVE (11.14.20)
INTRO
Welcome to another edition of “Around with Randall,” Your weekly 10-to -2-minute podcast on making your nonprofit more effective for your community.
And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.
HOST, RANDALL HALLETT
Thanks for joining me on this edition of “Around with Randall.”
I want to talk a little bit about a recent article from the Chronicle of Philanthropy. Terrific publication. Absolutely love it. But I found the title in one of their articles interesting and challenging at the same time. I'm referring to actually a letter to the editor that was written in the November 6th edition, which talks about the concern that the author has for the Biden tax plan and how it would steer aid to the poor, but could deter some wealthy donors from giving. So the letter was a reference to an earlier article from October 28th. The letter said there was a deep concern about philanthropic giving drying up and even to quote the letter to the editor, “suffocating it at worst.” I was troubled by it. And, maybe that's because of 25 years’ worth of philanthropic experience and having been very fortunate to work with some pretty incredibly generous philanthropists… I totally disagreed with it.
I think there's data out there to support it, that there may be a different way of looking at it. And I think my own experience also contradicts that thought process. So for this edition, I want to talk about this article and what it actually means for you, and what maybe you could be doing in your nonprofit. That there's maybe a different way of looking at it. And as always at the very end, we're going to have tactics that you can possibly use to increase your opportunities.
So let me go back. I've studied taxes for most of my career. It helps that I spent an enormous amount of time in law school studying tax law; loved working with individuals on very intricate, detailed plan gifts. And in the major gift and capital campaigns, I have dealt with six, seven, eight-figure gifts and donors on a regular basis.
Here's what I know.
Number one is that taxes eventually are going to go up the rate of spending in the United States and the amount of revenue we're bringing in indicates. At some point, there's going to have to be a reckoning. I don't think there's an economist out there that would argue that at some point we're going to have to have hard discussions, but we're not here to talk about the political. My experience leads me even with the idea of taxes going up says that the people that I've worked with at the highest levels never really asked a lot about the tax consequences. i.e…. it doesn't actually persuade them to make a gift or not.
Let me give you a couple of examples.
There's a gentleman here in Omaha, Nebraska, where I live, who I like to think of as the “Godfather of philanthropy.” He's changed the nature of philanthropy in Omaha for 50 years. And that gentleman's name is Walter Scott. One of the most benevolent, well-thought, generous people who loves his community. I've never seen him ask a tax question.
If we go back in history, if we talk about Andrew Carnegie, he made almost his entire fortune philanthropic at his death or throughout the last parts of his life. And he believed in what he called the “gospel of wealth,” which means that wealthy people were morally obligated to give back to society. But there weren't the tax-related issues that he dealt with. After the beginning of the 20th century, we didn't have write-offs like we do today. He did it because he felt a moral obligation to do so.
What about John D Rockefeller? If we take a look at him and his history, he did it and set up his foundations, and then his children, son in particular, unbelievably generous. They did it because of religious reasons--very devoutly religiously in the idea of giving back and helping other people again--not because of tax reasons.
And then if you look to today and you think about the unbelievable generosity of people like Bill and Melinda Gates. In a recent article, they commented about a letter that they wrote talking about their philanthropy. And I quote from the letter, “There are two reasons to do something like this.” And they're referring to the idea of giving away hundreds and hundreds and hundreds of millions of dollars a year to worthy causes. “First it's meaningful work. Once you've taken care of yourself and your children, the best use of extra wealth is to give it back to society.” And for them, for the second reason, they are quoted as saying, “we have fun doing it. Both of us love digging into the science behind our work.”
So there are three or four examples of people giving away resources that don't ever talk about tax consequences as the reason they do so but let's take a look at the data as well. The data would say that's important as well.
Giving USA has done a fantastic job of accumulating immense amounts of philanthropic data over the years. And the trend over the last, maybe six-to-eight years, maybe a little bit longer, is that there are, year-over-year, increases in the amount of philanthropy given in the United States, but there are less people actually giving it--- which is leading to a lot of illusions that what used to be when I was younger and less gray-haired, the “80:20” rule: 80 percent of your dollars come from 20 percent of your people.
That might actually be closer to the “95:5” rule. Five percent of your people are giving 95 percent of the dollars.
If we begin to look at hard data, Giving USA again, another fabulous job in 1990 of the total philanthropic dollars, just over 80 percent was given by individuals in 1980. The last reported data year that number's down to 68.3, which means fewer individuals are giving more of the money. That's the share of the total number of gifts. And then you add to that some of the great work done by AHP association for healthcare philanthropy, they're finding that the number of dollars of people making gifts over 500,000 has increased by 57 percent since 2003.
And if you look at overall smaller donations, there's a decline of 34 percent of donors giving less than $100,000. What this all means is that we're finding the importance of ROI---return on investment.
Where do you spend your time? Another great AHP statistic association for healthcare philanthropy. The average gift in major gifts in healthcare is $105,000. So ROI is important. Corporations, $19,000 (Grants and foundations). Planned Giving $346,000. Special Events, $2,000 on the production. Annual Gifts, $180.
So, if we put all this to get to the tactical, what can you do about it? Sum it up this way. We have fewer people donating, and those are at the top are giving a larger and larger percentage of the gifts. And the ROI is driving us towards this idea of major gifts, planned giving as a part of that major gifts, campaigns, corporations, foundations---it's where the ROI is.
And particularly with major gifts and planned gifts, driving that process, we have a history in this country of indicating that people didn't make gifts for tax reasons. It's not that we didn't take the tax deduction. It wasn't the driving reason for why many did what they did.
So what can you do about it? Well, these are the tactics and this is what you might be able to take back and use in your organization right now to make it more effective and make you more effective as a foundation leader, get as your gift officer or an executive in the nonprofit.
Yes, there are financial challenges now. Yes, there are people who are challenged by what's going on in our world with COVID-19. But let me tell you a couple of statistics about people who might be invested in the markets if a year ago today. So November 1st of 2019, you had Apple stock and you didn't trade it--- it's up 48 percent. Since last year, Amazon up 57 percent. Dell up 25 percent. GM up 8.7 percent. Walmart up 18 percent.
People have made money. People are doing well.
There is no question that there is a long-term conversation around the social-economic divide in our country, but there are those who are doing well through this coronavirus time economically. That's why they call it a “K” recovery. When it comes, some are going to do better than others. Taking the politics out of it. What does that mean for philanthropy? We need to stop with our addiction when it comes to better understanding who we should be speaking with.
We are in this industry addicted to wealth screening. I'm not saying don't do it. You should, but it should be the minor part of your decision making about who you engage. The question is, “Who believes in your mission, who believes in what you're trying to accomplish? And those people that you're close enough to, what is it they actually want to give to? What do they want to change?
So here's a couple of tactical pieces. My favorite qualifying question.
“What are your favorite three philanthropic or most important philanthropic organizations or opportunities? And why, why do you give to them?”
You should be asking every single person close to you in your organization. That question, because if you do, you begin to see what is important to them, and then you can tie it to things that you do that are similar. Another great question to ask—“What do you want your legacy to be philanthropically?” They will tell you an awful lot about what's valuable to them. What do they think of as important?
And where can you start? Well, chart it. Start with your Board. Start with your key volunteers. Have you bothered to ask them what “moves” them or do you just keep telling them what you need?
It doesn't mean you shouldn't have a strategic plan--but if you want their money, then you probably should ask them. Which brings me to my favorite quote, inside of philanthropy.
“If you ask somebody for money, you'll get advice. But if you ask them for advice, you are more likely to get money.”
It's important that we ask those in your community, the community leaders. Put it on a chart---who leads your community? Do you go and ask them, “What is it that moves you?” Or “Why do you choose to give to these things?” “What are your priorities?” Or do you go to them and say, “we have this project and you should give to us.”
If you're in healthcare or educational or social services, if you find out they love kids, you probably do something with kids. If you find out they like something with education, you probably do something with education. If you find out they like things around basic services, (food shelter) you probably do those things as well. Every organization has different ways of looking at how it expels its money, what its mission is, what its programs are…
Where to start, start with your Board, your key volunteers, community leaders, and go ask them what moves them and then come back and figure out what those needs are that your organization has or the strategic vision it has that's meeting with those needs, and then match them up to that desire. We are matchmakers…put the match together.
And sometimes you have to work with your executive team, your CEOs, your executive directors---whoever's leading the team. Even if you know, you're 60 percent, 70 percent, 80 percent of the way to a strategic direction, maybe it might be smarter to go into a meeting and say, “Tell us what you think. Tell us what you believe.” Give them the 20 percent and let them feel like they're invested in building the other 80 percent. Even if you're already moving down the road, make them feel as if they have a vested interest in your organization, helping the community to be a better place.
So the tactics pretty simple. Listen, more. Ask more. Direct less. Talk less
Here on Around with Randall. Two things to remember. Number one in a couple of episodes we'll start “Randall Reeks.” If you disagree with something I've said or have a comment, email me at reeks, reeks@hallettphilanthropy.com. We'll take a look at those and go back to see what people think. Get a value proposition from the larger community.
Or if you have a show topic suggestion, you would like to hear more about something. Email me at podcast@ Hallettphilanthropy.com.
So that's “reeks” if you think something I did doesn't meet up with what you believe. Or if you have a topic you want covered, email me at podcast@hallutphilanthropy.com.
You know this is a noble profession. I love what I do. I hope you have your head up high. We are in the business of helping our organizations make a difference in the community. It is an amazing vocational call. The ability for us to really move the needle in making a difference should give you a sense of pride to feel like we are changing the world. We are a catalyst for people to invest in us because our communities need it. I don't want to see anyone hanging their head or feel embarrassed by the fact that they call themselves a fundraiser or work in a foundation or a nonprofit.
This is a calling, and I'm glad it called to you. And I hope today's episode helps you be more effective. My all-time favorite saying is
Some people make things happen. Some people watch things happen. And then there are those who wondered what happened.
In life, in nonprofit work, philanthropy/fundraising is about people who want to make things happen, doing just that for people who are just wondering what happened. And if there's something better in the world, other than the love of family, I'm not aware of it.
So keep your head up, keep doing a great job.
I want to thank you for joining Around with Randall. We'll be back next week with another episode. Hope you have a great week. Make it a great day.