#110 The Data and Facts Behind Why People Give, With Laura MacDonald Board Member Giving USA and Founder of Benefactor Group

Jan 02, 2023

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Laura, who is the founder of Benefactor Group and a lead author of the Giving USA study, talks with Sybil about the research and facts from the report, which offers research every year to answer the question of why people give. This episode is packed with interesting facts to help you as a donor be even more effective at tapping into why you give, and also how your giving fits into the data and facts about good giving practices.   

Episode Highlights:

  • A deep dive into understanding why people are giving 
  • The statistics and facts that explain why people give
  • Discussion of the major yearly study, called Giving USA,  which reviews trends in giving

Laura MacDonald Bio:

Laura MacDonald, Principal and Founder of Benefactor Group, has served the nonprofit sector for four decades. In 2000, she established Benefactor Group to serve the needs of those who serve the common good. The firm works with healthcare, arts, culture, and educational institutions; human service organizations; women’s funds; and others as they pursue their vision of a better world. The team at Benefactor Group has served hundreds of clients, ranging from universities, art museums, hospitals, and global NGOs, to start-up community organizations.

Prior to establishing Benefactor Group, Laura served as the vice president and creative director of a national fundraising firm, as chief development officer in arts and higher education, and as a key volunteer for community organizations. Laura was the chief development officer at The Ohio State University’s Wexner Center for the Arts where she also served as a senior development officer in the University’s $1.2 billion capital campaign.

 

 

Links: 

Benefactor: Benefactorgroup.com

Giving USA: Givingusa.org

LinkedIn: Linkedin.com/in/benefactorgrouppresident

Facebook: facebook.com/Benefactorgroup

 

If you enjoyed this episode, listen to these as well:

#99 Partnering With Government to Leverage your Private Funds, with Meta Loftsgaarden Forest Supervisor for the Mt. Hood National Forest and former Director of the Oregon Watershed Enhancement Board 

# 88 Navigating Transitions Via a Nonprofit Working on Climate Change, with Elizabeth Bast, Executive Director Oil Change International 

#46 An Entrepreneurial Philanthropist Takes Action on Climate Change with Tim Miller, Executive Director, PECI

 

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Full Transcript

Hey everyone, I couldn't help it. I was doing a lot of research into why people give during December. I just ended up interviewing more than a few interesting people who think a lot about their motivations for giving, and so I want to offer you this one last interview with somebody with amazing experience about why people give.

Her name is Laura McDonald, and she helped create the Giving USA Guide, with a team for 2022, this guide has come out every year for over 60 years, and it's amazing and interesting. So, without further ado, take a listen.

Laura, I'm so happy that you're on my podcast today, we've met, and I sought you out, and I just so appreciate that you responded. And you said Sybil, it would be great to talk with you because the reason I sought you out is that that research on why people give. What are the motivations behind giving? 

And I came across your name because you are so active in so many areas. You've been involved with Giving USA, which produces a report every year, for many, many, many years, specifically thinking about this exact question. Consider the following questions: Where are people giving and what are their motivations? 

And so, I'm just so honored to have you on the podcast so we can talk about these things. And again, the reason I think that you and I both feel it's so important to talk about the motivations of why people give and where they're giving is not just a sort of fluffy statement. Oh, let's talk about it. It's also to say, "Look, it's really important for you as a donor to think about your motivations for giving to be effective in your giving strategy and to show up the right way for nonprofits." So, we'll talk about some of that. So far, before we go into all those things, let's talk about who you are and what brought you into this field. Then why do you care so much?

So, I created a fundraising consulting firm in the year 2000. Based on the experience that I had both working in other fields and consulting and also serving in a non-profit organization, the catchphrase for the firm is "serving those who serve the common good," and that's really what the inspiration is. 

A commitment to the common good and rallying others to work toward it; earlier in my career, I'd worked in television production and corporate communications, so I believe the through the line. Through all of that is storytelling; really, it's about storytelling, and we can talk more about how powerful that is and how much more we're understanding the power of story when it comes to inspiring people to give generously.

Commercial Add 

That's great, Laura, and one thing you talk about, and we've talked about it before when we talked offline, is that there are two key things that you feel are important. One is loyalty, and the other is leverage. 

So, a donor must be committed to their giving strategy and must believe that they are leveraging their dollars with key causes and how to make that happen. Can you talk a little bit more about those two pieces?

Sure, so if you think about any business model, the most expensive part of the business is customer acquisition. It's no different in a fundraising operation. The most expensive activity is new donor acquisition. 

And so, the most efficient fundraising they can do is to retain their donors over time. And we're seeing a little bit of a crisis in donor retention. We've seen that it's fallen off over the last several years. There's a quarterly report called the Fundraising Effectiveness Project that looks at donor retention, and, among other things, we know that if a donor gives once when they make their initial gift, there’s only a one in five chance that they're ever going to make a second gift to the organization. And you know that, so that means you know you haven't established a relationship. 

If a donor gives three times in a row now, the likelihood that they're going to continue to give to that organization skyrockets. And, depending on the organization, there may be a 60, 70, or even 80% chance that they will continue to give. If you want a nonprofit organization to be efficient think about really leaning into a developing relationship and sticking with them over the long haul because it will help them have better predictability in their business model. But, more importantly, they must enhance the efficiency of their business model. If they can rely on you in the long run. 

Then, as you, the arc of time. And of course, there's always a chance you'll make an initial gift to an organization and feel that it wasn't well handled or that they didn't communicate with you effectively, in which case you're under no obligation to continue that giving. But I would say that if you find out if they are a credible organization and if you're happy with the way they're investing your resources. Then stick with them if you can. So, I'd say maybe supporting fewer charitable organizations, but doing it more generously and over a longer period.

And as you get to know them, I think you have the opportunity to begin to think. about leverage, so I'll give you a few examples of how you might leverage your giving, and some of these will be very familiar to people. 

We recently had Giving Tuesday. And I think my husband was reading the paper and said it was over $3 billion raised on Giving Tuesday. Well, there are some best practices to maximize your fundraising revenue on a day like that, and one of them is that throughout the day, you can release a couple of large gifts to create momentum for your cause, and you know how momentum works. You want to call it "fear of missing out" or "social norming." Donors want to be in good company, so seeing the tally ticking makes them happy. Now it bolsters their competence, and they want to be a part of it as well. So really think about contacting your favorite organization before whatever their giving day is or giving Tuesday and saying, "Hey, I'd like to help you leverage this." I'm willing to do a match or a challenge, or I'm willing to do $1000 an hour every hour, all day long so that you know your tally is constantly moving. 

If your favorite institution is holding a capital campaign, for example, I believe you should attend. Oftentimes, first of all, they'll be looking for some early support to build that momentum, but they may also really welcome the opportunity to do so as a challenge or a match. 

So, a match is where you say, "I know I'm prepared to pledge up to $500,000, and I will match dollar for dollar." Every dollar that's given by other donors until you get to $500,000. And, by the way, science would agree. Say there's no difference in the success of a match. That's one-to-one versus if I give you $0.50 for every dollar or even if I give you $0.25 for every dollar that you raise because they're all similarly appealing to the other donors that you're trying to motivate, but that's a match. It usually means that you count up.

A challenge, you say I understand that this is the new classroom wing at the school, which is worth $10 million. I tell you what I will pledge: $1,000,000, but I won't give it until you raise the other $800,000. Nine, so it's sort of a carrot that's out there in the distance, but it gives people confidence that you know their gift of any amount will have value and move the needle, and so most of the leverage is either challenges or matches or some other way in which your dollars are worth more than simply put, whatever the size of the gift, you are inspiring others to give.

I love that advice. That resonates with me, so thank you for that, Laura. 

Now let's pivot over to the Giving USA report. I think I saw here that it's the 67th annual one, so you're not kidding around here. This is a serious document that offers serious information. And I found it especially useful in guiding my thoughts about how I advise my clients who are donors in terms of where they might want to think about giving. So, I just appreciate that you've spent all this time on it. I know it's with It’s a team. 

I have not been doing it for 67 years.

Yes, that is exactly a good point.

The Giving USA Foundation is a charitable organization. And we work closely with the Lilly Family School of Philanthropy at Indiana University to commission this annual research on the sources and uses of philanthropy in America. It is a team. The board, we have an expansive board. Many of the board members are people like me who are leaders of firms that are working somewhere in the philanthropic ecosystem, and most of the donors are firms like ours that are working somewhere in the philanthropic ecosystem. 

In addition to the earned revenue from sales and subscriptions, but it's there then. Therefore, it creates this amazing longitudinal data set. So, for example, when the news stories say we haven't seen inflation like this for 40 years, well, guess what? We were doing this work 40 years ago, so I was able to go back and take a look. And what kind of influence did inflation have on charitable giving in the years in which it grew by more than 5% per year? It was a pretty reassuring picture, actually, or as a colleague of mine, Josh Berkholz, our current board chair, says, "you know the impulse to be generous is not influenced by economic condition."

Sometimes the timing or the magnitude of a gift will be right, but you know the people that we are privileged to work with who give generously to causes they're passionate about. They are less likely to see inflation or hear stories about a possible recession and discontinue charitable giving for another day, you'll know they lean in.

That's a great point, and I like the side comment you made there too, where it may be that they don't leave, but they sometimes may not be able to give as large a gift that year, but they're not gone as long as they are motivated to give in that space. 

I found your report interesting on a lot of levels and overall. It was interesting that it says here that 2021 was the second-highest giving year on record in inflation-adjusted terms. It's a big statement. Can you talk about that a little?

And it becomes even bigger when you realize that this is not an annuity. We start at zero every year and build up from there. It's not like we're building on last year's growth, but what we have seen is that generally, year after year after year, Charitable giving does increase. 

Some macroeconomic factors influence primarily GDP, corporate pre-tax profits, and disposable personal income. I have the greatest influence on it, but what we've seen is that if you look at it in current dollar terms, the world is most of us. Then there are only five times in 67 years when charitable giving has declined. Only five times in current dollars. Now, the growth hasn't always kept up with inflation, and that did happen from 20 to 21 when charitable giving in real dollars grew by 4%. But as we know, inflation was greater than 4%, so it didn't keep pace with inflation. 

However, the five-times declines in charitable giving declined on both counts they were caused by changes in tax policy, so when the tax cuts and JOBS Act were adopted in 2000, they came into effect in late 2017. Well, what we saw was the donors rushing to give in 2017 under what were more generous rules, and so giving went down a little in 2018, we saw that once before as well. So it's not that Joan donors' habits are changing dramatically as a result of economic conditions, but it doesn't always keep up with the rate of inflation.

That's so interesting. In a Stanford study when they surveyed 20 years, they looked at motivations for giving and talked about how tax deductibility is not one of them is not necessarily the sole motivation for giving, and at the same time, I find your information interesting about how a tax policy shifts, it gets people to want to take advantage of that as well, so there's a complicated relationship that we as donors have with tax policy, isn't there?

Yeah, and the first thing I'll say is that I don't care what the tax policy is. Making a gift still costs you real money. Nobody lives in a 100% tax-deductible world, or at least very few of us do. It is a calculation on the donors' part that they are making. By giving something of value money in exchange for something of value exchange, they seek alignment with their values and the world change they wish to see. Occasionally, an invitation to a party or recognition on the building, but increasingly so. It's more about those pro-social behaviors that we want to encourage.

But yes, especially major donors are savvy, and so they will structure their gift in such a way that they take full advantage of the policy environment that they find themselves in. which is why they might shift the timing of their giving, as I said given 2017, there was, after all. a huge spike in giving. People wanted to take advantage of the policy environment in December of 2017, which is why we saw a slight decline in 18. And yeah, yeah.

Very interesting. 

And so, I think it might affect the timing or magnitude of a gift. We're hearing it from some, although we see less of it than we might have expected is what they call bundling. They may choose to do all of their charitable giving by bundling in odd-numbered years because then they'll get above the threshold to itemize deductions and not do any charitable giving in even-numbered years, or they may choose to make all of their contributions through a donor-advised fund, allowing you to fund the fund in one year and claim the tax deduction. 

However, they continue to support the causes to which they have been loyal for years, which can influence their behavior. But again, I don't think it affects the impulse to be generous.

Commercial Break 

Yeah, that's very well said. Thank you for that. 

Let's go, and you have so much great stuff in this Giving USA Guide, so I recommend—we'll have the links to it in the show notes—that anybody you know pours through these details. Want to pull out some things you were talking about? Actual substance-sort of issues? People are talking about it, and you mention it in your guide or the review, you know, you mention how religion and religious institutions received 135 billion dollars, plus or minus a billion dollars. It sounds like we're giving to religion, and that's 27% of the overall giving. 

And then education is also up there, although it's only about half as important as religion. It's more than 70 billion dollars. 

And then we go to Human Services, which is the next highest. Then you keep going, and it gets much lower at 3%, like the environment and animals, arts, culture, and humanities, or in the lower area. It's still 16 billion dollars and change for the environment and animals, followed by 23.5 billion dollars for arts, culture, and education humanities, so we're not talking chump change here. We're talking about quite a significant amount of money from the private sector.

Can you talk to me a little bit, were there any surprises in this? Were there any things you were interested in? You did mention some of these in the report, such as how education fell by 2.8%, but is that correct? Talk a little. A bit about these issues.

Sure, then you know stop me when I've talked too long because I love to talk about this stuff.

So giving to religion has always been the largest slice of the charitable giving pie, at 27%. And it’s almost entirely gifted to houses of worship of any faith, so you know it's not a gift, for example, technically the Salvation Army is a religion, but a gift to the Salvation Army would be counted under human services. 

So this is almost exclusively houses of worship. There's a strong correlation between actively participating in worship and the likelihood that you're a charitable donor. When I started my career, more than half of all charitable giving went to the church or through the church. More people were active in organized religion. And the church tended to be the place where you knew if you wanted to lean into human services. It was through a mission or outreach effort at your church, synagogue, or mosque, but what we've seen is that that's declined. 

For one thing, people have begun to spread out their charitable giving and say, "No, I'll take care of the human services that I'm most in on the side, if I'm still giving to a house of worship, but the other thing that we've seen is that in the last two decades, about 20 million households have stopped participating actively in worship. 

And in the last two decades, about 20 million households have stopped giving regularly. We found this very interesting. And concerningly, we don't know that they're saying 20. but it does not.

We don't know that we didn't know it was the same 20 million then, but it sort of happens to be similar numbers. Interesting. 

Like the economists at Indiana University constantly remind me, Laura, it's a correlation, not causation. So, we've got a correlation here, but it also leads you to wonder, where does the next generation learn those habits of generosity if it's not on, Friday, Saturday, or Sunday, whenever they happened to worship as a family?

So that's religion. very dynamic, and I will also say that it has grown, but it's grown more slowly and lost. market share to other sectors, especially education. You know, I would imagine the vast majority of members of your audience have been solicited by their alma mater in the last 30 days. I'm just going to guess.

Most institutions of higher education have become real fund-raising machines, and this number is driven mostly by higher education as opposed to independent schools or literacy programs, or other worthy expressions of education. But the other thing that we know is that if you make a gift, let's say to an environmental study, you’re probably giving it to a university because that's an academic institution that's probably doing that.

It was fascinating that in 2020 we saw giving to health decline right at the beginning of a global pandemic. Health declined but think about it: when Dolly Parton gave $1,000,000 to COVID vaccine research, she gave it to Vanderbilt University has a great point. It counted as a gift to education, and so that tends to be a bit of, you know, at one point in my career, I was the director of the Wexner Center for the Arts at Ohio State University, and we raised several million dollars a year. And guess what? They were gifts to Ohio State University. 

As a result, that sector tends to hide in education giving. And then I'll just unpack another reason that there is a slice in our pie chart called public society benefit. 

I was going to ask you about that Laura

it's a common question because it's a bit of a mishmash. Advocacy organizations are included there.

And it's 50. 5 billion of a hodgepodge, so yeah. It's a 55-billion-piece hodgepodge.

That's right; it's any kind of collective giving. As a result, United Way, and United Jewish Appeal. Many of those combined federal campaigns include such things for the benefit of the public, and to be honest, that's a dwindling business model. They've perked up a bit through the pandemic and the disruptions that we've seen. But that's been a bit of a drag on giving it to the public benefit.

Advocacy organizations, on the other hand—those that advocate for or against gun rights, those that advocate for or against reproductive health choices, and those that advocate for or against voting access—all fall into this category. And I think that you've probably talked with your audience about this phenomenon we call rage donations are what we call them. People who give motivation, giving might initially come out of anger or fear about some advocacy issue, but the big driver of that sector is commercial or national donor-advised funds.

That's where that sits okay.

If you give to fidelity, Vanguard, Schwab, or a national philanthropic trust, it's going to show up in the public society benefit just to keep you confused. If you make your gift to a donor-advised fund at a community foundation, it will count as a gift to a brand-making foundation. 

But that's why we included it in the book for the first time this year, and we intend to keep doing so in the future. To retain it now, there is a special chapter on donor advice. They now represent something like 8 or 9% of all charitable giving activity, and so, because there's both money in and money outside of that equation, we put it right between the chapters on uses and the chapters on sources because it's a little bit of both.

Yeah, yeah, all these are so interesting. 

You know, I wish we had all day to talk. I say this to a lot of my guests. I think it's because the guests I have on are just as amazing as you are. 

But, uh, there are so many thoughts and questions I have in my mind around this. But before I get into the weeds, how in the world do you get all this information, it's a huge task to make sure that people are filling out the information that you need to be able to accurately display the amount of money and percentages, how do you do that?

So, I don't want to scare your readers. But it is a 450-page long book so there is a lot of information in there. And there is a summary of the methods that are used. We want it to be very transparent. There's also an advisory committee on the methodology of active missions, scholars, and data scientists, so that, you know, we feel that we can stand behind what's in the book. 

We sometimes describe it as an almanac, so you know there's one chapter for each of the sources of giving: individuals' bequests, corporations, and foundations. And then there's a chapter for each of the recipient sources. sectors, so, as you said, religion, higher education, healthcare, et cetera. And in those chapters, the author does an excellent job of providing a landscape view of the research, data, and studies that have been published in that sector or source over the course of the year, so it can be a very useful reference for, oh, these are all curated sources.

They've been looked at by people who are. Both academics and practitioners Partners and I can stand behind each other if I need to drill deeper. I can go get this study because they're all cited in the footnotes, and I can drill deep into that study itself. 

So much of the text editorial follows the Almanac approach summarizing the landscape in the field for the last year. But the big part of the book, as you know, are the estimates on charitable giving. And that's an econometric model, so it relies on a variety of different data points. And as I said, the overview of the methodology is on page 333 of the book.

That's fantastic; yeah. And I was thinking people might just be thinking while they're listening and multitasking. Well, how? How is Laura getting all this information? And dig into the whole report because it'll tell you even more. 

Before we go, I would love to hear from you in terms of this report that you just put out, or maybe some of the others that you're thinking about. If I were a donor and I was interested in a bunch of different Issues like arts, environment, health care education, and I'm new to this, so I'm sort of thinking there are all these different pieces. I want to give to, what would it be? be your recommendation. Would you advise a donor to allocate only 3% of total funding to the environment and animals? and I care about that. Maybe I should lean into that sector because it's not as robust Would you advise a donor to go into a sector that may be better funded, but there may be some specifics limitations, such as in the education sector or other areas where you see a person could make a difference.

You know, I would say it's sort of like First and foremost, it is like purchasing quality art. You need to pursue your passion. If you are going to become a loyal donor, it will be because it is a cause that truly speaks to you and that you want to stick with, so I would say, first of all, think deeply about yourself, your values, and what's impolite, in your life, and where you want to make and understand the distinction. 

Know that between $400 and $85 billion is given to nonprofit organizations, as you stated. You're in good company. I happen to be an optimist who believes there's abundance, and, you know, we can meet the needs of all of these sectors and so start by choosing one that speaks to you in your heart.

And then, as I said, perhaps only 3% goes formally to environmental or animal-based causes, but there's stuff hiding in the education slice of the pie, so I wouldn't give so much. Look at that sort of scarcity mentality. They only get 3%, so that's what I want to bolster them. Know that they are supported in other ways, such as through the arts, culture, and the humanities. many organizations in that space get some public funding, for example. 

So, again, I would say it's important to lean into your passions and then study up. There are lots of great resources. I'm sure you've mentioned GuideStar, or as you now know it, now called candid. You've talked about Charity Navigator, and you've looked at resources available at places like Pro Publica. There is a lot of good information available from credible third parties to help you understand more than overhead.

Please do not use overhead as one of the metrics to decide whether or not an organization is worthy. That is, it has nothing to do with their impact. Begin to think about what is there. If you are inclined to give locally, I'm willing to bet that there's a really good community foundation and that you could begin to have some dialogue with most community foundations. There are great donor education events, and some require you to be a donor to that community foundation. So maybe you open one of your donor-advised funds there locally, but not all do, and they'll be happy to invite you or keep you on their e-mail list for their donor alerts. That sort of thing, so that you can become more and more educated about how other donors are thinking about the causes they support. 

And what can you do?

I appreciate all of your advice. I also follow some of it.

So, I have an I only have a small donor-advised fund.  They were also my clients for a short time, and I have a donor-advised fund at the Oregon Community Foundation. I worked with them as a consultant for about 6 years, I agree with you about the Community Foundation model; they always have great educational opportunities. 

They have other donors who are extremely experienced in those areas with whom they can connect, in addition to those who are just moving into the area to address any local issues. You're with those people. So they're great networkers. There are numerous other types of examples; I only provided one just like that you pulled out. Is there anything else you'd like to say before we leave? Offer any words of wisdom you have. To my listener:

A few things, I think. First of all, thank you for your generosity, and know that it is appreciated that the non-profits that you're supporting are stretched thin and are doing their best. And if they don't always remember to thank you, you might chalk it up to those bandwidth issues. 

I wrote a white paper once as a thought piece saying that if we want to hold nonprofit organizations up to the standards of the for-profit world of a corporation, it’s not such a gleaming multinational corporation that you should be comparing it to a non-profit organization. It's a perpetual start-up, you know, and they have to start from zero every year to raise funds again, and so they're constantly sprinting and running, and anything you can do that will inject some stability and predictability is helpful. I think it will help them be even more impactful.

That's a great final word, Laura, so let's stay in touch, and I hope that my listeners will go and investigate Giving USA and everything else you mentioned candida, and other pieces. We'll have a lot of those in the show notes. 

You're right, I have. We've talked about all those different elements before, and I want to remind owners to keep going over there because there are some great resources available to people. Thanks again, Laura.

Thank you for inviting me.