Tag: donations

Donation pledge update

As of the 31st of August, 2016, I have pledged to donate all of my income each year over $45,000 Australian for the rest of my life to what I believe is the most effective charity/cause. That’s the short version, but I’d like to say a few more things.

Why are you making this public?

I recently heard a quote (and sadly I can’t remember where so I can’t give due credit – edit: found it) that it’s more selfish to donate and not tell anyone than to donate and tell everyone. By telling people you donate, you encourage giving norms, which encourages other people to donate. Imagine if, over the course of my life, I encourage just 1 other person to do the same. I’ll have doubled my impact.

Also, there is the very real possibility that, if I kept this as a pledge internally, or didn’t pledge at all, my values will drift over my life, and eventually I’ll stop caring to donate.

I keep a very transparent list of my donations here, and encourage others to do the same.

That’s a lot of money! Aren’t you worried?

Not really. As I’ll discuss below I think this would make me much happier than spending the money on myself. Plus $45,000 probably gets you further than you think once you take out excessive holidays, fancy houses, cars, clothes, restaurants, movies etc. And on an income of $45,000, I’d still be in the richest 1.3% of the planet.

Anyway, about $4,000 saves a life at the Against Malaria Foundation, 60 cents reduces one year of animal suffering if donated to an Animal Charity Evaluators recommended charity, and a donation to an existential risk organisation like the Future of Humanity Institute has a meaningful chance at reducing the risk of human extinction. It’s pretty hard to spend too much money on myself once I realised that.

Where do you think that money will go?

I think the answer to this question will change very often, so I won’t answer it in full here. At least in the near future it will probably just go to whichever charity I think is the most effective at reducing the suffering and maximising the pleasure experienced by conscious minds (including non-human animals, insects, and even AI if it turns out to be sentient). In the future I might decide that, say, political lobbying is more effective, so I remain open-minded.

What’s the catch?

Well, if the cost of living dramatically increases, I probably won’t make large sacrifices to maintain the pledge. There are practical and selfish reasons for doing this. The practical reasons are that, sometimes you have to spend money to make (and donate) money. If I were going for a job interview and thought I’d need a suit to land the job but I was about to go over, I’d probably buy the suit.

Also, there’s the risk of burnout. I don’t feel like I’m in any danger of burning out because I’m so motivated to make a difference, but a lot of smart people have told me that living a certain way is difficult to maintain. Donating a medium amount over a life is certainly better than donating everything for 3 years then giving up.

My current living costs are about $20,000 per year, so I really don’t see this happening any time soon. Plus I’m going to allow the cap to grow with inflation.

Wait, $20,000 a year? So you plan to blow $25,000 on yourself each year?

Not quite. I still donate as much as I can, the $25,000 is just to allow for changing circumstances.

Should I do the same?

Maybe. I guess you should ask yourself what you want in life. If it’s to make a positive difference, this is probably one of the best ways of doing so. If it’s for yourself to be happy, I’d actually argue you should still make a pledge. Anecdotally, I am much more happy after I first made a smaller pledge last year, and I feel no regret or worry about doing this today. I feel like I’m making a real difference, and that feels good.

Also, someone earning $100,000 a year is only marginally more satisfied than someone earning $50,000 a year. An individual earning $100,000 but giving half would arguably be quite a bit happier than someone who just earned $50,000 a year too. At about $40,000, other factors, such as health, relationships and a sense of purpose contribute more to happiness than income.

Have you ever felt like you have to work harder so you can buy more ‘stuff’? This is a concept called the ‘hedonic treadmill’. You can keep buying stuff and not really increase your happiness.

As I say, it did take me 18 months between hearing about such pledges and making this one. I would definitely encourage making a smaller pledge (Giving What We Can have suggested 1% for the first year), and increasing that if (or when) you’re convinced it’s manageable/makes you happier.

Any tips for saving money?

Totally. Toast sandwiches are delicious and are one of the cheapest meals per calorie (don’t use dairy butter though folks).

But seriously, Mr. Money Mustache is a great blog on reducing your spending in creative ways and investing wisely.

Budget yourself, and just don’t spend money on crap you don’t need.

I still think you’re kind of weird

Perhaps, but I think it’s a good weird. Plus, more and more people are doing this!

Choosing charities carefully is hard but necessary

The below comments are taken from my response to an article featured on www.adelaidenow.com.au. This article contained several fundamental flaws which are potentially harmful and need to be addressed, as The Advertiser has not made a move to issue a correction.

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On December the 17th, Anthony Keane wrote a piece titled ‘Why you should choose charities wisely’ with quotes from Fausto Pastro and John Oliver suggesting reasons for vigilance when choosing which charities to support. Unfortunately, this article contained several major errors and misconceptions which should be cleared up.

Pastro says that “With donations, there is no right way or wrong way. Anything you do is right.” This claim is objectively wrong, and even potentially dangerous. Not all charities and programs are equally effective. In fact, some turn out to produce more harm than good. For example, the Scared Straight program has been run in USA since the 1970s and places teenage delinquents in a jail for several hours, where they are threatened and yelled at by guards and inmates. The idea is that the students will be so scared of prison they will stop committing crimes. Unfortunately, what sounds like a good idea doesn’t work, and is in fact outright harmful. Of nine studies performed on this program, two suggest that it has no impact, and seven suggest a negative impact. The teenagers would have been better off if they had not been in the program to begin with. Donating to a program like this would not be ‘right’.

In addition, some methods of improving societies are hundreds of times more effective than others, even for producing the same outcome. For example, take the following three methods of preventing or treating HIV and AIDS; surgical treatment for Kaposi’s sarcoma (an illness characteristic of AIDS), antiretroviral therapy, and education for high-risk groups. On a dollar to benefit basis, antiretroviral therapy is 50 times as effective as treating Kaposi’s sarcoma directly, while education is 1,400 times more effective. If one were to decide between supporting a program that treats Kaposi’s sarcoma and one that provides effective education, the choice should be clear. When we buy a new car, we shop around to find the best value for money. It’s surprising how little this is done with charities, and how often we trust the money is being spent well.

The article also criticises charities with high administration costs (staff salaries etc.), but in reality a high admin cost does not always mean an ineffective charity. Admin costs are an important and necessary part of running a charity, and if a charity spends an extra 10% on salary to attract a top management team which boosts effectiveness by 50%, this shouldn’t be vilified. With the example above, a charity providing education with 10% of their costs being admin would still be far more effective than one treating Kaposi’s sarcoma with admin costs of 1%.

To be fair, it’s hard to figure out which programs work. It takes randomised controlled trials and a lot of analysis. Luckily, a new breed of organisation is doing this work for us. Meta-charities such as GiveWell analyse the cost-effectiveness of charities to provide, free of charge, a list of the very best from across the world.

Unfortunately, 75% of charity programs end up having little to no impact, or even a negative impact. It’s not enough to pick the charities that seem good and have low administration costs. So when you donate, don’t just do your homework, do the right homework.

How effective is face to face fundraising?

Recently I did some work for Charity Science on the effectiveness of a number of fundraising methods, with a focus on face to face (F2F) fundraising, which involves ‘door to door’ or ‘on the street’ solicitations for donations, with a focus on acquiring monthly donations. The benefits of monthly donations over larger, once off donations are they provide a steady stream of income that is more reliable, and can be used to maintain base operations in times of financial struggle when individual donations are thin.

I performed a brief literature review, and I have posted some of my notes below. If you are with a charity and are considering whether to undertake F2F fundraising, this may be a good starting point.

Reasons for lapse: The case of face-to-face donors (Sargeant & Jay 2003)

F2F fundraising experienced a significant amount of criticism in its early days. This paper concludes that donors are largely satisfied with the recruitment process and lapse mainly because of changing financial circumstances than feelings of having been pressured into supporting, despite media claims.

69% of survey participants were aware of the charity before the recruiter approached them, and 54% were familiar with their work. The paper concludes that this means there is a ‘substantial degree of brand awareness but rather less understanding of services and programs’. I disagree slightly with the wording here – while the sample size is high enough that the difference is likely statistically significant, 54% is not substantially less than 69%.

Over 60% of participants said that they agreed to talk to the recruiter because they were friendly and unthreatening. Lapsed supporters (those who has signed up for monthly donations but had since stopped) were significantly more likely to have been under some pressure of time than remaining active supporters.

Those that felt pressured into offering support were significantly more likely to lapse than those who weren’t, but this doesn’t necessarily imply causality (donors who would have lapsed anyway may claim they felt pressured). Those that were impressed by what the recruiter had to say were significantly less likely to lapse, but again, for the same reasons, this doesn’t imply causality. It is interesting to note that the difficulty and length of time taken to offer support did not appear to play a major role in reasons for lapsing.

The general consensus in the literature is that around half of donors recruited through F2F will lapse after 1 year, with an average length of support of around 5 years, which can be used to estimate your return on investment per donor acquired.

The paper says that F2F reaches a younger donor audience, but younger donors appear to show a higher lapse rate, partly due to lower average income.

Most donors appear to prefer quarterly communications from the charity. 14% of active donors state they would be happy to not hear from the organisations they support at all. It is interesting to note that lapsed supporters are significantly more interested in acknowledgements for their gift (23% compared to 13%). This may indicate that those donors who lapse are likely to care less about intrinsically doing good and more about getting some kind of recognition of their support. The majority of lapsed and active supporters (around 80%) prefer to hear about the work the charity undertakes, with less (around 55%) interested in how their money has been used in the past, and less still (around 25%) interested in other ways they can support the organisation.

Of the remaining active supporters, about 73% indicated they had about the same level of commitment to the charity compared to when they first started giving. This sounds low, but around 22% said they were more committed, compared to 5% that said they were less committed.

The most startling conclusion was that there is no significant difference between lapsed and active supporters in the trust they put in the charity. That is to say, trust does not appear to play a role in the reason for donors lapsing.

It was noted that, of the lapsed donors, about half expected that their support would last for a year or less when they first signed up. When asked whether they would support the charity again, 66% of lapsed supporters said that they would, which supports the idea that donors lapse primarily due to changing financial circumstances than anything to do with their feelings towards the charity. I would caution putting too much faith in this conclusion though, as survey participants like to rationalise their past choices and have incentive to lie in a survey to save face. People generally don’t want to say that they stopped donating because they decided they would prefer to spend the money on themselves, even in an anonymous survey.

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Applying relationship management theory to the fundraising process for individual donors (Waters, 2008)

This paper aimed to measure the relationships that non-profit organisations develop with their donors and examine the differences between levels of giving.

Major gift donors were more likely to have stronger trust, satisfaction and commitment with the organisation than the annual gift donors did. Donors who gave multiple times to an organisation rated their relationship with the organisation as being stronger than the one-time donors did. The paper appears to argue for more resources being spent on donor stewardship and relationship management strategies (including F2F and related activities) to increase donations. I’m not particularly impressed by the above conclusions, as they say nothing of causality. In a sense, it seems obvious that someone with stronger trust and commitment will be donating more to the charity. What would be more useful is a longitudinal study that demonstrates the effects of increasing levels of stewardship over time. In Waters (2008) (summarised below), there is more reference to the fact that increased donor relations and stewardship can result in increased donor loyalty, though I’m still not convinced on causality.

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Factors influencing the break even probabilities of agency recruited low value charity donors (Bennett 2013)

This paper examined the factors that may affect the likelihood of a donor recruited through F2F reaching the financial break even point within a certain period of time, defined as the point when a supporters total donations exceeded the recruiting agency’s fee, induction costs and annual donor maintenance costs.

Interesting to note that apparently a number of agencies refund a proportion of their fee if a donor cancels within a certain period, usually 12 months (Sargeant & Hudson 2008), which should improve the economics of such a test.

“In 2009, the average value of each standing order acquired through F2F agency employee solicitation was 90 pounds per annum (Quigley 2010), while the average fee paid to external agencies varied between 80 and 160 pounds per donor (Jones 2010).” Other costs the client charity incurs include the costs of printing and mailing a welcome pack to the new donor, processing the standing order, entering the donor into a database, phoning them, printing and mailing regular newsletters etc. According to the paper, it seems that, even for a 5 year donor, the costs can quickly add up to a loss for the charity.

According to the Professional Fundraising Regulatory Association (PFRA 2011), the fee paid to an external agency will be recovered within 8-16 months on average if a new donor can be persuaded to give 10 pounds a month. Including additional costs, the expected break even point is 26-28 months.

Another consideration is that regular donors may be more likely to make additional ad hoc contributions such as donations in response to direct mail/email appeals or other requests and donations. On a related note, according to Fleming and Tappin (2009), a lower value of monthly contribution for a donor is correlated with a higher rate of retention.

The author suggests that the conversion of low value regular donors into higher value supporters is a critical field of research, but one that has not been covered to date.

According to Sargeant 1998 and Aldrich 2000, regular donors rarely support a charity for more than 6 years, possibly due in part to one becoming ‘overfamiliar’, bored or disinterested with the charity, which is  an interesting claim.

One concern with asking people to just give a small amount is that it may make people less likely to donate a lot, and can remove feelings of guilt one might have about declining a tougher ask (MacQuillin 2011).

The paper advocates segmenting a charity’s donor relationship management policies to better target and serve low value donors. “The present study demonstrated that many of the low value supporters most likely to break even within 4 years and/or to uplift their standing orders shared certain characteristics; notably a strong sense of obligation, relationship proneness, involvement with the charity’s cause, low personal inertia, satisfaction with the charity, willingness to accept incentives, and a tendency to experience ‘warm glow’ when making donations.”

Therefore charities can implement measures to specifically nurture these tendencies for low value donors. An example might be making it easier for people who donate for ‘warm glows’ to feel the warm glows, e.g. “via the transmission of profuse congratulatory messages when issuing thanks for gifts.” When asking for extra money, thanking donors for being ‘compassionate’ can increase gifts by as much as 10% (Hudson 2011).

Incentives such as invitations to parties appear to be effective ways to increase donation levels, which suggests that investment into these incentives may be worthwhile. Examples of such incentives can be found in Bennett 2007.

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Benchmarking charity performance: Returns from direct marketing in fundraising (Sargeant et al 2006)

The paper presents the results of a study of 150 UK charities, and indicates the ROI that can be achieved through each of the marketing tools/techniques used. They suggest that most charities lose money on donor recruitment activities and that the overall returns from direct marketing activities are comparatively low compared to other forms such as major gift, trust and corporate solicitation, which, according to the paper, “can often generate over 10 pounds for every 1 pound of investment. (see Sargeant and Kaehler 1999)”

Door drops and off-the-page advertising perform poorly in terms of ROI compared to alternative media. Direct response TV appears promising, but has a high cost per donor which reflects the high levels of up-front investment.

F2F cost per donor compares favourably with other cold recruitment strategies and promotes longer-term committed giving.

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Measuring stewardship in public relations: A test exploring impact on the fundraising relationship (Waters 2009)

This paper suggests that donors favour reciprocity (gratitude of charity for donations), responsibility (keeping promises), reporting and relationship nurturing, and that they have a significant impact on how donors evaluate their relationship with the charity. Spending more time on donor relations and stewardship can result in more donor loyalty according to O’Neil (2007), though I’m still not convinced on the causality here.

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Conclusion

Overall, F2F fundraising is a good way to build public awareness of your charity and develop a base income and group of supporters, though the returns are generally lower than other forms of marketing such as major gift, trust and corporate solicitation.

If you have any thoughts or comments, feel free to leave them below. If you’d like a more targeted analysis of fundraising for your charity, please get in touch and I’d be happy to help out.

References

Aldrich, T. (2000). Reactivating lapsed donors: A case study. International Journal of Nonprofit and Voluntary Sector Marketing, 5(3), 288–293.

Bennett, R. (2007). Giving to the giver: Can charities use premium incentives to stimulate donations? Journal of Promotion Management, 13(3/4), 261–280.

Fleming, M., & Tappin, R. (2009). Face to face donor cancellation rates (attrition): Establishing a benchmark. International Journal of Nonprofit and Voluntary Sector Marketing, 14, 341–352.

Hudson, S. (2011). Telling donors how much others have given brings in more. Third Sector Online,6 July 2011. Accessed August 24, 2011, from www.thirdsector.co.uk.

Jones, M. (2010). Charity donors ‘pay fundraisers’, BBC News, 26 August 2010. Accessed August 25, 2011, from http://news.bbc.co.uk.

MacQuillin, I. (2011). A nudge in the wrong direction, UK Fundraising, 9 June 2011, pp. 1–5. Accessed August 18, 2011, from www.fundraising.co.uk.

O’Neil, J. (2007). The link between strong public relationships and donor support. Public Relations Review, 33(1), 99–102.

Professional Fundraising Regulatory Association (PFRA). (2011). Face to face fundraising. London: PFRA. Accessed August 24, 2011, from www.pfra.org.uk.

Quigley, R. (2010). Revealed: how fees for high street ‘chuggers’ are eating up the millions you donate to charity. Mail Online, 27 August 2010. Accessed August 25, 2011, from www.dailymail.co.uk.

Sargeant, A., & Hudson, J. (2008). Donor retention: An exploratory study of door to door recruits. International Journal of Nonprofit and Voluntary Sector Marketing, 13(1), 89–101.

Sargeant, Adrian and Juergen Kaehler (1999), “Returns on Fundraising Expenditures in the Voluntary Sector”, Nonprofit Management and Leadership, 10(1), p.5-19.

Sargeant, A. (1998). Donor lifetime value: An empirical analysis. Journal of Nonprofit and Voluntary Sector Marketing, 3(4), 283–297.