ReThinking Not-for-Profit Donation Percentages

Over the past decade, many donors have demanded more transparency from not-for-profit organizations as to how they use their resources. It’s becoming more commonplace for organizations to highlight or even market their percentage breakdowns of spend on donations received. Overall, I’m glad to see the shift towards more fiscal transparency.

But…

Yes, there’s a but…

I think this has also created unrealistic expectations, skewed perspectives, and a myriad of problems for organizations. Knee jerk reactions and platonic thinking (i.e., a belief that there is one ultimate way to think or do something) has led to many organizations dwindling in viability and some even closing its doors. Yes, it’s complicated and public perception is often king. It’s interesting to see how many organizations wear their percentages as a badge of honor… “We give 100% to…”, “We only use 15% for…”, etc.

Organizations like charity: water, who give a 100% of their public donations to their projects, have set the bar really high for others. The truth is that charity: water has worked incredibly hard to develop a separate donation stream to fund its staffing and operations. They’ve gone the extra mile to make sure they can keep all of their public donations focused on their initiatives.

Not every organization is or should be charity: water. In fact, I doubt that charity: water would ever say that they have “the” model for donations. In other words, percentage designations can and should vary by organization. Very few organizations will be able to pull off what charity: water has been able to do.

So, what percentage of donations should you use for an organizations initiatives versus operations?

Here are some initial thoughts and questions to consider as you determine this number:

  • Do you have a fiscal plan or a fiscal wish? As foundational as this may sound, every organization is a business. It needs an actual plan with real numbers. I meet far too many people who overlook fiscal planning and choose to be romanticized by the false nobility of “working with less”. It’s no wonder that many organizations today will not be around in 10 years. Most businesses would never survive on the percentage breakdowns of many organizations. Why should organizations think they are any different? I personally would rather give to an organization that has higher overhead if it means they will be around years from now to continue their impact.
  • Don’t play the comparison game and educate us. Each organization is different and comes with a set of unique needs to accomplish its mission. Take time to transparently educate your supporters about what it is you’re actually doing and what it’s going to take to fulfill your mission. Be upfront and help us donors understand how much you need and why. If it’s significant work, we’ll get on board. Don’t make up numbers that will prevent you from sustaining and scaling your efforts long term because you were fearful of being compared to other organizations. In many cases, it’s lack of good storytelling and clarity that kills support.
  • Take time to learn from others. Some organizations get stuck in their strategy because they choose to be inwardly focused. Take time to reach out to other organizations as well as your donor base (In my opinion, this is one of the greatest underutilized source of ideas for organizations.) to learn about best practices. It’s tragic how often organizations don’t turn to the rich source of wisdom they have right around them. The minute you start thinking that you’ve got it all figured out is the moment you start being irrelevant. Stay humble and keep learning.

Are you a leader of an organization or a donor to an organization? I’d love to hear your thoughts on this.

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Charles Lee
Charles is the CEO & Chief Idea-Maker at Ideation, a brand innovation company that specializes in helping businesses & organizations build remarkable brands via innovative business design, organizational change architecture, brand integration, design, web, and marketing services. He is also the author of Good Idea. Now What?: How to Move Ideas to Execution, a practical book designed to help people move ideas to implementation. Charles is regularly invited to speak to leading companies and organizations on topics such as creativity, innovation, idea-making, and branding. Executive leaders from brands including Wells Fargo, Toyota, The White House, Catalyst, William Morris Endeavor, mun2, Council of Urban Professionals, Chick-fil-A, and many others have benefited from having Charles present at their key events.