5 Reasons Charitable Giving Will Never Exceed 2% of GDP

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Every June, the Giving USA report is released. This is one of the premier items produced by the Giving Institute and is always well worth reading cover to cover.

In case you have not seen it already, you can view the 2014 report here.

One key statistic of this wonderful report – the percentage of the gross domestic product (GDP) that total giving will represent – will most likely stay the same as it was the year before: 2%.

Why? Here are five reasons:

1) Hesitancy To invest In Infrastructure Prevents Major Change

Breakthroughs seldom happen without the advantage of added capacity and resources.

Within the infrastructure of fundraising at the vast majority of small-to-mid-sized nonprofits, it is rare to see investments being made to add capacity or resources.

For some reason both, internal leadership as well as nonprofit boards seem only to be willing to approve more or less the same budget as the year before! Once that budget has been handed down from upon high, there are a precious few staffers who can find a way for any budget exceptions to improve infrastructure or to add fundraising resources.

With this looming “harness” we call a budget, even in light of a well-developed strategic plan, how can we expect a bold jump in fundraising dollars at any nonprofit budgeting for less than a 5% increase?

Only a rare few will make more than a 5% increase come to fruition.

2) Blind Adherence To Legacy Fundraising Tactics

My good friend Roger Craver ran a blog series titled “Barriers to Growth” just about a year ago.

My favorite section is this one:

Only by adopting very different mindsets and methods can organizations double or even quadruple their income…  …only a small part (15%) of the market is capable of or likely to undertake the necessary changes.

W. L. Bateman’s famous quote sort sums up what I am trying to say best: “If you keep doing what you’ve always done, you’ll keep on getting what you’ve always got.”

The nonprofit world of fundraising seems to shy away from empirical evidence and clings to concepts akin to passing age-old recipes down from one generation to another.

Part of this will tie into third point below, but suffice to say blind faith to the “way we have always done it” will not lead to breakthrough results!

3) A Dearth Of Proper Testing Of Fundraising Methods

Nearly every rapidly growing commercial business utilizes proper testing of just about ever factor influencing revenue generation, from simple A/B testing regarding all types of communications to full-fledged test markets for potential game changing concepts.

In the nonprofit world, such testing tends to only be attempted by the larger organizations, but even then old traditional methods seem to hang on.

However, when you see large jumps in annual fundraising dollars by certain organizations it is often times due to either an emergency event or new fundraising methods/tactics being put into place based upon testing.

Just think how much more often that would be the case if every organization at least did basic testing!

4) Lack Of Proper Training

Over the many years of the Giving USA report, proper training of the vast majority of fundraising professionals has been scattershot at best. Those new fundraising professionals entering the sector via small and mid-sized nonprofits do their best to cobble together training ranging from conferences to books to webinars.

They often hear methods that are diametrically opposed to each other in some manner or another.

Only a few seek out and achieve proper credentialing such as their CFRE or ACFRE.

Over the last few years, there have been created college degrees devoted to proper training of individuals for these fundraising and nonprofit executive leadership roles.

Without such training, how can we expect game changing breakthroughs to occur? Hopefully, more boards and nonprofit leaders will demand and assist in funding such training in the future.

5) Poor Donor Retention

If nearly six out of ten donors do not give again in the next year, which has been the national average for nearly a decade, how can we see exponential growth?

One only needs to compare to the commercial sector again to see customer retention rates of twice the percentage (if not higher) than the nonprofit sector!

We often hear of customer retention rates of 95% or higher and first time customer retention rates of 70% or more. The first time donor retention rate often is below 30% for most nonprofits.

I am going to boldly say as long as the average nonprofit organization has an overall donor retention rate below 50%, the 2% of GDP barrier will not budge.

Just think what an overall rise in the donor retention rate of merely 10-15% would do for overall dollars raised, if all other factors remained constant. We could see the dollars raised percentage of the GDP growing to 3 or 4% over time!

Please let me know if you agree or disagree with the above five reasons for overall giving in the United States staying at 2% for another year.

How else can we help move the needle upward so more missions can be funded?

Jay Love

Jay Love

Co-Founder & Chief Relationship Officer at Bloomerang
A 30+ veteran of the nonprofit software industry, Jay Love co-founded Bloomerang in 2012. He currently serves on the board of the Center on Philanthropy at Indiana University and is the past AFP Ethics Committee Chairman.
Jay Love
By | 2017-06-10T18:56:04+00:00 June 2nd, 2015|Nonprofit Sector|

11 Comments

  1. Michael J. Rosen, CFRE June 2, 2015 at 4:01 pm - Reply

    Jay, sadly, you’re absolutely correct. Despite the massive growth in the number of nonprofit organizations over the past few decades, despite the professionalization of fundraising, despite the growth of training opportunities, despite the volume of instructional books, despite the creation and growth of professional associations, giving has remained static related to GDP. Clearly, as a sector, we’re not doing something right. Yet, there seems to be very little appetite for doing anything radically different.

    As a development professional for 35 years and as someone who has been advocating for significant change in our sector, I’m enormously frustrated.

    You’ve outlined five major problems holding back the nonprofit sector. Unfortunately, there are other roadblocks as well. Inertia is a powerful force.

  2. Simone Joyaux June 2, 2015 at 5:19 pm - Reply

    Great piece, Jay. I wonder WHEN fundraisers and their organizations will FIX THIS!!??!! Because none of this is new. Thanks for illuminating the poor infrastructure.

    Hey fundraisers and bosses and boards! Did you read CompassPoint’s 2013 UnderDeveloped Report? Did you read my response to that report? Did you read the Sargeant / Shang Growing Philanthropy Report? (You can find all of these in my Free Download Library on my website, http://www.simonejoyaux.com.)

    Do you know about the Centre for Sustainable Philanthropy at Plymouth University in the U.K. Founded by Adrian Sargeant. Focused on specifically improving fundraising through psychology, sociology, etc. etc. Academic research in existing fields + applying that research to improving fundraising…… And then maybe we can raise more money.

    No quick fixes! Social media isn’t the answer. Neither is the ice bucket challenge. Neither is yelling at your board members if you don’t know what to yell about.

    I could rant on and on and on…. But I’m too tired right now. NO EXCUSES people. No more. Stop it. Fix it.

  3. Jay Love June 2, 2015 at 5:24 pm - Reply

    Thanks for the comment Michael! Inertia in and of itself is so huge… It could a whole other group of it’s own.

  4. Jay Love June 2, 2015 at 5:25 pm - Reply

    Vintage Simone! I am so glad you ARE doing something to help…

  5. Jay, I couldn’t agree more. Giving will stay status quo as long as nonprofits stay status quo. If I had a nickel for every time someone in nonprofit leadership said to me “But that’s not the way we’ve done it/do it here,” well… Change is S L O W in nonprofits. And perhaps it will ever be thus as long as we insist on wearing the hair shirt mentality, paying low wages, not offering opportunities for internal development and wearing our “lean and mean” mindset like a badge of honor.

    Michael and I have already had a dialogue also on the problem of the continuing proliferation of new nonprofits mimicking what existing organizations are already attempting to do. Rather than join forces, leverage resources and benefit from strength in numbers, we end up with endless duplicative infrastructures leading (IMHO) to donor confusion and fatigue. This confusion leads to “drop in the bucket” donations. Folks want to at least doing something, but don’t want to risk throwing their hard-earned money into a black hole.

    See my article on Partnering to Solve Social Problems/Stop Working in Silos, and some of the comments, at http://www.clairification.com/2015/05/25/partner-to-solve-social-problems-stop-acting-in-silos/

    I also think the research by Adrian Sargeant, Penelope Burk, the Fundraising Effectiveness Project and the Greater Good Institute in Berkeley California, among others, reveals that we could be doing a much better job at inspiring more loyalty and passionate giving from our current donors. That alone could lift the giving we see as a % of GDP. But we don’t prioritize donor retention as we should.

    No quick answers, but I do hope the tide is beginning to turn!

  6. Eleanor Altman June 8, 2015 at 7:59 am - Reply

    Ditto to all. It is hard not to be as exasperated as Simone and Michael over this situation. How can any improvements be achieved when a fundraising professional averages 18 months in a job. Long-term donor relationships can not be maintained without consistency. The continued lack of fundraising professionals’ retention makes the lack of donor retention inevitable. But another major challenge is the structure of a nonprofit organization. Can a group of volunteers who are rotating on and off a nonprofit board every 3 to 6 years with little training but tremendous authority provide the leadership to make the necessary changes? The paid professional director they supervise is beholden to them and at the mercy of their inadequacies/foibles and ignorance no matter how well meaning they may be. It’s a mess. Jay’s #1 reason, the lack of investment in infrastructure, is also at the top of my list.

  7. Rob Mitchell June 9, 2015 at 9:21 am - Reply

    Jay, your 5 reasons are solid. I’d agree with all and add another… NPOs are hugely resistant to measurable accountability. They don’t like solid benchmarks that might suggest they are not keeping up with their peer group.

    However, the Atlas of Giving believes that giving is already exceeding 2% of real GDP. For 50 years Giving USA always produces the same answer – US giving is 2% of GDP. We believe they are incorrect because their methodology is flawed and they have no experience practitioners as a part of their team. One example: GUSA does not use surveys but churches do not file IRS information so church giving cannot be determined from IRS data. So, how is GUSA estimating nearly 1/3 of the charitable giving economy? Also keep in mind that GUSA is using IRS data from 2 years ago to estimate giving for the year. (2008 was a VERY different year than 2010)

    1. Factors in the economy are far more determining of giving results than are any activities of non profits. (Following 9/11) giving to non-disaster charities virtually stopped for 6 months… no mater what efforts were made. Even in a slow economy a robust stock market drove huge giving to higher education and record giving to donor advised funds. 2. The number of nonprofits has increased more than 50% in the last 15 years. 3. Technology has and is driving more giving and making it more effective and efficient. Crowdfunding, online event support (Kinterasphere and Convio), prize philanthropy, online auctions, and many other exciting innovations are driving new giving. Benevity is on track to dramatically change and increase employee giving in the workplace.

    Don’t get sucked into believing that giving is stuck at 2% of the US economy. Giving has never been better and will continue to improve as more targeted charities enter the marketplace and new technologies and techniques drive more giving.

    The Atlas of Giving uses advanced algorithms to measure and forecast giving by sector, source, and state, each month – the same sort of technology used by Google, Wall St Hedge Funds, and thousands of other companies that rely on current data and forecasting. By the way, the 2014 giving results were announced by the Atlas of Giving in January. 2014 Giving totaled $456.73 Billion – a 9.3% increase over 2013. You can read the full report at http://www.atlasofgiving.com The complete report is free.

  8. […] why charitable giving will not likely move beyond 2% any time soon, five of which are outlined in this provocative article. All of them get at the core of the sector’s most entrenched […]

  9. […] Love, CEO of Bloomerang and chair of the AFP Ethics Committee argues that there are five pragmatic, fixable factors blocking the growth of charitable […]

  10. Andrea John-Smith February 29, 2016 at 3:10 pm - Reply

    Jay and Simone– You are both brilliant and I am grateful for your wisdom. But saying, “it’s crappy out there” and nothing will get better is actually not helpful (though, I get and embrace the goal behind that sentiment). Research and the data is not (ever) enough. Isn’t the real trick translating the smart insights derived from research into behavior change? I am re-reading Chip and Dan Heath’s book “Switch: How to Change Things When Change is Hard.” Among many thoughtful and inspiring insights, they admonish us to look for examples that defy the negative trend — Bright Spots. Examples of organizations that have elected to invest in testing, that have made solid capacity building bets with their fundraising and communications that translated to changes in practice — they’re out there.How can we ferret out and lift up those stories?

  11. […] According to Giving USA, philanthropy has remained stagnant at 2% of GDP and 2% of disposable income for the past 40 years. This immobile figure has baffled fundraisers and philanthropists for decades, and others have written extensively on the subject. Some have even issued challenges for the profession to increase giving by a percentage, yielding an additional $170 billion to non-profits. Still, others have offered reasons why this number will likely never change. […]

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