[ASK AN EXPERT] Pros and Cons of Restricted vs. Unrestricted Giving?

Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity.

Today’s question comes from a fundraiser who wants to whether they should seek restricted or unrestricted giving (or both).

Dear Charity Clairity,

I’m being pressured to ask for unrestricted gifts, but I’ve heard people give more if they can designate for a specific program. I could use some solid advice regarding the pros and cons of restricted vs. unrestricted giving? Who’s right, me or my boss?

— Wannabe Right

Dear Wannabe Right,

What if you were to ask those pressuring you why they prefer unrestricted gifts? My guess is they’ll tell you it gives them greater flexibility. Then what if you were to respond with: “We’ll have the greatest flexibility if we raise the most money?”

Because, IMHO you are correct.

You’ll raise a lot more money if you stop thinking about you and your needs and think more about your donors and their needs. Perhaps your boss may reluctantly even agree with you when it comes to asking for major gifts from individuals, understanding you must really float a donor’s boat if you want them to give at a passionate level. That’s true!  And… this holds true for donors of all size gifts.

“It is more motivating for donors to sponsor something specific, for example providing supplies or a well for a school at a cost of $xx.” 

— Anonymous donor, Burk Donor Survey

Trying to force donors to give where you prefer rather than where they prefer is the antithesis of donor-centered fundraising. Which is why I’ve never really understood the penchant in so many nonprofits to eschew restricted gifts. Some do this to the extent that major gift officers are penalized for bringing in too few unrestricted contributions. Essentially, this means these fundraisers are not allowed to talk to donors about what the donor really cares about. Their task is to steer the donor away from their passions and towards a middle-of-the-road strategy that simply doesn’t excite them. I’m sure you can see how absurd this is.

This is not to suggest you should accept gifts that cause mission drift and don’t accomplish your priority objectives. You can serve donor needs and still raise the general operating support you need — whether the donor ticks the “where most needed” box or another of several boxes where funding is definitely needed. How, you ask?

The secret is to “package” your case for support so you break down your core needs (all those falling under the “unrestricted” umbrella) into several specific key initiatives designed to capture the attention — and engage the passions — of different types of donors. Explain to those pressuring you to ask for unrestricted gifts that many of your donors have specific passions and interests, and they’ll give MORE if your organization can be specific describing key initiatives and the associated costs. This means getting program, finance, and leadership together to come up with all program-related costs (including overhead) so you can wrap these into your case for support.

Instead of saying ‘give where most needed,’ what if you said ‘give where most moved?

People tend to make more passionate gifts when they can specifically earmark them for things about which they’re really zealous. They don’t give to your organization. They don’t give to numbers of people. They don’t give to solve every problem your organization tackles. They give to one person faced by one challenge. They give because you told them a story to which they can give a happy ending.

I hope this advice provides you with your happy ending and inspires you to serve your donors in ways that will unlock their most passionate philanthropy.

— Charity Clairity

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