As analysts and consumers alike read reports on the impact Black Friday and Cyber Monday may have on the economy, today the nonprofit community is focused on another important day—Giving Tuesday. This first-ever Giving Tuesday seeks to unite and transform the way we think about, talk about and participate in the end-of-year giving season. Wouldn’t it be nice if the droves of post-Thanksgiving shoppers invested in charities with the same enthusiasm as they had while waiting to purchase the latest hard-to-get electronic or finding the best online deal for this year’s most popular toy?
There was an essay I read in The Wall Street Journal this past September that questioned why charities can’t be sold like perfume, unfettered from the restrictive financial expectations that require them to almost do the impossible: spend less on salaries while keeping staff satisfied and invest little in infrastructure, fundraising and marketing to lower administrative costs while operating effectively on minimal resources. During the holiday season—when most charities experience a peak in investments—those of us in the nonprofit community are fighting an uphill battle against corporations spending billions of dollars to get your attention. So, we hope at least on Giving Tuesday, you’ll take notice of us!
I came from the business world—working both on Wall Street and in Silicon Valley before becoming co-founder and CEO of Room to Read, a global nonprofit organization focused on literacy and gender equality in education in the developing world. Now that I understand the operational efficiencies and inefficiencies within both the nonprofit and business sectors, I want to offer you some advice on how to spend your philanthropic dollars this Giving Tuesday and throughout this holiday season. And really, it comes down to investing in trust.
You trust your financial institution with your retirement money so you should have that same trust in those who receive your philanthropic dollars. If you trust the company you are making the investment in—whether a start-up you think will be the next Facebook, or the charity that is doing work you are passionate about— you need to trust they know the best way to apply your donation to achieve the most significant impact.
But how do you know? Start by getting to know the organizations working in your field of interest. As the investor, conduct proper due diligence just as you would when purchasing a product or stock. While it is important to look at an organization’s overhead to see what they spend on programs verses administrative costs, don’t make this your only indicator. There are smart ways a nonprofit can invest in overhead to increase operational efficiency, such as investing in their workforce and IT infrastructure.
Also, evaluate how your charities compete in the marketplace. The little known secret in the nonprofit space is that, although we don’t like to admit it, the nonprofit sector is competitive—for donor dollars! Although nonprofits often share information and lessons learned, which do not pose a drain on limited resources, many expect nonprofits to collaborate extensively and even partner if they work on the same issue. Yet, do we ask Pepsi and Coke to do this because they are both in the beverage industry? When I worked in Vietnam for Unilever in the mid-90s, no one asked me to collaborate with our major competitor, Proctor & Gamble. Instead, I was expected to beat them at every opportunity with the understanding that healthy competition drives quality and efficiencies.
Once you have identified charities you have grown to trust and understand, I suggest making bigger donations to fewer organizations. Your chosen nonprofits can now have greater impact with your resources and build a stronger and longer relationship with you, the investor. I also encourage you to give unrestricted funding. Philanthropic investors should see their investment in an entire organization, not just one business unit. An investment in Apple, does not include the option of investing solely in iPhones or the cost to keep the lights on in Cupertino, California, so why do we allow this in the nonprofit sector? When donations are restricted to individual projects, organizations may then have limited funds to support program monitoring and evaluation, internal audits of funds, and investment in more effective systems, processes and infrastructure.
So, as peak shopping season continues, we hope you will consider investing in charities on Giving Tuesday and beyond. There are millions of philanthropic opportunities for you to consider and millions of us working hard to gain your attention. One of these days I hope this holiday sees results akin to those of Black Friday or Cyber Monday and we too are asked to open our doors earlier to manage donor demand. Until then, we simply ask for the gift of your trust.
This post originally appeared in The Huffington Post on November 27, 2012 in honor of Giving Tuesday.