Guest Post: Donors as Investors

By Guest Blogger Sarah Pierce

For a long time, on behalf of the nonprofit sector, I’ve been jealous of the corporate sector. Corporations have investors who, via financial interests, are tied to the future of the company. These investors seek out information on the corporation and identify themselves with the company. Is it possible to harness that relationship and help donors to be similarly invested in nonprofit organizations?

Last week, Rosetta Thurman and Allison Jones hosted the monthly Twitter chat #ynpchat with Dan Blakemore as guest host. The chat for young nonprofit professionals focused on fundraising and discussed how we define fundraising, what role we play in it, challenges it presents, and fundraising resources. As it is each month, the chat was filled with passionate individuals and fascinating side-conversations, including one spurred by Dan and Red Cross Development Director, Patrick Sallee: How does donating compare to investing? And what can we, as fundraisers, learn from the company-investor relationship?

The Company-Investor Relationship

In the corporate sector, investors are shareholders. As shareholders, each person legally owns a share of stock in the company. Shareholders also hold special privileges with respect to the company that can include the right to vote on or nominate directors, get dividends or share in the company’s success, and the right to vote on other important company decisions. All of this means that investors and shareholders feel a sense of ownership about the company and its future.

What’s more — the relationship is mutual! Every corporation has a legal obligation to work to earn money for their shareholders.

The Nonprofit-Donor Relationship

Nonprofit organizations have a similar ongoing structure that misses one key element: the return shareholders (aka donors!) get on their investment. At the heart of every nonprofit organization is the social good contract it maintains with the public. The organization does social good and the public supports it with donations. The key for every nonprofit organization is convincing the public that by donating to the organization, they’re investing in receiving a return – a social good.

If nonprofit organizations had a way to make their social good more like the return that shareholders get on their investment in corporations, donors would feel more ownership over the organization and the part they play in it.

I’ll never forget my Business Associations professor explaining that he invests in The Walt Disney Company because it felt good to be a part of The Magic Kingdom. Nonprofit organizations need to find a way to give donors some sort of return on their investment that helps them to feel a similar ownership over the organization.

Sure that’s nifty, but how do we go about doing it? How do we give them ownership and a return?

A feeling of ownership can be established through knowledge and power. Nonprofit organizations already have a pretty strong handle on the knowledge aspects. We educate donors through blogs, newsletters, emails, mailings, events, and just about any other existing channels. The more familiar donors are with the workings of the organization, the more they feel a part of it.

The harder things for nonprofit organizations to emulate are the power and return aspects of the company-investor relationship.

One of my favorite examples of empowering donors is the model that FORGE uses. FORGE is a U.S. based nonprofit that gives donors the power to select the specific project to which they would like to contribute, and educates them on how much the project costs overall and how much has been contributed so far. Thus, donors know exactly what their money is being used for and how they are helping.

The return aspect however, is still trickier. I think a big part is the message Dan gets across so clearly in this blog: stewardship. It gives donors the return of both the appreciation of the nonprofit organization and knowledge of what a difference their funds are making. Personalizing thank yous and appeals to each donor can make him or her feel some of the positive impact the gift made on the organization and ideally help to create a long-lasting and meaningful relationship.

But that can’t be the only way! Are there other ways to establish the company-investor relationship with donors? What should the “return” be? And are there downsides to doing this?

Guest Blogger Sarah Pierce is a third-year law student at the University of Iowa and the Director of Outreach at Child Soldier Relief.  While in law school, she has interned at Human Rights Watch and the California Appellate Project.  You can follow her on Twitter @sarahcpierce.

5 Replies to “Guest Post: Donors as Investors”

  1. Sarah,
    Great post and so glad you brought that twitter conversation to another platform to continue. I think you are spot on with how to make the donor/organization relationship one of investment and return.

    For me it is all about expectations. By using the “invest in” this program language you are putting some expectations on the table that you want to be held accountable to something and you will be reporting on the outcome.

    Donors don’t choose to support us because they want the personal return as much as they want to see something accomplished or see lives changed. By talking about investment you are asking for their trust that your org’s leadership can create these outcomes they want to see, much like a person investing in a company.

    Your FORGE example is great. I also think we make the mistake some times of trying to sugar coat our stewardship to always share the “great news”; but people feel stronger connection and ownership when you are willing to share the struggles as well. That is where the transparency and communication of stewardship come in to play. It can’t just be lipservice, you have to treat them like business partners.

    1. Thanks Patrick! I’m so happy you liked it.

      You’re right. The expectations of “investment” would set the bar pretty high for the future of the relationship between the donor and the organization. I wonder how many organizations would actually have the ability to live up to it.

      I really like your second point on the habit of “sugar coating” and how much better a “business partners” relationship would be. So many nonprofits treat donors with kiddy gloves, saying things such as “Your gift will help with great things!”. It would be great to see a more formal and adult relationship formed in which more nonprofits show where the resources are going and exactly how it is going to make a difference.

      In a way, it traces back to the movement to have affected populations speak for themselves (ex. http://bit.ly/gg1bY8). It shows respect and provides for a bigger impact. It is far more moving to hear from the people on the ground rather than the executive director in a penthouse office. And, that level of transparency shows a respect that, I believe, builds an enormous amount of trust with donors.

  2. Sarah,

    I also agree that this is a great post. In fact, you beat me to it. After our chat, I was fired up about what it means to invest in an organization and be a part of something bigger. It can be so challenging to present this idea as you have said, but the final product is well worth it. When I have some extra time I also want to explore this topic more and post an article of my specific thoughts.

    Another point I would like to add right now is this: Asking for donations (and by donations I mean investments) should never be thought of as putting a burden on the potential donor. Unless you present the opportunity, they cannot be involved. I have many friends who naturally fall into asking very hesitantly. They know that their cause is important and are actively investing their time, money, and life in it. However, when it comes to giving other people the opportunity to be involved, they can feel like they are being an inconvenience. Thinking with an investment-centered mind is a great way to fight this natural tendency and to share your passion with other people.

Leave a Reply

Your email address will not be published. Required fields are marked *