The next generation of nonprofit donors has arrived.
Gone are the days of charitable organizations relying on direct mail and telemarketing to secure the donations mandatory for successful mission fulfillment. In addition to Baby Boomers, Generation X, Generation Y/Millennials and Generation Z, the first generation of the 21st Century, have emerged onto the philanthropic scene and become a requisite for profitable fundraising. While each of these categories have distinct characteristics, one thing is certain. Nonprofit donors and their charitable giving has been forever transformed via technology and the unyielding desire for increased information to make educated donor decisions.
The modern donor views giving as an investment; one that will help to solve a societal problem or concern and thereby provide an appropriate ROI. Sound investments require reliable information and charitable donors have grown to expect key pieces, including:
- Agency Fundamentals – Mission, vision and values
- Impact – How the nonprofit is affecting those it serves
- Financial Management – How the agency spends its money overall
- Legitimacy – Financial contributions will be used as the donor intends
Providing performance indicators in a transparent, easy to understand manner will help nonprofits to connect with donors in a meaningful way. Two indicators stand out as able to provide the information the modern donor wants: Outcomes vs. individual activities and an agency’s financial statements.
According to the Chronicle of Philanthropy, measuring outcomes rather than individual activities has become a key performance indicator. Outcomes should illustrate how well a nonprofit reaches its ultimate goal – the fulfillment of its mission. Individual activities, alternatively, refer to the actions a nonprofit performs, for example providing training or conducting research. It is essential to provide this information to donors in an easy to understand format that focuses on the organization’s bottom line. A nonprofit that aims to help reunite foster children with their families will target individuals and families as outcome indicators, while a nonprofit that works to change laws to protect children and create systematic change will highlight a broader outcome spectrum.
Financial statements also are essential in drawing attention to a nonprofit’s overall performance. Many nonprofits highlight this information directly on their websites. This information also can be found on charity ratings sites such as Guidestar or Charity Navigator, where a breakdown of how an agency distributes its fundraising revenue or a breakdown of percentages of each donation spent on programs vs. overhead expenses, respectively, can be found. Further, by taking a close look at an agency’s financial position, donors are acting more like true investors in a for-profit entity and are therefore able to make more informed and effective investment decisions. A key factor to keep in mind when turning to financial information to make donation decisions is even a philanthropic organization that has a lean profit margin and higher in-house expenses can have a substantial impact on its overall mission.