Tom’s Takeaways: The Continued Decline in Giving….The Uncomfortable Conversation.

The recent release of the Giving USA 2024 report, widely quoted and the most robust annual review of giving trends by donor and recipient type, showed a decline in individual giving in 2023 of 2.4 percent. Alarming? Possibly. Surprising? No. Cause for Pause?  I hope so.

The above paragraph is word for word what I wrote last year, with only the numbers adjusted for the most recent report.

There is a trend here, but don’t get caught up in the numbers. Instead of regurgitating the widely available numbers for you, let me save you some time on the big picture:

• Giving dropped while the economy flourished.
• Individual giving dropped to a near all-time low of 1.9% of disposable income.
• The number of donors, from big to small, dropped 3.4%.

Scary? That’s the Point

Anytime a decline in revenue, in real terms, reaches double digits, anyone paying attention should take notice.  This goes for both nonprofits and for-profits. This decline happened when:

• The stock market, which is highly correlated to philanthropic giving, reached all-time highs. 
• GDP was up 6.5%.
• Personal income was up 4.2%.
• Unemployment was at historic lows.  
• Corporate profits were up 1.5%.

What’s going on?

Ah, inflation is the culprit. Hmmm, while inflation is the easy scapegoat, and people did feel like they had less money to spend, it can’t be the sole reason.  Inflation actually came down in 2023, dropping to 4.1% from 8% in 2022. So, although giving in nominal dollars was up, it didn’t keep pace with inflation.

I’m Not Making This Up

Giving USA, the good folks who publish the report, also offered this observation in one of their versions of the results, and I quote:

What if we—the inspirers of philanthropy—had spent more time building authentic relationships with our donors and making the case for their gifts?

Simply put, in 2023 we didn’t do enough to convince donors to shift their spending away from consumer goods and services and towards philanthropic giving. (Bolding as originally appeared)

Let me put that in slightly different language…you didn’t do your job.  You didn’t do enough to shift spending away from what people need, consumer goods and services, towards philanthropic giving.  So, it’s your fault development officers, board members, and nonprofits in general. When I first read this, I was shocked.  I reread it to make sure I didn’t miss something. I didn’t.

It’s Time

In the 70’s and 80’s, Detroit automakers were on the ropes. Their market share was in free fall, and Japanese imports were gaining year after year.  Detroit had to do something.  Did they simply take out more ads? Did they try to convince the public their cars were better when they clearly were not? To their credit, they realized they had to completely retool and reinvent, from production issues to quality concerns to reliability fears. They simply had to make better cars.  After years of corporate pain, Detroit came back, but not until Japanese manufacturers became firmly entrenched in the American marketplace.

The analogy here is more parallel than it might first appear. While we all know the value of relationships in fundraising, the crux issue is failing in “making the case for their gifts.” The fundraising industry needs to retool and reinvent, just like Detroit.  American automakers did not turn things around because the salespeople in the showroom honed their sales skills.  They turned things around because they made a better product. The marketplace is not stupid.

The first step in that pursuit for fundraising is changing how they approach people, especially in how they ask them for money. The vast majority of the fundraising industrial complex is rooted in emotional giving.  In fact, there is an entire segment of this machine devoted solely to tugging harder at your heart strings, telling better stories, and deepening your emotional response. Some sectors of the philanthropic sector rely exclusively on this emotional appeal.

This reliance on the emotional appeal is a big part of the reason that people (and corporations and foundations) are not giving like they used to. They have appeal overload, donor fatigue, or whatever you would like to call it. The visuals of the suffering child or the abused pet are powerful, but they cannot be the only reason one expects people to part with their hard-earned dollars.

At the end of the day, people give because of the outcomes they value…and the outcomes that are delivered by the nonprofits that ask for their money.

I’ll end this article with the same words I wrote last year about the decline in giving:

If there ever was a time to reevaluate, this is probably it.  I feel the most valuable thing a nonprofit can do to become more financially sustainable is move from the donor/charity model of raising money to an investment-driven model.  Investment-driven models focus on the outcomes you deliver, which are much more appealing to today’s nonprofit investors, especially those that can make transformative, rather than transactional, investments.

Moving to this model is more than just changing your vocabulary from donor to investor.  But believe me, it’s worth it.