The International Journal
of Not-for-Profit Law

Volume 8, Issue 2, November 2005

By Charles B. Maclean and Jim Moore1

The record-breaking string of natural disasters made 2005 a challenging year for many American nonprofit organizations, especially small and medium-sized ones. Moved by the horrific images on television, donors rushed to support relief efforts, typically by diverting precious dollars away from the nonprofit missions they traditionally support. As a result, nonprofits have found themselves competing for donors’ attention and a diminished pool of resources. Donor fatigue has become a buzzword. Now it’s time to truly understand the dimensions of donor fatigue and focus on how to move beyond it now and prevent it in the future.

The news is full of stories about organizations falling short of fundraising goals. In early December, an anxious Salvation Army representative told a Denver television station that, despite the organization’s direct role in disaster relief, donations were down overall from the previous year and the “bell-ringer” campaign was bringing in less than expected. Shelves in many food banks are nearly empty, and many small- to medium-sized organizations have gotten disappointing results from annual donor appeals and new-donor recruitment efforts.

Desperation, unfortunately, produces inundation: donors find themselves awash in appeals for funds. Many donors are growing exasperated. A northwest physician said, “I’m feeling burned and burned out. We get at least 100 appeals to give a month. We’re overwhelmed, frustrated over wasted time and paper, and feel betrayed by the nonprofits that sold our name to other charities without our permission. We’ll still give, but will start seeking out the charities we want to give to and will put all the rest of the solicitation mail in the circular file unopened.”

To measure the dimensions of the problem, we undertook a nationwide on-line pool, seeking the views of some 500 donors and non-donors, nonprofit professionals and board members, foundation officials, and nonprofit consultants. Key data in this poll correlate well with those from other formal and informal surveys, including surveys conducted by GuideStar and the Association of Fundraising Professionals. At the same time, our poll is unique in that more than a quarter of respondents have no affiliation with nonprofit organizations other than giving.

Among our findings:

• Nearly three-quarters of respondents believe that fundraising for disaster-relief missions has reduced giving to other missions.
• Of organizations that conducted annual campaigns in 2005 and assessed the results, over half – 57% – saw their income decrease from the previous year’s.
• Of those organizations, 95% believed that the decrease was probably related to disaster relief.
• Among all respondents from nonprofit organizations, three-fifths say they will definitely (34%) or possibly (26%) have to adjust their budgets as a result of the disasters.
• A third of donors who gave to disaster relief did so by diverting all (8%) or some (24%) of their regular giving from the organizations they traditionally support.
• Small to medium-sized organizations have been hit hardest. A third of smaller organizations report decreased revenues, compared to a quarter of larger organizations. Similarly, larger organizations are likelier to report revenue increases in 2005 (12%) than smaller ones (8%).
• Despite their struggles to raise money, nearly half of organizations outside disaster zones were called upon by community leaders to assist disaster-relief efforts in some way, and over two-fifths rose to the challenge.
• We also asked about donors’ faith that nonprofit organizations will use their donations wisely. In an interesting twist, four-fifths of respondents from nonprofits believe that donors trust their organization, but only 29% believe that donors trust other organizations.
• And what of donors themselves? The results are sobering: only 19% say that they generally trust nonprofit organizations to use funds appropriately.

Overall giving may have risen in 2005, but that’s only part of the picture. Our poll demonstrates that disaster-relief fundraising has had a major impact on small to medium-sized nonprofit organizations. The diversion of dollars from one nonprofit segment to another is vitally important. A community’s needs remain the same regardless of suffering elsewhere.

And, while it’s true that much of the sector’s overall revenue comes from sources other than individual donations – such as government contracts, ticket sales, fees, foundation grants, and corporate funding – individual donations constitute a “substantial” or “majority” portion of revenue for most organizations with budgets under $2 million per year. These groups rely on individual donations.

History, the post-9/11 period in particular, shows that the nonprofit sector will recover. That’s the good news. Unfortunately, today’s revenue shortfalls are, in many cases, hurting the people these smaller, non-disaster related organizations serve. The ones who suffer the most are those who can afford it the least: people who rely on the programs and services of struggling organizations. When a soup kitchen must close, its clients may be pleased to know that a flood zone is being rebuilt – but they’re still hungry.

History shows, too, that disasters recur, and a prudent nonprofit manager will take steps to prepare for the unexpected. Just as responsible organizations back up computer databases, lock confidential files, maintain off-site copies of important records, and carry insurance, they must be ready to adapt to events outside their control. Nonprofit boards and executives have a fiduciary responsibility to ensure, to the best of their ability, that a natural disaster elsewhere does not become a financial disaster for their organization.

For instance, boards and executives may believe that they pursue their missions most effectively by living hand-to-mouth and spending every dollar on program activities. In truth, such an approach may seriously jeopardize their mission. Crisis-driven budget cuts inevitably hurt those the organization serves, and no one is served if the organization must close. Instead, nonprofits must develop realistic, long-range fiscal plans that diversify revenue and set aside reasonable strategic reserves during times of relative abundance. By doing so, they, like larger organizations, will be able to survive the next disaster.

In addition, our survey indicates that – in good times and bad alike – nonprofits need to focus on earning and retaining the trust of their donors. Transparency, unambiguous messages, and candid reporting of program performance and organization finances are vital. Renée Beauregard, of CommUlinks of Colorado, suggests that donors and members should expect regular communications from organizations, and that most of these contacts should not include an overt fundraising appeal.

In sum, nonprofit leaders and staff members can take five important actions based on the findings of our poll:

• Establish policies and practices that provide for a more secure future, even when disaster strikes.
• View and relate to donors from two perspectives: as valued partners in caring, and as customers who face plenty of choices about where to invest their social capital.
• Understand and put to work the distinctions between donor max-out, compassion exhaustion, donor numbing, donor selectivity, donor resource shifting, riding celebrity short coat-tails, donor resiliency, and donor uplift.
• Give donors more control over how, how often, and for what reasons they are contacted.
• Debrief best, lapsed, and lost donors to deepen your understanding of donor motivations.

Carpe diem – these actions will determine which nonprofits are goners, mere survivors, and thrivers.

1 Charles B. Maclean, PhD, is the author of a new tool and workshop, “Shifting from Donor Fatigue to Donor Uplift.” Jim Moore is the prime sponsor of the series of surveys available at www.commulinks.com. For the complete report summarized in this article and an opportunity to take part in a “1-Minute Donor Resiliency Poll,” see www.philanthropynow.com. Send feedback to the authors at advocate@philanthropynow.com or info@communlinks.com.