Thirty years ago, organizations could tell warm and fuzzy stories, describe their work in terms of the number of people served, and almost be assured of funding. That’s not always true today. Although heart-warming human interest stories and reaching large numbers of people are important, funders are demanding to see measureable returns on their social investments. On top of that, their funding criteria and priorities change from time to time, making nonprofit leaders wonder how foundations are really making funding decisions.
GuideStar commissioned Hope Consulting to conduct a survey of 4,000 high net worth individuals and foundations in 2010 to get a sense for how donors make funding decisions. They were specifically interested in learning how donors conducted research of organizations, and whether their findings impacted giving. In 2011, they commissioned Hope Consulting to survey 6,000 affluent donors and foundations to find out what information they were seeking from nonprofits and the sources they used to get their information. They also wanted to know if there was a typical format in which high net worth individuals would like to receive the information.
GuideStar and Hope Consulting explored 10 factors that impact donors’ decision to give or deny funding. They found that foundations were most driven by causes and the level of impact organizations made through their programs and services. Foundations were more likely to give to the highest-performing organizations that align in their cause areas of interest. Foundations were least likely to take into consideration personal connections with the organization, the organization’s reputation, or input from colleagues.
Individual donors were likely to spend less than one half hour doing research on organizations before giving. Foundations, on the other hand, were likely to spend 4-6 hours researching organizations before giving. Some foundations spent more than a week. Foundations typically compared prospective donors with similar organizations, focusing on the degree to which programs have made a positive impact upon their clients and communities. Other factors that were strongly considered included financial management practices and performance; whether or not the organizations were current in their filings with the IRS and state agencies and the organization’s legitimacy in the community and nonprofit sector.
Currently, foundations are most likely to get their information from sources like the organizations’ funding proposals, site visits, conversations with organizational leaders and word of mouth from other grant makers. In the future, it is expected that funders will get most of their information from sources like the GuideStar website, which currently collects data on every nonprofit in the country, including their form 990’s, organizational profiles and stakeholder reviews of those organizations. It is also expected that foundations will rely more heavily on reviewing organizations’ websites and other government and commercial databases that track organizational performance.
Given what we know about how foundations make funding decisions, and where they get their information, how should nonprofits proceed? It goes without saying that organizations should keep good financial records and make sure their filings with the IRS and state agencies are current. While it’s not a requirement, organizations can set themselves apart by posting their Form 990’s on their websites and updating their GuideStar profiles. Other items that should be posted on the organization’s website include organizational newsletters, evaluation results, annual reports, client satisfaction questionnaires and results, board and staff bios, and program descriptions and outcomes. After prospective funders leave your website, they should have a very good sense for the quality of organizational leadership, the impact of the organization’s programs and services in the community, how well the organization manages its finances and whether the organization has legitimacy in the community. If funders were to visit your website today, what would they find?
About the Author
Valerie F. Leonard is an expert in community and organizational development, with a mission to strengthen the capacity of organizations to make a positive impact on the communities they serve through technical assistance, specialized workshops, resource and organizational development and project management. She is also an instructor with the University of Illinois at Chicago’s Online Certificate in Nonprofit Management Program is a member of the Chicago Metropolitan Agency for Planning Citizen Advisory Committee and North Lawndale Innovation Zone. For further information, visit www.valeriefleonard.com or e-mail her at firstname.lastname@example.org.