One of the more common questions we get from local United Ways goes something like this: “How do we get donors to stop asking about our administrative costs?” To answer this question, let’s start back at the beginning and talk about why donors care about United Way’s administrative costs.
When a United Way raises money expressly for the purpose of funding programs offered by local partner agencies, United Way provides a service to the donor by passing through their contributions to fund these programs. United Way provides two primary benefits to donors: first, it is an easy way to give, and second, the donation funds local programs.
The one way that donors can evaluate the effectiveness of their donation is to look at United Way’s administrative costs. In the donor’s mind this is simple. If the donor gives $1000, and the administrative costs are 18%, then $820 of their donation is going to fund local programs. The donor can now decide, is it worth it to me to spend $180 to have United Way distribute $820 to fund local programs, or would I be better served to take my own time and effort and make contributions directly to local nonprofit organizations?
I can hear some of you screaming now, “But Gary, we do more than pass-through donations! We carefully screen the partner agencies, we hold them accountable for outcomes, we evaluate what programs will best address community needs, etc.” Those things are all well and good, but our donor research has found that donors do not realize that United Way screens partner agencies, holds them accountable for outcomes, evaluates which programs will best address community needs, etc. And perhaps more important, there are donors who do not value these things enough to want to pay for them from their donation.
Donors that ask about administrative costs do so because United Way has sold them on donating to fund local programs. They do not know about, value, or want the other things that United Way does in the process of allocating their donation.
Donors will stop asking about your administrative costs if the reason they give to United Way is to reduce poverty, increase the graduation rate, halt hunger, or address some other specific issue in your community. We call United Ways that focus on addressing a specific issue in the community “issue-focused.” When a donor gives to an issue-focused United Way they are giving because they want to change their community by addressing a specific issue, not because they want to fund local programs. Campaign brochures for issue-focused United Ways talk about the issue and how the donor can give to address the issue; they do not list their partner agencies or funded programs.
Issue-focused United Ways certainly fund local programs that address the issue. But, donors donate to issue-focused United Ways to change the issue, not pass through funds to local programs. For a donor, the two primary benefits of donating to an issue-focused United Way are: first, it is an easy way to give, and second, the donation reduces poverty, or increases the graduation rate, or lowers homelessness, etc. The question that donors will ask an issue-focused United Way is: “How did the issue change due to my contribution?” For example, if the issue is increasing the high school graduation rate, donors will want to know how the graduation rate has improved over time. Our research with donors at issue-focused United Ways shows that they are not concerned about the administrative cost when they understand how the issue is changing for the better in their community.
Becoming issue-focused has many other benefits for United Ways, including reduced designations, and engaging the younger generation. Find out if an issue focus is right for your United Way with our Introduction to an Issue Focus Board Retreat or give us a call and we’ll talk.