Editor's note: This is the third in a series on financial management for nonprofit organizations.
For today's donors, a charitable contribution is an investment in a cause.
This new generation of donors is data-focused and hands-on. And that means nonprofit organizations can expect relations with their donors to look a little different.
Studies show that younger donors are changing the philanthropic landscape as they lean into online research, online giving and social sharing of causes they support. Many millennial donors take a "trust but verify" approach, wanting to see the data that backs up a nonprofit's claims.
Forbes reports that millennials also are more likely to give than other generations. In 2014, 84% of millennials were giving to charity. This generation, unlike those that came before, knows how to navigate the digital landscape to find the organizations whose missions align with their passions.
On the heels of millennial donors comes Gen Z, often called "Philanthroteens," who are championing even more changes. According to the nonprofit support organization Classy, 32% of Gen Zers donate their own money, 26% of 16- to 19-year-olds volunteer on a regular basis, and one in 10 want to start a nonprofit organization of their own.
"This is a trend we've started seeing over the last 20 years. Nonprofits are attracting more sophisticated donors who are asking more and more questions and expecting a level of transparency that wasn't there before," said Evan Walter, BOK Financial® Institutional Wealth relationship manager.
All donors want to help organizations and causes they're passionate about, "but the big change is the level of involvement," Walter said. "As with any investment, they're going to do their due diligence."
Engaged donors require transparency, which means they're likely to ask these questions:
- How will their money be used?
- What is the desired impact of their gift?
- How will that impact be measured or assessed?
- And how will that information be reported back to them?
"Donors want to know that the organization is financially viable," Walter said. "And that their investment is going to be used to make an impact."
As a result, nonprofits have become more analytical and discerning, with particular attention to their mission and efficacy. They should be prepared to share with donors:
- Financial reports
- Revenue forecasts
- Liability forecasts
- A gift policy
- Steps taken to protect the organization from physical, financial and cyber risk
"Social media and the abundance of information at our fingertips has changed how people operate," said Brooke Clark, a BOK Financial nonprofit advisor. "People are engaged and many want to champion a cause they believe in. Their contributions are active, not passive. This may mean they'll champion the cause and act as an advocate in the community, which is a positive for the nonprofit."
Ultimately, nonprofit executives should rely on their own expertise.
Some well-meaning donors may want to get in the weeds of the organization's operations, and that may not benefit the organization, Clark cautioned. "It would serve nonprofits well to practice transparency by having these governing documents available to donors, and to be able to explain how these documents govern the organization.
"In their heart, every donor means well. But that doesn't mean every piece of advice they offer is what's best for the organization," she said . "It's important for nonprofit leaders to remember they have a fiduciary responsibility over all the assets under their care, not just to one donor."
Learn more:
Part 1: A financial handbook for nonprofits
Part 2: Tracking dollars and donors
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