Impact vs. Efficiency
Written by Alexa Langford, VP, Giving Science, One & All
An anecdote I read recently about fundraising for social good organizations really struck me.
Consider two organizations serving hot meals to the homeless:
- Organization A has poor facilities, cheap food, and minimal training.
- Organization B has well-maintained facilities, focuses on nutritious foods, and trains their staff in excellent culinary practices.
Both organizations fundraise to their strengths. Organization A focuses on their efficiency with a tagline such as “95% of your dollars go directly toward food for the homeless! We don’t waste your money on overhead!” Organization B focuses on their impact on the community with a tagline such as, “With our teaching kitchen, we are feeding our underserved neighbors, while providing life skills to those in need.” Which approach is more effective for fundraising? The short answer is, “It depends.”
This contrast spurred my curiosity to question how impact versus efficiency affects nonprofit operations and fundraising. I looked to the experts—our insightful clients who live and breathe these conversations daily.
In talking with Chris McGown, Director of Donor Communications and Engagement at The Salvation Army Kentucky/Tennessee Division, he pointed out that the discussion of efficiency versus impact with supporters is “a really delicate balance. The Food Pantry is a highly efficient program that’s easy to shout from the rooftops. We have other programs, like Renewal Place in Memphis that help women moving through addiction. It’s very expensive—but also very effective long term.” He also talked about how it can be more difficult to gather support for programs that help the individual versus building up the community, stressing that, “We (often) have to extrapolate to how helping one family really is effective at building community through (preventing) recidivism. We downplay the cost.”
This is a much more complex view than just a simple dichotomy. It speaks to the power of knowing your audience.
One & All’s annual DonorGraphics survey dives deep into the philanthropic behaviors of Americans who give charitably. When supporters are asked how they evaluate the charitable organizations they give to*. Impact is perennially the most important factor, with 47% of respondents choosing it as most important in 2021. Need was second-most important at 37% (up seven points during the pandemic), and efficiency was least important at 16%. However, it varies significantly by generation—with Millennials placing the highest value on impact. While Seniors still place the highest value on impact, efficiency is much more relevant. Age remains one of the most discriminating factors in audience definition.
Clearly, there’s not a one size fits all approach. Chris also touched on the different offers that appeal to different types of supporters. “We focus on promoting hope and lives changed for $250+ donors. Really large donors are often interested in solving specific problems and pigeon-hole (their gifts).” Like The Salvation Army, most nonprofits have different messaging for their different audiences—and our research coupled with decades of experience bears out that each supporter interaction requires nuance and intention.
If you’re looking to start investigating how impact and efficiency affect your organization, make sure you have a plan and defined KPIs. Consider message testing and slicing your results by different demographic angles. The results will likely vary by platform; what works on Facebook may not work in direct mail as those audiences are quite different. You can also do a demographic append of your donor file, allowing you to analyze results and see trends through a persona or audience-based lens. And, as Chris would advise to anyone in fundraising, “Talk to your donors!”
If you’re looking for guidance, One & All can help you craft a plan, set up testing, and analyze the results.
*Source: One & All’s DonorGraphics 2021. Base: U.S. donors (adults who are 12-month active donors), n=1,408.