So Long, Giant Check Ceremony: The New World of Charitable Giving
December 24, 2013
Source: Harvard Business Review
Say goodbye to the glory of the "giant check" ceremony, the requisite Toys for Tots drop box, and the depressing ASPCA commercials: The ways corporations, marketers, and individual donors are approaching charitable giving is starting to change dramatically -- for the better and worse.
Michael Norton, an associate professor at Harvard Business School and the co-author of Happy Money: The Science of Smarter Spending, studies the relationship between business, charity, and a person's motivation to give. An edited version of our recent conversation is below.
How are companies are thinking about making donations this time of year?
Some companies now allow employees to set aside money at the beginning of the year, from which they use to make a donation each month. This provides employees with an initial happiness boost from giving, and then an additional boost each month when they decide where to give. Even better, because they've already committed the money, it's not as painful to donate. It is an interesting way to help people commit to giving that also maximizes the happiness we get from giving.
PwC is working with a mission-driven tech company called Givkwik to similarly innovate in this space. For many years, companies have offered matching donations: if you give, the company will match it. PwC and Givkwik are now just giving employees money to give to charity.
Imagine getting an email from your employer that says, "Here is some cash, feel free to give it wherever you want," then going to a website where you can give to one of several charities that the company is supporting. It's a kind of "prosocial" bonus in addition to the more traditional bonus many companies give their employees.
Does this fit in with how companies traditionally think about doing good around this time of year? Is it usually the case that a company picks one big cause and tries to get everyone to rally around it?
It is still often the case that a company decides on one charity to support, and, equally often, the CEO decides on the charity. It's extremely idiosyncratic, because the cause is whatever the CEO happens to pick. It's sometimes the case that the cause ends up being one that the company's employees do not care about, or that the company's customers do not care about.
Some companies now involve employees and customers in the selection process, empowering their stakeholders to determine what -- and whom -- the company supports.
On the one hand, it gets people more excited about giving, with a high return on investment for both the employees and the companies. On the other it seems like this would disperse where the money is going. Are the charities themselves benefitting from this change?
Essentially, companies are trading off the benefits of supporting one cause against having employees feel that their company helped them to support a cause they are passionate about. The hope is that employees will say, "this is the kind of place I like to work."
Charities aren't always excited about these innovations, because if you had a relationship with a company for many years, you are accustomed to getting a regular lump sum. New approaches really open up the door for employees to give to many different causes, complicating matters for non-profits.
Many companies try to balance these issues with a hybrid model. The CEO doesn't just pick one cause, but allows the employees to select, say, five charities. Employees still feel empowered to give where they want, but those five charities still receive a significant lump sum that they can count on.
There are two kinds of impact: actual and perceived impact. Both are important, but for different reasons. Actual impact is important for charities because they want to show they are getting things done with the money they receive. Websites like Charity Navigator allow donors to assess the efficiency of different charities in order to turn money into actual impact.
But we've found in our research that, for givers, perceived impact is extremely important. This is the feeling that you've had an impact on a specific person, and it's crucial to making you feel good about the giving process. Very often, actual impact and perceived impact align. If I give to a specific child, for example, I can see that I'm having a specific impact on that person.
Is it a problem that the person giving may feel emotional benefits, but not necessarily the person supposedly receiving the gift?
We have conducted a great deal of research on exactly this point, and there are some organizations that get it right. I work with the non-profit DonorsChoose, which allows people to donate directly to public school classrooms. You can search for your hometown or a keyword like "novels," and give a specific thing to a specific classroom.
The teacher and kids write you back saying, "thanks, here is how we used your gift." DonorsChoose has gotten impact exactly right. Not only can I give where and what I want, but I have evidence that I had impact on specific people.
Switching gears a bit, what are you seeing when it comes to retailers who ask you to, say, donate $2.00 to some organization at the cash register or online checkout? And are companies starting to think differently about giving when it comes to customers?
Marketers are responding to countless surveys purporting to show that Millennials really, really care about saving the world, much more so than previous generations. Millennials feel, "I want to do good at the same time that I'm buying the things that I want." Many companies are responding by showing that, not only are they not doing harm, but that buying their product has positive externalities.
At Warby Parker, the hipster eyeglass retailer, for every pair you buy, one pair goes to a person who needs glasses. Consumers still get the cool product, but they also get the feeling that they are helping somebody else.
Are people inclined to give without that sort of product tie-in, something that's in it for them?
Katherine White at the University of British Columbia and her colleagues have a new paper on "slactivism." They show that when people click the "Like" button on Facebook for a cause, they feel like they've done something good -- and therefore don't need to actually give money to the cause or volunteer.
It's very subtle. People want to feel and look like they are doing good, but it's not clear that they actually need to follow through in order to accomplish those goals.
Are there any campaigns that are innovating in the realm that don't involve a product quid pro quo?
But the campaign is extremely effective for a number of reasons. For one, it allows you to show everyone that you engaged in a charitable action. Often our charitable actions are hidden -- we write a check and nobody sees it. Second, campaigns like this make charity fun. Charity is often a downer.
There's nothing wrong with those, but there are many consumers who respond more to doing something positive, and maybe even having fun while they are doing it.
There is a general move toward creativity in giving as opposed to simply saying: here are some sad people and you should give. Companies are trying to make charity a more interesting and engaging experience.
Are there other innovations in giving you want to note?
Yes. There's a non-profit called TisBest that has a program called DiscoverGiving. They have a classroom activity for teachers where teachers give young students a "charity gift card" worth $1.00. The classroom plan encourages very young children to think about how money can be used not just for yourself, but to benefit others. So that's another innovation: starting early.
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