What Happens When Nonprofits Don’t Keep Their Promises to Donors? Nothing Good

A charity must honor what it promises donors, or risk losing their financial support, volunteer hours, and positive comments about the organization from donors to others, according to new research. Donors whose preferences are not honored are also more likely to switch their support to another organization.

As Inside Philanthropy has reported, some unhappy donors file lawsuits against recipients of their largesse. In 2018, a foundation run by twin brothers Timothy and Thomas Pearson sued the University of Chicago to recover $22.9 million they’d paid on a $100 million pledge. (The university quickly took its own legal action to have the case dismissed and to demand $13 million, the next installment on the gift the brothers had promised.)

While few disgruntled donors ever take nonprofits to court, they have plenty of other ways to act on their displeasure with how their gifts are used—starting with closing their checkbook.

Lessons From the Consumer World

The latest research, a series of studies with more than 400 individuals, explored whether research on customer reaction to poor service from companies would apply in the charitable sector. Led by marketing professor Jeff Joireman at Washington State University, the researchers examined people’s reactions to learning that a charity had spent money earmarked for one project for another purpose.

The researchers gauged subjects’ responses when they were given money to distribute to either a traditional charity such as the Salvation Army, which decides how contributions are spent, or a donor-directed organization that allows people to select the project that receives their money. In the latter case, subjects could choose to support work providing clean drinking water or to establish a library.

Participants imagined interacting with either a traditional charity or a donor-to-recipient charity. Those in the traditional charity condition were asked which project they preferred, but were also told that the charity would ultimately choose which project to fund. Participants in the donor-to-recipient charity actually made a choice between a water well versus a project to create a library. Later, half of the participants were told the charity used their donation for their chosen project, while the other half were told the charity used the money for the project they did not choose.

Individuals in the donor-to-recipient condition who elected to support clean water work or create a library were later informed that their money had, in fact, been used on the other project.

Feelings of Betrayal

When donations were redirected, subjects in both the traditional and donor-to-recipient charity conditions experienced a heightened sense of betrayal after learning their contributions had not supported their preferred cause, or what they had chosen to support in the donor-to-recipient condition. Notably, the sense of betrayal was magnified among subjects given a choice of which project to support, presumably because the donor-directed mission of the organization was not upheld.

In every case, in response to questions, participants said that they would give less money and volunteer less—or not at all—to support the same organization again. They were also more likely to make negative comments about the organization and to say that they would start supporting an alternative charity.

The results suggest that charities are viewed as “moral actors” and held to high standards, the researchers said. Redirecting funds can magnify people’s sense of betrayal, said Joireman.

If people are motivated by pure altruism, they shouldn’t really mind that much when their money is redirected, as long as it helps others, Joireman added. “The research shows that something else is going on.”

Featured