Potential Risks of AI for Nonprofits

Last month we explored the ways AI can benefit nonprofit organizations. While AI holds immense promise for nonprofits, it is essential to recognize and navigate the risks associated with its implementation. This month, we delve into the potential risks nonprofits may encounter when utilizing AI technologies.

Ethical Concerns:

AI systems rely on vast amounts of data to learn and make informed decisions. Nonprofits must be cautious about the data they collect and use, ensuring it is ethically sourced, unbiased, and representative. The risk of perpetuating existing biases or inadvertently discriminating against certain groups is a significant concern. Organizations must actively address issues related to data quality, privacy, and transparency to ensure AI solutions serve their mission without compromising ethics.

Lack of Human Touch:

One of the primary strengths of nonprofits lies in their human-centric approach. However, the use of AI can sometimes result in a diminished human touch. Overreliance on automated processes and AI algorithms may lead to a loss of personal connection with beneficiaries, stakeholders, and volunteers. Nonprofits should strike a balance between leveraging AI's efficiency and preserving the essential human element that drives their work.

Financial Constraints:

Implementing some AI technologies can be costly, especially for nonprofits operating on limited budgets. Expenses associated with infrastructure, data storage, AI talent acquisition, and ongoing maintenance can strain financial resources. Organizations must carefully assess the long-term financial implications and ensure that AI investments align with their strategic goals and deliver a substantial return on investment.

Skills and Capacity Gaps:

Leveraging AI effectively requires specialized knowledge and expertise. Nonprofits may face challenges in acquiring and retaining AI talent due to competition with the corporate sector. The scarcity of skilled professionals and the high demand for AI expertise can hinder the successful integration of AI solutions. Nonprofits need to invest in training programs, partnerships, and collaborations to bridge the skills and capacity gaps.

Unintended Consequences:

AI systems are designed to optimize specific objectives based on the data they are trained on. However, there is a risk of unintended consequences arising from these optimizations. Nonprofits must carefully consider the potential impacts of AI solutions on various stakeholders, ensuring that decisions made by algorithms align with their values and ethical guidelines. Regular monitoring, evaluation, and adaptability are crucial to identify and mitigate any unintended negative effects.

While AI presents significant opportunities for nonprofits to enhance their impact, it is crucial to approach its implementation with caution. By being mindful of these risks, organizations can harness the power of AI to create positive change while upholding their core values and commitments to the communities they serve. Striking a balance between technological advancement and human-centric approaches will be key to unlocking the full potential of AI for nonprofits.

How AI Can Benefit Nonprofit and Fundraising Work

Artificial Intelligence (AI) is transforming the way nonprofits operate, creating new opportunities for them to deliver greater impact in their communities. By leveraging AI-powered solutions, nonprofits can automate tedious administrative tasks, enhance communication with stakeholders, and make data-driven decisions. Here are some ways that AI can help nonprofits:

• Automating administrative tasks: Nonprofits can use AI to automate repetitive and time-consuming administrative tasks, such as data entry, record keeping, and scheduling. This frees up staff time to focus on more important work, such as program delivery and fundraising.

• Streamlining donor engagement: AI-powered chatbots can handle basic inquiries from donors and volunteers, freeing up staff time to focus on more complex tasks. Additionally, AI can analyze donor data to tailor communications and fundraising appeals, ensuring that messaging is personalized and resonates with individual donors.

• Predictive analytics: Nonprofits can use AI-powered predictive analytics to analyze data from multiple sources, such as social media and email, to identify potential donors and supporters. This allows nonprofits to more effectively target their outreach efforts and engage with the individuals most likely to support their mission.

• Optimizing program delivery: Nonprofits can use AI to optimize program delivery, by analyzing data from program participants to identify areas for improvement and refine program design. Additionally, AI can be used to monitor and evaluate program impact, allowing nonprofits to measure and report on the effectiveness of their programs.

• Enhancing fundraising: AI can be used to analyze fundraising data, identifying trends and patterns in donor behavior and preferences. This can help nonprofits tailor their fundraising appeals and optimize donation processing to improve donor conversion rates and maximize fundraising revenue.

• Enhancing decision-making: Nonprofits can use AI to support decision-making by providing insights and recommendations based on data analysis. This allows nonprofits to make informed decisions based on real-time data, rather than relying on intuition or past experience.

• Improving operational efficiency: Nonprofits can use AI to optimize resource allocation, improve supply chain management, and reduce waste. By automating routine tasks and optimizing processes, nonprofits can improve operational efficiency, reduce costs, and increase program impact.

In conclusion, AI is transforming the way nonprofits operate, providing new opportunities to streamline operations, enhance donor engagement, and optimize program delivery. As AI technology continues to evolve, nonprofits will have even more opportunities to leverage its power to achieve their mission and create a positive impact in their communities.

Still not convinced? AI can also be incredibly useful for content generation. This entire article (besides this paragraph) was written by AI!

Evaluating Donor Databases

For many, donor databases are a necessary evil of fundraising. Bring up the topic and you will likely hear various groans and four-letter words. And while many are not necessarily fans of their database, they are a necessary tool for any serious fundraising operation. So if you are just getting started, or considering switching databases, here are a few factors to keep in mind.

1.      Data Security: While no database is 100% secure, the database you use needs to have protection for your donor data. Security features to look for include strong encryption methods, access controls, user permissions, and firewalls to protect against security breaches and data theft.

2.      Customizability: Fundraising databases must be flexible and customizable to fit an organization's specific needs. The database must allow the addition or removal of fields, reporting options, and data input types to meet the needs of expanding fundraising efforts. For example, a theatre may want to track ticket buyers, or a hospital may want to note who has been a patient.

3.      User-Friendliness: This is a BIG one! Even a database with the best information is useless if you are not able to access what you need. The database must be user-friendly enough to allow managers and analysts to easily access and manipulate data. Non-technical users must be able to access and use the data insights to improve fundraising strategies.

4.      Cost: The cost of the database should align with the organization's available budget, number of donor records, and money raised. Most companies offer pricing based on your organization’s size.

5.      Integration: Does the database easily integrate with other essential fundraising software, such as email marketing platforms and accounting software? Is that a need?

6.      Data Import and Export Options: A database that can easily export and import data in a variety of formats will simplify the process of importing and exporting data from other software applications. Will data from your current database be able to transfer to the new database?

7.      Reporting and Analytics Capabilities: This depends on the needs of your organization, but many databases will offer standard and customizable dashboards and analytics that include information on donor affinity or wealth.

8.      Donor Engagement Features: For managing donor communications, many databases can send and track personalized messages to donors at scale through email, text, or even social media integrated within the software.

9.      Support and Maintenance: The database provider should offer quality support and maintenance, update the software regularly, and troubleshoot issues quickly. Having a 24/7 technical support system can be essential in case of any data failures or issues that arise at any time.

The needs of every organization are different, but the factors listed above should be considered when evaluating a database. And if you are the unicorn who has found the perfect database, drop us a note so we can spread the word!

The End of Amazon Smile

As you have probably read, Amazon recently announced the end of its Amazon Smile program. Through Amazon Smile, 0.5% of eligible Amazon purchases were donated to a charity selected by each shopper. Amazon cited the disparate impact of the program and the desire to have a greater impact in more concentrated areas, such as affordable housing. The announcement also coincided with recently announced layoffs at Amazon.

To its credit, Amazon Smile gifted $449 million to nonprofits globally over its 10-year history. That is a huge number and one that any company would be happy to publicize. The problem? The average annual gift per charity in the US was only $230. To that extent it is hard to disagree with Amazon—the overall impact per organization was minimal.

The end of Amazon Smile raises a few important topics. First, it is worth watching how Amazon restructures its charitable giving. Amazon has alluded to the fact they plan to have a larger impact in designated areas—how will they follow through with that promise? And aside from grantmaking, how can Amazon use its technology and platform as a tool that benefits donors and nonprofits? As one of the largest companies in the world, Amazon has tremendous potential for impact.

Second, many have likely encountered a non-fundraiser board member or organizational leader who suggests that you should promote Amazon Smile (or Facebook giving, or an ice bucket challenge) to increase fundraising productivity.  Do not be afraid to use that suggestion as an opportunity to (politely) educate. Talk to them about the importance of building relationships with donors, educating and engaging them, thanking them, and eventually asking them to support again—all things that are not possible with platforms like Amazon Smile. Be sure to use data to illustrate your points. Most of these leaders probably see the headline that Amazon has given $449 million (we should get some of that!), and not the small print that explains it only equals a few hundred dollars per year for an organization.

Finally, educate leaders on the things you are doing to have a much larger impact than one $230 gift. Discuss a new stewardship program and how you are monitoring its effect on donor retention. What does a 1% increase in retention look like in terms of dollars? What about 5% or 10%? Or talk about an upgrade strategy for donors from the past year—what does a 5% increase in average gift look like?

It can be awkward or hard to have these conversations. You don’t want to come off as telling someone, especially a leader, that they are wrong. Sometimes allowing yourself time to gather data and suggesting individual follow-up is a more tactful approach. But by helping other “non-fundraisers” understand the fundamentals of our work, we can gradually reduce the high time commitment/low-impact activities in our day-to-day work.

Trends in Private Foundation Giving

You have likely read about the dramatic rise in giving to Donor Advised Funds (DAFs), and while there are arguments to be made about their overall benefit to philanthropy, they are now a reality and a major funding opportunity for your organization.

But because of their structure, and likely as a feature, it is difficult to gain insights into individual DAFs or the behavior of their donor(s).  If you can find out who has one, you still likely do not know how much is invested in a DAF or how much and to what other organizations a DAF is contributing.  

To gather more insight into DAF donor behavior, we suggest looking at another giving vehicle that acts comparably and draws a similar audience while having more available data—the private foundation. The Foundation Source recently released its 2022 Report on Philanthropy (covering data from 2020-2021), and here are a few takeaways that shed insight into private foundations, and likely correlate with DAF donor behavior.

• Total dollars granted from the 948 private foundations studies increased from 2020 to 2021. This was largely due to the giving of the largest foundation ($50-$500M), while giving from foundations with $1-$50M was flat to slightly down. Increases in asset values accounts for some of this growth, but the foundations analyzed gave 7.2% of their assets (above the 5% required). This was driven primarily by smaller foundations ($1-$10M) which were the most generous, giving 8.9% of their assets.

• Despite giving more dollars, private foundations gave to fewer organizations and shifted away from urgent needs driven by the pandemic. Giving to human services and public/society benefit both fell by 2% from 2020-2021 (largest sector decreases), likely due to granting fewer emergency funds that were given during the pandemic. The overall number of gifts from foundations with over $10 million also decreased and foundations gave more restricted grants in 2021 than in 2020.

• Although most private foundation giving occurred at the end of the year (35% in November or December), there is also a “summer spike” with 10% of gifts being distributed in June.

The whole report is worth examining, but here are a few takeaways to keep in mind in light of the trends illustrated above.

• Even though these are foundations, there are still people behind them and it is important to build those relationships. This is even more important as competition for grants is increasing and donors are becoming more focused in their giving.

• Focus on the long-term vision of your organization. While donors spread dollars around and turned to the emergency needs brought on by the pandemic in 2020, they are now becoming more focused with their giving. Communicate the future needs of your constituents and how your organization will address them.

• Do not assume gifts are made at the end of the year! Again, this is where having a personal relationship can be helpful. Ask when the best time for a gift request is, or what can make your proposal the most competitive.

 One final note—this data is from 2020-2021, two years that saw strong market performance. As we know in 2022, most portfolios and assets decreased in value. And because foundations have been generous over the past two years, many have excess grant carryovers that could cause their giving to dip below the 5% threshold.

When we finally see the data from 2022, it would not be surprising that foundation giving takes a bit of a dip because of these two factors. But just like individual giving, it will NOT disappear, making it all the more important that you explore, engage, and steward these donors in 2023!

Intangible Benefits of a Feasibility Study

If you read these articles, you are likely well versed in many of the benefits of a feasibility study—finding out which messages resonate with donors, who is willing to lead, what questions donors may have, and of course, how much money can be raised. The answers to all these questions should be detailed in the final report.

But there is one intangible benefit that does not show up in the final report—engaging donors in a new and distinct way. By interviewing someone for a study, you are educating them on the future plans of your organization, and also importantly asking them, “What do you think?”

Indicating that you value a donor’s opinion is important, and a professional consultant should make the interview itself an enjoyable experience. But even more can be done following the interview to ensure you are maximizing a valuable engagement tool for donors.

At the very least, a personalized thank you note should be sent to each participant after the interview. To further engage donors, an organization should also think about how they can communicate the results of the study. Key donors and study participants can be followed up with one-on-one conversations to discuss the study results. A summary report or infographic can be prepared to highlight the most important findings.

Another idea is to invite study participants to a small group event where the findings of the study are presented. Your first instinct might be, “Who would want to attend that?!?” And true, you might not get a huge response. But the people who do show interest and attend are further signaling their interest in your campaign. These are likely to be key donors and volunteers. One caveat--you likely only want to offer this option if you are confident you are moving forward with a campaign.

Remember to look past the final report and recommendations when considering a feasibility study. When used correctly, it is an extremely effective early step in the lifecycle of a donor’s campaign gift!

Cultivation and Stewardship of Planned Giving Donors

Last month, we focused on identifying potential planned giving donors. Today, we will examine what those donors want and how you can move them from a potential donor to donor. A reminder that the information used to provide these tips is contained in a Giving USA report, highlights of which can be found here.

Qualifying

When it comes to learning about planned giving, 49% did so through personal visits, 40% through mail, 15% through other printed materials, and 13% through the website.

Takeaway: Include mentions of planned giving and opportunities for donors to express interest in your printed materials. While in-person visits are still the most common channel, many of these may be from donors who already have established relationships with a fundraiser. Mail and other marketing materials are a great way to whittle a list of hundreds or thousands down to a more manageable number who are expressing interest. And then once they have expressed interest, reach out for a visit!

Cultivation and Stewardship

Donor preferences vary greatly, with most donors simply wanting to be included in a list of legacy donors (41%), have membership in a legacy society (37%), or receive personalized contact (32%). Thirty-nine said they wanted no recognition at all.

Takeaway: Once someone has established a planned gift, it is important to develop a relationship and know what their preferences are in regards to recognition. While many simply want to be included in a planned giving society, others want NO recognition at all. When establishing a planned gift, educate donors about recognition opportunities, including the option to have no recognition. Ask about their preferences and be sure to document them in your database.

Giving Societies

Sixteen percent of donors said membership in a legacy society caused them to increase or plan to increase their planned gift.

Takeaway: Giving societies are generally a good strategy (even if not everyone wants to be a part of one). Similar to naming opportunities in a capital campaign, this is something you should consider offering even if some donors choose to opt out. While 16% considering an increase in their gift may not seem like a huge number, it does not account for the relationships and gifts that are solidified through a planned giving society. By building the relationship, you decrease the chances your organization will be taken out of estate plans.

Above all, always remember these decisions are deeply personal. These donors are quite literally shaping their legacy. While less personal approaches like direct mail or newsletters may help you identify donors, a personal relationship should be established with those who are expressing their interest in a planned gift.

Finding Planned Giving Donors

Over the next two months, we will look at practical ways to boost (or start!) a planned giving program. Next month, we will look at how to build relationships with planned gift donors, but first we will examine who could be your planned giving donors. Data highlighted in this article comes from a 2019 GivingUSA study looking at planned gifts (linked here).

Age

The GivingUSA data shows that the average age of writing a first will is 44 years old, and nearly half of donors established their first planned gift at the same time.

Takeaway: Don’t focus solely on the retiree crowd. It’s true, this group may be making adjustments to their estate plans, but you may also be competing against other organizations that have already been included. Slide your age for planned giving messaging down a bit, below 44, so it can be on the radar for those writing their first will.

Relationship

Planned giving donors typically have a close, personal relationship with an organization. These donors often identify as alumni (36%), volunteers (36%), board members (14%), or staff (11%).

Takeaway: It is wise to drop those that don’t have a close connection with your organization—say an event attendee or someone who made a memorial or honorary gift. That doesn’t mean you have to give up on those people entirely, but if you want to start talking about a planned gift, you need to grow the relationship. And don’t forget to speak to your board as whole and individually!

Giving

When it comes to planned gifts, the longevity of the giving is much more important than the size. Half of donors in the GivingUSA data had given less than $25,000 to their beneficiary organization, and 78% said they have supported their largest beneficiary for at least 20 years!

Takeaway: While it does make sense to add some giving threshold to filter likely planned giving prospects, keep it low (this will vary from organization to organization). Focus more on consecutive or total years of giving.

Donor research databases like iWave or WealthEngine can also be helpful and identifying planned givers based on other factors like assets and number of heirs. Next month, we will focus on how to build relationships with the potential planned gift donors.

Stewardship is More than a Thank You

When you hear the word stewardship, what comes to mind? For many, it is likely some form of thank you for a gift. At the very least, that looks like some kind of acknowledgment and record for tax purposes. Some may go further with handwritten notes or phone calls to say thank you to certain donors.

Don’t get us wrong, these modes of thanking are a MUST and necessary for any effective fundraising. But stewardship is not just a thank you. Equally important is showing donors the impact of their gift.

A recent study by the Lilly Family School of Philanthropy that examined donor trends, and specifically the decline in households giving to charity, shows donors feel organizations fall short when demonstrating the impact gifts have.

Link to study (lots of other great insights) here.

It is important to note here that you should not assume donors receive and examine every communication you send them. They don’t read every letter word for word or engage with every social media post. While you may feel you are demonstrating impact to donors, they are telling us we are not doing enough, and they want more information on impact to increase their engagement.

For this reason, it is important to create a plan that illustrates impact across multiple channels and throughout the year. It is also important to note that impact means different things for different donors. For some, it may mean the number of people who participated in your program or other statistics (think infographics). For others, it may be an in-depth story about a single beneficiary of your organization. Be sure to communicate both. Here are methods you can use to show impact to donors:

• Donor acknowledgments and thank yous - Use underlines, bullets, and graphics to draw attention.

• Newsletters/magazines - Consider more in-depth profiles of beneficiaries and programs supported by donors.

• Social media - Articles from newsletters or magazines can be highlighted through social media. Video, even short updates on new programs are buildings, can be especially effective here.

• Annual reports – These tend to be a bit more formal, conveying more statistics. Consider multimedia annual reports that incorporate short videos.

• Events – While articles and videos can convey impact, there is no substitute for hearing a firsthand account of an organization’s impact.

• Personalized donor communications – Major gift donors will likely have higher expectations for how impact is communicated. For some donors, this may be an in-person meeting or a more formal report. A personalized video is also a great tool. For capital campaigns, consider sending a donor a quick video shot from your phone showing construction progress.

By incorporating illustrations of impact into all these channels, you will increase the chance donors receive information on the impact of their gifts. And of course, always remember to put the donor at the center of your communications. Instead of “we accomplished x,y,z…”, say “Your support provided x,y,z.” Make the donor, not the organization, the hero.

Inflation and Nonprofits

As fundraisers, we often like to read the economic tea leaves to predict donor sentiment and willingness to give. Over the past 10 years or so that has often been tied to GDP as an overall indicator of the economy, or the stock market as a sign that individual wealth is increasing and how quickly. But as we enter 2022, we have all come to learn about another, slightly more complicated indicator: inflation.

There are many theories as to what is causing inflation, whether it’s a lack of products available due to supply chain issues or money that was pumped into the economy to keep it afloat through the COVID pandemic. While talking heads can argue the causes, what cannot be argued is that inflation is now being felt throughout the economy.

So what does this mean for nonprofits? The most obvious answer is that just like other households or businesses, costs are going to be higher. Employees, for example, will likely seek higher salaries because more money is needed just to maintain their current standard of living. Supplies and rents are also more expensive.

With costs rising, organizations will likely look to fundraising to help fill the gap. The trouble is that fundraisers have to turn around and ask individuals and businesses, who are also feeling the effects of inflation, for a gift. But as we all know, if you don’t ask, you likely won’t receive. So how do you go about it?

For individual donors who you see and have regular conversations with, be straightforward about how inflation is impacting your organization, but focus more on the cost of services provided versus salaries and overhead. Position their gift in terms of impact (feeding x number of people, for example) and explain the cost it will take to have that impact over the next year.

It gets a little trickier when considering mass appeals, like direct mail or online giving. You want to gently suggest to your donors that their gift does not go quite as far as it used to. One way to do this is through the ask string.

Consider doing a quick analysis of what amounts your donors are giving at, like the example below. Donors typically like to give in round numbers, increments of 10 or 25. Once you know where those most frequent amounts are you can choose asks strings that are just slightly above that, and again positioned in terms of impact.

For this example we might choose to build our ask string around the four most frequent levels--$250, $100, $50, and $25. Our goal is to get these donors to upgrade to help cover increased costs by showing them the impact their gift has. Let’s use a classic example of an organization providing food for children and families in need. Our ask string might look like this:

• $280 – Provides dinner for a family of 4 for two weeks

• $140 – Provides dinner for a family of 4 for one week

• $70 – Provides lunch for a parent and a child for a week

• $35 – Provides one week of healthy after school snacks for a child

These amounts provide a more subtle upgrade than asking donors to double their gift when inflation may also be impacting their household. Like a one-on-one conversation, this appeal encourages donors to think first about the impact they want to make, then how much that will cost.