Seven Faces of Philanthropy

The following is a synopsis of key points taken from The Seven Faces of Philanthropy written by Russ Alan Prince and Karen Maru File. Their work provides valuable tools for executive directors and development directors of charitable organizations to understand each donor’s personality, motivation, and needs. We look at the Seven Types of Philanthropic Personalities, Identifying the Philanthropic Personalities, Giving Strategies, and Value Gaps. Additional concepts and real life applications for building endowments and for fund development as practiced by Profit Financial, Inc. can be found as notes at the end of some topics and at the end of the synopsis. The use of these tools, concepts, and applications will strengthen endowment building and fund development success.

The Seven Types

1. The Communitarians – Communitarians give because it makes good sense. This largest group (26.3%) is typically made up of local business owners who find that serving on boards and committees of local nonprofits can be good for business because of the relationships that often develop in such settings. They also believe active philanthropy makes good sense because they help their own communities prosper by supporting local charities.

2. The Devout – The Devout support nonprofits for religious reasons: they believe it is God’s will for them to help others. This is the second largest group (20.9%). They are almost always members of a local church which is part of a regional or national religious group. Nearly all (96.4%) of their giving is to religious institutions.

3. The Investor – Investors are affluent individual donors who give with one eye on the nonprofit cause and one eye on personal tax and estate consequences. About 15.3% of major donors are Investors. Their giving takes advantage of tax and estate benefits, and Investors want to work with nonprofits that understand these concerns. To achieve their tax, estate and philanthropic interests, they donate to a wide range of nonprofits and are the segment most likely to support umbrella nonprofits such as community foundations.

4. The Socialites – Socialites find social functions benefiting nonprofits an especially appealing way to help make a better world and have a good time doing it. They make up 10.8 % of major donors and tend to support the arts and education as well as religious nonprofits. Socialites are members of local social networks with which they interact to select nonprofits for support and to leverage in fundraising activities. They seek fund raisers and social events benefiting nonprofits, and are less interested in participating in the day to day operations of the nonprofit or activities directed at constituents.

5. The Altruist – Altruists embody the popular perception of the selfless donor who gives out of generosity and empathy to urgent causes and wish to remain anonymous. They give because they believe it is a moral imperative and because it helped them grow as human beings or evolve spiritually. Altruists make giving decisions without the input of advisors and are not usually interested in active roles in the nonprofits they support.

6. The Repayer – Repayers tend to have been constituents first and donors second and make up 10.2% of major donors. Typically they have benefited from some institution such as a school or medical center and now support it from a feeling of loyalty or obligation. Repayers concentrate their philanthropy on medical and educational institutions.

7. The Dynast – Dynasts typically inherit their wealth and their motivation stems from their socialization. Giving is something their family has always stood for, and Dynasts believe it is expected of them to support nonprofits. They make up 8.3% of major donors. Younger Dynasts will seek out different philanthropies than their parents.

Identifying Philanthropic Personalities

The authors identify the need for research and conversation. They suggest background research should be done on donors before meeting with them formally. Using the research the fund developers can converse with the donor about the donor’s background, current situation, and giving interests while seeking to understand the donor in detail. The conversation allows the fund developer to understand the donor’s underlying motivations, to learn what benefits are sought by the donor, and to identify each donor’s philanthropic personality within the seven types.

The conversation(s) with the donor help the fund developer evaluate the importance and impact of different “life domains”. The authors identify four:

• Family History
• Financial Orientation
• Fundamental Beliefs
• Friends and Associates

The “life domain” as applied to the seven types is summarized below.

Family History

Financial Orientation

Fundamental Beliefs

Friends and Associates

Please note, in addition to identifying the philanthropic personality type of the donor, Profit Financial finds the organization needs to understand another type of donor motivation. Is the donor organizationally or institutionally driven? Are the donors concerned with the programs and benefits provided or are they concerned with bricks, mortar, and steel associated with the organization?

The authors discuss the four “life domains” noted above. Profit Financial identifies five key issues that impact donor motivation:

• Personal Freedom
• Personal Financial Freedom
• Family
• Community
• Heritage

We have found in donor development that the donor’s values and life changing events affect how the donor responds in each of these areas when considering a major gift.

Giving Strategies

The authors look at three aspects of giving strategies:

1. Donor Familiarity with Charitable Giving Strategies
2. Strategies Promoted to Donors by Nonprofits
3. Donor Interest in Learning About Giving Strategies

Significant differences exist across what the seven types are familiar with, what is promoted to them, and what they would like to learn about.

The following Giving Strategies were explored:

• Cash
• Life Insurance
• Bequests
• Gift Annuity
• Charitable Remainder Trust (CRT)
• Lead Trust
• Foundation
• Community Foundation

1. Donor Familiarity with Charitable Giving Strategies – Cash is universally understood by all seven types of donors and it is also the one most promoted.

All seven groups were familiar with Bequests but to varying degrees depending on the type of donor. Dynasts and Socialites were 100% familiar with this strategy. They were followed by Repayers at 76.2%, Communitarians at 70.2%, and Investors at 59.4%. Altruists at 20% and the Devout at 35.5% were the least familiar with this approach.

Life insurance as a giving strategy ranged in familiarity from 0% for Altruists to 87.6% for Dynasts and 77.7% for the Devout. For all other types familiarity was less than 40%.

Dynasts (100%) were the most familiar with Gift Annuities. Familiarity was much lower for Communitarians (29.8%), Socialites (26.1%), Altruists (10%), the Devout (8.9%), and Investors (3.1%).

Familiarity with Charitable Remainder Trusts is highest with Dynasts (75%) followed by Repayers (42.9%), Socialites (30.4%), Communitarians (29.8%), Investors (28.1%), the Devout (26.6%) and Altruists (20%).

Charitable Lead Trusts are not well understood with Dynasts the most familiar with this strategy at 56.3%. Socialites (13%), Devout (11.1%), and Communitarians (8.8%) were the only other types with knowledge of this strategy.

Only Dynasts (31.3%) had some level of familiarity with Foundations and only Communitarians (21.1%) and Investors (12.9%) were familiar with the Community Foundation Strategy.

2. Strategies Promoted to Donors by Nonprofits – Cash was the most successfully promoted strategy. Bequests were promoted across all seven groups but to varying degrees. Repayers at 91.5% and Socialites at 78.2% were the largest groups who found nonprofits promoting bequests.

Charitable Remainder Trusts are not heavily promoted even though donors have a high level of interest in learning more. Repayers (28.6%), Communitarians (28.1%), and Investors (21.9%) have discussed CRT’s with fund developers but fewer than 12% of Devout and Socialite donors have. Dynasts and Altruists say fund developers have never discussed CRT’s with them.

Foundations are not promoted even though there is interest in learning more by all seven types of donors. Community Foundations are promoted only to Communitarians and Investors.

Life insurance strategies are promoted most heavily to Socialites at nearly 40%, somewhat to Repayers, the Devout, Communitarians, and Investors at less than 30%, and not at all to Dynasts and Altruists.

Charitable Lead trusts are promoted only to the Devout and Gift Annuities are not promoted to any group.

3. Donor Interest in Learning About Giving Strategies – All seven types of donors were 100% interested in learning more about Foundations even though they were not promoted by fund developers.

The only other Strategy that all Donor types had further interest in learning about was the Charitable Remainder Trust. Dynasts, the Devout, Communitarians, Repayers, and Socialites interest ranged from 42.8% to 47.8%. Altruists and Investors had lower levels of interest in CRT’s.

Some interest in learning more about Bequests was expressed by Repayers, Communitarians, Socialites, and Altruists. There was little interest in additional information on Life Insurance as a giving strategy and very little to no interest in the other strategies.

Interest in more education by donors regarding Charitable Remainder Trusts and Foundations provide nonprofits with an excellent opportunity to promote current and planned giving.

Please note, Profit Financial has found that the Charitable Lead Annuity Trust (CLAT) to be a beneficial tool in creating bequest. It can also be useful in creating a Foundation gift so that the donor does not lose control of the asset(s).

Value Gaps

The authors discuss four ways donors feel valued by nonprofits. Relatively few donors say that the nonprofits they interact with value them as highly as they think they should be. Thus a value gap exists. This finding provides an immediate opportunity for nonprofits to communicate to current major donors how much they are valued. The donors appreciate the thanks that they get, but they want to feel valued for their participation as well. The value gaps are discussed below along with the way nonprofits can involve the different groups of donors or communicate the value to them.

1. Value for Fundraising Efforts – In general philanthropists feel they are highly effective in soliciting contributions from others, but their perception is that the nonprofits rate them low in terms of development support.

2. Value for Volunteer Activity – The wealthy rate their volunteer activities very highly often providing to nonprofits for free what they can command considerable value for commercially in terms of business and management expertise. The donors do not feel they are valued as they could be by the nonprofits for the value of their time. The key is to involve them to increase their participation

3. Value for Recruiting of Other Volunteers – Donors feel they are a valuable asset in enlisting other wealthy people to become involved with a nonprofit as volunteers, but they do not feel the nonprofits value them for that role.

4. Value for Their Personal Donations – No value gap exists here. Donors feel their contribution is important and feel the nonprofits think their contribution is important.

Concepts and Applications

The 80/20 rule says that 80% of your revenue comes from 20% of your donors. For example, if you have a donor base of 1500, and a budget of $1,000,000, the top 300 donors will provide approximately $800,000 of revenue.

1. Endowment - The top 60 donors (20% of 20%) need to be your primary focus. This is the group which becomes the basis for your endowment building. These top donors need to be evaluated for their capacity to give, and a plan needs to be created for how they may make the endowed gift (Charitable Lead Annuity Trust, insurance policy, premium finance, real estate, stocks, cash). The top 60 donors require personal visits.

However, the charitable organization needs to be aware of other donors’ capacity to give that may trigger a personal visit (e.g. donors who may have been in the top 20% in previous years or referrals).

2. Capital Needs -The balance of the top 20% or the next 240 donors, fund the capital needs of the organization.

The top 300 donors need to receive specific suggestions for increasing their gifting capacity based on their socio/economic background. These specific suggestions are communicated in several ways. The suggestions can come from personal visits made by the development director, board members, and/or trustees determined by the relationship these individuals have with the donor. The suggestions can also come from a monthly regional newsletter from the charitable organization or a special event hosted by the organization.

3. Current Operations - The remaining 1200 donors provide gifts which are applied to current operations. These donors need to receive a monthly newsletter with gifting ideas from the main office and also a monthly regional newsletter. Donors are more likely to give greater amounts to local causes.

Volunteerism
The Volunteer Revolution Reviewed

Find fulfillment. Find your passion and make your life meaningful. Serve your neighbor. Life is more exciting for the participant than it is for the spectator. In the Volunteer Revolution, Bill Hybels explores the power of volunteerism. As pastor of Willow Creek Community Church, he employs the model of Christ and his disciples – advance His work on the shoulders of ordinary people. The church is primarily a volunteer organization.

Love the Lord our God with all our heart and souls and mind and strength and our neighbor as ourselves. With these two great commandments, Jesus forms the basis for volunteerism. Serve God. Serve your neighbor. Lifetime volunteers point to a specific moment when they found purpose. They overcame the demands of the me generation learning to give in order to receive.

Giving opens hearts, eases pain, and promotes healing. In serving, volunteers have the opportunity to give back. They get to see how God works in others the way He worked in them.

To get started, Hybels suggests jumping in. Experiment. Do what it takes, employ your spiritual gifts, and discover what you are good at. He asks volunteers to assess their experience asking themselves four important questions:

1. Did the work feel meaningful?
2. Was your emotional energy higher or lower after you served?
3. Do you enjoy the people you are serving with?
4. Does the work fit your schedule?

If one does not have an immediate fit, the assessment guides one through the process of self discovery.

Volunteerism does not just happen.  Volunteers can be easily wounded by:

• Poorly conceived volunteer activities
• Heavy workloads with no vision of how the work serves
• Unreasonable demands
• Poor training
• Being poorly matched to the work

Reach out to volunteers. Ask them personally. Cast the vision to capture the impact of volunteer experience. Give the volunteer a specific job description and invite them along. Let them experience the service first hand. Then debrief the volunteer afterwards:

• Ask how it went
• Don’t waste their time
• Make sure the work is ready
• Do not overburden them with responsibility
• Make sure they know their work is not in vain

Lifelong volunteers serve in a community on a team. They share the highs and lows with each other. Seeing the change in the lives of those served builds energy. Longevity requires self-care. Servant-hood is not an all or nothing venture. Burnout is all too possible if the realities of life are forgotten. Family, health, and recreation must remain part of the equation. Finally, pay attention to the spiritual motivation. Spiritual fullness sustains servant-hood.

Hybels implores us to do good deeds. The good deeds of one spur others to do good deeds. He seeks high-spirited revolutionaries to dream of when things will be better. His revolutionaries believe it can happen. They take the first steps of collective effort to serve the community. Hybels asks us to imagine the power of the Volunteer Revolution.

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