Researchers find a way of avoiding overhead aversion in charity donations

October 31, 2014 by Bob Yirka report
Credit: George Hodan/public domain

(Phys.org) —A trio of researchers with the University of California has found that rephrasing donation requests to avoid the problem of overhead aversion can result in a bump in donations. In their paper published in the journal Science, Uri Gneezy, Elizabeth Keenan and Ayelet Gneezy describe two experiments they conducted, one in the lab, the other in a public setting, regarding donation amounts and what they found by doing so.

As some charity organizations have become big business, donors have become more concerned about where the they donate will actually go—to those in need, or into the paychecks of those who work for the organization and other overhead expenses. Though many research efforts have shown that the percentage of dollars that go towards overhead for any given organization rarely is a sign of the relative efficiency of such organizations, donors have become wary nonetheless. In this new effort, the researchers sought to discover if donors would be influenced if they were told that their would not go towards overhead—that every cent would go to help those in need—because the overhead expenses were already covered by a previous donor.

To find out, the researchers conducted two experiments. The first involved the assistance of 449 undergraduate students who were each asked if they were going to donate $100 to one of two different charity organizations, which would they choose based on certain criteria. Some were told that another would match theirs 1:1, another 1:3, others were told that their donation would be part of a seed fund, and a fourth group was told that all of their money would go to help those in need because the overhead was already covered. The researchers found that the fourth option made the most difference—donors in that group were found to be 80 percent more likely to donate with that option than to the seed fund option and were 94 percent more likely to do so for either of the matching options.

Next, the researchers partnered with two real life charities that were involved in asking for donations from 40,000 people via the postal service. Four different types of letters were sent: an overhead-free option, a matching funds option, a seed funding option and a control group where there were no terms. Once again, the no-overhead option got the best response, garnering 80 to 84 percent more money than matching or seed money options respectively.

The researchers put it simply, donors prefer to think the money they give will directly help someone, rather than pay for a CEO's large salary.

Explore further: Economist finds formula for the 'perfect ask' in online fundraising

More information: Avoiding overhead aversion in charity, Science 31 October 2014: Vol. 346 no. 6209 pp. 632-635 DOI: 10.1126/science.1253932

ABSTRACT
Donors tend to avoid charities that dedicate a high percentage of expenses to administrative and fundraising costs, limiting the ability of nonprofits to be effective. We propose a solution to this problem: Use donations from major philanthropists to cover overhead expenses and offer potential donors an overhead-free donation opportunity. A laboratory experiment testing this solution confirms that donations decrease when overhead increases, but only when donors pay for overhead themselves. In a field experiment with 40,000 potential donors, we compared the overhead-free solution with other common uses of initial donations. Consistent with prior research, informing donors that seed money has already been raised increases donations, as does a $1:$1 matching campaign. Our main result, however, clearly shows that informing potential donors that overhead costs are covered by an initial donation significantly increases the donation rate by 80% (or 94%) and total donations by 75% (or 89%) compared with the seed (or matching) approach.

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4 comments

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RichManJoe
5 / 5 (2) Oct 31, 2014
How to tell a better lie. This sounds like a pyramid scheme to me - you tell me the overhead is covered by a previous donor, but to the next donor, I am the previous donor. Not ethical, and very quickly donors will catch on. It is a much better policy to tell have a highly efficient organization and to not overpay the management.
Tangent2
5 / 5 (1) Oct 31, 2014
The researchers put it simply, donors prefer to think the money they give will directly help someone, rather than pay for a CEO's large salary.


I would have thought that this was obvious. Who really wants their money going to a CEO that should have gone to help someone in need?

And now the bigger question: We know that claiming that overhead is already taken care of will increase donations, so how do we implement this in reality? How does the overhead get covered?
gzbylut
4.5 / 5 (2) Nov 01, 2014
It's the same old story: everyone wants the glory, no one wants to do the work necessary. Every kid wants to be the quarterback, not the lineman. The reality is, no charity can function entirely on volunteers and donations. At some point, people will demand to be paid for their time. Vendors will give away only so much product, and virtually no one will give space rent-free.

But no one wants to deal with that. It's much easier to say 'make sure my money goes to those in need' than to say 'how can I help you cover costs?' Truth is, if costs aren't covered, the charity doesn't exist, and those in need get nothing. And yes, some CEOs get large salaries. That's because for-profits are willing to pay them large sums for their services, and charities know that if they ignore reality the CEO position will become a rotating door benefiting no one.

This study would have been better if they had figured out how to overcome the challenge of getting people to contribute to overhead.
Nik_2213
5 / 5 (2) Nov 01, 2014
Our family used to sponsor a school in sub-Saharan Africa until we discovered that charity's money was used to fund a cruelly minimal curriculum there, plus intensive international evangelising...

Seems they were more concerned with stealing parishioners from rival sects than doing 'Good Work'.

Game Over.

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