Mazarine Treyz: Hey, everybody. Welcome. This is Mazarine Treyz of Wild Woman Fundraising and today I am chatting with Rob Mitchell of Atlas of Giving, and Rob is a legend in the fundraising industry. He has done so much for fundraisers in the last several years, helping us make predictions with the Atlas of Giving to learn more what we should be expecting from our fundraising results and efforts. So Rob, without further ado, who are you and what do you do?
Rob Mitchell: Well, Mazarine, I have spent – this will be my 34th year having something to do with the nonprofit world. I started out in a single person fundraising shop for a community hospital, and I progressed to other jobs as people do in their career. And my last – what I would say is my last real job for a nonprofit was as Chief Development Officer for the American Cancer Society, and President of the American Cancer Society Foundation. Arguably one of the largest fundraising jobs in America, if not the largest at the time.
RM: And today what I do, I left the Society at the end of 2009 and I built the Atlas of Giving, which we’ll talk more about. I have become a business guy and an entrepreneur. I’m now working on a new project called The Ultimate Giveback, which is an online platform which will enable grant making corporations to never have to say no again, and for those participating companies to gain constituents, and for the nonprofits participating in the process they’ll gain not only new donor dollars, but new donors. So I’m very excited about that and the process of getting that launched.
MT: That is so exciting. And so today we’re going to be talking about your May data for Atlas of Giving. I guess it’s coming from the last couple of months, from March and April. But how do you get the data for the Atlas of Giving?
RM: Well, great question. We don’t get data in the traditional ways that people are used to hearing about like surveys. In fact, you know, I can tell you that having worked for a number of nonprofits, often times we use services to dispense disinformation for competitive purposes. So we don’t use surveys. What we use is a thing called correlation science. So I hired a team of 25 PhD level researchers, analysts, and statisticians. I gave them more than 30 years worth of fundraising published data, and then I had the hypothesis behind the Atlas is that giving, whether by sector, source, or geography. By state in our case. It is driven by one of three things, by certain factors of the economy, demographic factors, or event factors, and the reason that I started the Atlas was I was main Chief Development Officer for ACS in June of 2001. Our fiscal year started September 1, and then we had September 11.
RM: And my CEO called me on the afternoon of September 11 and said what does this mean for our fundraising? I said, “John, you know, there’s just no way I can know. It’s not going to be good. What I’m not sure is how bad it’s going to be or how long it will last.” Well, now we’ve recreated monthly data by sector, source, and state going back to 1968.
So now I know what happened, and what happened was unless you were a disaster related charity, your giving pretty much dried up for six months and then came roaring back.
So what started out in 2001 to be a good year for giving ended up not being a good year for giving because of one event, and that event happened to be a terror event. But it could be a natural disaster. It could be a major stock market correction. There are all sorts of events that can enter in, and so what we did was this team that we hired, we gave them factors that we thought might be involved in charitable giving and asked them to test them, and the list that we gave them initially was about 55 different economic, demographic, and event factors.
To that, they added a couple dozen more, and when working on the national giving number, just the national number. Not sector, source, or state. They came back to me and said, this is a company that works for most of the international Fortune 100 companies. They do analytics for them, and they came back and they said,
“We’ve never seen this kind of result before, but what we have found is that we’ve found what factors are involved in national charitable giving for the U.S. We’ve found what their relative strengths are, and we’ve built an algorithm that when you match it back to giving data going back to 1968, matches what we call a coefficient of correlation of 99.5%.”
RM: So we knew that we had something. Now this kind of technology is used by the Fed. It’s used by hedge funds. It’s used by almost every major corporation, not only in this country but around the world, and it’s called correlation science. What it means is that sometimes you find things that correlate that don’t necessarily have a relationship, and sometimes there is a relationship.
One example I will give you is that in our corporate giving algorithm – we now have 65 different algorithms, by the way. We have one for each of four sources of giving. So individuals, foundations, bequests, and corporations. We also have algorithms for nine separate sectors. So that would be arts, education, churches, and so forth. And for all – we’ve built algorithms for all 50 states plus D.C. So we’ve got these algorithms, and each one is different. What motivates giving for individuals is very different from what motivates giving for corporations, let’s say. One of the things that’s in the corporate – one of the factors that is pretty large in the corporate algorithm, a pretty strong factor, is something that we don’t think has any sort of relationship. It just has a strong correlation, and that is auto part sales believe it or not.
Now, some of the more typical things that we looked at were things like GDP, unemployment, consumer confidence, stock market values of different types of markets. So some of the more traditional things that you would expect to look at. But some things came out differently. One of the things we just recently have discovered is that heavy equipment leasing has a strong correlation to American giving. We don’t think that there is a relationship, but there is a strong correlation.
So that’s how we get the data for the Atlas of Giving. It’s not unlike the Fed. In fact, the Fed’s banking algorithm actually also uses auto part sales as a strong contributor to their algorithm. So we are in good company with lots of major firms. This is the 21st century way of not only measuring results, but also being able to forecast the future. And as you may know, the Atlas is the only forecast of charitable giving in the United States, and we update our forecast each month because conditions change.
There can be an event like 9/11 that can change it. Everything. Or Hurricane Katrina, or a 20% correction in the stock market. So we update our forecast each month and we publish a report at the end of each month that shows what giving has done, and what the new forecast for giving is. And we give away that report, by the way, for free. All you have to do is go to Atlasofgiving.com with no more than a workable email address. You can get access to the current monthly report at no charge or obligation to you whatsoever.
MT: Wow. So for those of you just listening and never hearing of the Atlas of Giving before, do definitely go get that Atlas of Giving, the latest summary right now.
What’s the big, scary thing happening right now with charitable giving that you’ve put out in your May 2016 report?
RM: Well, for the first time since the recession, we’ve had two consecutive months of decline in giving, and the forecast for giving for this year is a little below. The range is a little below flat to less than 2% growth. That’s very different from what we’ve experienced – the kind of growth rates we’ve experienced since 2010. Now, I will say that the recession affected different organizations differently. If you’ll remember, right after the stock market corrected in 2008, it started to come roaring back in 2009. So organizations that rely lots on major gifts, and I will say a beautiful example are colleges and universities. They did exceptionally well, while the stock market was roaring. They experienced double digit growth. The organizations that had the roughest time were those that rely on lots of small gifts from lots of individual donors, and that can be large nationwide charities. It can be churches, and the reason is that if you fear losing your job, or you’ve lost your job, or you’ve just recently become re-employed or found a new job, you suspend your giving for as many as two years. And so those organizations struggled longer to get back to where they were, than say, a college or university which came back. They started setting new records in 2010 for giving.
RM: So you ask about the big scary thing happening. The big, scary – I’d say the biggest scary thing I see happening right now, two things.
Uncertainty about the upcoming elections. Obviously, you know, political contributions and charitable contributions both come out of discretionary income for individuals and corporations, and so when there’s less discretionary income, that’s going to affect charitable giving. Whatever is causing it. Now I’ve seen, as you have, a number of reports recently from various organizations stating that campaign giving has little effect on charitable giving, and in a way that’s true because the amounts of money given to political campaigns overall in the United States pale in comparison to the total amount of charitable giving in the United States. But what we have noted is that charitable giving slows down in some election years, especially presidential election years, because of uncertainty. I mean, and this year is a landmark example.
I mean, you’ve got a guy running as a committed socialist, and you have arguably one of the biggest capitalist businessmen in the country vying for President of the United States. The outcome of this election, depending on who is elected – and that trickles down, of course, to Congressional seats and Senate seats – is going to make a big difference. Because one of the things that we also know from our study of the charitable giving economy is that the bigger people perceive the government’s role in helping people in a particular area, the fewer charitable donations are going to be made to that area. And the most recent example I can give you is the Affordable Care Act. Many health organizations who were used to having annual campaigns for annual gifts, some of them cause related, by the way. I’ll just use my daughter as an example, working in a national women’s retail clothing store, and they were trying to raise money for a very large health charity that involved hospitals, primarily.
People were giving her the answer, well, you know, the government is now taking care of everybody’s health needs. So I don’t need to give you any money. You know, I don’t need to give any money for that cause anymore.
MT: Right, right.
RM: There are so many moving pieces in the charitable giving economy, and that has been some of the most interesting work that I’ve done in my lifetime has been learning how the charitable economy fits together. While I may have more information than anyone in the U.S., I still have a lot to learn because the charitable giving economy has not really been studied in any significant way. Charitable giving has been studied, but not the charitable giving economy and what affects it.
So just as an example, let’s take Larry Ellison, the founder of Oracle Software. The word was that he spent $8 million on his America’s Cup yacht, and he spent about $4 million to recruit and train what he thought was the finest crew available to win the America’s Cup. Well, the truth is, you can have the best team, the best plan, in his case the best boat. But in his case, if he didn’t have any wind, he wasn’t going anywhere.
So what controls charitable giving in the U.S. is not necessarily what those of us who’ve been in fundraising have always thought. We thought if we worked harder, had a better plan than the next organization, had more talented staff than the next organization, then we would do better.
And to a degree that’s still true. But the bigger factor is what’s happening in the economy. So the big, scary thing is we’ve got a lot of volatility right now in the stock market. The stock market has made a bit of a correction. It’s not been a major correction quite yet, but GDP, we’re getting revisions downward in predictions for GDP for 2016. That’s not good for charitable giving.
RM: The threat of higher interest rates, and thankfully Janet Yellen, our Fed chair, has not really raised interest rates. But she’s been talking about the threat of it for quite some time, and what any economist will tell you is what comes after interest rates go up is inflation goes up.
And those two items take money away from discretionary funds that individuals, corporations, and foundations have. So those things, should they happen, are not good. Those are the scary things.
That we’re monitoring very carefully at the Atlas of Giving.
MT: That’s fascinating. So you talked about why giving is stagnant already. Is there anything else you’d like to say about that? Just basically like it’s the downturn. It’s the volatility of the market.
RM: Well, there is one other thing that I think is – I’d be really negligent if I didn’t mention. Fifteen years ago, giving to churches amounted to 50% of all giving in the United States.
This year it will probably amount to 32% of all giving in the United States.
The U.S. is following the pattern of Western Europe in that fewer and fewer Americans are associating with churches, joining churches, and attending churches, and for many, churches are becoming less and less relevant and therefore less in need of individuals’ financial support. So that is a major shift, and it’s going different places. We’ve also seen that because of all the hype about the environment, the church sector has always been the largest sector in terms of total giving in the U.S. and still is. But the smallest sector traditionally has been the environment, and while it is still the smallest sector, it is growing faster. It has been growing at a faster rate than the other sectors are, and that’s a fascinating shift. What people are hearing about and what they care about is changing.
Tune in tomorrow where we’ll talk about what you can do about this new downward trend, and how you can mitigate this for your nonprofit.