Matching Gifts: Bonanza Or Sham?
Every few weeks I wade into the Sea of Sameness that is my pile of unopened fundraising mail.
While leafing through the current batch I came across 3 Matching Gift offers.
One advances the offer of a 3 for 1 match … another expresses the urgency of a 4 for 1 match … the third breathlessly proclaims a 5 for 1 match plus a pack of free notepads and labels.
Nearly 18 months ago, in a post titled Snickers Bars and Matching Gifts, I pointed out the findings of University of Chicago economists John List and Uri Gneezy that a 3:1 matching grant offer is no more effective than a 1:1 challenge. And that a 2:1 match works about the same as the 3:1 and 1:1 challenge.
These findings were based on real campaigns conducted and measured empirically by Gneezy and List.
They explained that the received wisdom of most fundraisers follows basic ‘Economics 101’ thinking. Meaning that ‘if you can get either one Snickers bar for $1 or two for $1, you’ll go for the two-for-one deal’ despite their actual matching gift findings to the contrary.
Now, 18 months later, judging from my pile of mail, the nonprofits and their agencies are still stuffing themselves with the sugar high of ‘Snickers Wisdom’ rather than nutritional ‘Empirical Insight’ when it comes to Matching Gift offers.
I don’t want to make a big deal out all this except to note that I sense mathematical ignorance or — perhaps worse — accounting shenanigans and sham.
(I also want to acknowledge that many small organizations pursue this tactic diligently day after day. Bless them.)
Most importantly, what I’m seeing is one more ‘best practices’ piece of nonsense that will ultimately erode donor trust and loyalty.
Let me explain.
If you can get the same results from a 1:1 match, why in the world use a 3:1, or 4:1 or even 5:1 offer?
Assuming there is a finite amount of matching $ available from major donors, every fundraiser should want that money to go as far as possible.
There is no reason, unless you just want to throw major donor matching money away (or unless it isn’t real money but rather accounting shenanigans), that you should go beyond 1:1 without empirical, not anecdotal, proof that a higher ratio makes a difference.
In short, if the matching gift offer is legitimate, meaning there is a finite amount of money available for the match and the nonprofit will take in no more donor dollars than can be matched, it is literally throwing money away to go above a 1:1 match when armed with the knowledge that a 1:1 match is just as powerful as something higher.
In short you don’t have to ‘juice’ the offer beyond 1:1 to raise whatever the matching pot can cover.
Simple math quickly shows why upping the match ratio from 1:1 to 2:1 or 5:1 is not good stewardship of a major donor’s matching gift.
Elementary example: Major Donor places a finite $100 in the matching gift pot. That money will be paid out if the organization raises another $100 from a Regular Donor(s) — (a 1:1 match). When this happens the nonprofit will receive the Major Donor’s $100 + the Regular Donor(s)’ $100 for a total of $200.
BUT … if the match goes to a 2:1 ratio the organization’s take from $100 in Regular donations is still only $200 (Regular Donor’s first $50 + the Major Donor’s $100, using up the entire 2:1 match pot, plus the second Regular Donor’s $50, unmatched) not $300 as most fundraisers would readily claim. Remember every dollar in goes against the match of $100 of the Major donor’s finite $100. The rest is a lie and a waste.
[Editor’s note: Tom and I worked for years with Environmental Defense Fund, where a major donor not only poured millions into matching gifts but demanded a detailed accounting. He hit a home run with this technique. So I’ve truly seen how a legitimate system works.]
So why do it any other way?
Several reasons suggest themselves:
- Because the match, in many cases is a sham. As much a sham as the claim that 100% of the overhead is covered by generous support from rich donor X.
- The reason charities go north of a 1 to 1 to even 5:1 or 15:1 is because there is no limit on the amount of money they will take in on the matching gift offer. If there is $100k in matching money and it is a 2 to 1 match offer, most charities will not turn down or give back the donor contribution that gets the total take over $50k.
- They will take dollar $50,001, $50,002 and as much as can be taken on a given mailing or campaign.
When is the last time you’ve heard your on-air PBS announcer say “we failed to meet the challenge” or received a donor mailing admitting to coming up short?
Do any Agitator readers really believe the 3 charities whose matching appeals I mentioned were actually calibrating the amount of mail to send out – given historical matching gift offer performance – so that they wouldn’t exceed the matching gift pot?
Does anybody think the charity will give money back to Donor 3,456 (for example) and every donor after 3,456 who broke the matching gift bank?
How many matching gift offers actually have new money being offered up by some major donor that the charity won’t get unless they raise extra dollars with a match campaign? Here at The Agitator we want to know.
If the nonprofits continue to take in money long after the theoretical matching pot is tapped out then there is no risk or concern with going north of 1 to 1.
Or is there?
- What about the risk in eroding the public trust when all this comes to light? Are you really willing to tell your donors how all this operates? Are you really any different than all the other scam artists?
- DonorVoice, our sister company, collects a lot of donor feedback. A lot. They know for certain that most donors see a matching gift campaign and assume there is finite time and opportunity to get their money in before the actual pot of matching gift money is all used up. In short, they assume it is legitimate. They trust us.
- But what if donors discover that Charity X, Y and Z got a total sum of donor dollars in the door due to a match campaign that exceeded the real (by whatever accounting nonsense) pot of matching gift money?
Let’s be frank. Should we admit this whole Matching Gift vogue is generally a hustle and we need to admit and deal with the damage it will ultimately do to donor trust?
Or do we choose to continue with our sham ‘countdowns’ to the match …our on-air fabrications … our phony trust-eroding techniques.
Some day it will all come out and only then will the ‘righteous’ scramble to dissemble and explain their accounting hustles.
If you’re playing this game don’t think for a moment you’re ‘not like all the rest’ of the bad operators — black and white examples of egregious violations of donor trust.
On the one hand, the illegal abusive charities like The Agitator’s outed with some veteran and cancer groups are black.
On the other hand, the pure-as-the-wind-driven-snow charities are white. And rare.
Very few exist in either category.
The ‘black’ charities take big chunks out of the collective donor trust.
Unfortunately, the ‘white’ charities aren’t able to build it back up, because behaving on the up and up with complete transparency is a difficult ‘can’t-meet-the-budget otherwise’ exception. Not when they’re using ‘countdown clocks’ … ‘only 72 hours to meet the match’ … and other such nonsense in efforts that will ultimately drive donors away.
The reality is that when it comes to matching gifts, most nonprofits operate in the gray.
Have you done the math? Have you done some soul searching?
P.S. My original ‘Snickers’ post generated lots of interesting comments. I think you’ll find many of them helpful. Check ‘em out here.
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