For Non-Profits, Honesty is the Best Policy

The economic crisis wreaked havoc on charitable non-profits. Individuals and corporations had less money to donate even as the crisis increased the amount of people in need. Many charities saw their investments take heavy losses, and to add insult to injury, Bernie Madoff targeted non-profits around the country, costing them massive amounts of money in his Ponzi scheme. Now that President Barack Obama has backed limiting many charitable tax deductions, things are looking even grimmer. 

Charities would be guilty of negligence if they weren't trying as hard as possible to adapt to the situation, so it is no wonder they've been accused of exaggerating the humanitarian situation in Somalia and whitewashing the barriers to delivering aid. Whether or not these particular accusations are true, it is counter-productive for non-profits to stretch facts when disaster strikes.

Non-profits essentially have two kinds of donors. Large foundations and governments have set budgets, while individual small donors are the most variable but also give the most. During a humanitarian crisis, non-profits advertise to the general public in order to collect donations, because foundations and governments already have set allocative budgets. Corporations also donate some money, but it is generally through foundations or by marketing products to individuals.

In respect to donation trends, the general public is actually quite irrational. Psychologists have long established that people are more inclined to give to one individual in need than many, even if giving to many individuals would be more efficient in terms of help per dollar. Small donors are also susceptible to trends like peer pressure, something which should not surprise anyone who has noticed commercial advertising. Thus, there's no need for charities to twist the facts about a circumstance, because people aren't deciding to give based on the facts. Charities should instead highlight individuals and small groups that benefit from their work and try to build a brand name like the Red Cross.

Hence, misconstruing the situation does not have the potential to help charities, but it could do tremendous harm. Governments and foundations can be counted on to do independent research into every situation, so charities that lie will undoubtedly be exposed. This will hurt the credibility of those charities and of similar charities, since non-governmental organizations are especially vulnerable to reputation damage.

However, even if non-profits could get away with lying to increase crisis donations, it would be part of an unproductive strategy. When large numbers of donations are precipitated by a specific event, money is often wasted, because it is hastily spent or misallocated by dozens or hundreds of private organizations that jump into the fray before a government can coordinate a coherent response strategy. Natural disasters have also distracted organizations from areas where they are capable of doing more to help, such as when the group Globalgiving shifted focus from the impoverished third world to Japan, which it wasn't designed to do. When people are rushing to donate for a specific cause instead of donating annually to an organization they have researched, it also increases opportunities for fraud.

There are always people in need of being helped, and charities need to advertise with a focus on the long-term, showing the public the kind of work they do, focusing on doing that kind of work well, and building a reputation. There are plenty of ways to do this without fixating on individual events, such as campaigns like Trick or Treat for UNICEF. Misconstruing and over-emphasizing disasters will only prove counterproductive. Both charities and donors need to focus on responsible long-term strategies, rather than knee-jerk reactions to events. Credibility is key and honesty should not be sacrificed.

Photo Credit: Oxfam East Africa