Nonprofits: Loss of the Trust Capital

Several years ago, I wrote a book where I referenced the loss of the trust capital. Since I wrote that book, so much has changed, because we operate in the digital age. So much of what we do, even in the social good sector, is now predicated on how well we gather and manipulate data.

For instance, in the nonprofit industry, leaders have to familiarize themselves and integrate artificial intelligence to work alongside their teams. However, it's not just about data.

We exist at a time where disruption is the norm — not the exception — for so much of what we do, from discovering unique fundraising ideas to how we do our nonprofit marketing to our programs matter. And because information is power, donors understand that if they want to know results, finances or how competitors operate, that information is right at the tips of their fingers. In other words, there are massive amounts of data donors can review and analyze to get a better picture before donating.

What Is the Loss of Trust Capital?

The loss of trust capital means the loss of trust in an organization or sector. When you increase your trust capital, people have confidence in what you do. Consider that "capital" as a currency you can use in the future. However, with the loss of trust capital, people do not think that you can do what you state. Some of the reasons for this lack of trust could be because your nonprofit doesn't demonstrate transparency. Or there may be a perception that you don't have strong leadership. Another significant contributor to the loss of trust capital is donors not having confidence in your financial management and their donations.

Recently, Give.org reported that the trust of the public in charities continues to decline. It's been happening for years, and the downward trend continues. In the reporting, just 19% of those surveyed said they "highly trust" nonprofit groups. What's more, only 10% think things will improve in time. And three times as many donors think less of nonprofits than they did five years ago. As you can imagine, this is a significant problem. As we move deeper into a metrics and results-based philanthropic sector, where data information and performance measurement are the norms, many nonprofits will suffer from declines in support and donations.

‘The Everyday Philanthropist’

My friend, Dan Pallotta, as well as many others, continue to provide thought leadership in the nonprofit space. And the time has arrived where leaders have to understand that donors want and demand a new paradigm. In other words, measurement, impact and results with an evidence-based approach to programs are what donors expect from nonprofit leaders. The old ideas of how we think about charities, such as keeping overhead low and not investment, as Dan says, is dead wrong. If you want a refresher on this idea, listen to Dan’s seminal TED Talk about it.

The erosion of the trust capital continues as donors and the public learn what makes for an excellent nonprofit, and one they can trust. Still, what people like Dan and groups such as Charity Navigator are doing is educating and informing the public on what makes a nonprofit worthy of their donations. And the more donors know how to assess a nonprofit from its financials to transparency and performance metrics, the better it is for society as a whole. Essentially, opaque nonprofits and those that don’t perform will fall to the organizations that do understand they have to earn the trust capital of their supporters.

Take a look at Dan’s "The Everyday Philanthropist" for more information on what today's donors want to see. By doing so, as a nonprofit leader, you'll learn where their heads are at, and you can pivot and make appropriate adjustments, if necessary.

5 Things Your Nonprofit Donors Want to See From You 

The more people like Dan speak, the more that donors understand that nonprofits have to invest. For instance, nonprofit compensation is a big topic. There’s a narrative in the sector about not paying professionals the value of the work to keep nonprofit costs down. Of course, the reasons leaders give for not paying people for their time are bogus, just as this article suggests. Donors are willing to invest if nonprofit leaders earn their trust.

The following are five things you can do to earn the trust capital of your donors — and stay ahead of the competition for fundraising revenue.

1. Be transparent. According to research, transparency matters. The more forthright and open you are, the more donors support you.
2. Talk about investment. Donors understand that it takes money to make an impact. Change your mindset and ask donors for an "investment." The returns get proven in nonprofit outcomes.
3. Become a leader. Don’t do things the way it’s always been done. Donors want to see disruptive change. So, become the best and leader in your particular mission area. 
4. Embrace failure. If you fail, you’re doing something. Embracing failure is not easy, but it’s necessary. When you try new things, you fail, but you also learn and improve.
5. Use data relentlessly. We live in the digital age, and that means that data and measurements rule. Pepper your stories with hard numbers so your fundraising revenue increases. 

These are fascinating times, and they will continue to be so as we move deeper into the 21st Century. Ensure that your group increases the trust of your donors and supporters. First, be aware of the industry loss of trust capital. And then take advantage of it by positioning your nonprofit as a leader by working for the trust, innovating, using data to inform your decisions, and of course, operating transparently.