Understanding the Importance of Storytelling in Philanthropy

One of the challenges in American philanthropy, broadly speaking, is its “stuckness” at about 2% of disposable income annually. The concept of financial “stuckness” is not a new problem; in fact, we humans demonstrate consistent financial behaviors – good and bad – in many ways. Economists and psychologists have been studying this for a while and have built up a whole body of knowledge about such things called behavioral economics. Professionals in fields other than philanthropy have been using this information for a while; now we can as well.

Now, some people may feel that using this information to raise money is manipulative, or worse. Not at all. If we know how people react to messages and communication about money and we don’t consider that when we communicate on such an important and sensitive topic, we will leave money that can support our mission and that can help people unraised.

We know that people as investors have a tendency to overvalue information they already have while taking longer than may be helpful to collect and effectively process new, contradictory information. This is called “confirmation bias.” (Kahneman and Tversky).

Conversely, people embrace information they are looking forward to hearing. And they prefer hearing good news in very specific forms. In a recent Foundations Reporting Study by Social Solutions, researchers found that funders making donations preferred demonstration of “impact” outcomes specifically in the form of stories (82%) relative to spreadsheets (35%). This is great news; actionable, and something that helps everyone in the philanthropic lifecycle! It’s also completely consistent with findings in the field of behavioral finance.

This empirical evidence amply demonstrates the value of organizational and mission delivery impact stories for nonprofits and foundations raising money in support of their causes. So let’s get started building those organizational and impact stories, and put together a spreadsheet or two for good measure!

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