It’s the Season of Giving

Around this time of year, with the holiday spirit emerging in all of us, many are considering donating to charity. Donation behavior has many reasons and causes, but I want to focus on two specific aspects of donation: making an impact and making an efficient donation. Making an impact means that the charity is indeed making a change in people’s lives and well-being. For example, a high-impact charity might be able to reduce illiteracy among children by 20 percent a year for a certain amount of money, while a lower-impact charity will be able to reduce illiteracy by only 10 percent for that same amount.

An efficient donation can be defined as the percentage of the donation that is allocated to the cause itself versus to the charity’s overhead, like salaries, fundraising, etc. For example, a high-efficient charity will allocate only 10 percent to its overhead and 90 percent to its cause, while a low-efficient charity will allocate 25 percent to its overhead and only 75 percent to its cause.

Obviously, the best scenario is to find a charity within your cause that has both aspects, it is impactful as well as efficient. However, some might argue that the two aspects can conflict with each other. For example, one might say that in order for a charity to be impactful and make a difference, it requires a larger staff and additional offices in various locations. That will result in higher overhead expenses, which will affect the allocation of one’s donation between overhead and the cause.

The counterargument might be that in order for a charity to be efficient, it needs to be lean and careful about its spending, which might result in less impactful actions. Regardless of whether the two can go together or one will always outweigh the other, different people value these two aspects differently. Some will focus on the impact effect, while others will focus on the efficiency effect.

Understanding Donation Behavior

We wanted to understand what would make people focus on one versus the other. In a series of studies, we looked at two main constructs: internal locus of control (Levine & Taub 1979) and scheduling style. Internal locus of control is our belief that we control our own environment. In other words, people who are high on internal locus of control believe that their actions have direct consequences on the way their lives turn out, while people who are low on internal locus of control believe that chance or luck mainly affects their lives and that their actions have only a mild effect on outcomes.

Scheduling style has to do with the way people schedule their daily activities and, more importantly, with their decision to transition from one task to the next. Event-timers schedule their tasks by order, and they transition from one task to the next based on the completion of each task. They will start working on their second task once they feel their first task is complete.

Clock-timers, on the other hand, schedule their tasks by time. They allocate a certain amount of time for each task. The transition then is based on the clock. The first task will end at a specific time, regardless of whether it is perfectly completed or not. The second task will start when it is time to start it, dictated by the clock. Research has found (Sellier & Avnet 2014) that scheduling style affects one’s internal locus of control.

The event-timers rely on their own internal sense when deciding on transitioning from one task to the next. That will increase their internal locus of control as they see a strong connection between their actions and outcomes. On the other hand, the clock-timers rely on an external cue to transition from one task to the next. As a result, the connection between their actions and outcome is loose.

Research showed that this, in turn, reduces their internal locus of control. Therefore we examined whether those people who are event-timers will care more about the impact of the charity rather than its efficiency. As event-timers believe their actions should matter, this will align with their need to find a charity that also makes a difference. However, we did not expect the impact to be an important aspect of clock-timers donation. Additional research found that clock-timers are driven by efficiency.

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As they need to complete their tasks in a timely manner to avoid missing their next task, their goal is to be as efficient as possible. Therefore we predicted that clock-timers would care more about their charity being efficient than necessarily impactful.

Where do you fall when it comes to donating?

We examined this question in two studies. In one study, we provided a list of charities to donate to, which varied by their descriptions. We then asked people to make a fictitious donation to as many charities as they wanted within this list, limiting the total sum they could donate. Once completed, we asked people how they made their choices. Indeed those who rated high on clock time preferred the charities that were more efficient, while those who rated high on event time preferred the charities that were more impactful.

In another study, we provided rankings of efficiency versus impact for each charity, and again provided a list of charities and asked people to allocate a fictitious donation to as many charities as they want on that list. Again we saw scheduling style affected the factor people considered important when deciding on a donation.

The implications of such a distinction can make an important contribution to fundraising. A charity would have an advantage in presenting itself as impactful in front of event-timers but as efficient in front of clock-timers.