“Workplace giving innovation” is a three-word phrase that we do not use often enough in our industry. That is changing. News of workplace giving innovation keeps popping up this summer. So rather than wait for an end-of-year “trends wrap up” blog post, I thought I should share the good news now.
With fall just around the corner, the usual workplace giving message would be something like this: “Kids are going back to school. The NFL is about to kick off. And it is time to get ready for your local United Way Campaign.” That is not a bad message, mind you. It just does not reflect the current state of workplace giving. Opportunities to give and volunteer are reaching more businesses and organizations than ever, thanks in large part to workplace giving innovation that benefits companies of ALL sizes.
In this post, I have three stories of workplace giving innovation to tell:
- Proposed legislation on Capitol Hill,
- Personal giving accounts that anyone can use, and
- A new company with a great idea.
Please join me. And when you finish reading, I hope you agree that these stories represent a brighter future for our industry.
Proposed legislation on Capitol Hill
Living outside of Washington, D.C., I should be the last person to get excited about a piece of legislation. Especially in today’s often-toxic political environment. But this legislative story rises above partisan politics. This summer, The Everyday Philanthropist Act was reintroduced in Congress. Creating a pre-tax personal giving account for every working American, The Everyday Philanthropist Act encourages charitable giving through the workplace in the same way that 401k plans encourage saving for retirement. Known as a Flexible Giving Account, or FGA, the account enables every working American to give through payroll deduction via a pre-tax benefit of up to $2,700.
CSR Matters came out in strong support of the Act when it was first introduced in Congress last year. And we whole-heartedly endorse it again. We interviewed the driver behind the FGA, business owner and philanthropist Dan Rashke. Dan founded The Greater Give, a charity to promote easier ways to give. And that organization came The Everyday Philanthropist Act and the Flexible Giving Account. Support is definitely picking up steam. For example, Ruth McCambridge at The Nonprofit Quarterly recently share her positive thoughts about the Act, including the observation that if passed, FGA’s could help offset the erosion of workplace giving through local United Ways. Way to go, Ruth!
America has more than 120 million people in the workforce, yet workplace giving has typically been left to our largest employers. Enterprise companies only employ about a quarter of the workforce. And large institutions can be challenging places to build cultures of caring and giving. Workplace giving, however, has the potential to generate more than $100 billion in annual giving. But we need to get creative, make it easier to give, and reach a much larger share of the workforce.
So it turns out that legislation CAN be innovative. And in this case, The Everyday Philanthropist Act represents a very needed catalyst to spur more giving at the workplace.
Personal giving accounts that anyone can use
Have you heard of Donor Advised Funds? Most folks in the charitable giving industry think of DAFs as a wealth management vehicle that shelters charitable contributions. By allowing wealthy donors to gift assets to a personal DAF account, they receive the tax benefits while deferring the charitable distribution decision until a later time. This in turn has led to industry-wide criticism that DAFs interrupt the flow of funds going to charities, benefitting the wealth managers over nonprofits needing the funds. Such criticism, however, is missing an important trend in DAF activity, especially where workplace giving innovation is concerned.
National Philanthropic Trust publishes the most complete data on Donor Advised Funds. Their 2018 Report noted that charitable assets under DAF management grew to a record $110 billion in 2017, with a grant payout ratio of 22.1% … far higher than payout ratios for personal and private foundations that are required to meet a payout ratio of only 5%. And that 22.1% ratio is up from 20.6% the year before. A recent survey of 251 community foundations by Candid found the same trend. Payout ratios are up. So what is driving this DAF-payout performance?
Part of the answer – and an important part of the story – is workplace giving innovation.
Workplace giving campaigns are managed via third party software developed by for-profit companies. As corporate America moved away from nonprofit partners like United Way to companies like Benevity, YourCause (now owned by Blackbaud), CyberGrants, and Bright Funds, those companies built the necessary software to greatly simplify gift distribution. Only they needed low cost organizations to support that gift distribution. Enter the Donor Advised Fund.
Benevity, YourCause, et. al. either established foundations to sponsor the DAFs (e.g. The American Online Giving Foundation and DonateWell), or they partnered with an existing foundation with a mission to support a wide range of workplace giving platforms and giving needs (e.g. CAF America). These software companies represent more than $2 billion of annual giving at the workplace, and their supporting DAFs are conduits, distributing nearly 100% of those donations to their targeted charities each year. Talk about a high payout ratio!
Furthermore, these workplace giving programs and supporting DAF accounts really are giving accounts that just about anyone can use. There are no minimum requirements for funding a DAF account through a workplace giving program. Overhead costs are minimal. Funds are distributed rapidly. And transparency is everywhere.
Side note: another reason CSR Matters is so bullish on Flexible Giving Accounts, endorsed above, is because of the impact of marrying FGAs with workplace giving DAFs. Workplace giving innovation times two!
A new company with a great idea
Let me begin this third story of workplace giving innovation with a disclosure. I am working with the company that I am about to describe. Hope that is okay with you. I have been involved with workplace giving and CSR for more than 20 years. I have seen a lot of companies come and go. Most of what I have seen in terms of workplace giving technology has been good technology. But the premise of the technology has always been to automate a manual process. What attracted me to become part of this next story is the innovation that is at the heart of RightGift.
In 2018, a startup out of Austin, TX was founded by a couple of guys who had worked in the online and affiliate retail industries. Kyle Kothe and Tom Kiely wanted to take everything they had learned about retail and apply it to charitable giving. But there were plenty of shopping apps that give away a small percentage of the profits to a buyer’s favorite cause. Nice ideas, but not game changers. Tom was also working on a supply chain management company, SourceDay. Then it hit them – every charity has supply needs, and what if donors could be invited to help manage the supply chain? A company was born.
Gifts-in-kind is not a new idea. There are good companies helping to re-purpose used or unwanted items (think “outdated company inventory”) for charities. But anywhere from 30% to 60% of gifts-in-kind donations go unused. Needs are mis-matched. Inventory management is expensive. And charities do not have capital to build better mousetraps. RightGift’s initial innovation was through affiliate retail and data management. RightGift enables customers to create free wish lists of items they need and promote them to their donors. From animal rescue to disaster response to 75 back-to-school programs run just this summer. RightGift wish lists support a wide range of causes. Wish lists can be free to customers because RightGift is an affiliate retail partner, receiving commissions on items purchases. No price mark ups.
Then RightGift “stumbled” into workplace giving when Minneapolis company Bright Health reached out to ask if they could use the RightGift platform to support a children’s hospital fundraiser. That story, shared here, was an incredible success. Within one week, employees cleared out the wish list, purchasing 131 gifts for kids in the hospital. 40% employee participation. And story of charitable software innovation became a story of a workplace giving innovation. Said one Bright Health employee:
Wow, that was easy. I just clicked through RightGift and purchased a few things for a great cause. Way cool!
Now RightGift is off and running. With over 100 new customers this summer, including 75 back-to-school supply campaigns, RightGift is pursuing more innovation that will create an even better user experience while driving down purchase prices through sheer volume and competition.
Companies looking to energize employees with a new way to give will find RightGift to be a fun and refreshing experience. Even better, RightGift delivers additional value to the donor in the way of transparency. As RightGift CEO Kyle puts it: “We enable impact transparency – donors know exactly how their gift will be used.” No more wondering “What did that charity do with my money?” RightGift makes for a great Signature Program around which to build your CSR strategy.
Bringing it home
Three great stories of workplace giving innovation coming to fruition this summary. Proposed legislation. Advances in the use of Donor Advised Funds. A new company with great new idea. Workplace giving needs more innovation.
Even better, though, is this observation: all of these stories of innovation benefit companies of all sizes. You can work at a small business like a restaurant, a startup tech company, a regional bank, or a national construction company. You and your employees can benefit from each of the innovations discussed.
And that brings new hope for revitalizing our workplace giving industry. The future is bright.
As always, if you have questions or need some help with your workplace giving and CSR programs, just give us a shout. Thank you!