Philanthropy and behavioural biases

Philanthropy can be a deeply personal endeavour. This is a good thing because it means philanthropy is one of the best examples of humanity’s empathy, generosity and desire to see a better and brighter future for future generations.

However, the same factors that drive this personal impulse to give may also hinder us from doing so effectively. The fact that UK charities are facing a funding gap that is estimated at anywhere between £4 and £12 billion this year, and particular beneficiary groups stand to be far more affected by the fallout from the pandemic than others, means there is a need now more than ever for funders to interrogate their giving behaviour, and see if there is something they can do differently.

To that end, here we tackle some common behavioural biases that can act as barriers that may be inadvertently preventing us from supporting the causes we truly care about in the best possible way.  

This article is not exhaustive; human behaviour is highly complex, but we hope that we have captured the most common biases. We are also always available to speak to you about any aspect of your giving, and help you refine your approach and strategy to deliver as much impact as possible.

Bias #1: Implicit bias

What is it?

This is the most commonly researched bias within philanthropy, and it is probably one of the more powerful biases and drivers behind why people give in the first place.

This is where the donor weighs the welfare of their own group, or those similar to them, more than those considered outsiders. This may be because of religion, race, gender or personal relationships. This bias triggers an emotional response of closeness and responsibility that increase sympathy and, with that, the probability of charitable donations.

Racial bias, when racial stereotypes and assumptions affect our actions, is one of the most common forms of implicit bias. It can often influence the way we see and treat others, even if we think we are being fair and objective.

Example

Because of the prevalence of implicit bias in giving behaviour, examples abound. However, a prominent one is the value of donations raised by large health charities such as Cancer Research UK, or the British Heart Foundation. They tend to raise far more than most other organisations because many in Britain have been touched in some way by these diseases.

According to the UK Charity Commission, in 2019 Cancer Research UK’s income and endowments stood at £672 million (£431 million of this was through donations and legacies). The British Heart Foundation’s income stood at £338 million. To compare, Give Directly (a charity that focuses on poverty relief through cash transfers to the extreme poor) had an income of £873,000 in 2018.

According to our UK Giving Report in 2018, the total amount given to charity stood at £10.1 billion. If we combine the income of both organisations, it is about 10% of the total amount given to charities in 2018.   

Another clear example of bias can be found within the charitable sector, which is largely white. According to a report published earlier this year by ACEVO (the umbrella organisation of charity chief executives) and Voice4Change England, people from BAME backgrounds are notably underrepresented within charities, with large numbers of those surveyed having experienced some type of racism at work. Making matters worse, those charities that are led by people from BAME backgrounds tend to be smaller, or micro charities and stand to be worst hit by funding implications of the COVID pandemic. Nine out of 10 BAME community organisations surveyed reported that they would likely have to close their doors by the end of the summer 2020 as a result of the pandemic if they do not receive additional funding.

How you can mitigate?

You could research the problems or cause areas that are neglected and underfunded relative to the scale of the problem, and fund them regardless of your own personal experiences with the cause or issue.  In terms of implicit racial bias, you could research BAME-led charities either in your local area, or nationally, and try to allocate your funds accordingly.  We are always on-hand to assist with this research.

Bias #2: Identifiable Victim Effect

What is it?

This is when our emotions are triggered with images and/or videos of individuals in need, which motivates individuals to act.

Example

All else being equal, donors are more likely to give to a single child with a name, rather than an unidentified child, or group of children. This is because knowing the child’s name makes it easier to connect emotionally, rather than rationally, to an issue or to a need. This is also why many charities will focus on individual beneficiaries of their work, for example through case studies, to highlight the success of their work.

How you can mitigate this?

While reading about one particular beneficiary of a charity that you support can certainly bring your philanthropy to life, we suggest researching the organisation, and the issue it addresses before donating.

Bias #3: Evaluability bias

What is it?

This is the tendency to prioritise certain attributes over others due to ease of evaluation, possibly side-stepping more relevant criteria. For example, people may make choices based on attributes that are straight-forward to evaluate, such as outputs, even though outcomes might be the better measure. You can find definitions of both outputs, and outcomes, here.  

Example

A study was conducted to see how this bias would affect charitable donations, using cost-effectiveness and overhead costs as attributes. This was based on the assumption that donors see overhead costs as easier to evaluate over cost-effectiveness. Researchers wanted to test whether subjects place more importance on cost-effectiveness when simultaneously evaluating two charities; and when presented with one charity, place importance on overhead costs.  This hypothesis was proven correct however there is also evidence that donors value low overhead costs for its own sake more than cost effectiveness. Definitions of both terms here.

How you can mitigate this?

Donors should be aware of this bias and not focus too much on a charity’s overhead costs as this calculation does not necessarily represent a charity’s effectiveness (we discussed common misconceptions, including overhead costs here). Caution should also be taken with organisations’ impact reports which focus more on outputs (which are easier to measure) rather than outcomes.

Fulfilling your giving ambitions

Philanthropy means different things to different people. Your giving should reflect your ambitions. We can help you find the right approach by identifying the causes you are interested in, finding the organisations that will support your giving strategy and help you to transform your giving to have greater impact and reach. We are always ready to help you think through these types of questions and help you explore the options available to you.

Contact us for more information: 03000 123 028 or email philanthropy@cafonline.org