Nonprofit Tipping Points

If not familiar with the phrase “tipping point,” perhaps it is now time to do so.  Many may have learned of the phrase thanks to Malcolm Gladwell’s 2002 book, The Tipping Point:  How Little Things Can Make a Big Difference.” 

The phrase, however, is not a Gladwell original, but a concept borrowed from economics, sociology and epidemiology.  While the concepts in each discipline play out differently, they all end with the same result:  a seemingly small change adds up to create a big change.  We ought to pay more attention to the tipping points in our sector.

Last week, Lalin Anik and Michael Norton wrote in The Wall Street Journal about their research exploring the role of the tipping point in raising money.  Though their original research involves five different experiments, the article is limited to one. 

They told 331 participants that they had a goal to raise $9 from nine donors in one hour for starving children around the globe.  Some of the participants were also told that nine donors had already given, and asked if they also wished to donate $1; others were told that they already had eight donors give their dollar and that they would be the ninth—the tipping point.  While participants in both groups agreed to give, 67% of those who were the tipping point gave, compared to 49% who were not.  The researchers followed up with some questions to try to understand why people gave, specifically wanting to understand if their giving was motivated by feelings of guilt and responsibility for the hungry children, or the other donors. 

Other donors beat out hungry children:  donors were more motivated by not wanting to disappoint the other donors—even though they had no idea who those other donors were—than disappointing hungry children.  When it comes to giving, people apparently like to know they are the tipping point—the one to bring it home, to allow the change to happen.

Another place “tipping point” as a phrase and concept comes up in our sector is in relationship to diversified income strategy and the public support test.  In a way, they are variations on a theme:  too much money from one source is risky to a nonprofit’s health; it can tip a nonprofit into an undesired status.

If, for example, a potential funder looks at a nonprofit’s income strategy and determines that its grant would tip the organization to being overly dependent upon one source of income, it won’t give that grant.  It won’t be the tipping point that jeopardizes the nonprofit.  The other scenario is how a gift from one foundation can end up “tipping” a nonprofit into the classification of private foundation—from the classification of public charity—because it no longer can pass the public support test.  There is nothing wrong with being a private foundation—if that is what you want to be.  But there is a lot wrong with being classified as a private foundation when you really are—and want to be—a public charity.

We find the concept of a tipping point coming into play in looking at nonprofit saturation.  Earlier this year, research was released that did just that.  Cutting to the chase, five researchers looked to see if there was a “tipping point” (my phrase, not theirs) where too many nonprofits in one community jeopardized the financial health and well-being of all of the nonprofits.   And there is:  the fourth nonprofit that comes into a county with three nonprofits per 1000 residents adversely effects the financial health of all.

Tipping points—be they good or bad—are important to recognize, and even more important to mind them.