I was asked this past week if there is a difference between Matching and Challenge gifts. The short answer is yes.
In a matching gift, the donor agrees to give a set amount for each gift given by others – perhaps dollar for dollar – up to a predetermined limit. This can be a good tactic to recruit new donors or upgrade current ones. The church or nonprofit is guaranteed to receive at least a portion of the matching gift, even if they don’t hit the full target. However, the credibility of the matching gifts is undermined when there is a strong suspicion that the donor will make the entire gift regardless of the success of the match.
A challenge gift is a lump sum, to be given when the fundraising campaign hits a pre-established target. This can be appealing to large-dollar donors who want to be sure that their extraordinary gift doesn’t dissuade others from donating. For example, when a congregation wanted to significantly expand its facility, a major donor agreed to give half of the projected cost of the project, but only when the congregation raised the first half of the project.
The congregation launched a capital campaign with the goal of raising the first half of the cost of the project over a three year pledge fulfillment period…knowing that if they could meet this goal, the challenge gift would cover the remaining cost of the project. The risk is: had they failed to reach the target within the specified campaign timeframe, they may have gotten nothing from the challenge donor. There needs to be an assessment that it is feasible for the congregation or nonprofit to raise the first half of the project before announcing a challenge gift.
Matching and Challenge gifts have the potential to create a mutual relationship between large and small donors, helping to restore the imbalance between the giving potential of donors. They can be an effective tool for engaging major donors, rallying grassroots supporters at all levels, and pushing forward a fundraising campaign over the finish line.
In the same conversation this week I was also asked, “Should matching or challenge gifts be encouraged?” It is my belief that there is a place for matching or challenge gifts, but major donors should be encouraged to make commitments unconditional, designed to inspire, rather than setting rules for unlocking their gifts. In fact, experience shows that unconditional gifts are more effective than conditional gifts in congregational and nonprofit settings.
Don’t hesitate to contact me if you have specific questions about your particular situation.
John V. Clark, President/Partner
The James Company