Effects of Feedback about Overhead Spending from Charitable Organizations on Overhead Aversion

Abstract

ABSTRACT Charitable organizations spend donated funds for programs and overhead. Donors expect their donated money to be used to help the cause rather than the overhead (i.e. overhead aversion). Donors expect feedback on the use of their donated money for helping the cause and for overhead. However, donors seldom receive proper feedback from charities, which is one of the reasons for not continuing donation. This paper highlights the importance of transparent feedback that presents information on the use of donated funds to help the cause and for overhead. Study 1 shows that attitude toward the charity is more favorable when the feedback is transparent than opaque. Study 2 shows that the transparent (vs. opaque) feedback sequentially affects perceived donation impact, charity attitude, and donation intention. Study 3 tests the framing effect of the feedback message. Donors perceive the impact of donation to be greater when the feedback on overhead presents the amount spent in terms of helping the cause than the amount spent on overhead.