The Hard Truth on Soft Credits

This post was written by OneTenth Consulting CEO, Rubin Singh, and originally published on roundCorner's blog.

I’ve always had a soft spot for soft credits. Soft credits are a truly powerful way to uncover fundraising insights that otherwise go unnoticed.

Take this scenario for example–you have a donor who makes a $50 per month sustaining gift. This donor may never show up on your “mid-level” or “major donor” dashboard. At the same time, she may hold fundraisers at her home, or take part in a giving circle that influenced hundreds of thousands of dollars in gifts. Surely, that’s a constituent you want to have a specific conversation with, send a mail piece to, or invite to a certain event and have seated amongst other major donors.

Different Options for Different Nonprofits

Having worked with hundreds of nonprofits over the years, I’ve seen the use of soft credits vary. Many organizations use them in a very limited way. For example, when a third party issues a check for a Donor Advised Fund, the donor receives a soft credit. For tax purposes, the payer or the Fund receives the hard credit.  

Other organizations extend the use of soft credits to recognize those who might influence a gift. An influencer could be a board member, an event host, or a peer-to-peer fundraiser. As we often see in Higher Education fundraising, auto-soft-credits can be sent to a designee (like a spouse) when a constituent makes a gift.

Giving Soft Credit Where Credit Is Due?

In contrast to organizations that judiciously apply soft credits, some organizations assign soft credit with reckless abandon. Each time a gift is made, everyone in that donor’s circle gets credited.

At the opposite end of the spectrum, there are nonprofits who are completely unfamiliar with soft credits. These organizations either don’t use them, or think that storing a separate set of figures and rollups is too cumbersome. Frankly, most nonprofits have enough trouble tracking the hard credits! However, I would challenge organizations that are not using soft credits to reconsider their position.

Make Soft Credits Work For You

Although there’s no “right or wrong” when it comes to soft credits, I’ve seen organizations where they have proven to be a game changer in fundraising results. Granted, I have also seen the contrary, where implementation of soft crediting policies became a colossal waste of time. Here are some recommendations to make soft credits a meaningful measure for your organization:

1. Determine an organization-wide strategy for soft-credits.  

What exactly are you hoping to achieve with your soft credit data?  Will it help serve a tax reporting purpose? Is it an indicator for your org’s key influencers?  The answers to these questions will drive how you capture soft credit data in your CRM. Once your org know your goals, soft crediting must be applied consistently across the organization. If Donor Services is tracking soft credits one way, but Philanthropy is tracking them in another, it will be hard to make sense of any organization-wide reporting.

2. Make sure it all adds up.

While there is debate on this topic, roundCorner experts recommend that soft credits on a gift do not exceed 100% of the gift amount. At times, there may be an inclination to soft credit multiple people with the full value of a gift. Nevertheless, having a $2,000 soft credit value for a $100 gift lessens the impact of what a soft credit tells us.

Likewise, tracking the “value” of volunteer hours is a great metric, but generally, organizations should not attribute soft credit dollar amounts to volunteer hours. Without doubt, this practice artificially inflates the value of the soft credit, giving it little institutional value or meaning. Alternatively, roundCorner recommends tracking volunteer hours separate from soft credits. To illustrate, one practice is to capture volunteer hours as part of a broader calculation or algorithm that comprises a constituent score.

3. Use the Data!  

Now that your organization is tracking soft credits, don’t let that valuable data go to waste! Build reports and dashboards off of soft credits with the same diligence and rigor you would with hard credits. In addition, consider direct mail or digital campaigns geared specifically to the large soft credit donors. Even further, invite these donors to events typically catered to major giving prospects.  

Although their lifetime giving may not show it, donors who have healthy soft credit totals are big fans of your work. Not only do they give to your organization, but they encourage others to do the same. By making soft credits a priority, your organization can recognize these influential donors, and let them know that their loyalty is not taken for granted.