The infant United States was a curiosity to Alexis de Tocqueville, a French statesman who came here in 1831 to study American society. About us he wrote, “I must say that I have seen Americans make great and real sacrifices to the public welfare; and have noticed a hundred instances in which they hardly ever failed to lend faithful support to one another.”

The American habit of voluntary giving probably goes back at least 200 years earlier, in light of the first colonists’ need for mutual aid for survival.

America’s network of charities and nonprofit organizations springs from this generosity, to the point where it is 850,000 strong, taking in $203 billion annually — three quarters of it from individual donors — reports the American Association of Fundraising Counsel in a year 2000 study.

A local share of the do-good sector was rocked recently by charges of poor management and a cover up at the San Diego chapter of the American Red Cross. A critical audit, a “60 Minutes” exposé, and numerous board member resignations followed, but nothing roiled the waters more than the disclosure that the local Red Cross executive was paid more than $300,000 last year.

In the aftermath, San Diego donors large and small were left wondering whether their generosity could withstand such a breach of faith. While nonprofit management has much in common with running a for-profit enterprise, keeping faith with donors and other “stakeholders” is perhaps the main difference between the two types of organizations.

On one hand, says Jerry Sanders, president of United Way of San Diego County, nonprofit executives must make money to keep their doors open, plus manage human resources, employee benefits, insurance, buildings, supply costs and most of the other duties of their private sector counterparts. On top of this are program service responsibilities — which could be health care, meals for the needy, art exhibits, child care and so on.

“But when you manage a nonprofit,” says YWCA executive Judy Case DiPasquale, “you must always be conscious of your agency’s numerous stakeholders, and this includes the clients you serve, your board of directors, members of the public, your donors and other funders. It’s much more of a commitment.”

People give money and time to agencies such as hers, DiPasquale says, because they believe in its goals, and in the staff who make those things happen. “Donors are the future of a nonprofit agency. They are individuals who pledge ongoing support for the mission and purpose of the agency. But if you are a donor who thinks your gift is not being used for the purpose you intended, it’s an assault, like a slam,” she says.

Although the buyer of a product also shows confidence in the company that makes it, DiPasquale says it is not the same. “When consumers are dissatisfied with a purchase, they can always try another brand. But in the case of nonprofits, who a donor gives to may be the only agency in town providing that service. If they lose confidence, they often have nowhere else to go. And if you are the agency, it is very, very difficult to get that confidence back.”

Charlene Pryor is vice president of philanthropy at the San Diego Foundation, which manages nearly 700 individual charitable funds that distribute $40 million in grants throughout the county. Her work with donors of all sizes has given her insight into what stimulates the charitable impulse, and why donors are sensitive to how their gifts are used.

“It’s the relationship,” Pryor says. “It might be the relationship between an event in someone’s past and something they connect it to now that helps them deal with it. It might be an illness, or a relationship with a person or an event. What inspires a person to give is that connection.”

And as such, Pryor says, each inspiration is unique and has an emotional component.

“And I don’t mean emotion in a bad way,” she says, “but in the sense of passion. Passion for a cause that we can gratify by connecting it with a specific program.”

But large donors, says United Way’s Sanders, have a slightly different perspective on the charitable giving picture. “They are interested in capacity-building,” he says, which the nonprofit community defines as helping nonprofits become stronger, more sustainable and better able to serve their communities. This might include creating a broader donor base, building an endowment for long-term funding, expanding services — possibly with scaled fees, staff development, strategic planning and other programs to ease many nonprofits’ endless struggle for existence.

Tom Murphy is executive vice president of R. J. Watkins & Co. Ltd., a high-tech/life science executive search firm that helps large, locally based nonprofits recruit chief executives. He says nonprofits that aren’t building capacity eventually will lose the confidence of donors who are no longer willing to help weak agencies limp along.

“The business world is a Darwinian place — if you don’t make money, you go out of business,” says Murphy. “But nonprofits historically haven’t gone out of business because the people who believe in them keep them alive. They need to be paying attention to the national trend: grantors, trusts and individuals want to ensure that their dollars are going to their highest and best use. They are less and less willing to give to organizations that aren’t performing effectively.”

To correct this, Murphy has joined several local technology executives and venture capitalists to form the San Diego Social Venture Partners. As the name suggests, SDSVP has adopted a classic venture capitalist model in making its first two grants, which is, in Murphy’s words, “Put your money in and stay close to it.”

So instead of just writing checks or staging fund-raisers, the SDSVP will shower its grant recipients — “investees,” in the group’s parlance — with the partners’ own business savvy and participation, including help with internal issues such as realistic goal setting and results measurement.

When meeting with groups seeking SDSVP’s help, Murphy says, “people thought we were talking in tongues when we asked about goals and planning and measuring results.”

Fellow SDSVP partner Lori Steele agrees. “The nonprofit world often needs much more help than typical businesses do with organizational issues,” says the Salomon Smith Barney vice president.

Another concern large donors share with mom-and-pop contributors — and which sets off alarm bells for almost everyone — is agency overhead. Molly Cartmill directs Sempra Energy’s corporate community relations, a job that includes overseeing the firm’s $8 million annual charitable outlay. She says Sempra is realistic when it comes to nonprofit agencies’ overhead.

“We ask the groups for budgets for the specific programs, projects, services and events they are seeking our help for. When that requires spending for overhead, that’s OK. But we have a whole list of things we prefer not to do, which includes general operating support, travel, debt reduction, endowment support, liquidation and capital fund drives.”

SDSVP partner Carrie Stone agrees. “Overhead is necessary, but it has to be held to a responsible level. Any donor would want to think that their donation goes directly to help someone or to research, but nonprofits are actual organizations, not virtual ones. For them, overhead is a fact of life. But it has to be managed with accountability and responsibility, just like in a public company.”

Many donors, especially individual givers, have shown a growing desire to end-run overhead costs by restricting their gifts for specific uses, thus squeezing a nonprofit agency’s general operating budget for such necessities as supplies, salaries and insurance. The YWCA’s DiPasquale says her agency allows its donors to designate their gifts for any of its programs, and relies on three annual fund-raisers for unrestricted funds for unglamorous uses such as paying utility bills.

But the principal ingredient in any organization’s overhead is the cost of personnel. In this, most nonprofits don’t differ from their for-profit counterparts. But employee compensation — especially at the top — is another flash point for nonprofits, one that can cause donors’ blood to boil. It certainly got San Diego’s attention when the $300,000-plus awarded Red Cross executive Dodie Rotherham last year came to light. She remains on the job, despite resignations of one-third of her board of directors and widespread community outrage.

Two basic views are expressed on how much nonprofit executives should be paid. Tom Murphy, the executive recruiter and SDVCP partner, represents one perspective. He is actively searching for Sanders’ successor for United Way.

“What organizations need more than anything is leadership,” Murphy says. “It’s important at any organization to compensate for the scope and skill of the leader’s job. When it comes to high-impact jobs in high-profile organizations, you get what you pay for, and you have to pay the market rate. I think donors are pretty savvy and realize that a leader is worth every single penny they are paid, even if they’re highly paid.”

Sanders — the former San Diego police chief Murphy recruited to run the United Way three years ago and who will join the Red Cross’ board July 1 — stands on the other side of the issue. He says his total compensation stayed roughly level at about $165,000 when he moved from policing to fund-raising, and he now thinks it may have been a mistake to have taken that much.

“No one expects a person working in a nonprofit to take a vow of poverty,” Sanders says. “You do have to pay for innovative people with good management skills. But I think the public has a threshold for the level of compensation it can understand, and I think it’s around $150,000.”

Nonprofits can attract a different type of CEO, he says, one for whom money is not the most important thing about a job. “There are lots of good people who are done with the for-profit world or are looking for something different.”

Although he disagrees, Sanders says he understands Murphy’s logic on compensation. “It’s easy for him to say because as a recruiter, his job is easier when he has a higher salary to offer. But most people in nonprofits understand the symbolic value to their donors of how much they make.”

For his part, Murphy regrets Sanders’s position on pay. “Nonprofits occasionally have to compete with for-profits for people,” he says, “otherwise they will have to settle for the lowest common denominator. Nonprofit leaders should not be working for significantly less than people in comparable for-profit jobs. Jerry’s thinking would eventually undermine nonprofits’ ability to get the best people for the job.”

Despite differences about executive pay, in the larger picture, donors and agency executives alike, whether large or small, seem to agree that managers of nonprofit and for-profit organizations have much more in common than what divides them. All worry about attracting and retaining talented staffers, rising employee benefit costs, property maintenance and the countless details that arise every day.

What divides them, though, may be what separates an investor from a donor. “When you put money into the stock market,” observes Carla Lehn, a former nonprofit agency consultant, “no one really has control over it because so many other forces are acting on the market. But there aren’t market fluctuations in the nonprofit world, except perhaps to increase or decrease a client load. The choices the nonprofit’s leadership makes are the only things that impact the money.

“Investing in the marketplace involves a sense of risk. Risk should never be a part of it when you invest in a nonprofit.”