Why Saying “Thank You” Is Good Business

IRSAmericans are the most generous people on the planet. Arthur Brooks, a public administration Professor at Syracuse University and author of, Who Really Cares: America's Charity Divide, cites the following facts: “Americans per capita individually give about three and a half times more money per year, than the French per capita. Seven times more than the Germans and 14 times more than the Italians. The fact is that Americans give more than the citizens of any other country.”

Several factors account for Americans’ generosity, including its citizens’ spirituality and their belief that individuals, not governments should assist those in need. Another significant, yet non-altruistic factor is America’s tax system, which incentivizes charitable giving.

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Give Your Donors Their Tax Deduction

As discussed in Personal Pitch, entrepreneurs must cultivate the help of Donors during the early days of their adVenture. Such Donors are willing to expend time and resources to assist the startup, often without monetary gain. In most instances, the Donor’s compensation comes from the satisfaction of helping a fellow entrepreneur who is on the front end of her career. However, much like the tax deduction given for charitable contributions, an explicit “Thank You” from the entrepreneur significantly sweetens the Donor’s psychic rewards.

I am continually surprised and disappointed by the number of entrepreneurs and startup companies that do not take the time to say “Thank You.” Not only does it make my donations less satisfying, I am less inclined to offer future assistance to those whom I only hear from when they are in need. As entrepreneurs can generally make use of all the help they can attract, especially free help, saying “Thank You” is not just polite, it is strategically savvy.

I am fortunate that I am at the point in my life where I can act as an effective Donor. I relish helping startups recruit executive talent and establish partnerships. I likewise enjoy recommending entrepreneurs and former students for positions at promising startups. I realize that I am privileged to have the time and professional network to provide meaningful favors.

I do not engage in such favors with the desire or even the expectation of receiving a “Thank You.” However, when one does find its way into my email inbox, I admittedly am more energized to help the person or organization in the future. Such acknowledgment is akin to making a charitable financial donation and then subsequently offsetting my taxable income by the amount of the donation. I do not make charitable donations in order to receive a tax break. However, the lack of such a break for a particular charity would cast a pall on my overall proclivity to give to that entity in the future.

I do not resent the lack of acknowledgment that my favors generally garner. There are several reasons entrepreneurs shy away from offering thanks for favors done on their behalf. They are generally good people, so it is not an issue of moral torpidity. Entrepreneurs are action oriented and not highly contemplative. As such, they are less prone to pause and consider if any of their relationships might benefit from a sign of appreciation. In addition, they tend to be accomplished and have high self-esteem. Thus, they naturally attribute personal successes to their abilities. This tendency is understandable, but it can contribute to the reciprocity animosity described below. Lastly, entrepreneurs are busy and the hectic pace of their long days makes taking the time to say “Thank You” a relatively low priority.

Donor Alert – The Favor You Value So Highly May Already Be Forgotten

Cialdini, Goldstein and Martin describe a counter-intuitive phenomenon that occurs between Donors and the beneficiary of the favor (the Donee) in their book, Yes! 50-Scientifically Proven Ways to Be Persuasive.

Assymetrical BuildingResearch has confirmed that a Donee usually places a higher value on the favor than the Donor immediately following the granting of the favor. However, something interesting happens as time passes. The relative value of the favor decreases in the mind of the Donee while it increases in the recollection of the Donor.

Such a disparity can strain the Donor / Donee relationship, especially if the Donor seeks reciprocity for a favor performed in the distant past. If the Donee attributes little value to the past favor, they may feel the request for reciprocity is unjustified. At the same time, the Donor may feel slighted by the Donee’s reaction, if they perceive the prior favor to be of significant value.

Who’s right?

Who cares?

Both parties are justified in their perceptions. If the Donor is an entrepreneur, they likely attribute most of the value derived from the favor to their own efforts. For instance, if the Donor forwarded the Donee’s resume to a startup for potential employment and they were subsequently hired, the Donee could rightly point out that they had to impress the company during the recruitment process and then deliver value once they were hired. Alternatively, the Donor will recall that the Donee likely never would have had an opportunity to prove themselves if not for the Donor’s initial recommendation.

Reciprocity Graph

Avoid Reciprocity Animosity

As shown in the above graph, the time for a Donor to seek reciprocity is before the lines intersect. After the intersection, the Donee will gradually value the favor less than the Donor and the magnitude of the discrepancy will continue to grow over time, until the respective value each party attributes to the favor differs dramatically.

If a Donor desires to seek reciprocity once significant time has passed since a favor was granted, she might consider first reminding the Donee of the favor. Obviously, such a reminder should be subtle in order to avoid overtly coupling the favor and the reciprocity request.  For instance, you might say, “I heard that your new job is going great. I knew when I recommended you that you would be great for that position. Thanks for making me look good.”

Saying “Thank You” Closes The Psychic Rewards Loop

When an entrepreneur does not take the time to acknowledge a Donor’s help, they are missing an opportunity to add symmetry to the Donor / Donee relationship. Since a primary motivator for many Donors is the psychic rewards, which arise from seeing the tangible benefits derived from their assistance, saying “Thank You” is more than expressing gratitude. It is an opportunity to allow the Donor to experience the warm psychological glow associated with their largess. For instance, if a Donor makes a potential partnership introduction on your behalf, you should inform the Donor when the deal is either consummated or abandoned. Even favors that do not net positive results should be acknowledged and verbally appreciated. In many cases, the Donor will be willing to offer additional favors in instances where the initial favor did not manifest a positive result for the Donee.

No Gifts, Please – Well, If You Insist

Thank YouSaying “Thank You” is not only the right thing to do, but it is the smart thing to do. As described in Jedi Mind Tricks, modern societies are based upon a keen appreciation of reciprocity. Asymmetrical relationships, in which one party largely gives and the other party mostly receives, do not tend to endure.

In some cases, Donees should go beyond a verbal “Thank You” and present their Donor with a small token of their appreciation. As Cialdini et al. note, gifts that are most highly valued by recipients share the following characteristics:

Significant – Does not mean expensive. In fact, an overly expensive gift might strain a Donor / Donee relationship as it may be viewed by the Donor as the harbinger of future favor requests. Balance making your gift significant with keeping it modest.

Unexpected– Given the abysmal rate at which most entrepreneurs say “Thank You,” any gift will likely be highly unexpected.

Personalized – Think “thoughtful” not “monogrammed.” Gifts that reflect an intimate knowledge of the Donor’s interest and/or passions will have the greatest impact.

Unconditional – Gifts given by a Donee after receiving a favor from a Donor are clearly not conditional on future favors (see the argument against expensive gifts above). However, gifts given as an inventive to elicit a favor will generally not motivate a Donor to offer their assistance – Donors do not generally welcome explicit quid pro quo requests for assistance.

Telegraph BeerIn writing this essay, I am not hoping for an avalanche of gifts from the many Donees I have helped in the past. Most of them are likely at the bottom of the favor value curve illustrated above and would not now consider the favor to be worthy of a “Thank You,” let alone a gift. However, for any Donee whose value curve is still on the left side of the graph: I do not care for cigars, wine or scotch, but my favorite beer is Telegraph. I will consider your gift and “Thank You” as a euphemistic tax

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John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.
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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.


Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.





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