Growing Social Profit

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2011-01-16T13:06:00.000-08:00

I've moved and so for the latest updates, go to GrowingSocialProfit.

Why is Gates Foundation Giving Money to Journalists?

2010-10-15T17:34:00.000-07:00

Since January 1^st this year more than 2,393 newspaper jobs[1] were cut in the United States. With fewer reporters, who will gather, report, and write about local, state, and regional activities? Blogs clogged with opinion won’t fill the absence of fact-based, vetted information.

See the blog on Gates Foundation's gifts.

What are the implications for the nonprofit community?

Without reporters, who will tell your stories? Who will investigate, report on, and describe topics in regards to the issues, public policies, and trends relevant to your work? Who will provide independent, third party validation of your work, impact, leaders, and supporters? Will nonprofits have to go the way of the Gates Foundation and underwrite critical reporting on issues they care about?

What Happened?

The golden age of journalism may prove to be the period between 1950 and the turning of the new century, 2000. The business model of newspapers worked during these times: there was enough advertising revenue to support large newsrooms, investigative reporting, and a wide range of news services. As ad revenue plummeted in recent years, the business model broke. Some already describe it as a dead model. Seeking to reduce costs, owners cut wherever possible. Newsrooms were obvious places to “save” great costs. The golden age is over and it’s not coming back.

Nonprofits NEED Reporters

More than they suspect or acknowledge, nonprofit organizations rely on validation provided by news and feature stories that reporters write and produce. With fewer reporters at all levels, it is likely only the largest groups or most dramatic stories will be covered.

What will be the implications of this shift on your ability to tell your story in a credible fashion, to build community awareness, and to generate buzz about important community issues or special projects?

Validation through reporters’ stories distributed through a variety of channels seems to be taken for granted. Nonprofit leaders celebrate when they get a front page, “above the fold” Metro section story or when a local columnist features their work or one of their volunteers. Paper copies are made and mailed; electronic copies are forwarded far and wide via email; links or PDFs are posted on the organization’s web site; and excerpts are placed in newsletters and in reports. Board members brag about the stories at social events.

It is valuable when an independent outsider chooses to write about and describe the work of a nonprofit. Donors to nonprofits often proudly talk about coverage of their favorite groups. “Did you see the story about _______?” is a common question at donor gatherings. Seeing “their” group talked about in newspaper and magazine stories is validation for donors: it tells them that they made the right choice. For many donors, this is an invaluable experience that encourages continued, and even increased, gifts. It has been my experience that this is important to donors at all gift levels. Some groups have actually based their revenue/funding model on continued attention in the media. They are even more vulnerable than others at this time of media change.

Will there be a new definition of “newsworthy”? Will it trend toward only the most dramatic stories, or the nonprofit scandal of the day, or perhaps only to those that provide prepared content?

It’s Not ONLY About You.

With fewer reporters and dramatically different distribution channels for information, will policy makers and community decision makers get the information that will help them make the right big-picture decisions? Such choices have the potential to deeply affect the work of nonprofit groups at all levels. From the group that works with pre-school children, to others that help feed those in need, to those making sure we have clean water, all rely upon fact-based digging by reporters. With a greatly reduced supply of information, how will this affect the nature of public and private interactions and decisions?

How will nonprofits fill these gaps? In effect, their marketing, education, and fundraising efforts will all need to increase in response. One of the consistently reported and documented needs of donors is for detailed information about the work and impact of the groups that they support. As reporters and news distribution changes, nonprofits may be forced to increase their sophistication, volume and channels of information distribution.

The need to expand communication and accountability reporting will lead to some increase in costs of operations. Today, most accountants would group this into the category of “overhead”. Yet rather than being burdensome “overhead”, such expenditures are wise, vital, necessary expenses without which organizations will not likely succeed in the fundraising market. This suggests that the narrow budget or functional breakdown of nonprofit activity consisting of program work and “overhead” is likely flawed and will need re-structuring or at a minimum re-interpretation.

Without enhanced public education, targeted donor education, and increased donor/volunteer/activities stewardship, program work may be severely inhibited or even hindered. The line that used to be somewhat clear between program work and everything else will blur, perhaps even disappear. This has implications for most nonprofit job descriptions, performance metrics, and staff skill sets.

Changes Outside

Mean Changes in How Nonprofits Think and Operate

As a result of these accelerating changes, here are some issues that will have to be addressed by nonprofits wishing to thrive in the coming years.

How will you provide donors, supporters, and policy makers with the news and information that they need to make decisions that affect your work?
What will you do to ensure the information reaches the people you need to reach?
What data do your donors need?
What data do policy decision makers need?
What data do community leaders need?
What data do other organizations and those linked to your mission work need?

Reporters were wonderful allies in helping translate or illuminate the work of nonprofits. Their independence was highly valuable because it gave donors an experience of transparency.

Transparency is linked to integrity and trust; it is also tightly linked to the size and frequency of donations. But there is more to transparency than news stories. It is the ability of donors and community members to get the right information in a timely manner, in a useful form, and then be able to use or understand that data. Often reporters not only accumulated data from hard- to-find sources, they also interpreted it. The result was a valuable service. How will it be replaced?

This suggests that the way nonprofits report their results and financial data, and distribute their 990s and other evaluation information may need to take on new forms and require much greater levels of translation and even third-party review.

Many nonprofits have yet to post their 990s on their web site; some don’t even list staff names. If transparency is a valued objective, there is great distance to travel in a very short time for these groups.

“You are your own news reporter”

The disappearance of reporters, the change in the distribution of news, the growth of electronic media: all raise significant questions about how nonprofits have structured, presented, and distributed their key messages.

How will you tell your story?

Newsletters and donor communications will need to be fundamentally reformed, re-thought, and re-contextualized, to more of a newspaper-style news source rather than a chatty, informal collection of essays. New reporting styles and formats may take greater precedence as well.

As a result of these accelerating changes here are some issues that will have to be addressed by nonprofits wishing to strive in the coming years.

How will you provide donors, supporters, policy makers with the news that need to make decisions that affect your work?
What will you do to ensure the information you need to be successful reaches the people you need to reach?
What data do other organizations and those linked to your mission work need?
Will you need to tell “both sides of the story” as your role changes and there is a greater need to present the other side of the story in a fair manner?

Thanks to comments from Robert McClure at Investigation West for inspiring this column.

[1] See http://graphicdesignr.net/papercuts/; also, research done by Investigation West.

Foundation Data Made VERY Public

2010-10-13T13:42:00.002-07:00

Congratulations to The Seattle Foundation, which just started making publicly available its data, research and evaluations on more than 675 local nonprofits. The information used to be kept inside, available only to staff and a small number of people who maintained giving accounts at the foundation.

The web site makes it easier for donors of all kinds to learn key information about a wide range of groups. In times in which good information about individual nonprofits can be difficult to come by, the service may prove invaluable to many groups seeking support and to many donors seeking sound data to support their personal and business giving decisions.

See the article in the New York Times
See the data on The Seattle Foundation site

Nurturing Relationships for Today and Years to Come

2010-10-13T13:42:00.000-07:00

Good fundraising is about good relationships. Board members and nonprofit staff often refer to donors as personal friends. But how many "good" friends can you actually have?

Donors report that communication quality and depth of relationship between them and the nonprofit are primary drivers for making gifts - both annual fund and legacy gifts (bequests). Donor research consistently reports that personalized and face-to-face interaction generates more in the way of gifts and resources for nonprofits.

But what if your brain is already filled up with the details of personal relationships? How many more can you add? Researcher Robin Dunbar suggests the most friends your brain can handle might be around 150 because of the way the human brain is hardwired. Other research suggests the number of close or best friends may be far smaller. Therein lies the rub. How do you stay "friends" with the dozens, perhaps hundreds, of people who value the work of your organization?

"Nurturing Relationships for Today and Years to Come" is the title of a just published article written by Kevin Johnson that shows just how a method of creating and maintaining authentic relationships can work for a nonprofit group.

Links:

Read the article

Check out Grassroots Fundraising Journal

Anthropologist Robin Dunbar interview

An Authentic Story Will Engage the Right Donors

2010-07-13T19:37:00.000-07:00

July 29th, 2010
Thursday, 8:30 a.m. - 1:45 p.m. at
Kennedy School, 5736 NE 33rd Ave., Portland, OR 97211

Stories create a vital link between strategy, mission and donors. Your authentic story – one that connects with your deeper purpose – makes your own story unique and powerful.

Well crafted stories enable staff and engage donors.

Stories help donors understand what part your nonprofit plays in their vision and dream for their community and the world at large. Stories inspire prospective donors and allies.

Participants will:
•    Learn to apply the power of using stories as an integral part of donor engagement and strategy planning
•    Gain insights individually and as a leadership team on how to engage donors in strategy discussions
•    Have the opportunity to plan with your team on how to apply the insights and skills to your own situation
•    Connect with other non-profit leaders

Who Should Attend?

This session is designed for teams of visionary leaders from nonprofits. Each three person team will consist of 1) an executive director or division leader, 2) a primary development officer, and 3) a board member or key volunteer, all from the same organization. Up to two development officers or volunteer board leaders may attend per organization. Single attendees or incomplete teams are not eligible. NOTE: New executive directors and their teams will also find this particularly helpful.

Is your story BIG enough? Is it visionary enough?

We will explore your visionary stories and examine how tactics and strategies can be combined that fit how today’s world thinks and acts.

How does “strategic planning” fit with your story? How can you connect donors and strategy together?

While the exercises will be focused on your own team, there will be a time for all the executive directors, board members, and development professionals to be together groups too.

The session will be filled with a combination of presentation, case studies, discussion and your own team work sessions. Please plan to attend during the entire workshop since the session after lunch will combine a number of discussion items and focus on your own next steps as a team of visionary leaders.

We will also have some advance homework so that your team will be able get to work immediately and come away with some concrete next steps. We will also have a survey tool that you can use with all of your board or staff in advance if you wish.

About the Event Hosts and Presenters

Guest Presenter:

Jelly Helm is principal of a creative studio in Portland. His clients include Wikipedia, Oregon Humanities, Infectious Disease Research Institute and Imperial Woodpecker. He is the former executive creative director of Wieden+Kennedy, and the founder/director of Wieden+Kennedy 12. Past clients include Nike, Starbucks, Coca-Cola, Google, Farm Aid, Ecotrust and National Voice.

Hosts/Facilitators:

•    Kevin Johnson, Retriever Development Counsel just published the book The Power of Legacy and Planned Gifts: How Donors and Nonprofits Can Change the World (JosseyBass/Wiley, 2010). His professional focus is on coaching nonprofit leaders on how to be more effective in strategy, charting new directions, and building sustainable funding models.
•    Karlene McCabe has over 20 years experience in leading communities and not for profits to find solutions to high profile challenges. Her strengths include fund development and diversification, organizational growth and positioning and fostering staff /board leadership. She served as the Executive Director of the Greenbelt Land Trust in Corvallis, Oregon from 1996-2010.   She led the organization through major growth and change. This included transitioning from a founding board of directors to the third generation of leaders, going from a local to a regional trust, securing a variety of new funding sources from federal, state and foundation grants and significantly increasing the amount of planned gifts to the organization. She served as the leader to design and pass a bond measure campaign for $ 7.9 million to purchase open space in the City of Corvallis.

Why Stories? Why Now?
More nonprofits report long-time strategies are losing ground. In the words of one nonprofit leader “we did everything that worked last year, but it didn’t work this year.” This begins to make sense if we recognize that many nonprofit strategic planning and fundraising practices evolved when members of the Greatest Generation were the primary players in the world of nonprofits. This generation trusted institutions – like United Way or Social Security – as well as nonprofits. Think Walter Cronkite, Billy Graham or Charles Schultz.

While the greatest generation trusted large organizations to make a positive impact (they won WWII and conquered polio that way), their children, the baby boomers, don’t trust institutions. The boomers have quite a different worldview and set of interests and needs.

“It’s about me.” Boomers trust stories if the stories help them figure out the role your nonprofit plays in their lives and in the world they want to shape or aspire to live in someday. (Adult learning research says the same thing.) How you tell your story will make the difference as to whether your nonprofit will thrive or not in the coming years.

Register: space is limited.

Overview of the day:

8:15 - 8:45 a.m.
Continental breakfast & check in

8:45 - 9:00 a.m.
Overview and introductions

9:00 - 11:15 a.m.
Linking story, resources, & strategy: a new paradigm

11:15 a.m. - Noon.
The Power of Stories

Noon – 12:30 p.m.
How Donors will help you craft and tell your story/vision.

12:30 - 1:00 p.m.
Lunch
buffet including vegetarian options

1:00 - 1:30 p.m.
Your Next Steps: What Inspires YOU?

Combining our discussions and choosing next, realistic steps

1:30 - 1:45 p.m.
Closing
(Note: we will end promptly at 1:45 p.m.)

Teams only please; each team should consist of the executive director or division leader, board chair or board volunteer, and primary development officer.

The fee for each three person team is $225. Additional team members may attend for an additional $50 each. Refunds available up to 7 business days before the event.

Continental breakfast and lunch included in fee. Vegetarian options will be available - no need to request them.

Register

2010-05-28T14:25:00.000-07:00

I saw this picture of a sign resurrected from the World War II era again in Jelly Helm's post on his blawg. (By the way, his accompanying post on staying present is worth reading.)

Continued fascination with WW2 in the form of books, movies, and mini-series suggests to me more than a passing interest in history. Or perhaps not an interest in history at all. Instead, these recent movies and books tell the stories of how men and women lived in difficult times; how they met challenges (big challenges); how life unfolded; they described what it was like to live in difficult times. These stories help us understand, or cope, or provide, in an odd way, comfort. In a sense its comforting to experience these stories -- because we know how things turned out. But we don’t KNOW how things are going to turn out today.

Perhaps you have seen the “Awareness Test” on YouTube. One version shows two team of basketball players passing the ball. The announcer challenges you as the viewer to count the number of ball passes one team makes. When I showed this to the audience at a conference recently many correctly counted the number of passes. But, they didn’t see the 6’ tall, moon walking bear that walked in and out among the players at the same time. It test begs the question that we see what we want to see and may not know what we don’t see or miss.

This brings me around to how many nonprofit board members and executives are acting these days. Some are focused on how to create a bright future – they know it will be different in both form and content. Other boards are acting more like checkbook managers with the perspective that they have to guard what little dollars remain.

When we consider the vital role that thousands of nonprofits play in our communities throughout the United States, which approach holds the most promise? It’s about what we CHOOSE to focus upon that will mean the difference between nonprofits that thrive in the coming years and those that will cease to be relevant to their communities and donors.

Another Fundraising Record

2010-05-17T15:02:00.000-07:00

What nonprofit fundraiser had gifts 109% OVER its results for the same period last year? It's Fidelity Charitable Gift Fund.

A Nonprofit Quarterly article reports that gifts were up to $270,000,000 the first quarter of 2010. In addition, according to an article in the Chronicle of Philanthropy the number of new accounts was also up 145%.

That's an astounding number. I have to wonder out loud what Fidelity Gift Fund is doing right -- it's got to be a number of things. What can the rest of the nonprofit world learn here?

The Baton Is Passed?

2010-05-05T08:10:00.000-07:00

In a recent post, The Planned Giving Blogger writes "I’m prepared to go on record today as announcing that the baton has officially passed from our elders to the silent generation and, more emphatically, to the Boomers. Look no further than yesterday’s post about Leisure World and then this recent NY Times article, “Boozy, Bawdy Reality TV, With a Few Wrinkles” if you need any further evidence."

I agree. Canadian author William Gibson puts it this way: "The future is already here, it's just not widely distributed." In interactions with donors and client staff, it's clear that we are passing through a subtle, but noticeable attitudinal shift in how people look at and feel about charitable gift planning. This bodes well for groups that focus on vision; less positively for groups that continue to focus on selling planned gifts as products.

Nonprofit Starvation Cycle

2010-04-30T17:12:00.000-07:00

(the title of an article that appeared in the Stanford Social Innovation Review and you can find it on their web site)

"A vicious cycle is leaving nonprofits so hungry for decent infrastructure that they can barely function as organizations—let alone serve their beneficiaries. The cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs, and results in nonprofits’ misrepresenting their costs while skimping on vital systems—acts that feed funders’ skewed beliefs. To break the nonprofit starvation cycle, funders must take the lead."

In my consulting practice I have seen many boards and executive directors make checkbook management kinds of choices recently -- not strategic ones. One of the many areas they cut was in development. The irony is that the cost of raising a dollar is going up and this at a time when people are clamoring to be more, not less, involved in the work of nonprofits.

You may have seen one of the stories about the decline of department stores that describe that it was not the economy that hurt, but instead they neglected the things customers wanted including, among other items, "having helpful people staffing the store." As a result these stores lost ground with the affluent customers - the ones they need the most. Imagine if Apple cut back the staffing in its stores as a "cost saving measure"? If you have been in an Apple store lately, you have had to fight the crowds -- but there always seems to be someone ready to help. They are thriving.

Cutting development (the customer service and marketing side of nonprofits) will likely result in the same troubling effects in terms of contributions both today and in the future. Such "cost saving" cuts will have negative ripple effects for years to come. Despite the dramatic emotional opening presented by economic shock, many nonprofits then failed to connect with their donors who now had an even greater vested interest in the success of those nonprofits; instead they looked inward, cut expenses, and are quietly prayed for a miracle. For most, there will be no miracle: too many of their donors will have moved on to do other things and invest their time and money differently.

The Met is Using Endowment to Survive: How Many Nonprofits Are Doing the Same?

2010-04-29T09:33:00.000-07:00

In a news report in the Wall Street Journal it was reported that the Met in New York had to tap into restricted endowment funds.

I am glad that the Met made it very clear that it asked donors to release or change the gift restrictions. Trust in how gifts are managed is a critical element for all nonprofits. While an endowment is a useful tool, as times change, nonprofits will need to continue to re-evaluate how they ask for support and how they manage and label their dollars to avoid donor and board confusion. The Met is among MANY groups that have had to use "endowment" in order to survive. In many cases I could easily imagine that the point of the original gift was to sustain the mission. I wonder today if those same donors would have insisted on the label "endowment" and instead offered a gift for an operating reserve or emergencies/rainy day fund?

Counting with a Purpose

2010-04-03T11:00:00.000-07:00

When it comes to keeping track of planned gifts, there are multiple perspectives. For many groups, the key to counting is first defining the project and objectives. Framing the project, your intent for it, and anticipated impact, then establishing appropriate metrics will guide you to what you count, and the when and how of counting it.

A useful reference guide, one in which I had some small role in helping come to fruition, is the Valuation Standards and Guidelines for Reporting and Counting Charitable Gifts published by the Partnership for Philanthropic Planning.

However, for most groups counting is primarily about fundraising goals, not accounting principles.

How would you count gifts toward project oriented goals that started out with statements like this:

We need to involve all of our volunteers.
All the board should do this.
We need to work with all the founding board members…
If we had a group of about 100 legacy gifts,
If we had at least $1 million of identified gifts, some people might give
We need an endowment. Legacy gifts would be perfect for that.
We have a lot of older volunteers. They need to know their gift could be combined with many others to make a real impact.

Each one could have legitimately different methods of counting success.

Each statement suggests a possible approach to how a group might move forward and add metrics and counting structure to its work. It could be a board campaign, a quiet campaign focused on getting a number of gifts identified, a very public effort focused on generating a combination of cash and legacy gifts for a purpose such as an endowment.

Here’s one example of how a group started with a campaign or project premise then developed its own counting goals.

Situation/Challenge:

“If we had a group of about 100 legacy gifts… Or If we had at least $1 million of identified legacy gifts, more people might give.” In this case the group faced a challenge in that loyal donors were supportive and gave annual gifts, but were hesitant to do more and did not understand how their gifts would be used or what impact bequest gifts would have.

Discussion:

Initial goals can be described in terms of number of gifts or estimated value of gifts, or both. The value in describing a goal in numbers is that every gift counts equally. It’s been my experience, that with rare exception, donors of all ages don’t have a good sense of their relative economic status in society. They often feel as though they have much less than they actually do and that they often think of themselves as much farther down the economic ladder than they are. As a result, a campaign that counts each gift as one, can be successful in engaging a wide range of people and bypass the concern that “I don’t have anything.”

Sometimes, focusing on an estimated dollar goal can serve to increase the amount of individual bequests. I have watched donors reflect on a total dollar goal, then respond saying, “well, since it’s that large a goal, I should give more to help you get there.” A combined goal of both numbers and dollar amount can help you include everyone and encourage those who are more aware of their favored economic status give greater amounts.

How will the 100 gifts or million dollars fit into larger, long term plans. For example, if a million dollars were received over the next few years, where would it be used? What impact would it make? This question will have to be answer before you arrive at a number or dollar amount for your goal.

I know sometimes we look for a one size fits all version, but such goals can sell short our donors and the wrong goals can undermine good development work.

News on Psychology of Giving

2010-03-20T09:42:00.000-07:00

How do you cultivate a differentiated nonprofit, and how do you inspire people to give? In this talk, from the Stanford's Nonprofit Management Institute, an event of the Stanford Social Innovation Review, Stanford marketing professor Jennifer Aaker talks about how to garner more volunteers and money in an era in which the giving of time and money is shrinking.

Hear her talk here: Social Innovation Conversations | Stanford Discussions | Jennifer Aaker

Legacy Gifts: True "Pay It Forward Fundraising"

2010-02-24T11:56:00.000-08:00

Legacy gifts, or bequests, are the real "pay it forward fundraising" tools.

Nonprofit Trends Report Just Released

2010-02-11T13:25:00.000-08:00

There is much positive news from 2009 and a demonstrated willingness to creatively tackle the challenges of the current fundraising environment according to a survey of 132 nonprofits of all types and sizes primarily located in Oregon. The January, 2010 survey was co-sponsored by a collection of professional groups, foundations and administered by Retriever Development Counsel, LLC.

Overall, 45% of respondent groups experienced higher fundraising results for 2009, 19% reported results that were the same as 2008, and 37% reported lower results in 2009. There was no group size that “lucked out” with fundraising last year. The only group size that demonstrated an overall decrease in fundraising for 2009 was in the $3,000,001 – $5 million budget range, as 67% of these groups reported lower fundraising results.

90% of survey respondents commented on 2009 changes they had made to their development strategies. Trends in these changes include: relationship building, events, board and volunteer involvement, funds diversification, and staffing. Given anecdotal evidence in the sector, it was surprising that more staff cuts were not reported.

Factors in Greater Fundraising Results in 2009:

Simply put, those who spent more got more.
Greater numbers and sizes of both major gifts and bequests/planned gifts reported by groups that saw higher fundraising results
Years of working towards major gifts, bequest/planned gifts, and foundation grants paid off this year
Regardless of the size of the organization, the primary reasons for greater fundraising results were more communication, greater contact with donors, and more effort spent.
Whether they were reaching out to new donors, getting back in touch with lapsed donors, or following up with current donors, organizations expanded their fundraising efforts for both annual and major gifts.
“We asked more. A lot more.

Morale has decreased from last year.

47% of respondents said that current circumstances have decreased morale in their organization, compared to 30% from last year. Only 28% report that circumstances have had no effect and 24% said that there has been increased unity, compared to 37% and 33%, respectively, from last year.

Respondents are also slightly more concerned about losing their jobs in the next year: 36% report some level of concern, up from 30% last year.

A summary is available free on the resources page on the Retriever Development Counsel, LLC website. Copies of the entire 30+ page report are available free to respondents and for $19 for those who did not participate in the survey.

Survey Background

This survey of the impact of the current economic climate on nonprofits in our region is a collaboration of the Association of Fundraising Professionals, Oregon Chapter, the Willamette Valley Development Officers, Meyer Memorial Trust, The Oregon Community Foundation, Grantmakers of Oregon and SW Washington and Retriever Development Counsel, LLC . The purpose of the survey was to better understand how nonprofits are managing within their organizations. The survey was conducted at the end of January 2010.

There were 132 completed surveys. 38% of organizations that completed the 2009 survey also completed this year’s. Participating organizations were located almost entirely in Oregon (95%). There was cross-sector participation, with the highest numbers in social services (22%), education (21%), and health (16%). Respondents were in positions of fundraising accountability; development directors (45%) or executive directors (29%) accounted for the majority of responses.

Table of Contents of Report:

Summary
Background & Demographics
2009 Fundraising Results

Actions taken by organizational leaders that were beneficial for fundraising
2009 Changes in Development Strategies
2009 Staffing
2009 Communication

2009 Lessons that Will Inform 2010 Work

2010 Plans

Fundraising
Communication with donors
Plan for overhead expenses
Leadership preparation to deal with necessary changes in 2010

Appendix A: List of Survey Participants
Appendix B: Resources
Appendix C: Selected Quotations from Survey Respondents

Bequests and Endowment Funds

2009-12-20T13:18:00.000-08:00

In a recent request for advice on the Association of Fundraising Professionals' Open forum a development professional posted questions raised when a bequest arrived. Board members thought it might be time to start an endowment; the accountant had some concerns.

Dear Mary,
You wrote about an unexpected estate gift and the possibility of using the gift to start an endowment fund. There are a number of issues raised in your post and they cross over each other. Here are a few that pop out this Sunday afternoon:

1) What is the ability of the board to restrict gifts received?

2) Can the board restrict a gift to an endowment fund?

3) Is there an ethical breach if the board restricts it?

4) What is the role of an endowment in your organization’s future financial plan for sustainability?

As you already know, state law defines the term “endowment”, and the details vary from state to state. It will have a specific legal definition in your state. (Usually each state has these statutes on line and you can look them up yourself.)

Often your organization will be able to choose a number of key aspects as to how your group may use its endowment funds in the form of an endowment or spending policy. However, if your nonprofit does not make specific choices, state law will impose the rules you must follow.

Critical point: In general, only a donor, not a board of directors, can actually place an “endowment” restriction on a gift. Usually the restriction imposed by the donor is in writing. A permanent restriction will also exist if the nonprofit asks a donor for a gift to the endowment. You have solicited for a specific purpose and you must keep your word (think contract law here). In that same vein, some groups have explicit written policy to place bequest gifts not otherwise directed into their endowment. They make this policy clear to donors, advertise their policy, and communicate it to local or regional professional advisors. By informing donors in advance of their policy, they intend to create, in effect, a contract or intentional donor restriction.

When a board chooses to label otherwise undirected funds as “endowment” accountants usually use the phrase “quasi endowment” to describe the nature of the created fund. However, in the common sense meaning of the word, it is not permanent; the board could chose to spend the money at its next meeting.

For much more detail on endowments, may I suggest you Google the terms “Eric Dryburgh” plus “endowment”. Eric is a San Francisco attorney specializing in nonprofit law and has written and presented on the topic. I am sure that some of his available materials will help you with your board deliberations and will certainly provide some useful educational material for your accountant.

Nonprofits, board members, accountants, CPA’s and lawyers use the word “endowment” differently – despite state law definitions and basic common sense definitions. When you hear the word endowment what’s the first word that comes to mind? I hope it is “permanent” because that’s what most donors believe (or insist upon). Ignore this simple, honest definition at your own peril.

I plead with you to forget the mumbo-jumbo used by the auditors about quasi-this or that. If you confuse the issue you kill the gifts. Period. I can’t tell you how many “correct” definitions I have seen that would contradict each other. What does it matter if you are technically correct within a narrow context but lose the gift all the while doing a larger disservice to endowment fundraising efforts of others and the charitable community at large?

Imagine hearing your favorite children’s charity spent part of its “permanent” endowment this year for operations. How long will it take for a donor to regain this trust in their operations or board? Too long! But wait, did they really just spend working capital designated as endowment, or was it quasi-endowment or ….? You get the picture (but not a gift).

Nonprofits are under increasing scrutiny today and we not only have to live up to the letter of the laws, we must go beyond that and live up to the spirit of our donors’ interests and intentions. That translates into successful endowment fundraising.

This introduction has been the preface to this (earned at a high cost) advice if your nonprofit is serious about your endowment you should:

1) Review, re-confirm, or re-vamp the policies you have in place that govern your endowment, its management and spending, and how it is reported.

2) State in easy to understand terms the purpose and value of endowment to your work/mission. Make sure all agree. (You may be quite surprised with the difficulty of this simple assignment.)

3) Look at everything used to communicate your mission and impact in the endowment building context. What messages are you actually sending? This includes every person and department that interacts with the public on your behalf. Don’t forget the direct mail letters that scream crisis funding needs. This will require persistence.

4) Take care of the most important things first. If it is intended for financial stability, might it be more appropriate to build up your operating reserve or working capital first? If you have six months to a year’s equivalent of a reserve fund, perhaps the next step is to actively encourage gifts to an endowment. Putting aside funds like this is akin to the advice of a financial planner who suggests to clients they have six months of savings in the bank and have paid off expensive credit card debt before they start putting more money into restricted IRA accounts.

Endowment fundraising is a powerful tool that can enable wonderful things to happen today and far into our futures. Endowment building is not just another fundraising or gift option: it is about the entire fabric of your organization. Your donors consciously or unconsciously realize this and will vote their dollars accordingly.

Of course, none of this is legal advice and I strongly encourage you to engage professional advisors in your state who are more familiar with your specific situation.

I hope this was helpful.

Best wishes for the Holidays,

Kevin

"Unrestricted" Gifts to Endowment Question

2009-11-12T21:15:00.000-08:00

In the discussion of bequests and endowments it's too easy to confuse issues. Often the confusion comes around use and definition of the words “unrestricted”, “endowment” and several different classification systems used to describe or proscribe the use of funds.

May I suggest that too often we mix and match definitions here with the result the discussion of the real issues becomes muddy? Based on board discussions I have witnessed on these same topics, this is nothing out of the ordinary. It is however incumbent upon nonprofit professionals to help lead these kind of discussions and add clarity.

Using different filters for the purposes of clarity in this kind of discussion may help.

Here are two perspectives or filters that may add clarity: 1) WHEN will a gift be used and 2) HOW will it be used. A gift could be “restricted”, so to speak, in either or both categories. When we mix words describing the HOW it will be used with similar words referring to the WHEN, it’s easy for discussions to go awry — particularly at the board level, not to mention in this forum. Donors and board members also get confused and when they are confused it’s been my experience that they do not complete gifts -- and no one wins if that happens.

There is also often a lack of clarity as to what constitutes a donor requirement. Often we hear the maxim that a donor must restrict a gift “in writing” for purposes of an endowment. However, if we were to send out a letter to donors asking for a gift to an endowment, and they sent back in response a check made payable to the organization (but not earmarked “endowment”), that gift would be appropriately restricted to the endowment. That gift would be restricted as to WHEN it could be used, a bit at a time for years to come. It would not be restricted as to HOW the money would be applied, say, to core operations expenses or to scholarships. Would you agree?

Some years ago I worked with an attorney who used the perspective of contract law to illustrate how donor intent would apply to the use of their gift. For example, if you and I agree on something, in effect we have created a contract or an agreement. If an organization has a standing and publicized policy to use bequest gifts that are otherwise undirected to put into the endowment, there is a reasonable expectation on the part of the donor that the gift will be used exactly in that way. There is in effect a contract or requirement that the gift be used in exactly that manner. Thus bequest gifts not otherwise directed placed in an endowment fund would be consistent with both promises and assurances the organization has publicly made AND an inherent part of the expectations of donors in completing a gift.

Imagine, if I as a prospective donor, or former board member, knew that the group had a written policy to place all gifts that not specifically directed to another use, into the endowment (a real one: a savings account from which we spend a portion each year). I could reasonably and confidently make plans to leave, say, my IRA to that group expecting it will be placed in the endowment. In the words of the attorney there is in effect a contract between the donor and organization. If I wished my bequest to be used another way it would be up to me to say that and to make sure that my contrary interests were reflected in the records of the group.

I have worked with a number of groups that have similar policies to Paul's in place. That is, they let donors know it is policy and practice to place part or all of estate gifts into an endowment (not a false or quasi-endowment fund) UNLESS the donors specify something else. This has satisfied donors large and small and a number of different legal counsel. (Of course I would imagine state contract law varies and might have some specific requirements or case law that might influence the way to construct your own policy.)

It seems to me that it’s always better to have confident board members telling friends and prospects about why they trust your group, compared with consuming their scarce volunteer time with conversations/arguments about the meanings of narrowly construed words. The lesson I learned observing a number of nonprofit board and staff discussions is that it will be continue to be very important for organizations to clearly describe their policies and to communicate them to donors using simple and clear language.

2009-11-02T08:49:00.000-08:00

Donor Wishes are Important

Animal-welfare groups charged in court last week that the attorney general of New York, Andrew M. Cuomo, failed to "discharge his duties" in overseeing the charitable bequest by Leona Helmsley and failed to uphold the donor's intentions as reported in a story in the Chronicle of Philanthropy.

Many donors carefully choose how their estate will be used when they are gone. To have such wishes disregarded sends an incredibly negative message — and dangerous one too. It is important charitable groups do everything they can to ensure that donors can and should trust us to do the right thing when they are no longer here to make sure the spirit and letter of intent of their bequests are carried out. I applaud the effort to enforce the donor’s instructions and wishes.

2009-10-30T14:53:00.001-07:00

Planned Giving Is Dead.

No pun intended. Donors are just not picking up on this fundraising term. It's time to re-label.

Donors are interested in the outcome or impact of their gift: it's a legacy gift.

Beqeusts account for 90% of the gifts often described by the phrase of “planned gift.” Often times a bequest – a legal term to describe the act of giving something through a will or larger estate plan - is viewed by nonprofit leaders as a fundraising tool. A bequest is a tool for donors too. The impact of a bequest – how the gift is used – is the real reason anyone would make such plans. Acknowledging that the outcomes are most important, nonprofits should call such bequest gifts “legacy gifts” to better describe their true value.

Growing numbers of Americans are creating and telling their own stories that demonstrate what matters most to them. An integral part of this story is how they express their lifetime values and make them real – by planning charitable gifts in the form of bequests directed to small and mid-size nonprofits. Every gift is an inspirational story about the value of the work of nonprofits and visions of a better tomorrow.

Technically the gift is planned, but calling it a “planned gift” sells short the legacy of the gift.

2009-09-10T08:59:00.000-07:00

E-mail vs. paper
for communications with donors is a question relevant for environmental as as well as for donor relations reasons. Here's a response to the paper or electronic question posed by a development director:

One of my clients, a national group with a young, wired constituency, discovered in a survey I did with their donors that many wanted the paper version of newsletters and reports. One wrote something like: “I am on line all day and I want to sit down in the morning with corn flakes and read about what you do.” Other donor surveys I have conducted for clients suggest similar interests and needs. The challenge is to give your donors what they need and want — not what’s most convenient for your group or a particular staff member.

There are also different kinds of communications. For example, materials related to legacy gifts or bequests might be better on paper. Making a decision to include a group in a will or estate plan is one arrived at over a period of time. Having a reference card or materials that will stay on a desk or in a file for reference can be effective. You will have to decide how your messages and formats match donor needs or decision making processes.

What about giving options for paper or electronic? Good idea. BUT, and it’s a very big “but”, you really have to be able to deliver on what you say you will do. Too often donor preferences are not well tracked and you can get set up to conflicts with donors as a result. In my own case, I was a regular donor to one group but decided I did not want to get all the email. After at least 7 requests to unsubscribe it still sends me email. They are now classified as “junk” on my computer. It’s not likely I will ever give to them again. My reasoning goes something like this: if they don’t track data, what else don’t they track? If they don’t get this right, what else can’t they do? If they can’t pay attention to simple requests, my gift certainly is not important, I will go elsewhere (and I did).

As you go about this work, your tone of voice used in communications with donor should also reflect that service oriented perspective. Too often that is missing. How will you make the suggestion in a way that builds and extends a trusting relationship with a donor?

Another key reason some people decline to give you an email address is the habit of some groups to exchange lists (email and post office mailing) or that they fear you will send too many emails. Penelope Burke’s research showed donors hate it when their names are exchanged, yet many groups still persist in doing exactly that. How will you enable donors to control how much or how little email they get from you?

Good luck — saving paper really does matter. Here’s a cut and paste link to a copy of a news article on a host of tips and things to do to reduce junk mail and wasting paper:

http://www.forestethics.org/salem-news----sick-of-junk-mail-opt-out-strategies-reduce-mailbox-waste-invasion-3

(Full disclosure: this article is posted on the web site of a group to which I donate time and money to support.)

2009-06-22T10:07:00.000-07:00

Who can be Trusted to
Tell the World Your Story?

Since January 1st more than 2,000 newspaper jobs were cut in the western United States. With fewer reporters, who will gather, report, and write about local, state, and regional activities? Blogs clogged with opinion won’t fill the absence of fact-based, vetted information.

What are the implications for the nonprofit community?

Without reporters, who will tell your stories? Who will investigate, report on, and describe topics in regards to the issues, public policies, and trends relevant to your work? Who will provide independent, third party validation of your work, impact, leaders, and supporters? This is the first of three columns on the impact on the nonprofit community, foundations, possible responses, and prospects for the future.

What Happened?

The golden age of journalism may prove to be the period between 1950 and the turning of the new century, 2000. The business model of newspapers worked during these times: there was enough advertising revenue to support large newsrooms, investigative reporting, and a wide range of news services. As ad revenue plummeted in recent years, the business model broke. Some already describe it as a dead model. Seeking to reduce costs, owners cut wherever possible. Newsrooms were obvious places to “save” great costs. The golden age is over and it’s not coming back.

Nonprofits NEED Reporters

More than they suspect or acknowledge, nonprofit organizations rely on validation provided by news and feature stories that reporters write and produce. With fewer reporters at all levels, it is likely only the largest groups or most dramatic stories will be covered.

What will be the implications of this shift on your ability to tell your story in a credible fashion, to build community awareness, and to generate buzz about important community issues or special projects?

Validation through reporters’ stories distributed through a variety of channels seems to be taken for granted. Nonprofit leaders celebrate when they get a front page, “above the fold” Metro section story or when a local columnist features their work or one of their volunteers. Paper copies are made and mailed; electronic copies are forwarded far and wide via email; links or PDFs are posted on the organization’s web site; and excerpts are placed in newsletters and in reports. Board members brag about the stories at social events.

It is valuable when an independent outsider chooses to write about and describe the work of a nonprofit. Donors to nonprofits often proudly talk about coverage of their favorite groups. “Did you see the story about _______?” is a common question at donor gatherings. Seeing “their” group talked about in newspaper and magazine stories is validation for donors: it tells them that they made the right choice. For many donors, this is an invaluable experience that encourages continued, and even increased, gifts. It has been my experience that this is important to donors at all gift levels. Some groups have actually based their revenue/funding model on continued attention in the media. They are even more vulnerable than others at this time of media change.

Will there be a new definition of “newsworthy”? Will it trend toward only the most dramatic stories, or the nonprofit scandal of the day, or perhaps only to those that provide prepared content?

It’s Not ONLY About You.

With fewer reporters and dramatically different distribution channels for information, will policy makers and community decision makers get the information that will help them make the right big-picture decisions? Such choices have the potential to deeply affect the work of nonprofit groups at all levels. From the group that works with pre-school children, to others that help feed those in need, to those making sure we have clean water, all rely upon fact-based digging by reporters. With a greatly reduced supply of information, how will this affect the nature of public and private interactions and decisions?

How will nonprofits fill these gaps? In effect, their marketing, education, and fundraising efforts will all need to increase in response. One of the consistently reported and documented needs of donors is for detailed information about the work and impact of the groups that they support. As reporters and news distribution changes, nonprofits may be forced to increase their sophistication, volume and channels of information distribution.

The need to expand communication and accountability reporting will lead to some increase in costs of operations. Today, most accountants would group this into the category of “overhead”. Yet rather than being burdensome “overhead”, such expenditures are wise, vital, necessary expenses without which organizations will not likely succeed in the fundraising market.
This suggests that the narrow budget or functional breakdown of nonprofit activity consisting of program work and “overhead” is likely flawed and will need re-structuring or at a minimum re-interpretation.

Without enhanced public education, targeted donor education, and increased donor/volunteer/activities stewardship, program work may be severely inhibited or even hindered. The line that used to be somewhat clear between program work and everything else will blur, perhaps even disappear. This has implications for most nonprofit job descriptions, performance metrics, and staff skill sets.

Changes Outside
Mean Changes in How Nonprofits/Social Profits Think and Operate

As a result of these accelerating changes, here are some issues that will have to be addressed by nonprofits wishing to thrive in the coming years.

• How will you provide donors, supporters, and policy makers with the news and information that they need to make decisions that affect your work?
• What will you do to ensure the information reaches the people you need to reach?
• What data do your donors need?
• What data do policy decision makers need?
• What data do community leaders need?
• What data do other organizations and those linked to your mission work need?

With Demand for Greater Transparency,
this is BAD timing.

Reporters were wonderful allies in helping translate or illuminate the work of nonprofits. Their independence was highly valuable because it gave donors an experience of transparency.

Transparency is linked to integrity and trust; it is also tightly linked to the size and frequency of donations. But there is more to transparency than news stories. It is the ability of donors and community members to get the right information in a timely manner, in a useful form, and then be able to use or understand that data. Often reporters not only accumulated data from hard- to-find sources, they also interpreted it. The result was a valuable service. How will it be replaced?

This suggests that the way nonprofits report their results and financial data, and distribute their 990s and other evaluation information may need to take on new forms and require much greater levels of translation and even third-party review.

Many nonprofits have yet to post their 990s on their web site; some don’t even list staff names. If transparency is a valued objective, there is great distance to travel in a very short time for these groups.

“You are your own news reporter”

The disappearance of reporters, the change in the distribution of news, the growth of electronic media: all raise significant questions about how nonprofits have structured, presented, and distributed their key messages.

How will you tell your story?

Newsletters and donor communications will need to be fundamentally reformed, re-thought, and re-contextualized, to more of a newspaper-style news source rather than a chatty, informal collection of essays. New reporting styles and formats may take greater precedence as well.

As a result of these accelerating changes here are some issues that will have to be addressed by nonprofits wishing to strive in the coming years.

• How will you provide donors, supporters, policy makers with the news that need to make decisions that affect your work?
• What will you do to ensure the information you need to be successful reaches the people you need to reach?
• What data do other organizations and those linked to your mission work need?
• Will you need to tell “both sides of the story” as your role changes and there is a greater need to present the other side of the story in a fair manner?

The second and third articles in this series address opportunities and options for nonprofits, foundations, and policy makers.

By Kevin Johnson

Thanks to comments from Robert McClure at Investigation West for inspiring this column.

2009-06-07T18:06:00.000-07:00

Fundraising in Times
of Economic Uncertainty
Six strategies for the rest of the year and beyond…
By Amy Brown

"Change or die." Although somewhat dramatic, this was the bottom line sentiment expressed by one participant at an Assocation of Fundraising Professionals workshop about fundraising in times of economic uncertainty. Nonprofits that don’t step up their game in this economy are likely to get lost in the shuffle. To strengthen your organization, consider these six strategies as shared by 25 senior development professionals who participated in AFP Oregon & SW Washington’s Senior Salon, hosted by the OSU Foundation and facilitated by Kevin Johnson of Retriever Development.

Capitalize on your board's desire for more information and involvement.
The recession is motivating board members to ask more questions about financials, fundraising plans and strategies. Many feel a heightened sense of responsibility and want to be sure they are pulling their weight. Younger members are often leading the charge, raising the bar for veteran members. Take this opportunity to talk with your board about current fundraising challenges. Remain calm, confident and transparent. Engage members in discussions about how they can help. Provide them with additional training in areas such as donor cultivation and solicitation, and board development. The latter can be especially helpful if you need to trim some “dead wood”.

Strengthen relations with your donors.
Staying connected with donors should be a top priority for all development professionals right now. With many donors reducing the number of nonprofits they support, you want to be sure yours remains on their list of “keepers”. Accountability breeds trust so be sure to let donors know the impact of their last gift before asking for the next gift. Engage board members and other leadership volunteers in regular “thank you’s” and “check-in’s” with your major donors. Negotiate extended pledges as necessary. And remember, board members are donors too.

Adjust your messaging to fit the times and better connect with your donors.
If you aren’t talking about why your organization’s work is more critical now than ever before, you are missing out. Today’s donors want to help address the challenges in their community so provide them with clear opportunities to do so. For example, “in tough economic times, education costs rise and thousands more aspiring students can’t afford college. By investing $______ in a scholarship today you can make a significant and lasting impact in the life of a young adult in our community.”

Streamline operations to reduce costs and better serve your constituents.
Many nonprofits are re-packaging their programs, partnering or merging with friendly competitors to become more efficient and better serve their constituents. Others are cleaning house by eliminating "weak" staff and cutting activities with low ROI. This is an especially opportune time to get rid of sacred cows (did someone say auction?) that influential staff or volunteers have been holding onto forever, even though they hit their peak years ago.

Assess and prepare your development program for action.
With campaigns on hold and development programs in flux, now is an excellent time to conduct a development audit to clearly identify what strategies and methods work well and what needs improvement. The results of such an assessment can be used to fine-tune or create a campaign plan or action-oriented development plan (with “pipeline projections”) so you are ready to jump into action when the economy bounces back.

Use technology to more effectively communicate with your constituents.
With the drive to reduce costs and be more “green,” development professionals are increasing their use of technology to enhance donor communications. E-newsletters and on-line appeals are replacing or supplementing print newsletters and mailings. Facebook, Twitter, weblogs and other social media tools are providing excellent forums for nonprofits to extend their reach and engage in valuable discussions with donors, alumni and friends.

Now is the time to take extra steps to connect with your donors, equip and motivate your board, and prepare your organization for the future. We live in a cyclical economy so better days are around the corner. Make sure your organization is prepared to succeed!

Thanks to Amy Brown, the author of this article.

2009-05-04T19:29:00.000-07:00

Wisdom from the Depression:
Building Market and Mind Share

A headline in The Economist reads “Past crises inspire little confidence about the outcome of this one for America.” The article described a gathering of economists and the discussions held about a series of studies of “severe” banking busts.” In other words, what ever we are going through, it will take a while to get out of it.

For nonprofit leaders and supporters, the question then becomes how will we survive AND continue to build the kind of organization that will be able to thrive now and in the years to come?

A recent column in the New Yorker magazine describes how some companies made tremendous progress during the depression. In fact, some became market leaders as a result of their strategic choices. There are some more recent examples as well. See the article here.

What choices will you make that help your favorite nonprofits survive, perhaps even THRIVE, in these times?

2009-04-27T10:44:00.000-07:00

This is a time of opportunity. I hear of a number of social profit groups cutting back expenses -- especially marketing and fundraising expenses. It will be hard to recover donor mindshare later. A recent article in the New Yorker entitled Hanging Tough discusses the value of marketing in hard times.

2009-03-29T21:05:00.000-07:00

Effective Board Members Help Nonprofits in Troubling Times

It’s a difficult time to be a member of a nonprofit board. Donations are up for some causes, down for many others. As a board member, how will you lead in these times? What are the important questions to ask and decisions to make? (Hint: Cutting expenses by an arbitrary 20% is not the act of a leader.)

In a recent survey findings and conversations with board leaders and nonprofit executives, five successful themes stand out in which board members played pivotal roles:

1. “We created detailed scenarios for program planning matched with resources.”
2. “Everyone helped to increase our time investment in relationships with key donors.”
3. “We focused on our program work to maximize impact in relationship to investment of time and resources.”
4. “As an executive director, I worked with a small group of the most loyal and interested board members to plan and work with donors.”
5. “We paid keen attention to cash flow and key financial indicators.”

Timely Planning To Overcome Fear

Overcoming fear and concerns of staff, other board members, and donors may be THE first most important task at hand. Uncertainty creates additional fear. Timely planning and preparations for solid planning are powerful tools to chart your own, clear course in the coming year and build confidence of donors, staff, and volunteers.

It’s time to identify core costs, fixed costs, variable costs associated with program work now so that you have the data you need for later decisions. What are the most important financial numbers to track, do you understand the cash flow projections, are budget numbers linked to programs so that you can make intelligent financial decisions and understand the true program/mission implications, what will the role of the executive committee be in these times when difficult decisions may be required?

“Managing in Hard Times” is an useful workbook and is available from the Institute for Conservation Leadership at www.icl.org/toolkits.

Identify Key Donors

Nonprofit groups must plan to now change the scale and nature of their fundraising work now to match predicted gaps. For many it may mean hard conversations about internal resource allocations. There are several realities to face:

1) Fundraising will cost more so budget for it now. You’ll be doing more donor-based fundraising, which is labor intensive. It’s wonderful to be able to brag about low overhead, but this will prove shortsighted. Cutting marketing and fundraising expenses may seem easy, but it may cost dearly in the long term. If donors don’t know about your work, they won’t be able to give; if their friends don’t know about your work, major donors may not have enough confidence to make larger gifts.

2) Marketing will increase in importance in terms of influencing donor decisions to give and invest. Will your group make the cut with existing and new donors? It is documented that as recessions end, philanthropic donations experience a substantial positive bounce back. If you cut back on fundraising and marketing now, will you be forgotten later when it will count even more?

3) Increased involvement not just of the board and the fundraisers but also on the part of program staff and volunteers at all levels will be critical for continued fundraising success. More and more research about giving demonstrates the value of personal connections. Use the network of passionate staff and volunteers you have to spread your connections even wider.

4) Depending upon your funding mix, you may need to re-evaluate your fundraising models because they might not be the ones that will stand up well in the coming 3-5 years. Bequests will become increasingly important as sources of income for current work, reserve funds and savings accounts for the future. Your marketing must address both the work of today and your vision for the future.

Board Members Play a Critical Role

A BoardSource survey reported that about half of nonprofit board members said they feel uncomfortable asking others to support their organization. In difficult times every board member must play some role. It is important to recognize that not every board member has to play the same role.

In difficult times board members may be preoccupied about their own financial security and find it hard to focus on service to a nonprofit. But when times are difficult, donors tend to stay close to groups they already know and trust. Thus, today it is even more important board members continue to expand their contacts on behalf of their nonprofit group. Simple ‘thank you’ calls, reminders to friends can be powerful influences on others and their giving.

Is it time to re-visit the expectations you have for board members in regards to fundraising and community involvement? Is every board member contributing money? Is every board member including or planning to include the organization in their estate plans in an appropriate manner? When other donors hear 100% of the board gives, it inspires confidence; when they hear that only a small percentage give, it raises serious, negative questions.

Overall there will be many new opportunities, along with many potential pitfalls. What opportunities will you as a board leader help prepare for your organization? How will you benefit from these times?

Note: Portions of this article are excerpted from Kevin’s article on the same topic which recently appeared in the Portland Business Journal.

2009-02-25T19:42:00.000-08:00

Fundraising Trends Survey Report

We surveyed 181 organizations in Oregon and SW Washington about fundraising trends. Here are some of the key messages we heard:

What responding organizations told us is:

⇒ The impact on nonprofits of the economic crisis does vary.

⇒ Those nonprofits with diverse revenue streams, good management, and what could be labeled “learning cultures” appear to be coping markedly better than others.

⇒ Organizations that are faring better appear to be putting more focus on development activities, especially individual donor relations including major donor development.

⇒ Respondents report that board members need to be more engaged team members by actively participating in fundraising, cultivating relationships, and being ambassadors for the organization.

⇒ Respondents stress that nonprofit leaders need to set the tone, be calm, and communicate clearly about decisions, priorities, and organizational vision and goals. They need to be more visible and more involved with individual donor fundraising.

⇒ There is a suggestion that, in some cases, the organizational sense of being “fine” may not match with finances, planning, activities, staff/board engagement, and other components of organizational health.

⇒ Better internal communication among organizational team members is key to surviving in this difficult economic climate.

You can get a copy of the full report at www.RetrieverDevelopment.com or at Fundraising Survey Report.

2009-02-14T18:44:00.001-08:00

Annual vs. endowment fund promotion.

There might be value in promoting an endowment fund gift now — not as a tool of giving or a product a social profit is selling. Rather, as a way for donors to express personal and civic values.

Maura wrote about whether or not her organization should again focus on the endowment fund or stick to their current annual fund promotions.

Here are a couple of different perspectives and questions in regards to the two tools to include as you make your planning decisions.

Using the endowment fund tool as a way of giving is a way to more appropriately talk about some of your big picture goals and long term vision. It could be very effective in these times in which donors are looking for values they can trust and groups that they can feel confident about. If you focus on an endowment gift merely as a tool or technique of giving, I suspect you will continue to get mixed results as you describe your past efforts. Why would an endowment be important to your mission and work and how does that connect with the interests of your most loyal donors?

You may also wish to explore reasons donors have already given (and have not given) to your endowment in the past. Are there hidden questions that you must answer before donors will have confidence in giving to a long term fund?

For example, one group I worked with couldn’t figure out why its big campaign was not working. Finally we interviewed a number of donors and several asked, what happened after that embezzlement 7 or 8 years ago? We realized that a number of key donors had some questions about how the money would be handled. As a result a well respected CPA made a statement that this was one of the best-managed groups around. That addressed the hidden question that had been negatively affecting donor confidence and in effect stopping bigger gifts. Do you have any hidden questions among your donors that might get in the way of committing to an endowment gift? (You won’t know if you don’t carefully ask and listen intently.)

Focus on the values and needs of donors. What needs do they have that will be fulfilled by making a gift to an endowment fund?

2009-01-27T09:57:00.000-08:00

Are major donors disappearing?

A recent Wall Street Journal article "As wealthy donors watch their portfolios shrink, a number of philanthropists are finding they may not be able to fulfill a multi-year pledge or continue annual contributions to charities they support."

I have observed that some donors have, in the words of one financial advisor to the wealthy, “gotten out in front of their skis”. But that is not the case for everyone.

There are many donors who have different portfolios, invest differently based on time of life goals, or who invested with a different perspective on the market. The affects or reactions of some wealthy donors do not necessarily represent a trend. (They do make a good story though.)

I have noticed that a number of major donors do appear less interested in making pledges. In fact some are signing paperwork and asking that a phrase be inserted saying this is not a legally binding pledge. Others are saying that will not make a pledge, but adding verbally, “you can count on it”. Economic uncertainty has many ripple effects. This is a time to re-focus on what donors need, not what an accountant needs to put on paper for tracking purposes. Nonprofits like pledges because they can be tracked. However, if a donor declines to make a pledge but still makes gifts, isn’t that good too? It may require more stewardship and attention on the part of the nonprofit. I would suggest that this will pay off for everyone both in the short and long term.

Shortly after the tech bust a few years ago, I met with a former high tech executive. I expected him to have taken some real hits to his portfolio because of what I assumed. In a time when everyone seemed to be taking double digit losses, I was stunned when he handed me statements from his portfolio: +9.58% for the year. It was a lesson for me that not everyone is in the same situation.

One donor couple with whom I am familiar told their favorite nonprofit that that they lived on 1% of their investment income. Since they had just come back from an around the world trip, this suggested a substantial level of their overall net worth. A decline of even 40% in net worth for them would not and did not affect their lifestyle at all. It is a matter of perspective.

One clear lesson from the last recession was that for many organizations, a relatively small number of major donors made a very important difference in fundraising success. This lesson is still relevant. Then, as today, there were some who were quite affected. There were also others who continued to give quite generously.

I suspect that these times, this economic shock, will bring out new donor needs and concerns the type of which are new to many in nonprofits. It behooves all of us to take extra care to focus on what our donors need now. It may be quite different from what we have assumed in the past.

2009-01-25T16:57:00.000-08:00

Invest in the Future

I am in the process of surveying nonprofit leaders and their responses to these difficult economic times. One of the preliminary observations is that those groups that executed fundraising plans well and, in many cases, increased their level of fundraising work, got more in the way of results in 2008.

Budgets for all nonprofits will likely be tough this year and next. However, in what may seem to be a counter intuitive move, this may the the year to budget even MORE for marketing and fundraising.

Competition for donor attention will be greater. Donors will need greater, more frequent re-assurance that they are making the right choices. They will need increased attention at all levels. In one recent fundraising letter I received the executive director had hand written, “Kevin, I hope we make the cut.” He recognized that most gifts this year were going to be subject to new and different levels of donor scrutiny. (By the way, that group did make the cut and I wrote a check.”

All of this argues for increases in marketing and fundraising budgets. Arguably for many nonprofits, the cost of fundraising will increase per dollar raised. There may be only a few exceptions to this: those that have put into place strong bequest fundraising efforts in earlier years. Several clients of mine have recently received six figure bequests in recent months which, in effect, “saved” their year end numbers and made up for other fundraising declines. (For the record, it’s not too late to start or renew a bequest oriented effort this year.)

Not only will fundraising cost more, if you don’t allocate the budget and resources now, you will likely miss out on even more income later. Why? After every recession there is a recorded increase, or pop, in philanthropy. If your organization is not top of mind, you will miss out. (See Institute for Philanthropy and recent Giving USA research reports for the details on the post recession pop.)

2009-01-10T13:46:00.000-08:00

"Creative Cuts" in the Budget

A nonprofit fundraiser recently wrote asking about “creative ways” to cut the budget in these times. Some of the ways she listed included:

• Talk with staff to see if they will voluntarily reduce their work hours—perhaps staying home in the summer with their kids or cutting back to less than full-time for a season
• Reduce or eliminate raises
• Reduce agency contributions to the 401(k)
• Schedule everyone for 1-2 weeks of unpaid leave—a “furlough”—either in a block of time or spread over the year
• Reduce travel reimbursement
• Eliminate all staff development except trainings

Dear Nonprofit Fundraiser:

I greatly admire your optimistic approach toward “creative cost cutting.” I wish such a thing were easily accomplished. I would suggest that cutting a development budget in these times is neither creative nor an exercise of leadership. That is not to say that one might be able to do things more cost effectively or smartly. But be careful what you ask for.

I once observed a staff person with a master’s degree spend almost two hours over a decision on whether to save a total of $15 on postage by using different methods of mailing. You do the math: did this well intentioned cost cutting effort save money or turn the mailing into one of the most expensive possible? Of course, I am sure such a thing would never happen in your shop.

You describe a number of possible cost cutting moves. Mid-last year one group with which I am very familiar did every single one of the things you listed in your post. Today I heard that the executive director has resigned, they are running a deficit budget, December fundraising with major donors was notably lower, several key staff have departed on short notice, and staff morale is bleak. Though I can’t make a direct correlation to those activities and the results, it is generally acknowledged by remaining staff that the “creative cuts” played a part in the negative results.

Here are some things I have observed in the past in the case of multiple organizations regarding development budget cuts:

Staff start job shopping (or the best staff quickly take the job when the recruiter calls)
Staff cut back on face to face donor contacts. The result is that major donors feel less connected and give less or go to other groups for their “big” gifts). A recent study documents such major donor dynamics.
Admin activities, as a result, take an increasing percentage of work time (since there is a core of that type of work that just must go on), the result is that your fundraising cost actually INCREASES in terms of cost per dollar raised (that’s counterintuitive at first, but do the math, include all the real costs of time and effort, and it will be obvious quickly).
You lose contact with donors at the time when you could build the most meaningful kinds of relationships. In troubled times people look for touchstones, successes, places that have or embody important values: social profit groups doing good work. If they don’t see or hear from you, they look elsewhere.
You know that it is far more cost effective to retain a donor than to find a new one. Yet, stewardship activities that keep donors connected are often the first cut.(It costs 11 times more to find a new donor than to retain one.)
When the post-recession fundraising bounce comes (and this is documented historically), you will likely NOT be part of your (now lapsed) donors’ plans.

This week I worked with executive directors and development directors of six groups all of whom are INCREASING their allocation of resources in favor of MORE fundraising efforts this year. Each is doing it for slightly different reasons, but all are focused on building their organization into something stronger and increasing their impact in the world.

I encourage you to look for opportunity. Fundraising should not be equated with fund squeezing. One builds an organization; the other, well, I suspect you already know where that path can lead.

May I suggest a different perspective in the form of this question: How will you, as a fundraising professional, be a leader within your organization and on behalf of its many loyal donors in these difficult times? I could imagine that many other people might like to join you in that quest.

2009-01-07T11:21:00.000-08:00

Current Trends and Nonprofits (Social Profits).

A social profit executive wrote: “I'm preparing a major gift strategic overview and wanted to include updated thoughts on the current economic situation and how that might affect our numbers moving forward. Any thoughts on this would be greatly appreciated.”

You raise a question that it seems is top of mind for every fundraiser, social profit board member, and executive director right now.

The challenge in answering your question is that every nonprofit has a different revenue stream. Some are heavily foundation dependent, others on small gifts, others on direct mail. These mixes will affect your planning needs.

With that in mind here are a few comments on the economy followed by an outline of 5 implications for fundraising. Notes and resources are listed at the end.

Perspective and Size Matters: This is NOT the Depression

Comparisons to the Great Depression are inaccurate and dramatic. For example, estimates for unemployment for 2009 are 7% to 8%; in contrast, in 1933 unemployment peaked at 24.9%.

Size relative to the overall economy matters. One trend watcher writes:
“ … this crisis would be about as great as the Savings & Loan crisis that we experienced in the U.S. from 1986 to 1995.[i] He acknowledges the impact will ultimately be greater than that but in terms of recent experience, this event may come closer to our experience of that time and economy and not the depression of the 1930’s.

One of three key indicators tied to giving growth is personal income: in August it was up, September was flat and in October, it was up 0.1%.[ii] however, in November, 2008 it was down slightly at –0.2%. December numbers are not out yet.

Impact on Giving Varies

Since 1954, total giving increased in current dollars every year except one.[iii] Over the past 40 years, giving in current dollars averaged increases of 8.4% in years without a recession and increases of 6.2% in years with a recession.

In the 4 years with recessions, inflation adjusted giving only declined an average of 2.7%.

The impact of long recessions on giving varies by donor types. Not all organizations, or types of groups, experience the same changes in giving, even in recession years.

In 1974, the worst year for recession giving, inflation adjusted giving declined a total of 5.4% and declined from all donor types. In 2001, giving from individuals declined, but increased from foundations and corporations. There will also be variation within the fundraising marketplace. For example, research based on data from 1987 to the present suggests that environ-mental donors still continue to increase total gifts in recession years though at a lower rate of increase.[iv]

Foundation giving, a mainstay for many groups, will likely suffer in the several years to come as a direct result of portfolio losses. For example, several foundations have already informed grantees to be wary. There are also negative ripple effects from the Madoff scam.

However, for many groups with a (disproportionately) high reliance on foundations, it will mean they will have to significantly increase their individual fundraising results to replace some foundation support.

FIVE Implications for Social Profit Groups

1. Overcoming fears and concerns of staff, board members, and donors may be THE most important task at hand today. There must be concerted response on the part of executive directors and boards. For the most part it will likely fall to the executive directors to spread the calm, the message, and to lead creation of an organizational response. Some are already doing this well; others are still in shock.

2. Groups must plan to change the scale and nature of their fundraising work now to match predicted foundation gaps. This shift must begin with work plans for the first quarter of 2009. For many it may mean hard conversations about internal resource allocations.

3. Individuals tend to give to issues that cross socioeconomic boundaries – like environmental advocacy – and to organizations that have clear, compelling, and simple messages.[v] In light of other needs, say for food banks and feeding families who recently lost their home to foreclosure, current messaging of many groups may fail to make the cut with today’s donors. There is likely an opportunity to re-frame your messages in the larger context of donor interests and concerns. This may be a significant challenge for many groups since their culture is often project oriented with (hidden) embedded values in sharp contrast to “simple benefits” as perceived and needed by potential donors.

4. Middle donors – those giving from $500 to about $10,000 a year will likely be squeezed hard economically and may step back in large numbers. In the case of many organizations, this group is often the pool they describe as their “major” donors. This retrenchment could have profoundly negative effects. This suggests the need to seek both wealthier donors for key gifts AND to use technology to economically increase the number of small gifts from people who are locally or regionally connected to the work of the specific group. For many groups, this will require a substantial step up and investment beyond current levels in their use of technology and its combination with advocacy, donor stewardship, and fundraising.

5. For many groups, it will mean the SCALE and orientation of their fundraising work will have to change. It will require more time and larger budgets for fund-raising and messaging. This will affect work plans of board and staff person (program staff too).

Notes:

[i] Dean Dordevic, Ferguson Wellman Capital Management, Market Letter, 3rd Quarter, 2008. His analysis is based on comparisons of GDP and relative size of losses. In an interview in late 2008, he confirmed he still believed that comparison to be generally accurate.

[ii] October data released Nov. 26, 2008.

[iii] Much of the reference material in this section is from Giving USA Research, the Giving USA Spotlight #3, 2008, and materials from the Center on Philanthropy, Indiana University.

[iv] Giving USA Foundation, Giving USA Spotlight, Issue 3, 2008. p. 16

[v] “How Nonprofits Get Really Big” by William Foster and Gail Fine, Stanford Social Innovation Review, Spring 2007

Other Resources:

• Giving USA and the Giving USA Spotlight
• News and research from the Center on Philanthropy at Indiana University
• “A Survival Kit for Fundraising in a Bad Economy,” Association for Fundraising Professionals Resource Center
• Robert Sharpe articles on Economic Conditions and Charitable Giving
• “Resilient Philanthropy” by Bradford Wm. Voigt, and “Charitable Giving and Inflation,” Advancing Philanthropy, September-October 2008
• “Seeing the Light,” by Kristin V. Rehder, CASE Currents, April 2003
• “Friends in Need: How charities maintain ties to financially strapped donors,” by Maura Webber, Chronicle of Philanthropy, June 26, 2003
• News and articles from the Chronicle of Philanthropy
• “International fundraisers debate impact of recession and credit crunch,” October 21, 2008, from the International Fundraising Congress in the Netherlands
• Google searches for “fundraising and recession,” “recession impact on fundraising,” or related topics