Donor Cultivation Advice ... from Starbucks?!?

I love this campaign to engage customers... from Starbucks, of all companies:

http://mystarbucksidea.force.com/ideas/ideaList.apexp

Could you imagine if fundraisers were this proactive with soliciting the input of their donors? What would change if your donors began to feel the level of ownership over your organization's mission that the typical Starbucks junkie feels about their local coffee house?

[where: 75223]

Uh oh... Tax Exemptions of Charities Face New Challenges

The New York Times reports that "Tax Exemptions of Charities Face New Challenges."

Could this be trouble for the sector?

Or is this another positive step towards better stewardship?



----------------------------------
What do you think? Please click the COMMENTS button below.

Ten Basic Responsibilities of Nonprofit Boards

While researching the topic of board responsibilities for fundraising and financial management, I came across this page at the New Nonprofit Nexus, which includes a reprint from Ten Basic Responsibilities of Nonprofit Boards by
Richard T. Ingram.

I encourage you to review the full list here:
http://www.mnaonline.org/bookstore_images/ACFBE0.jpg

The book, a publication of BoardSource, states that the following are the Ten Basic Responsibilities of Nonprofit Boards (each is detailed further here):

1. Determine the organization’s mission and purpose.
   
2. Select the chief executive.
   
3. Provide proper financial oversight.
   
4. Ensure adequate resources.
   
5. Ensure legal and ethical integrity and maintain accountability.
   
6. Ensure effective organizational planning.
   
7. Recruit and orient new board members and assess board performance.
   
8. Enhance the organization’s public standing.
   
9. Determine, monitor, and strengthen the organization’s programs and
   services.
   
10. Support the chief executive and assess his or her performance.

It seems to me that all boards get really excited about the first one, and most enjoy the second step as well. Then, regardless of size of board, they begin to stumble until they get to the eighth, at which point they give themselves the excuse of having a big special event that they believe achieves this goal as well as many of the others (particularly the fourth, which is rarely the case).

They then get excited again when it comes to the ninth and tenth points.

Why is it that the others are such a struggle? After all...

• Providing proper financial oversight is the core function of the board.
  
• Ensuring adequate resources is the most vital function of the board, in terms of sustaining the ongoing mission.
  
• Ensuring legal and ethical integrity and maintaining accountability goes hand-in-hand with providing proper financial oversight, and is something that ONLY the board can do.
  
• The board is likely far more qualified to ensure effective organizational planning than the staff (like it or not, non-profiteers generally lack the level of business sophistication and strategic thinking necessary for this step to be successful). Besides, the organizational plan should reflect the community's interests (which the board represents) rather than the internal motivations of the organizations (which the staff live and breathe).
  
• There is no way that staff can compete with board members when it comes to recruiting and orienting new board members and assessing board performance. This area can be an incredible chore, which is why it is generally neglected; but there is no better way to improve the performance of the organization.

I would welcome your thoughts, particularly if you are a member of a non-profit Board.
----------------------------------
What do you think? Please click the COMMENTS button below.

The Camel through the Needle's Eye, by Fr. Roch Kereszty

I have been blessed with many mentors in my life: John Roppolo (2005 Fundraiser of the Year in the local AFP chapter), Larry James (2005-6 United Way Agency Executive of the Year), Willard Spiegelman and even the blogosphere's own Phil Cubeta has shaped me in his own way.

But few have had the deep, lasting impact of my dear friend and lifelong teacher, Fr. Roch Kereszty, O. Cist.

A native of Hungary, Fr. Roch was educated at the Athenaeum Anselmianum in Rome as well as Eotvos Lorant University in Budapest. He serves nobly yet humbly in many posts, including Head of the Theology Department at Cistercian Prep School. He is also, in many ways, the father of my faith as a Catholic, something I resisted bitterly while under his direct tutelage by later embraced.

Like many great teachers, his greatest lessons were learned many years after he left the daily passage of my life.

Below is one of his more insightful articles, which I have pasted in its entirety for your review. I find it to be incredibly challenging for all of us, particularly those in the business of soliciting or providing charitable donations:

“It is easier for a camel to pass through a needle’s eye than for a rich man to enter the kingdom of God”

"This is one of those sayings of Jesus which has caused much anxiety for many people (Mt 19:24). The first to be disturbed were the apostles themselves. “Who then can be saved?” –they ask Jesus. He restores their peace: “This is impossible for men but for God all things are possible” Mt 19: 26). In other words, wealth can be an insurmountable obstacle if someone is so attached to it as the young man was to whom Jesus told to sell all he had, give the money to the poor and literally follow him. But Jesus did not give the same command to every rich person. He even accepts invitations to rich people’s homes.

"He does not demand from Simon the Pharisee to sell his property. Instead, he tells his audience in a Pharisee’s house that when they invite people, they should invite the poor, the crippled, the lame and the blind, those who cannot repay the host (Lk 14: 12‐14).

"We also learn from the Acts of the Apostles and from Paul’s letters that there were rich people among the first Christians (Acts 20:7‐12). Their homes served as meeting places for the local churches in every city where Paul established a Christian community (Rom 16:23, 1 Cor 16: 15,19, Phlm 1‐2). Paul does not despair about their salvation as long as they are sharing their wealth with the poor generously and serve the needs of the Church.

"A just social order does not mean that everyone would have an equal share of goods, ‐‐ an impossible ideal anyway—it is one in which everyone who works and those who cannot work such as children, the sick and the elderly, would have a fair share in the goods of the world. In our sinful world, however, we must strive for this goal, but we will never fully reach it. Yet we can turn this sorry state of affairs to our own advantage. Are we affluent, this indicates our vocation to use our wealth to help those who are in need and in this way learn to be generous and even humble when we realize that some of the poor would more deserve the good life than we ourselves do.

"Are we poor or indigent, we can learn gratitude toward those who are helping us. The Fathers of the Church and more recently Paul VI explained in his encyclical opulorum Progressio that what is truly superfluous to the rich man and his family does not belong to him but to those in need. This, of course, cannot mean that all superfluous wealth ought to be given away in form of charitable donations. That would ruin the economy of any society. But wealth should be used to provide job opportunities, promote better health services and better education for children who are caught in the vicious circle of poor neighborhood and poor schools, they could endow foundations which provide effective help, etc.

"There are people, however, who are extremely generous with material help but also extremely proud of their status, talents and virtues. They can belong to the poor in spirit to whom the kingdom of heaven belongs only if they discover their real situation: all that they have and all that they are is undeserved gift, a cause for gratitude rather than pride. Blessed are they if they realize this fact before death deprives them of all they cherish."
----------------------------------
What do you think? Please click the COMMENTS button below.

If you had Google's ear.... would you whisper or scream?

Over at Tactical Philanthropy, Sean Stannard-Stockton has taken a very difficult task onto his shoulders by asking the question:

What to Measure and Why in Philanthropy?

(Continued thanks to Phil Cubeta for pointing us to interesting things like this... does the man ever blink, let alone sleep?)

Sean's question comes as he works to prepare for a "meeting with someone from Google.org next week to talk about what kind of information I think they should make available about nonprofits in Google Finance and other ways that Google.com’s mission statement to “organizing the world’s information” can be directed at the Third Sector."

Here are my thoughts...

As we approach the elections, I am reminded of a similar question: What makes a good country?

Is it simply GDP growth? % of electorate who participate in elections? Average income? Average lifespan?

I think it can be very difficult to gauge a good non-profit organization. In fact, I think that we have a problem with the way that we gauge all organizations.

The over-reliance on financial measures for evaluating a for-profit company is a problem, as well. I am in the minority with this idea, but I do not believe that the purpose of a company is to make money. I believe that it is to provide a needed service or product to the community.

This is the case for non-profit and for-profit companies. Their distinction should be limited to tax designation.

Is it a profitable company a good company if it causes social ills? Is a company that provides social benefits a bad company if it operates at a deficit?

These are the larger questions that we must ask ourselves.

----------------------------------
What do you think? Please click the COMMENTS button below.

Does (gift) size matter?

Thanks to Unfair Park, GiftHub and The Chronicle of Philanthropy for linking to my last post: Would you rather have one $100,000 donor or 2,000 $50 donors?

There are some interesting comments on those three blogs, and I encourage you to visit them for some perspective on what I hope will become an ongoing discussion in fundraising offices around the country:

"Are we pursuing the right donors?"

On the The Chronicle of Philanthropy blog, there was a comment from Susan Racanelli that stated the obvious: "healthy nonprofit needs both types of donors in the appropriate measure." I agree fully, and don't think that either I or the anonymous donor at
Don't Tell the Donor.org -- whose blog initially started this discussion -- intended to imply that an organization should intentionally choose between the two.

In reality, very few of us would turn down a six-figure gift or turn away 2,000 small donors. This was not the debate.

(Although I did enjoy finding the images of "Giants among us" at Worth1000.com).

What the aforementioned blogs were trying to portray were the considerations that fundraisers must make when pursuing either. There are some unique differences between how you sustain a relationship with a single, six-figure donor vs. a swarm of two-figure donors.

The real strength of any development program is, of course, its ability to sustain both.

I am currently working on my department's 2008 Strategic Plan as well as our 2008 Annual Operations Plan (AOP). One of the most crucial elements of these plans is that they work together: activities that are not tied to a broader strategy will not help a development department to achieve its goals, and strategies that are unrelated to the daily operations of a fundraising program are worth less than the ink they take up on the paper.

Here are some of the broad goals that I am considering including in this Strategic Plan:

• Decrease the lapsed donors rate (by comparing the percentage of 2007 donors who lapse in 2008 to the percentage of 2006 donors who lapsed in 2007)


• Increase renewal rate of lapsed donors (by comparing the percentage of donors who gave in 2005, lapsed in 2006 and came back in 2007 to the percentage of donors who gave in 2006, lapsed in 2007 and came back in 2008)


• Increase average gifts from existing donors (by comparing the average gifts of donors who gave in both 2007 and 2008)


• Increase number of new donors acquired in 2008 compared to 2007

These are goals that apply to both our $50 donors as well as our $100,000 donors. The AOP will likely include significantly different activities for these two types of donors, but the fundamental goal remains the same.

Regardless of the size of your organization's budget, you should have a clearly outlined strategy for soliciting donors. Even if you are part of a smaller organization that does not have a full-time development officer, you should try to set up a clear set of expectations for revenue generation that are not purely financial (i.e. "raise $_____ from individuals."). By focusing on outcomes such as those mentioned above, you will almost invariably achieve better financial results for your organization than if you simply focused on dollars raised.

It is also critical that any development program have a plan for its annual activities; again, this is regardless of an organization's size. Even if it is nothing more than a calendar of the various print and electronic communications that you will send in 2008, this plan will enable you to look at your overall activities costs related to sustaining donor relationships.

This will help you to be a good stewards of your own time and the resources that your organization dedicates to fundraising.

QUESTION: What are the additional goals that should be a part of any fundraising program?

Would you rather have one $100,000 donor or 2,000 $50 donors?

UPDATE: Thanks to Unfair Park, GiftHub and The Chronicle of Philanthropy for linking to this post.

The anonymous blogger at Don't Tell the Donor.org makes some interesting points but overlooks some important details in their recent blog, "The difference between philanthropy and fundraising."

In summary for those who read this blog through syndication, the blog states that:

"I know some nonprofits that rely on big gifts from a small group of philanthropists in order to keep their doors open, however I personally feel better when an organization has hundreds (maybe thousands) of individual members who give provide many nonprofits with their mandate to exist."

We could argue pretty fruitlessly about the issue of needing to validate the organization's mandate (which I only see as relevant in order to satisfy the IRS' private vs. public charity test; it's a matter of tax benefits, not public good). However, I think that some valid points can be made on the matter of how these two scenarios impact non-profit organizations (and fundraising offices in particular).

In many ways, the anonymous blogger is right that it is better to have 2,000 gifts of $50 rather than a single gift of $100,000.

First of all, this situation is more sustainable. Making a political mistake with a donor in scenario one costs you $50, rather than $100K in scenario two.

And yes, as a fundraiser whose organization relies on major donors, I can tell you that there are people who have given upwards of $100,000 per year who suddenly stopped giving because we invited the wrong speaker to an event or our CEO made a comment with which they disagreed.

This is the downside of major gift programs: the tyranny of the donors.

(See this blog from Larry James, CEO of our organization, about Justin Hudnall's fabulous article, "Giver's Greed")

Second, the mission is more likely to be the focus rather than the donors if you receive lots of small gifts rather than a few large ones. As much as I support the sort of donor-centered fundraising advocated by Jeff Brooks at the Donor Power Blog or Phil Cubeta at GiftHub, major donors can wield undue influence over organizations that can frequently distract these organizations from their mission.

And yes, in the same way that I can give you examples of major donors who have pulled their giving to Central Dallas Ministries because of silly faux pas, I can also cite several instances in which we have been driven to make unwise decisions because a large checkbook was behind them.

I am proud to say that we have also turned down lots of money along the way because it would have pulled us off strategy. And I mean 6-figure and 7-figure gifts... nothing to balk at. We've maintained our integrity in key moments when donors were pushing the organization in the wrong direction.

But we are not perfect, and major donors have wielded disproportionate influence over our work at times.

And yes, we have at times been guilty of chasing money.... writing and securing grants for new programming because the money was available, not because we had the program in place and needed to fund it.

Again, these are problems that you would not have in the scenario of relying on many small gifts rather than a few large ones.

And if you're the Salvation Army, with a bucket on every corner soliciting pennies from the public, you don't have even to worry about filing a Form 990.

There are some problems, though, with relying on the masses for the bulk of your support.

First, some practical problems for the fundraising officers:

1. If you believe in good stewardship, you send a receipt for every gift that you receive regardless of size. At $0.41, receipting 2,000 gifts is over $800 in postage. Factor in the costs of paper and printing, and your spending 1% of your gift just on bare-bones stewardship.


2. Someone has to enter that information into your database and print those letters. Assuming it takes 2 minutes per acknowledgment (likely a very conservative estimate), that's nearly 67 hours in staff time. At a minimum wage of $5.85 per hour, that's an additional $4,000. Since most development officers make at least twice that, you're now talking about an additional 1% of your gifts on just bare-bones processing.


3. Someone has to spend time depositing those gifts. That's more staff time, and possibly fuel costs. Likely, this is another 1% of your gift.


4. Many of those $50 gifts will come in via credit card. That's another 3-5% cut off the top.


5. You can therefore conservatively estimate that you will receive $6,000 to $8,000 less in the scenario of 2,000 $50 gifts rather than a single $100,000 gift.

These are just a few of the immediate costs associated with receiving lots of small gifts rather than a few large gifts. This doesn't even begin to include the costs of newsletters, event invitations, annual reports and other communications mailed to these donors. The costs can quickly grow to the point where these thousands of small gifts begin to contribute less and less to your organization's mission.

Let's take it to the next level: It is nearly impossible to build relationships with 2,000 donors who give you $50 compared to single donors capable of giving you $100,000. The return on investment of spending time calling $50 donors, sending them personal notes and meeting with them to tour programs is simply not there compared to cultivating major donors.

Are there people donating $50 to your organization who are capable of donating $100,000? Certainly. In fact, my organization recently received a commitment of $5,000,000 from a donor whose first gift was $100.

But this was a very rare exception to the rule. Although we eventually did a very good job cultivating this donor, his initial gift brought forth no such stewardship. In fact, he would have gone completely unnoticed without the help of an outsider -- who did not even know about his first $100 gift -- who referred him to us as a place to donate $50,000 at the end of last year.

This gift got our attention... which helped us to then add two more zeroes to that commitment within 12 months by stewarding the relationship.

We never would have done this for someone who donated $50 unless we realized that they were capable of the major gift.

On a related note, there is an insightful blog about at the Donor Power Blogcalled "The secretly wealthy donor fantasy." This blog debunks the myth of the $90,450 Direct Mail donor (in brief, they criticize that justify continually mailing the small-gift donor by saying that they may leave them money in their will when they die).

I do not believe that major giving programs should fully replace all other forms of fundraising (in fact, I previously blogged about some the problems of major gift fundraising in my November 10 blog, "UT Southwestern: A Case Study in the Core Problem with Major Gift Fundraising.").

However, if I had to choose between $100,000 from one person vs. $50 from 2,000 people, I would realize that there would be far more ramifications to my choice than simply the validation of my organization's mandate to exist.

I am thankful for the Don't Tell the Donor.org blog. At the end of the day, I think that any successful fundraising program needs to integrate both a high-volume, low-dollar annual gift program alongside a major giving program driven around a small number of high-dollar gifts.

Stewardship

Later today, we will make a presentation to the United Way's stewardship committee to defend our organization's stewardship ranking. The committee is concerned that we don't have enough cash on hand to sustain our growth.

Of course, they are right. And yet we continute to grow. For twenty years, we have been hand to mouth, continuing to add programs in response to pressing needs of the community. True, we have not built up the operational reserve that we need to weather the tough summer months (let alone an endowment). And yet, our growth has been so phenomenal that Charity Navigator awarded us a four-star rating for our capacity to effectively utilize our resources.

(The United Way has only received a three, and previously received a two).

What should we say?

Should we mention the fact that they have nearly twice our overhead despite the fact that they are merely a fundraising organization? That their CEO is paid over $325,000 (2005 figure)? That their top seven staff are collectively paid over $1 million of donors' otherwise charitable dollars?

Or should we perhaps just tell a story?

For the kingdom of heaven is as a man travelling into a far country, who called his own servants, and delivered unto them his goods.

And unto one he gave five talents, to another two, and to another one; to every man according to his several ability; and straightway took his journey.

Then he that had received the five talents went and traded with the same, and made them other five talents.

And likewise he that had received two, he also gained other two.

But he that had received one went and digged in the earth, and hid his lord's money.

After a long time the lord of those servants cometh, and reckoneth with them.

And so he that had received five talents came and brought other five talents, saying, Lord, thou deliveredst unto me five talents: behold, I have gained beside them five talents more.

His lord said unto him, Well done, thou good and faithful servant: thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord.

He also that had received two talents came and said, Lord, thou deliveredst unto me two talents: behold, I have gained two other talents beside them.

His lord said unto him, Well done, good and faithful servant; thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord.

Then he which had received the one talent came and said, Lord, I knew thee that thou art an hard man, reaping where thou hast not sown, and gathering where thou hast not strawed:

And I was afraid, and went and hid thy talent in the earth: lo, there thou hast that is thine.

His lord answered and said unto him, Thou wicked and slothful servant, thou knewest that I reap where I sowed not, and gather where I have not strawed:

Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury.
Take therefore the talent from him, and give it unto him which hath ten talents.

For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.

And cast ye the unprofitable servant into outer darkness: there shall be weeping and gnashing of teeth.