Are fundraising professionals “ashamed”? Too busy? Too lazy?

June 21, 2013 erik Fundraising

Welcome to O.D. Fridays at DonorDreams blog. Every Friday for the foreseeable future we will be looking at posts from John Greco’s blog called “johnponders ~ about life at work, mostly” and applying his organizational development messages to the non-profit community.

In a post titled “I’m Ashamed?,” John talks about an old Danish proverb that goes something like this: “He who is afraid to ask is ashamed of learning.” This post and the proverb made me think of so many of my friends who are fundraising professionals, and it got me wondering if “shame” has something to do with how they shy away from engaging board members, donors and fundraising volunteers.

Some of you are probably wondering what the heck I’m talking about because every time you show up at a fundraising event you see volunteers running in every direction. So, let me provide a few examples:

Too many resource development plans (aka fundraising plans) are written behind close doors without any input from those who we depend upon to help with implementation. And then we wonder why no one is jumping in to help and why board members are acting as if to say: “That’s not what I agreed to do … go implement YOUR plan.”
Too many donors make one charitable contribution and then are never heard from again. I don’t see many fundraising professionals picking up the phone, organizing lapsed donor focus groups, meeting individually with, or surveying these donors and asking a few simple questions.
I certainly hear many of my fundraising friends complain about how their executive director is disengaged from the fundraising program. However, I don’t see many of those folks exhibiting tenacity by asking-asking-asking. There are so many different questions to ask an executive director, and I witness lots of surrendering before they get to the second question.

I could go on and on with examples, but I’ll stop here because I think the better question, which is posed by the Danish proverb, is WHY don’t we ask more questions and WHY don’t we ask for more help?

So, I thought about the WHY and here are some of the possibilities I came up with:

The Danish are right . . . some people feel a sense of shame in asking for help. It gives people the impression that you’re not capable of doing the task at hand, even though you might be perfectly capable and trying to cultivate, engage, steward, etc.
It is easier to just do it yourself. Asking and involving others usually means investing more time in doing something. Even though a case can be made for it being time well spent, it is easy to rationalize and justify not doing so because your calendar and task list is slammed.
There is a sense of having “job security” in being the only person making the agency’s fundraising program work.
Perhaps, it is simply a matter of not caring???

I’m sure there are a number of other possible explanationz, but it is Friday and thought I should ask you for some help. 😉

Please take a moment to ponder WHY and then scroll down and share one additional explanation in the comment box below.

Have you ever sat in a meeting or training, had a question and not asked it? Have you ever been in a board meeting marveling at why a board was making a particular decision and not jumped in with your questions? Have you ever been in front of a donor and not asked a ton of questions about what makes them tick, who they really are, and why they’re giving to you?

After you think through some of these questions, you’ve earned the opportunity to peek at some of the following websites that speak to the issue of asking good questions:

The Resource Alliance: “7 questions every fundraiser should ask a potential donor“
GuideStar: “Fundraising’s Four Magic Questions: Answer These and the Gifts are Yours“
Joan Garry: “10 Good Questions Board Members Should Ask“
Denver Post: “Five questions every nonprofit donor should ask“

You should also go back to a series of posts I wrote a year ago on this subject:

DonorDreams blog: “Questions every non-profit board member should be asking“
DonorDreams blog: “Questions you need to get answered before asking people to join your board“
DonorDreams blog: “Fundraising questions to ask donors and anticipate from them“

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
http://www.facebook.com/eanderson847
http://www.linkedin.com/in/erikanderson847

Giving USA report is out. Are you benchmarking yet?

June 19, 2013 erik Fundraising

waybackmachine I love this time of the year because Giving USA allows fundraising professionals to jump in Mr. Peabody and Sherman’s “Way Back Machine” (aka WABAC machine) and look at what happened in philanthropy in the previous year. This activity has become an event of sorts. Reports are released. There are webinars. The media covers it, and then there is lots of chatter throughout the sector.

For those of you who are hoping for a quick down-n-dirty synopsis, here you go:

Overall, charitable giving is up, but it is small and reflects our slow economic recovery (1.5% increase when adjusted for inflation.)
An increase in corporate giving was robust (but it still only accounts for less than 6% of total private sector fundraising.)
Individual giving is still the biggest piece of the pie (approximately three-fourths of philanthropy . . . DUH!)
The sector is still nowhere near approaching its pre-recession peak. (at this pace, it may take another five to eight years to get back to 2007 charitable giving levels . . . welcome to the “New Normal” for non-profit organizations.)

In a nutshell, slow-and-steady progress which is a re-run from the last many years of Giving USA reports. Is it just me or is this beginning to feel a little bit like that scene in the movie Groundhog Day?

Maybe you will feel better if you click the Giving USA link I provided in the first paragraph, purchase the report, and try smashing it like Bill Murray did to that alarm clock in the movie. LOL (Well, it is worth a try because nothing else seems to be working. Right?)

For me, this time of the year isn’t so much about the excitement and the numbers. Instead, it is a gentle reminder that benchmarking opportunities exist all around us, and non-profits should invest more of their time in benchmarking if they want to improve their performance.

I was reminded of this while on the Giving USA website where I ran into the following testimonial from Heidi Jark, who is the Managing Director & Vice President at The Foundation Office at Fifth Third Bank:

“I look forward to the Giving USA report every year to better help me work with not for profit organizations and our private foundation clients. The data helps me to better understand the philanthropic world around me and, many times, confirms what I see on a day to day basis. We can better serve our clients when we have research data. It helps us to better explain and structure gifts to meet both the needs of our individual clients and the missions they wish to advance.”

I think Heidi and I are kindred spirits. While she didn’t specifically talk about benchmarking, she is in the ballpark.

Some of you might still be a little hazy on the concept of benchmarking so here is a quick thumbnail sketch:

It is a process where you: 1) measure your performance, 2) measure like-minded organizations’ performance, and 3) compare and contrast to draw conclusions on how well you’re doing.
It is a process by which you will manage and improve your performance.
It goes beyond measurement, it also involves looking for and using best practices that make sense for an organization of your size.

Here are some resources for those of you who are intrigued and want to learn more:

Christine Letts, William Ryan & Allen Grossman at tgci.com: “Benchmarking: How nonprofits are adapting a business planning tool for enhanced performance“
Author Jason Saul at amazon.com: “Benchmarking for Nonprofits“
Wikipedia: Benchmarking

As I thumb through the Giving USA numbers and reports, I think I’d be asking myself some of the following questions if I were still on the front line running an agency:

Did our private sector fundraising increase last year? Did it mirror the national numbers? Better? Worse?
How well did other local non-profit organizations who are approximately our size do last year?
What did those organizations that did better than our agency and better than the national benchmarks do differently?
What changes (if any) should we look at making to next year’s written resource development plan to improve our fundraising performance?

Does your organization do any benchmarking? Do you benchmark your fundraising efforts? Programming? Marketing? Please share your thoughts and practices in the comment box below. We can all learn from each other.

Here’s to your health!

Is “fear of failure” defining your fundraising program?

June 18, 2013 erik Fundraising, Planning

Last week I was on the road working with clients. One evening when I was out to dinner, a revelation about your fundraising program struck me like a bolt of lightning while in the restroom of a restaurant. Yes, you read that last sentence correctly. I was thunderstruck in the bathroom. Inspiration came in the form of a little sign sitting by the sink.

This is kind of what that sign looked like:

I’ve been chewing on this question for a week now, which tells me that there is a good blog post somewhere in there. 😉

Failure and your fundraising plan

The first flurry of thoughts that ran through my head pertained to many fundraising programs I’ve seen throughout the years. Here are just a few questions I find myself asking about many agencies’ annual resource development plans:

Why are they running so many special events?
Why aren’t they measuring return on investment (ROI) on each of their events and campaigns?
Why aren’t they evaluating and critiquing each event and campaign?
Why aren’t they innovating and trying new things (e.g. email, social media, etc)?

I’m now wondering if the answer to these questions is that we’re afraid of failure, and it is just easier to keep doing the same thing over and over again. After all, if we evaluate and ask questions, then shouldn’t we “do something” about those things that don’t look so good?

As for innovation and trying new things, there has to be all kinds of “fears” associated with venturing off into the great unknown. Right?

I know that talking about those things we’re afraid of is difficult for many of us. It is this simple truism that keeps countless counselors, therapists and psychologists employed every year. However, I encourage you to take 30 seconds our of your busy day right now and consider these questions and the possibility that your fundraising program is in the grip of fear-based decision-making by staff, fundraising volunteers, and board members.

What would you do . . . if you knew?

What an interesting question to ponder. Dontcha think?

What would I do, if I knew, I could not fail?

Let me step off that cliff first. The following is a list of things (as it pertains to non-profit management and fundraising) I thought of in 30 seconds:

I would call the top 10 most influential people in town and ask them to join my board or get involved in some aspect of my fundraising program.
I would kill every special event fundraiser that was older than 5 years old and replace it with something new and fun.
I would calculate ROI on every event and campaign and stop doing everything that didn’t bring me at least a 75% return (and I’m talking about using both direct AND indirect costs in that calculation)
I would find the time to add an ePhilanthropy aspect to my annual fundraising plan that includes blogging, social media, email and website (and I’d add a robust evaluation component to this program).

Now it is your turn. Please take a few second to contemplate the question at hand. What would you do? Once you have one thing in your head, please scroll down and share it in the comment box below. Let’s inspire each other today.

Here’s another thought. Why not start off your next board meeting and all of your upcoming committee meetings with this question. You might just be surprised by what your volunteers tell you. If you do, I hope you’ll circle back around to this post and share what they said.

Here’s to your health!

Donors don’t like deception

June 14, 2013 erik Fundraising

In a post titled “Fire and Rain,” John talks about the story behind the story with regard to James Taylor’s song “Fire and Rain” and his personal reaction when he discovered some of the urban legend associated with it. While it is obvious that John will use this post as a springboard to another post, I think John’s reaction as he describes it in his post speaks to a basic truism:

No one likes to feel like they’ve been deceived.

Even when there are elements of truth, I’ve seen people react strongly just because it “FEELS” deceptive.

This idea is something that non-profit organizations deal with all of the time as it relates to donor communications. Right?

The following few examples spring immediately to mind for me:

Example #1: Agency X is experiencing cash flow issues, but doesn’t share this news with its donors. Why? They are afraid that this news will deter donors from writing checks.
Example #2: Agency Y is getting ready for it annual audit. In preparation for a visit from their auditor, they discover that their administrative and fundraising costs were a little higher than they anticipated. So, they change some of their salary allocations in order to put their numbers back where they should be. Why? They know that individual donors, United Way agencies, foundations, and even the Better Business Bureau have expectations (and standards) associated with how much money a “responsible” non-profit organization spends on fundraising and administrative costs.
Example #3: Agency Z is developing a direct mail appeal and knows that people don’t like to give money to the “general fund”. So, they craft a letter that says something like “It costs $X to run program A, it costs $Y to purchase equipment B, and $Z to purchase program supplies”. When the responses start rolling in, the money is not used for A, B or C and instead put into the general fund to pay for the electric bill or employee salaries. Why? The intent of the letter was to raise unrestricted income, and the organization thinks donors understand that “cash is fungible“.

These are fictitious examples, but do you remember the 1994 Christian Children’s Fund scandal? Here are a few other recent examples of when donors were deceived or “felt” deceived:

Susan G. Komen for the Cure threatening to not fund Planned Parenthood. How was this deception? Donors never thought their contributions were supporting an organization with an alleged political agenda.
LIVESTRONG’s founder, Lance Armstrong, admits to doping. How was this deception? The foundation co-branded itself with its founder’s image and donors invested based on his story, character and credibility. After the confession, donors couldn’t help but openly wonder: “If he lied about doping, what else is he lying about?“
Boy Scouts of America and their long standing battle with the LGBTQ community. How was this deception (after all haven’t they been very vocal about their membership restrictions)? Some donors see hypocrisy with this policy because a case can be made that the policy contradicts some of the 12 points of the Scout Law. Moreover, the Scouts announced to the world a few months ago that they were poised to re-visit and possibly reverse this policy. As the date got closer, they postponed and stalled. “Deception” is sometimes as simple as saying you will do something and then dragging your feet on doing it.

In John’s post, he admits that his feelings for James Taylor’s song “Fire and Rain” changed after he learned the truth. The reality is that your donors’ feelings for your agency will change if they feel deceived. The point here is that it doesn’t even have to be outright deception. It only has to be the “feeling” of deception.

What does your agency have in place to insure honesty, transparency and ethics? Please use the comment box below to talk about things like ethics policies, whistleblower policies, evaluation practices, etc. We can all learn from each other.

Here’s to your health!

What are you doing with your non-profit data?

June 13, 2013 erik Board development, Board governance, Fundraising, organizational development

If you are collecting data on your non-profit organization’s performance and doing nothing with it, then you should be tarred and feathered. You are too busy to be doing things that don’t get you a return on investment on your time. Unfortunately, data collection can be time-consuming if you haven’t built good systems to make collection easy, and there are too many small non-profit organizations who are under-resourced and haven’t built those systems.

So, why do so many agencies still invest the time to collect data when it is difficult to do and so incredibly time-consuming? In almost every instance that I’ve seen, it is simply because a donor is requiring it or they are affiliated with a national organization that makes it mandatory.

Here is a thought . . . if you are going through the effort, then why not benefit from it?

What should you measure?

The “WHAT” is hard to answer unless you know the “WHY”. In other words, you should measure things relating to board engagement and performance if you want to improve those things. You should measure things relating to money and donor behavior if you want to improve your resource development.

One national organization with whom I am very familiar (wink, wink), developed an entire organizational scorecard full of key performance indicators (KPIs) that breakdown into the following five ares:

strategic growth
increased impact
financial health
resource development
board of directors

I know that a number of subscribers to this blog aren’t members of this “unnamed national organization,” and you are probably wondering what are some of the KPIs listed under these categories. While I don’t think I’d be violating any major trade secrets in sharing those KPIs with you, I want to be respectful of their work. So, I’ll only share a few of those KPIs to give you an idea and a start:

net change in number of clients service
average days cash on hand
net change in total income
percent of board volunteers that attended 75% of meetings
percent of board volunteers who make a personal unrestricted financial gift
percent of board volunteers who make a face-to-face solicitation on behalf of the agency

If you are interested in developing KPIs and a scorecard for your non-profit organization, here are a few resources I’ve found online that may help you:

Association of Fundraising Professionals: “Key Performance Indicators: Nonprofits Need Them, Too!“
Liz Marenakos of Blackbaud: “Identifying and Measuring KPI’s“
Virtue Center: “Brutal Honesty: Measuring Non-Profit Success with Key Performance Indicators“

What next?

I point you back to my inflammatory opening sentence:

“If you are collecting data on your non-profit organization’s performance and doing nothing with it, then you should be tarred and feathered.”

Collecting this data isn’t rocket science, but it is time-consuming and you’re too busy to invest that time and get nothing back in return. Right?

If you are measuring program-related KPIs (e.g. outcomes data, impact data, etc), then you should share that info with the staff responsible for those programs. If you are measuring fundraising-related KPIs, then you should share that info with your fundraising staff and fundraising volunteers. If you are measuring board engagement related KPIs, then you should share that info with board volunteers.

I believe all KPIs should be shared with all board members in all instances (but at the appropriate time and setting) so they understand whether or not the organization is healthy or unhealthy. I also believe that where possibly, KPIs should be directly tied to performance management systems and evaluation tools.

The big idea here is that collecting this type of data, sharing this type of data, and integrating this type of data into systems like employee performance appraisal and board evaluation will drive change because it creates urgency, accountability and the assessment information necessary upon which organizational plans can be built.

Has your agency developed KPIs? If so, how do you use them? With whom do you share your data? What has been the result? Please use the comment box below to share your experiences.

Here’s to your health!

Don’t set the bar too high for your next fundraising appeal

June 11, 2013 erik Fundraising

Hmmm? I must be on a Jeff Brooks kick because this is the second or third time I referenced his blog — Future Fundraising Now — in the last few weeks. LOL Did you read his blog post titled “Pixar’s 22 rules of fundraising” from a guest blogger named Andrew Rogers? If not, then you have to find a few minutes to do so. Those 22 rules are awesome and should be part of every fundraising professional’s toolbox. Today, I’m focusing on “Rule 16: What are the stakes? Give us reason to root for the character. What happens if they don’t succeed? Stack the odds against.”

When applying this Pixar rule to fundraising, Andrew Rogers says:

“Rule for fundraisers: What happens if the need isn’t addressed? How are real people being affected? In our case, we should never “stack the odds” by exaggerating or otherwise being less than perfectly truthful. On the other hand, don’t tell less than the full truth either, and remember that the full truth often isn’t very pretty.”

I cannot tell you how many times I’ve seen a non-profit organization try to apply this rule by telling donors things like:

We’ll close our doors unless we meet this fundraising goal.
We’ll shut down a site if this campaign fails to hit goal.
We’ll eliminate this program if we’re not successful.

To be clear, I don’t think Rule 16 is a license to practice extortion or heavy-handed fundraising tactics.

In instances where I’ve seen agencies use urgency messages laced with “We’re gonna close or we’re going to eliminate programming,” two interesting things seem to happen every time:

They usually get an initial bump in money coming in (e.g. donors respond), and
The next time donors get solicited, the response is down again.

I believe there is a simple explanation for this phenomenon . . . donors don’t like to throw good money after bad.

Before you decide to hit that big red panic button on your fundraising dashboard and tell the entire community that you’re in trouble, I advise that you think twice about doing it. All you’re doing is setting the bar very high down the road, and what happens if you cannot get over that bar?

I suggest going back and doing exactly what Rule 16 tells you to do:

Write a case statement that tells a story about one of your clients (or a composite client).
Describe their needs. What is at stake if they don’t succeed?
Describe how you help them with those needs. Help me root for them!
Describe how a donor’s support will tip the scales in their favor of our main character.
Don’t make this story so dramatic that donors conclude that nothing they do will make a difference.
Be truthful and make it emotional. You are telling a story!

This case for support document is internal. Use this tool to:

develop your agency’s marketing materials and fundraising brochures,
write your direct mail and targeted mail letters,
write your website and social media copy, and
train your fundraising volunteers on how to turn it into a story that they share with donors during a cultivation, solicitation or stewardship visit with a donor.

Always remember . . . donors care about your mission, your clients, and the impact of their contribution. They don’t normally care about saving institutions and your sacred cows.

What does your case for support (e.g. case statement) look like? When was the last time your refreshed that document? How do you go about developing that document? Please share your thoughts in the comment box below.

Here’s to your health!

Are non-profits getting serious about crowdfunding?

June 10, 2013 erik Fundraising, technology

A long time ago in a galaxy far, far away . . . we used to do a special themed blog post to start every week and it was called “Mondays with Marissa“. We haven’t run that series in a while because Marissa moved on to bigger and better things (and I should add that by bigger and better I mean “things that pay”). She got snatched up by one of the local Girl Scout councils to manage their online communities. However, in the spirit of “Mondays with Marissa,” I thought we would look back today at a previous post by Marissa, provide a little update, and spur additional conversation.

Crowdfunding is defined by Wikipedia as “… the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.”

Crowdfunding is a spinoff of crowdsourcing, and this YouTube video by crowdsourcing.org does a really good job of explaining it:

[youtube=http://www.youtube.com/watch?v=-38uPkyH9vI]

In the last year or so, both Marissa and I wrote about crowdfunding in the following posts:

In spite of my confession that I was a doubting Thomas and suddenly “saw the light” when it came to crowdfunding, I have another admission to make today. I was still a little skeptical after writing that post a year ago.

However, just last week and almost a year after proclaiming Marissa “right,” I read in the Fundraising Digest Weekly published by FundraisingInfo.com that the Smithsonian plans on running its first crowdfunding campaign. Click here to read more about the Smithsonian’s efforts at Businesswire.com.

After reading this, I must admit that it is impossible to be a doubting Thomas about this ePhilanthropy tool.

The Smithsonian is no slouch when it comes to resource development and fundraising. Their decision to turn to crowdfunding validates this online fundraising strategy as something that is here to stay.

Are you still a doubting Thomas? If so, why?
Has you non-profit organization experimented with crowdsourcing or crowdfunding? What did you do? What did you learn?
Have you seen other heavy hitting non-profit groups use a crowdfunding campaign successfully? Who? What?
Have you looked into other crowdsourcing applications other than crowdfunding such as crowdengineering, cloud labor, or crowdcreativity? Please explain.

Please use the comment box below to share your thoughts and experiences. Why? Because we can all learn from each other.

Here’s to your health!

Fewer statistics and more stories, please?

June 6, 2013 erik Fundraising

As someone who blogs every day, I find it necessary to read a lot of other people’s blogs, too. Every one in a while, I come across something that gets me thinking. If it is really good or cuts against the grain of something I believe, I might mentally chew on it for days. Two bloggers, who I respect and read a lot, are Jeff Brook at Future Fundraising Now and Marc Pitman (aka The Fundraising Coach). Both of these guys have had me chewing on something recently, and I must admit that my jaw hurts from all that macerating. The topic in question? Should you include statistics in your fundraising appeals?

In recent years, the non-profit sector has been hyper-focused on things like:

measuring program outcomes
measuring community impact
benchmarking projects
analytics

I must admit that I’ve bitten into this trend as hard as anyone. I am a bit of a data geek, and I love information. If I were being truthful, I’d even admit that sometimes the old expression “paralysis by analysis ” defines my work (even though I fight hard not to fall into this trap).

The logical extension of these tendencies is to include data and statistics in fundraising appeals, which is something I’ve done for years.

So, when I recently read Future Fundraising Now and The Fundraising Coach, it felt like nails on a chalkboard for a moment. However, I try to read with an open mind, and I must admit that they have a point. Here is how I did an about-face on this subject . . .

Hurricane Katrina

As I thought back upon this devastating natural disaster, I remembered being glued to the radio listening to NPR deliver the blow-by-blow description of what was happening on the Gulf coast. I have very clear memories of my attention waning when the reporter started saying things like:

1.2 million evacuees
$81 billion in damage
1,833 deaths

I also remember being glued to my radio as the reporter interviewed individuals who had survived the storm as they told their stories:

I remember one woman telling a reporter about climbing into the attic with her family as she watched the water levels fill the first floor of her home and start to consume the second floor.
I remember a gentleman talking about how long he had to wait on his roof for rescuers and how hard that ordeal was.
I remember a public official talking about the national guard’s efforts to evacuate trapped senior citizens from a nursing home.

Statistics . . . .Zzzzzzzzzzzzz. Stories? Please continue … I’m listening!

Before the written word

There is a lot of debate about how long the written word has played a role in human culture; however, I think it is fair to say that literacy rates only started significantly climbing in the last few hundred years.

So, how did humans communicate to each other important things like:

How to appropriately behave?
What to value and what is important?
Who should do what and by when?

It was storytelling. Sitting around a campfire and telling stories. Passing lessons along from one generation to the next generation by word of mouth in the form of a story with a moral to every story.

Fundraising conclusions

I still believe that measuring community impact and program outcomes is important. Please don’t stop doing this hard and arduous work. It is important to measure for accountability, stewardship and quality control purposes, but . . .

Please stop sharing all of that data with me during the solicitation process.

I want to hear warm fuzzy stories about your clients and how my contribution has contributed to those success stories.

Please train your volunteers to be good storytellers because there is nothing worse that having to sit through lunch with someone who can’t tell a good story. This is an art form. For some people it comes naturally and for others they need substantial training on how to do this.

So where should you put all of your data?

Well, I still believe that this information is an important part of being a good steward of donor dollars.

Upload it to your website . . . those donors who love data can find it there, and this sends a strong message about your commitment to transparency.
Share some of it in your annual report.
Create an impact report and send it to your donors every quarter.
Sprinkle some of it into newletter stories.

BUT . . . whatever you do, please don’t share this with me when you’re asking for my money. And if you do, please forgive me for the yawning and vacant blank stare.

If I’ve intrigued you with today’s post, then you may want to check out the blog posts by Jeff and Marc at the following links:

The Fundraising Coach, “Throw statistics out of your fundraising letters!“
Future Fundraising Now, “Why using statistics will kill your fundraising“

What does your agency do with its data? How much to your share with your donors? How and when do you share it with your donors? Do you include it in your written case for support document and training your volunteer solicitors to use it when soliciting contributions? Do you include it in your direct mail appeal? What has been your experience when using a storytelling approach to fundraising?

Please share your thoughts and experiences in the comment box below. Why? Because we can all learn from each other!

Here’s to your health!

How much money should your non-profit have in reserve?

June 4, 2013 erik Board governance, Fundraising, organizational development, Planning

operating reserves Identifying blog topics can be hard. Sometimes you find a comfort zone and ideas flow freely. Other times, it is next to impossible and the writers block is crippling. So, I love it when readers sometimes email me on the side and suggest topics.

Yesterday, a reader did exactly that when she emailed me with the following request:

“Do you take requests? If so, I would love to hear your take on social service agencies that have more than 6 months of money on hand and the impact of that on fundraising.”

When I first read that email, I planned on squirreling the topic away for one of those days when topic ideas are difficult to come by. However, there was something about this topic that possessed me. I opened up a few Google searches, read a few white papers and blog posts, and found myself whipping out this post.

First, let me start with a very direct response to the question posed by the reader.

I have worked with a disproportionately large number of small non-profit organizations. Organizational capacity for these agencies is always an issue and the amount of cash on hand is typically very small. So, I’ve always advocated to CEOs and their boards that they put plans in place to build operating reserves equal to three to six months.

Only one client to my recollection every worked with more than a six month operating reserve, and I don’t think it impacted their fundraising efforts. If I were to speculate as to why that was, I think the explanation is simple . . . that agency did an excellent job with donor communications and made their case as to why operating reserves of that size were important.

Setting this one example aside, I do generally believe that building large operating reserves larger than 6 months or one year causes problems with donors. I say this because of everything Dan Pallotta writes in his book Uncharitable and how donors hold the non-profit sector to a different standard than the for-profit sector.

In his book, Pallotta talks eloquently about how for-profit corporations are rewarded by investors for generating profits, banking cash and growing organizational capacity. He contrasts this point with how donors punish non-profit organizations for doing the same thing.

For actual examples and a better explanation, I encourage you to read his book. I promise that it will be an eye opening experience. Additionally, you’ll likely walk away from the exercise and find yourself muttering the words: “Damn Puritans!”

In my clicking around and Googling, I found a number of interesting facts including:

Charity Navigator reserves its top ratings for organizations with 12 or more months of working capital.
The Nonprofit Finance Fund reported in its 2012 State of the Sector Survey that only one-fifth of survey respondents said they felt their donors were comfortable talking about operating reserves.
In 2011, more than three-quarters of non-profit organizations had less than 4 months of expenses in operating reserves (60% reported less than 4 months and 28% reported one month or less).

I strongly urge you to click-through and read more startling statistics on this and similar subjects at:

Executive Service Corp, “How Much in Reserve Funds Should Your Nonprofit Have?“
Nonprofit Finance Fund, “2012 State of the Sector Survey“
Nell Edgington’s Social Velocity blog, “A Financial Taboo Nonprofits Must Get Over“

I want to thank the reader who suggested this blog topic because they have caused me to change my thinking on this topic. From now on, when agencies ask my advice on what they should strive towards with regards to building an operating reserve, I plan on telling them . . .

12 months or more! ! ! !

With this Big Harry Audacious Goal (BHAG), the next words out of my mouth will be . . .

“Create a strong case for support or prepare to incur the wrath of donors.”

For those of you who don’t think this is possible, please take a moment to think about why that much cash on hand is important to your organization.

Many agencies are using their operating reserves as cash flow cushions as they wait for their accounts receivable from government grants. (Believe it or not some states are six to 12 months late in paying their bills.)
It is a sign of financial health to have operating reserves of this size.
One of the lessons learned from the recent economic recession is that larger rainy day funds are a necessity and not a luxury.
Stuff breaks and your organization needs to be in a position to fix the roof or replace a HVAC unit without running off to donors with an urgent case for support that sounds like a crisis or fire drill.

My advice to anyone who cares to hear it is:

Set a goal to increase your operating reserves to 12+ months
Work with the Finance Committee to develop a plan to achieve this goal (Yes, it will likely be a plan that spans many years). Perhaps, include in your plans to use a portion of your operating reserves to invest in organizational capacity building once certain targets are achieved.
Work with the Resource Development Committee to write a case for support that supports these actions.
Don’t hide from donors. Get out there and start talking to them. Weave the talking points from this new case for support focused on increasing reserve levels into your stewardship efforts. Donor engagement and education is the key to success.

So, I’m curious how many of you think I’m crazy? How big are your reserves? How big would you like them? What do your donors say about your reserves? Please use the comment box below to weigh-in on this discussion.

Here’s to your health!

The changing face of philanthropy

June 3, 2013 erik Fundraising, technology

I often counsel my non-profit clients to invest in technology and social media. I tell them to experiment with ePhilanthropy strategies and tactics. However, I warn them to avoid living on the cutting edge and especially be aware of the “bleeding edge” of these types of efforts. In a nutshell, I advice them to invest and learn, but do so in a way that make sense from a “return on investment” perspective.

Of course, what I mean is that fundraising professionals should not forget that more than $300 billion is generated every year by charities from private sector sources (e.g individuals, corporations, and foundations). While the data is messy, it still appears that less than 10 percent of this funding results from online efforts by non-profit organizations.

Essentially, I’ve been telling clients that investing 90 percent of your time in something that accounts for just 10 percent of overall giving might not be a wise decision. So, my counsel has always been “slow and steady wins the race.”

This has been my advice for the last decade, and if there is one truism in life that I really subscribe to it is the old saying by Heraclitus that the only constant in life is change. With this in mind, I pay attention to the benchmark data from our online giving friends at Blackbaud, Network for Good and other such organizations. I do this because I know that one day we will hit that tipping point and my advice will need to change.

Before I go any farther, it is important to say:

I don’t believe direct mail is dead.
I don’t believe you should stop asking people face-to-face.
I don’t think you should ignore your Baby Boomer donors and double down on ePhilanthropy strategies focused on GenXers and Millennial donors.

However, we may be getting closer that “tipping point“. Have you seen some of the 2012 benchmark data for online giving? The Chronicle of Philanthropy did a nice job reporting on these trends on March 27, 2013. The following are just a few of the highlights from a report issued by M+R Strategic Services and Nonprofit Technology Network:

Revenue from online fundraising efforts increased by 21 percent.
Annual growth in Facebook fans of non-profit organization pages was 46 percent.
Annual growth in Twitter followers of non-profit organizations was 264 percent.

Click here to see an awesome infographic based on this benchmark study.

It is hard to get a handle on what the average size gift is from online efforts. I get different numbers when I look at different sources, but we are talking about average gifts in the $60, $70, and $80 ranges.

There is also interesting benchmark information about online monthly giving programs. This online fundraising strategy appears to bring in an average monthly gift of $19.

Lots of data and very little time to digest it all; however, this quotation caught my attention in another Chronicle of Philanthropy article on December 2, 2012:

“Online giving, though, accounts for less than 10 percent of the dollars charities collect, experts say. But Steve MacLaughlin, director of Blackbaud’s IdeaLab, predicts that over the next five years, the total share of gifts raised online will grow to 15 percent of charities’ overall donations.”

All of this gets me wondering . . . where is that tipping point? When should non-profit organizations get more serious about investing in technology, social media and development of online giving strategies and tactics?

I think my advice might be evolving. Yes, slow and steady wins the race, but investments in benchmarking and planning are always wise.

What is your average size gift from one-time online gifts? Is it in line with national averages? Did your Facebook fan base grow by 46 percent? Did you Twitter following grow by an audacious 264 percent? If not, what are you planning to do in 2013 to adjust your efforts and prevent yourself from falling behind the curve? And how will you guard against the risk of over-investing and living on the cutting edge?

Please use the comment box below to share some of your thoughts. Why? Because we can all learn from each other.

Here’s to your health!