Events, Grants and Individual Giving

I was having breakfast this week with a friend and fellow consultant and we were discussing resource development efforts, including events and grants.  As I’m sure you are well aware by now, I’m not a huge fan of organizations hosting multiple events.  Events are expensive, labor intensive and don’t usually generate a lot of income.

I can hear you out there saying “No Dani, they’re fun!”  And they are, at least some of them are.

One signature event a year is a wonderful way to engage new donors, connect with current donors and showcase your programs while raising significant money. Even signature events that don’t raise significant money may still be a good use of your resources.  However, more than one signature event a year is too much.

More than one event (two, if you must) may be a sign that your leadership, board or executive, is reluctant to raise money in other ways.

Leadership that doesn’t want to embark on an annual appeal or a major donor campaign will often advocate more grants be written or additional events be introduced.  Not only will more events not raise more money, more events will cannibalize your signature event and may yield less income for more work.  Any process that doesn’t get you to your goal is a bad process.

“The Executive Director is the Chief Development Officer” of any non profit that seeks contributed income. (Erik Anderson Donor Dreams blog) Whether they want to or not; whether they’re good at it or not; whether they have a development director whose job it is or not, the Exec is still responsible for fund raising and one of the responsibilities of a governing board is to raise money. Neither is a role that can be abdicated.

Events are often 5-15% of an agency’s budget and generally net 50% of what they cost, sometimes less. Most attendees would be appalled to know that, but it’s true. It’s too high! I recommend events net 75% of what they cost. There are other, better, avenues to raise money.

Grants, which are often 30-50% of an agency’s budget, more if they receive United Way funding, are one way.  Yet, they too come with a cost. Most agencies get somewhere between 50-80% of the grants they submit. That means that the time spent on writing the 20-50% of the grants that don’t get funded is time lost.  For the grants that are secured, there are reports to be written, dollars to be tracked, objectives to reach and programming to introduce. All of which is as it should be, and none of which is without cost.

As I mentioned in the Culture of Philanthropy or Fund Raising post, according to “Fund-Raising: Evaluating and Managing the Fund Development Process” (1999) individual giving offers the highest rate of return for the lowest cost (5-10%) to the organization.  It is also the largest pot of money given in this country and usually only reflective of the percentage of special event income in most agencies’ budgets.  In other words, 80% of the philanthropic dollars in this country are given by individuals yet 10-15% of most agencies budgets are received from individuals. Like the post says, “opportunity is knocking. Get the door!”

Your board, staff and major donors will be the foundation of any individual giving program and the program should be introduced in just that order: Board giving should come first with the Board setting and then meeting a giving goal. Staff should then be asked and then major donors. Individual giving is about one on one relationships that are cultivated – and later, stewarded – and require intentional asks for specific dollar amounts.

Once those asks are made, as mentioned in the Sustainability by Descending Order of Love post, “if you have the time and the volunteers, consider asking your larger mid level donors and prospects in person. Those with the potential to become major donors should also be asked in person as should anyone who is committed to your organization.  While we follow the path of descending order of love in planning, we love all of our donors equally.  If someone would like to see you in person, even if it will be a small gift, go.  It is fun to thank someone in person and is worth keeping a committed donor engaged. When that is not practical, the next best thing is a phone bank or phone calls.”

There are a lot of ways to raise money and some will generate more money in less time than others.  Nonprofit leaders are busy.  Get the best bang for your buck and get on the individual giving path.  It will be scary, and also worth it!

What have you done to increase individual giving?  As always, I welcome your insight, feedback and experience.  Please share your ideas or suggestions for blog topics and consider hitting the follow button to enter your email.  A rising tide raises all boats.

Generative Governance

“Governance as Leadership,” by Richard P. Chait, William P. Ryan and Barbara E. Taylor, introduced a new paradigm for nonprofit boards. This paradigm is focused on three modes of governance with the third, the generative mode, quickly becoming the new model of choice to improve board process, board outcomes and board member engagement.

Those modes are as follows:

“Type 1- The fiduciary mode, where boards are concerned primarily with the stewardship of tangible assets.

Type 2- the strategic mode, where boards create a strategic partnership with management.

Type 3- the generative mode, where boards provide a less recognized but critical source of leadership for the organization.”

The fiduciary mode is where most boards function. It covers four of the five basic roles of board governance: setting policy, hiring the executive, raising money and acting as the fiduciary responsible agent. This is where the business of the board gets done. It’s not sexy, it may not even be fun, but it is critical.

The strategic mode includes the fifth role: setting the mission, vision and strategic direction for the organization. This is the role that decides or revises why the agency exists, where it’s going and how it’s going to get there. It’s a little sexier, and a lot more fun!

The governance mode is, or could be, the more fascinating piece in Board leadership. Most Board members serve to move forward the mission which is reflective of their passion. Yet, most Board meetings are focused on business not mission. Chait et al offers a way to make sure all board members are vested, engaged and participating in the work of the board AND the mission of the agency.

It’s not enough to suggest a new idea; we also have to show people how to implement that idea. Chait, Ryan and Taylor do just that and offer the following:

“Techniques for Generative Boards

• Silent Starts- Set aside 2 minutes for each trustee to anonymously write on an index card the most important question relevant to the issue at hand.
• One Minute Memos- At the end of discussions give each member 2-3 minutes to write down any thoughts or questions that were not expressed.
• Future Perfect History- In breakout groups develop a narrative that explains in future perfect tense how the organization moved from its current state to an envisioned state.
• Counter Points- Randomly designate 2-3 trustees to make the powerful counter arguments to initial recommendations.
• Role Play- Ask a subset of the Board to assume the perspective of different constituent groups likely to be affected by the decision at hand.
• Breakouts- Small groups counter group think and ask: Do we have the right questions? What values are at stake? How else might this issue be framed?
• Simulations – Trustees can simulate some decisions – not to second guess- but to provoke discussion about the tradeoffs that management faces.
• Surveys – The board can administer a survey anonymously prior to the discussion of a major issue. For instance: What should be atop the Boards agenda next year? What are we overlooking at the peril of our organization?”

If you’ve never been to a board meeting that operates in the generative mode, you are missing out! Some of my clients have split their agenda into three parts, one for each mode. Some have added strategic and generative questions at the end of each session. Some have extended the length of their meetings because their board was so interested in exploring the generative and strategic modes!

I’ve said it before: fiduciary is the price of admission to good governance, but it’s not enough; strategic and generative leadership is what engages Board members and moves the needle for change in our communities. Isn’t that why we serve?

How have you introduced generative governance? As always, I welcome your insight, feedback and experience. If you have other ideas or suggestions for blog topics, please share. A rising tide raises all boats.

Conflicts of Interest

In the nonprofit world, and the rest of the world too, conflicts of interest are defined as anything that you control, influence, vote upon or have responsibility over that has the potential to personally benefit you, your company or your family. As you might imagine, Board of Directors have the opportunity to do just that on a somewhat regular basis.

There is a requirement for nonprofits to have a conflict of interest policy. Every agency must affirm each year the existence of such a policy or explain why it does not exist on their 990 (nonprofit tax form).  Each member of the board, annually, should sign a conflict of interest form affirming there are no conflicts or disclosing what may be a conflict.  Conflicts must be disclosed.

That’s right; I said disclosed. The requirement is that a policy exists, not that conflicts are not allowed to occur. The best policies include an official body that reviews each form and decides what to do about any reported conflicts.  It may be the Executive Committee or the Board Development Committee but some sub-group of Board members will decide if the disclosed conflict is in fact a conflict and if so, propose a recommendation to address the conflict.

Here are some examples and some circumstances when each might or might not be a conflict.  You may see a theme.

Conflict #1: The Chair of the Facility Committee is also a contractor and wants to bid on the building renovation.

If the Chair doesn’t own the company, is waiving their fee or donating back their compensation, it may not be a conflict.

If you bid out the work as per your policy and the contractor is the lowest bidder by a lot and you can prove that, it may not be a conflict.

If neither of the above is the case, it is absolutely a conflict.

Even when it’s not a conflict and you can defend why that is the case, it still may look like a conflict and, therefore, be perceived as one.  It may not be worth it for that alone.

Conflict #2: An office supply salesperson is on the board and wants the agency to purchase products from his company, for which he will get a fee.

If the items have been bid out – or depending on the price- at least compared against the same items being sold elsewhere and the board member’s company is offering the lowest price, the Committee may not deem it to be a conflict. Even in this case, I would encourage the Board member to donate the fee back to the agency.

If the above is the case AND if the board member will donate the fee back to the agency, it isn’t a conflict at all.

If you do not compare the items or if the items are not the most favorable price (to the agency) it is absolutely a conflict of interest, regardless of if the member donates back the fee.

Conflict #3: The husband of the Board Chair owns property that is being considered as a program site.

First let me take a moment to say, unless the property is being offered for free or for $1 per year, this should not happen at all, under any circumstances, ever. The Board Chair’s spouse renting, even at below market rate, space to the agency is a one way trip to the front page of the paper, an eventuality much easier avoided.

Even if you bid it out and even if it is the best rate for the best location and the best deal for the agency, you still shouldn’t do it. You will never have the opportunity to explain to all the people who will judge you for it and it’s just not worth it.  If you must have the property, ask the Chair to step down.

Perceived conflicts are just as dangerous as real ones. It doesn’t even matter if it’s real; if people think it’s real, it’s real to them and a problem for you.

I illustrate the above to make my point but most conflicts that will come up will be far more benign, though still potentially problematic.

When I served as an Exec, we had the owner of an HVAC company on the board and he sent his guys in to put up programmable thermostats.  I assumed they would be done pro-bono and was very concerned when I got a bill a few weeks later.  The Board member was incredibly gracious when I (nervously) called. He said it was a mistake and that we should have not been billed.  Phew!

What if it had gone the other way? I should have clarified prior to accepting the work being done. Since I didn’t, I would have had to go the Board President or designated committee and ask for a decision- and forgiveness.

So, you may be wondering by now, what if the Committee deems it is a conflict, what then?  The committee has to make a recommendation. There may be grand bargain devised but usually the decision is either that the purchase is not made or if it is made, that the Board member step down.

It’s not that agencies can’t do business with members of the Board, but I recommend you avoid it when at all possible. I have a few leadership rules I live by; the one that applies to this situation- and many others is – conflict avoidance is easier than damage control.

If you must do business with a Board member, document why. Bid it out and be able to able to and prepared to prove to your community why you elected to entertain a conflict of interest.  It will be easy if the Board member’s company is the lowest bid, with the most comprehensive offer and the best reputation.  It will be much harder if it isn’t.

What have you done to manage conflicts of interest?  As always, I welcome your insight, feedback and experience.  If you have other ideas or suggestions for blog topics, please share. A rising tide raises all boats.

Ps. I’m delighted to announce that, in addition to my current role as consultant and blogger, I have joined answers.com as their nonprofit expert. Please let me know if you have any suggestion for articles.

Major Gifts from Major Donors is Major Fun

Philanthropists make the world a better place. They take their own money – money that they could spend on traveling, or eating, or shoe shopping or anything they want – and they invest it to solve the community’s and the world’s problems. How cool is that?!?!

It’s our job to match up their passion with our programs; to demonstrate the need, and later the impact and to well represent both our organization and our profession!

I once got a call from a guy who grew up near the neighborhood in which my organization was located. He wanted to donate $5,000 for a small capital venture – basketball court, outdoor activity – something he could name in honor of his parents. My agency was in a housing development owned by the housing authority. We didn’t have the land to build something – but we needed a new tech center. I shared our needs and submitted a proposal. He and I played phone tag for a while and at some point he called me in the evening while I was driving my 2 year old daughter home from day care. While he and I talked, she screamed. I thought I lost the gift! Not only did I not lose the gift, he funded the entire $13,000 project and gave me a compliment that I still treasure to this day. He said he’d been talking to a variety of nonprofit leaders (news to me!) and I was the most professional (even with a screaming 2 year old!) with the best presentation and follow through. Woo Hoo!

Sometimes the calls will come to you. Those will be very good days. Sometimes you will have to work to meet major donors. You will have to figure out who they are and what you need to do to get in front of them; who you know that knows them and what piece of your organization will be interesting and inspiring to them. Then, once you meet them, the real fun begins! You will need to cultivate and engage them in your future plans.

How?

Ask each member of the Board of Directors to identify new people to introduce to the organization. When they do, communicate with every introduction, friend, prospect & donor regarding the impact of your organization. Obviously, a goal of any fund raising program is to build strong relationships with donors that will, over time, lead to increased engagement and increased giving. Trustees and the senior staff should each have cultivation goals based on their spheres of influence. Focus on friend raising as well as fund raising.

Fund raising is an art not a science. At some point, depending on the donor’s level of engagement and your experience, it will be time to request a specific (to their circumstances) donation. The asker should be assigned based on the likelihood of getting a yes. It may be a board officer; it may be a different board member; it may be the executive director; or a member of the development committee. Regardless of ego, you send the person who is most likely to get a yes.

Train askers to thank potential donor for their interest and past support, as appropriate, explain and present the written case for support, and request consideration for a suggested specific donation. Then, train them to be quiet until the potential donor has spoken. At which point, askers should answer questions, and either say “thank you” for the donor’s pledge/gift or their consideration while requesting an appointment to follow up.

Some consultants will tell you to never leave without a pledge form signed but that always felt much too aggressive to me. I prefer the gentler approach to donor engagement.

Once the donor has made a gift, it is imperative that you continue to engage them, which is called stewardship. Stewardship happens after a gift has been made and is an activity in which the donor is not being asked for a contribution, but is being informed/ updated of organizational activities of interest to her.

This should happen 3-4 times after a significant gift is received before another gift is solicited. Donors should not only hear from you when you want money.

I encourage you, at a minimum, to follow the four touch approach after you have received a major gift. Let’s pretend the gift was received in January.

1. Thank the donor for the gift.

The day your organization receives the gift, the CEO or Board member should call to say thank you. Two days later, the donor should have a formal thank you note in their hand that includes the proper IRS language. Within the week, they should receive a personal hand written thank you note from whoever solicited the gift. Whatever else your giving opportunities afford for a gift at that level should happen.

2. Tell them what you did with their gift.

In April, call and tell them about the program that their gift supported, in whole or in part. Share the expected impact of that program.

3. Tell them the impact of their gift.

In August, call and share the actual impact of the program their gift supported.

4. Then- and only then – you can ask for another, slightly larger, gift.

In December, call and ask for a meeting to share the successes of the year and discuss their participation in the current annual campaign.

Throughout the year, donors should also receive newsletters, marketing and email blasts as well as invitations to program events and special events. If you see their name in the paper, send a note. If you see an article in which they might be interested, send a copy. Include them; check in with them; and keep your major donors updated.

Major Donors make the world a better place! Don’t be afraid to meet them, meet with them, engage them and, if there’s match between your mission and their passion, solicit a gift. The worst thing they could say is no and even if they do, they’ll respect you for asking. I once had a philanthropist laugh – out loud for a not insignificant period of time – when a Board member and I asked for $100,000. She gave a major gift but the time between when she laughed and offered her pledge seemed to go on forever.

Do you have a similar story? What’s been your experience with major donors? As always, I welcome your insight, feedback and experience. If you have other ideas or suggestions for blog topics, please share. A rising tide raises all boats.