One of the things I’m really excited about is the potential for the financial crisis and restructuring we’re experiencing to completely transform how nonprofits are financed. I’ve written before about how we need to move away from the notion that “overhead” funding is bad, and how we need to restructure nonprofit accounting principles in order to allow equity capital (or money that allows us to build organizations rather than just buy services) into the equation. We also need to make government funding easier to come by and with less strings attached. And philanthropy needs to begin to emphasize equity and growth capital as opposed to program-only funding. The entire way that we fund the nonprofit sector has got to change.
Which brings me to an interesting letter that Hildy Gottlieb’s “Creating the Future” blog received recently. A fundraiser argues that focusing on a donor’s interests keeps a nonprofit from working on the larger problem they are trying to solve:
I work in fundraising, and I feel like we’re not only merely addressing the symptoms, but we’re actually exploiting the symptoms…To me, my organization exists to address the needs of the population we serve, not the needs of donors…we miss the big picture, the opportunity to solve core problems, when our primary focus is on making the donors feel good about giving…we neglect the big picture, the real solutions when we fundraise to the donors’ fears and egos…our community suffers when we fragment it by each individual’s personal motivation to give rather than unifying it to address the whole picture, and to perhaps finally solve those greater problems…the way we (and most other non-profits) fundraise might be counterproductive to actually creating solutions. So what can I do? How can I advocate for real, big-picture change when our fundraising is entrenched so deeply in its individualized, donor-centric philosophy?
This fundraiser doesn’t understand that nonprofit organizations exist within a market economy. A nonprofit’s work, their mission, must be in alignment with their core competencies and their revenue engine. A nonprofit cannot merely “exist to to address the needs of the population we serve, not the needs of donors.” A nonprofit organization exists to create change in the world, hopefully rectify a disequilibrium, by channeling resources (money, talent, expertise) into a proven theory of change. The resource piece is critical. Some in the nonprofit sector would, I think, argue that they should just be left alone to do their “good work” and not have to worry about fundraising (see my previous post about another fundraiser who complained about her self-interested donors) . But fundraising is an integral and critical element to the work nonprofits are doing. A nonprofit connects a community to its needs and harnesses the resources of that community to address, and hopefully solve, those needs. A nonprofit is part of its community and is funded by donors who make up that community.
Fundraising is not a dirty word. Fundraising, when done right, is about connecting those with resources to the results and impact an organization is creating. The impact should generate the revenue. When the mission of the organization is operationalized through the organization’s core competencies, revenue should follow. Mission, core competencies and revenue are in alignment.
That is not to say, however, that the system works perfectly. Far from it. As I’ve said many times, the nonprofit sector is sorely undercapitalized. We have got to find ways to get more and better capital into the sector, capital that follows results and impact and encourages smart replication of proven solutions. Philanthropy has to recognize this and change how they invest, accounting standards have to change in order to allow better capital to flow, IRS requirements have to change, many of the systems have to change. But in order for those structures to change the nonprofit sector has to understand that fundraising is absolutely critical to their work. It is not dirty, and it does not detract (if raised effectively) from a mission, but rather is part of the mission. We have got to start being smarter about how we finance the nonprofit sector. And to do that we have to recognize how critical aligning revenue with the mission and core competencies of an organization is.