This week the Evelyn and Walter Haas, Jr. Fund released the second in their series of reports about fundraising. Their Fundraising Bright Spots report, by Kim Klein from Klein & Roth Consulting and Jeanne Bell from CompassPoint, joins their Beyond Fundraising report, released last month.
These two reports are part of the Haas, Jr. Fund’s larger “Resetting Development” effort “to ‘learn out loud’ about how to…help put the sector on a surer path to sustainability and long-term success.” Given my concerns about their Beyond Fundraising report, the Haas, Jr. Fund very graciously asked me to review this latest report.
This new report analyzes 16 social change organizations that have been successful at individual fundraising to determine what the sector can learn from them.
I am always a huge fan of case studies. I think there is much to be gained by looking at others who have done things well, so I applaud the Haas, Jr. Fund for moving from theory into practice to see what is working in individual fundraising.
But first, we have to understand this report for what it is. This report only looks at nonprofits that have been successful with individual donor fundraising, which is just one of several ways that nonprofits bring money in the door. And the report only looks at “progressive organizations with limited budgets and small staffs.” So I would argue that this report and the case studies contained within it will only be applicable to similar types of nonprofits that have individual fundraising as part of their financial model.
Nevertheless, the report finds four themes present in these 16 social change organizations, which are that fundraising:
- Is core to the organization’s identity
- Is distributed broadly across staff, board and volunteers
- Succeeds because of authentic relationships with donors
- Is characterized by persistence, discipline, and intentionality
Many, if not all, of these themes make up the “culture of philanthropy” that the Beyond Fundraising report described.
There were several things I liked about the Bright Spots report.
First, I love the report’s focus on making fundraising part of the job of an entire organization’s board and staff. Two case studies in particular, Jewish Voice for Peace and Mujeres Unidas y Activas, demonstrate how major donor fundraising should be shared among senior staff and board members. For example Jewish Voice for Peace “has 57 portfolio managers from across the staff, board, and volunteers who together manage 600 major donor relationships in addition to other roles they play within the organization.”
Indeed the report points out that in these 16 organizations the head fundraiser’s role is to marshal staff, board and other organization resources toward fundraising, which I love: “Time and again, we heard from the development directors at these organizations that their job is to coordinate, to teach, to coach, and to inspire. The individuals in this role are highly relational and they take deep satisfaction in enabling staff, board, volunteers, and members to be successful fundraisers.”
Second, I really appreciate the Breast Cancer Action case study, which emphasizes creating a give/get fundraising requirement for the entire board:
At Karuna [Jaggar]’s first in-person board meeting as the new executive director, she laid out her desire to establish a board give-and-get policy to her board members, each of whom had been told explicitly upon recruitment that they did not have to participate in fundraising…After an in-depth discussion, they set a give-and-get policy of $10,000 per board member. “Maybe we lost some potential board members who felt they couldn’t do it,” said [board chair] Tracy [Weitz], “but only in the first year. Now, our veteran board members can share their fundraising stories with prospective members and say, ‘I’ve been fine, and you’re going to be fine.’” It’s important to note that BCAction does not prioritize personal wealth now more than it did before this policy change, but rather invests the time to support board members’ success, regardless of personal financial capacity, in the fundraising program.”
Yes! That’s exactly the way to get every board member involved in fundraising, of which I am a huge proponent.
Third, the Bright Spots report points out the need to fully integrate marketing and fundraising in a nonprofit: “A critical aspect of building and refining an individual donor program is tending to the intersection of communications and fundraising…development and communications are inextricably linked and staff driving these efforts work extremely collaboratively.” Agreed, fundraising can not sit on the sidelines of anything an organization does, but must be fully integrated throughout the organization.
Now, let’s get to where I think the report falls short.
First, I would have liked to understand better how these 16 organizations were selected as “bright spots.” I think in holding up organizations as exemplars it is critical to understand in what ways they are exemplars. While the beginning of the report describes what these organizations have in common: “a deep commitment to and strong track record with raising money from individuals,” and “individual support is a consistent part of their overall revenue strategy,” and the report highlights some of their individual donor fundraising successes, it is unclear why these 16 organizations in particular are held out as bright spots.
In my mind, I would select case study organizations that achieved: individual giving growth year over year, and/or higher than average donor retention rates, and/or more profitable than average fundraising activities, and/or demonstrated long-term financial viability. While some of the 16 organizations had significant individual donor growth, not all of them did, so I’m not sure what selection metrics were used. I would like to understand how the Bright Spot organizations’ fundraising metrics compare to their most fundraising-successful peers.
It is particularly important to understand what makes these organizations bright spots when the report points out that some of the 16 social change organizations are struggling with scaling or making sustainable their individual fundraising efforts:
“We heard from the Bright Spot leaders who want to grow their organizations that they are grappling with how to scale this organizational highly relational approach to fundraising. And many of them acknowledge how dependent their success is on long-time leaders, despite their distributed approach to fundraising…Many of the Bright Spots will soon have to adapt to very long-time leaders moving on.”
Second, the report does not make a clear distinction between small donor fundraising (one-to-many cultivation and solicitation of donors) versus major donor fundraising (one-to-one cultivation and solicitation). I wonder if the four themes that the report uncovers differ, and if so how, between fundraising activities targeting many small donors versus fundraising activities targeting a few large donors.
Third, the report touches briefly on the 16 organizations’ fundraising systems and use of data and metrics, but not in a robust way. I would have loved to understand better the kinds of systems these bright spot organizations use and what metrics they are tracking and trends they are seeing. While I understand the report’s overall emphasis on some of the “soft” skills of fundraising (“authentic relationships with donors,” “culture of philanthropy”) I also think that understanding the “hard” skills (systems, metrics) is key to replicating fundraising success (and overall financial sustainability).
Fourth, just as the Beyond Fundraising report did, the Bright Spots report continues to leave the problems (and in this case, the successes) with fundraising largely in the hands of individual nonprofits and their leaders. I am still hungry for case studies and research about how nonprofits (and their funders) can overcome the more systemic financial flaws inherent in our social change sector.
In the end, I would say that the Bright Spots report gives us a glimpse into a piece of what works to bring money in the door. For social movement, individual donor fundraising at small nonprofits, the Bright Spots report provides some important and useful insights. But for more broadly understanding what contributes to overall financial sustainability in the nonprofit sector, this report falls short.
But as I have said before, I don’t fault the Haas, Jr. Fund for exploring these issues. Indeed, they are one of very few funders contributing to the knowledge base about what creates a more financially sustainable nonprofit sector. We just need more of them.
Photo Credit: Evelyn and Walter Haas, Jr. Fund
It is the ultimate question for many nonprofit leaders. But often one that they can’t answer on their own. Perhaps because nonprofit leadership may be so mired in the weeds, or so used to doing what they’ve always done, or simply lack fundraising expertise or knowledge of new trends and tools. The end result is that they simply can’t figure out how to raise money in new and better ways. Which is where a revenue assessment can turn the tide.
Let me give you an example.
Institute for Human Services (IHS), a large social service agency for homeless men, women and children in Honolulu, Hawaii, enjoyed success in government grant funding, but had been unable to diversify their funding as much as they would like in individual and corporate areas. At the same time, their small fundraising staff was over capacity and struggled to keep up with the volume of work. The board of directors was eager to help fundraise but didn’t know the best way to get involved.
The organization knew they had the opportunity to raise more money, but didn’t know how to prioritize their resources to do so.
IHS hired Social Velocity to conduct a revenue assessment to find opportunities for growing their funding. I interviewed board, staff and external funders to get their insights about fundraising at IHS. Then I reviewed organization financials, materials, technology, staffing, planning, and other processes. From this analysis, I wrote a 30-page analysis with specific recommendations for improving fundraising in each revenue area and presented my findings to the staff and board.
With Social Velocity’s revenue assessment, IHS has hit the ground running making improvements to their fundraising function. They have already hired a new Development Director who has been able to shoulder more of the responsibility for fundraising, freeing the Executive Director to participate in more donor relations activities. They are looking forward to reviving past donors through more targeted fundraising strategies, caring for existing donors and creating broader opportunities for constituents to support the mission more personally. The staff and board are energized by the specific fundraising role and responsibilities I outlined for them. The assessment really turned the tide for them, as executive director Connie Mitchell explained:
The analysis and recommendations turned on the light bulb for me about how an investment in one key development staff could multiply our results over a short time. We’re also confidently using our resources more wisely for a better ROI when it comes to fundraising tools and media strategies.
A revenue assessment is for nonprofit organizations that know they want (or need) to raise more money, but don’t know how to get there. Here are the steps I go through in a nonprofit revenue assessment:
- Interview Stakeholders. I conduct in-depth, one-on-one interviews with the executive director, key staff, key board members, and key funders and other external constituents to understand what is working and what isn’t.
- Review Documents. I analyze all organization documents, policies, procedures, financials, systems, and materials to understand the internal and external processes for raising money.
- Assess Organization. I look at 6 elements of the organizational structure (mission and vision, strategy, operations, etc) to determine how well they contribute to fundraising effectiveness.
- Analyze Revenue Streams. I look at all current and potential revenue streams to uncover opportunities for increases.
- Review Fundraising Infrastructure. I review all aspects of the organization’s back-end functionality for raising money (such as donor database, materials, systems, technology) in order to uncover areas for increased efficiencies.
- Deliver Analysis and Recommendations. I write a 15-20 page detailed analysis with recommended actions for increasing funding streams.
- Present Assessment. I present the assessment and recommendations in-person to staff and board for questions and discussion.
It doesn’t have to be so hard. A revenue assessment can give you a clear road map for moving your organization from financial insecurity to long-term financial sustainability.
Photo Credit: Julia Manzerova
Lucy Bernholz is hosting a great conversation on her Blueprint Research and Design website called “What Capital When?” As part of their work with the John D. and Catherine T. MacArthur Foundation in their Digital Media & Learning initiative, Blueprint is hosting this online conversation around the theories and strategies of program-related and mission investing to advance knowledge and research in the field. They asked that I do a guest post on using PRIs (program related investments) to improve the fundraising effectiveness of nonprofit organizations. Below is that post. You can also read the post on their What Capital When site here, and you can read the whole series here.
I think there is a tremendous opportunity that most foundations and nonprofits are missing. PRIs (program-related investments) are an under-used tool that could provide much needed capital for nonprofits to transform how they finance social impact.
PRIs are loans that foundations make to nonprofits at low, or no interest. At the end of the loan period (typically 3-7 years) the loan is repaid, or forgiven. PRIs are usually used for capital projects or land purchases in the nonprofit world. But they could also be used to increase the fundraising capacity of a nonprofit organization, through increased fundraising knowledge, planning, tools and staffing. The current economic climate seems like the perfect opportunity for this new use of PRIs when foundations are trying to hold on to their dwindling corpus while maintaining their past level of community support.
A nonprofit could use a PRI to improve their fundraising infrastructure in several ways:
- Create a strategic development plan. Many nonprofits don’t have the expertise or time to put together a strategy for how they will bring money in the door. With funding to hire an outside consultant to put together such a plan, the nonprofit would have a much better chance of increasing their fundraising revenue.
- Get fundraising training for their staff and board. If a nonprofit staff and board have the tools and expertise for successfully raising money, they will be more likely to do so.
- Hire a seasoned Development Director. Many nonprofit organizations can only afford to pay the bare minimum for a Development Director, which means that they are often forced to hire someone with little experience who must learn on the job. If instead they had enough funding to pay a market rate salary for a seasoned fundraiser, they could hit the ground running, increasing the likelihood of fundraising success.
- Purchase a new donor database. A key element to success in individual donor fundraising is an organization’s ability to capture and use data about donors and prospects. A good donor database makes this effort easier and more successful.
- Upgrade their website, email marketing, social media efforts. As direct mail appeals (a nonprofit fundraiser’s traditional standby) continues to become less and less effective, nonprofits need to move effectively into the online world. Funds for technology upgrades and staff could help them do this.
- Launch a major gifts campaign. The vast majority of private funding in the nonprofit sector comes from individuals (80+%), so to stay competitive nonprofits need to move into the world of major gift solicitation. But that takes expertise, staff, collateral and other infrastructure elements.
These are just a few examples of how nonprofits could make investments to strengthen their fundraising efforts. But currently it is difficult to find funding to support things like this.
But a PRI could provide an initial investment that sets the nonprofit on a path toward more diversified, more sustainable fundraising for the social impact they are working to create.
There are tremendous benefits to a PRI program like this. First, for the foundation:
- Increases their ability to meet past levels of giving, despite any losses they might have found in the market, because the loaned money will eventually come back to them.
- Encourages their nonprofit grantees to be proactive in creating fundraising streams that will make them more sustainable. Thus, increasing the likelihood that their nonprofit grantees a) won’t have to come back to them year after year for ongoing support and b) will become more sustainable and thus achieve greater social impact.
- Stretches their capacity-building dollars further. Because PRI money eventually comes back to the foundation, they can increase their level of impact by helping more nonprofits improve their capacity than they could with grants alone.
- Increases the level of accountability among nonprofit recipients because of the expectation of repayment.
And second, for the nonprofit:
- More diversified and sustainable fundraising streams.
- Increased fundraising knowledge and experience.
- Increased ability to work towards social impact.
Although PRIs used in this new way seems, at least to me, to be an obvious win-win, very few foundations are doing it. PRIs in general are used (according to the Foundation Center) by only a few hundred of the thousands of grantmaking foundations in the country. And I know of only one example of a foundation using a PRI to upgrade the fundraisng capacity of a nonprofit (the KDK Harman Foundation in Austin just launched a program like this last Fall, but does not yet have any participants).
So what is holding foundations back from launching a PRI program like this? A number of things:
- Nonprofits lack the expertise to put a plan together and pitch it to foundations. This is where Social Velocity comes in to help nonprofits create a plan to upgrade their revenue function and pitch that plan to foundations and other funders.
- Most foundations have an aversion to capacity building funding and prefer that their money go to direct program service. However, as more nonprofits can demonstrate to funders that capacity building actually results in even more impact, this aversion can be alleviated.
- Foundations lack awareness of or experience with PRIs. However, this is changing, especially in the last year when the poor economy has made foundations increasingly interested in finding alternative ways to maintain community investment levels.
- Foundations that are experienced with PRIs are not aware of using them to improve a nonprofit’s fundraising function.
So there is a disconnect. But I am optimistic that as nonprofits learn to put a plan together to upgrade their fundraising function and articulate to funders how PRI’s could finance it, more examples of this new use of PRIs will surface.