In part 11 of our ongoing blog series, Financing Not Fundraising, we are talking about being brutally honest with your donors. If nonprofits are going to truly break free from the vicious fundraising cycle, they must find the courage to tell funders how it really is. And since board members are a nonprofit’s closest supporters and (I hope) donors, you need to stop telling them these lies as well.
If you are new to our Financing Not Fundraising blog series, the series is about how nonprofits must break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities. Instead, they must create a broader, more strategic approach to securing the overall FINANCING necessary to create social change. You can read the entire series here.
If you want to learn more about how to apply the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series
If you want to break free of the exhausting cycle of fundraising, a key step is to start being brutally honest with funders. Here are the top 5 lies you have to stop telling donors:
- X% of your donation goes to the program
The distinction between “program expenses” and “overhead” is, at best, meaningless and, at worst, destructive. You cannot have a program without staff, technology, space, systems, evaluation, research and development. It is magical thinking to say that you can separate money spent on programs from money spent on the support of programs. Donors need to understand, and you need to explain to them, that “overhead” is not a dirty word. A nonprofit exists to deliver programs. And everything the organization does helps to make those programs better, stronger, bigger, more effective.
- We can do the same program with less money
No you can’t. You know you can’t. You are already scraping by. Don’t accept a check from a donor who wants all the bells and whistles you explained in your pitch, but at a lower cost. Explain the true costs, including administrative costs, of getting results. Politely, but firmly, explain to them that an inferior investment will yield an inferior result. If they simply can’t afford the price tag, then encourage them to find fellow funders to co-invest with.
- We can start a new program that doesn’t fit with our mission or strategy
Yes that big, fat check a donor is holding in front of you looks very appealing. But if it takes your organization in a different direction than your strategy or your core competencies require, accepting it is a huge mistake. Nonprofits must constantly ensure that money and mission are aligned. Otherwise the organization will be scattered in countless directions with an exhausted staff and confused donor base. Don’t let a donor take you down that road.
- We can grow without additional staff or other resources
Nonprofit staff truly excel at working endless hours with very few resources. They have perfected the concept of doing more and more with less and less. But someday that road must end. Nonprofit leaders have to be honest with donors when their staff and resources are at capacity. Because eventually program results will suffer and the donor will receive little in return for their investment.
- 100% of our board is committed to our organization
If that’s true, then you are a true minority in the nonprofit sector. Every nonprofit board I know has some dead wood. Members who ignore fundraising duties, don’t contribute to meetings, miss meetings, take the organization on tangents are always present. It’s a fact that funders want to see every board member contributing. But instead of perpetuating the myth that 100% is an achievable reality, be honest with funders. Tell them that you continually analyze each individual board member’s contributions (financial, intellectual, time) and have a clear plan for addressing deficiency, including: coaching, peer pressure, training, asking for resignations. Getting to 100% is probably never realistic, it is far better to demonstrate that you are tirelessly working toward 90%.
Stop the madness. We need to stop telling funders what they want to hear and then cursing them behind their backs when they set unrealistic expectations. Funders must be made to understand the harsh realities of the nonprofit sector if they are ever to be expected to help bring change.
If you want to learn more about applying the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series, or download the 27-page Financing Not Fundraising e-book.
There was a really interesting article in the Wall Street Journal recently about the New York City Opera that dramatically illustrates how critical a nonprofit’s strategic alignment of mission, money and competence is. I’ve written before that for a nonprofit to be truly effective and sustainable, three things must be aligned:
- Their mission, or reason for existing
- Their core competencies–what they do better than anyone else in the world, and
- Their revenue engine–all the ways in which they sustain themselves financially
So that an organization, in alignment, fully integrates and gives equal weight to those three elements. Those nonprofits not in alignment eventually suffer the consequences, which can sometimes be quite dire, as is the case with the New York City Opera (NYCO).
Once a shining star in New York City’s performing arts world, NYCO has fallen on financial hard times, requiring them to move out of their Lincoln Center home and dramatically scale back their performance calendar this year. The NYCO chorus and orchestra are so upset about the situation that they have held a protest. What a nightmare.
In the 68 years of its existence, NYCO’s mission statement has been clear, succinct and captivating: “The People’s Opera.” However, in recent years, the organization has struggled to align its core competencies and revenue engine around that compelling mission. In 2008 Gérard Mortier, the NYCO general manager and artistic director, canceled NYCO’s 2008-09 season while Lincoln Center was under construction. And the following season, after Mortier quit, NYCO scrapped their planned season and staged a selection of unpopular productions that flopped. The result is that NYCO has lost its audience, lost its revenue, and lost its way.
At the same time, NYCO’s competitor, the Metropolitan Opera, has transformed from a very conservative opera house into a media-savvy, artistically adventurous opera company that trains its own new singers instead of relying on NYCO to develop upcoming stars. All of this leaves the Wall Street Journal to ask, “New York already has one major opera company. Why does it need two? If [NYCO] can’t come up with an answer to that question, then New York City Opera is doomed—and deserves to be.”
Harsh, but true. NYCO is faced with a critical inflection point. They can either figure out how their mission should adapt to their core competencies (what they do better than the Metropolitan Opera) and develop an integrated revenue strategy around that mission and those core competencies, or they need to close up shop.
The reality is that NYCO isn’t alone in this dilemma. It is becoming increasingly difficult to survive these days. Growing competition from nonprofit and for-profit solutions, decreasing funding available, and the advent of new technological channels to reach customers, clients, and funders means that now more than ever nonprofits need to find alignment. They must constantly be analyzing whether their mission, money, and competencies are working in tandem to create an effective, sustainable organization that brings value to its community. Because to ignore alignment is to eventually wake up to the heart-wrenching decision NYCO now faces.
Photo Credit: NYCO website
The term “strategic plan” has become so misused and abused in the nonprofit sector that it has almost become meaningless. So many organizations have undergone a poor strategic planning process that the idea of “strategic planning” has almost become laughable. But the fact remains that to be truly effective at creating social change a nonprofit organization MUST have a strategy for the future and a plan for how they will get there.
There are some very clear ways that a good strategic plan differs from a poor one:
- A good strategic plan starts from an in-depth understanding of the outside community marketplace in which the nonprofit operates (trends in clients, funders, competitors, etc). Whereas a bad strategic plan is created in a vacuum among only board and staff. One nonprofit told me that at a board retreat years ago, board members were asked to write their goals for the organization on post-it notes, which were then tacked all over the room and voted on. And like that, their strategic plan was born.
- A good strategic plan forces the organization to articulate its value proposition, i.e. how the organization uniquely uses community inputs to create significant social value (change to a social problem). A poor strategic plan fails to articulate a value proposition and assumes that everyone outside the organization loves it and understands its value just as much as everyone inside the organization.
- A good strategic plan puts everything on the table and allows no sacred cows. Board members with pet interests are reigned in and staff members who are not contributing are encouraged to realign themselves with the new plan. A poor strategic plan only deals with the easy or non-controversial issues and leaves the difficult questions aside.
- A good strategic plan makes sure that the strategy for programs is aligned with the organization’s business and financial model so that the resulting strategic plan includes programs, financing and operations in an integrated way. A poor strategic plan focuses only on programs and assumes that the money will somehow follow.
- A good strategic plan includes a tactical plan so that the broad goals are broken down into individual steps to get there. This allows the organization to monitor and revise the plan on an on-going basis. A poor strategic plan has no tactical plan or monitoring system attached to it. Once approved, staff or board don’t see it again and it certainly doesn’t drive the day-to-day activity of the organization.
- A good strategic plan is inspiring and compelling to potential funders. It sets forth a bold vision for the future and a specific road map for getting there, which inspires confidence and investment. A poor strategic plan is boring, maintains the status quo, and elicits only nominal external support.
It’s not enough to go through the “strategy” motions. A real strategic plan is bold, compelling, tactical, well-financed, integrated and inspiring. It gets everyone (staff, board, funders, volunteers, clients) moving forward in a common direction from which real change flows.
If you’re interested in exactly what Social Velocity’s strategic planning process looks like, go here.
Photo Credit: HikingArtist.com
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