Drakes Bay Fundraising
A Next Generation Fundraising Company

Archive for July, 2012

Don’t Try This at Home

Posted by Christopher Dann
Thursday July 26, 2012
Categories: Fundraising
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The nonprofit conference season has opened with abundant opportunity to hear about fundraising practices advertised to be among the best.

As an addendum for conference booklets, we offer three perspectives on the topic.

Perspective One: Caveat Emptor

Best practices might not be. They may be…

• irrelevant and even deleterious when applied to the wrong fundraising model
• untested or poorly tested and therefore yet to be proved
• unexamined conventions needing to be challenged
• tactical practices antithetical to sound strategy
• sales people’s claims

Perspective Two: Testing Claims

1. Does the practice apply to my fundraising model?

Fundraising models (or fundraising business models) need to be different from one sub-sector to another and are frequently different within a subsector. Just think about the distinctions between fundraising in the Health subsector and for an Arts, Culture, or Humanities institution. But also within the Arts, Culture, Humanities sub-sector, the distinctions between the fundraising models of art museums and public broadcasting organizations are substantial.

2. Are the performance results tested and statistically significant?

It’s astounding how conference presenters avoid explaining methodology in research and accounting for statistical significance when presenting performance data. We need to know if results are just random or will hold up under basic and proper scrutiny.

3. When dollar figures are presented beyond the current year, are they adjusted for inflation?

Often – and especially after a period such as we have been through from 2007 through 2011 – we need to understand if the average gifts or average cumulative giving, total campaign, or total program income numbers we are looking at really represent the improvement or degree of improvement claimed by new or refined practices. The rate of inflation from the beginning of the Great Recession in 2008 to what we common folk believe was its end in 2011 was 4.5%. That’s a big number when we’re talking about marginal improvement.

4. Are trends really trends?

All data presented as trend data should have at least three data points over time, each calculated in the same way. One data point means nothing from the standpoint of a trend, and two are very likely to be random.

Perspective Three: Follow or Lead

Beethoven would never have written his magnificent 9th symphony if he had cleaved to best practices in symphonic composition. In fact, he probably would not have written any of those compositions post dating his 2nd symphony. Yet the practices set out for him by Haydn, Bach, and Mozart, among others, were clearly the stuff of immortal musical accomplishment.

Instead he did what in the argot our times would be called benchmarking. He demonstrated in the first two symphonies that he had learned the best practices of symphonic composition; then he stepped out of that box.

In the final analysis, a best practice is one that moves remarkably the needle on one’s own organization’s fundraising performance. And no one can do that better than you can.

 

2012 Summer Nonprofit Conference Fad

Posted by Christopher Dann
Tuesday July 24, 2012
Categories: Fundraising
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It started at the public broadcasting annual fundraisers’ conference in Seattle. And it’s a sure bet focus on the presumed opportunity of raising money from the Millennial generation cohort – those under 35 – will be the favored and favorite topic of summer fundraising conferences.

In an interesting way, fascination with Millennials appears less a virus spread from the commercial sector – which has always had bias, at least in advertising and media buying toward 18 to 35 year olds, perhaps because they are presumed to look better in anything or in any setting – than an effect of an infatuation with new communications technologies undiminished by even a modest investment in reason.

Also called “Echo Boomers” because they’re principally Boomers’ children, they present a cohort of impressive size, but not one nearly as financially promising as their forebears.

The table below, drawn from a June 2012 Federal Reserve bulletin titled Survey of Consumer Finances, illustrates one perspective of the questionable strategy of focusing fundraising on Millennials: they have the least income of any age group under 75 years old.

Since, as we’ve said many times, all giving is voluntary, it begs credulity that any household having lost income through the Great Recession (or “Lesser Depression”) would be more inclined to give, notwithstanding technological advances in the media of communication and financial transaction.

Another perspective worth our attention is financial assets. In the table below we are looking at the value of financial assets held in 2010 by households holding any financial assets, along with the ratio of debts to assets.

Such data tell us not only why we sometimes feel there are more Millennials engaged in street fundraising than in giving but also – seriously – why the Consumer Confidence Index has been stuck in its cellar for so long. There’s more to overcome than marginal rises in the stock market can inspire.

It turns out that the wealthiest age cohort, according to the Fed’s figures on net worth are now the oldest. As Cheryl Russell, Editorial Director of New Strategist Publications noted in her July 12 American Consumers Newsletter (www.demographics@newstrategist.com) median net worth in 2010 peaks among householders 75 or older, a change from 2007 when it peaked (as we’d expect it should continue to) in the younger 55 to 64 age group.

To return to Millennials, in the same edition, Ms. Russell references the rise in student debt, noting, “The numbers are worse for householders under 35. Fully 40 percent had education loans in 2010, up from 17 percent in 1989,”surpassing the 34% with mortgages, 32% with vehicle loans, and even 39% with credit card debt.

We have reported before that cash contributions from households headed by college graduates index at 174, more than twice the 83 index of households headed by people with some college, and almost three times the 65 index of those without college. So, with recent graduates being so indebted by student loans, the prospect of their giving – and giving ahead of satisfying other needs and interests – is diminished.

And a study released in May further documents their situation. Chasing the American Dream: Recent College Graduates and the Great Recession reports that 60% of 2006 to 2011 graduates are paying off an average of $20,000 in loans. The report from the John J. Heldrich Center for Workforce Development at Rutgers University (www.heldrich.rutgers.edu) says further than 40% of 2009 to 2011 graduates have yet to pay off any of their debt.

One reason graduates are struggling as they are with their debt, the report says, is that only 51% are working full time and earning a median salary of just $28,000.  The majority (60%) of the additional 20% who are in graduate school, meanwhile, are adding to their indebtedness.

Paradigm Shifting Case Study

Posted by Christopher Dann
Wednesday July 11, 2012
Categories: CPB, Fundraising
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On June 20 the Corporation for Public Broadcasting (CPB) released a report, Alternative Sources of Funding for Public Broadcasting Stations, prepared under the directive of H.R. 2055 for House and Senate Committees on Appropriations.

If you are in public broadcasting, this is a must-read report. If you are in a management position in any nonprofit organization or a student aiming in that direction, this is a should-read report.

The report is the product of collaboration between the CPB and Booz & Company. While it aims – and we think succeeds masterfully – in making the case for continued Federal support of public broadcasting, its value is in its comprehensive form and substance. It is, therefore, a good template for anyone asking about the prospects of alternative funding for any nonprofit organization.

And, coincidentally, since it is focused on public media enterprises, the report provides very useful documentation of alternative media enterprises including digital publishing, subscriptions, development and marketing of apps, sales of DVDs and CDs, and other means and media of monetizing content.

The authors were, moreover and most importantly, careful at every juncture of question or issue to bear in mind and remind the reader of relevance to or variance from public broadcasting mission.

It’s terrific that this report is published. It’s not obvious where one finds it on the CPB website. But just go to www.cpb.org and type Alternative Sources of Funding in the search bar and it will appear, readily downloadable.

N.B. What the report doesn’t address – and didn’t aim to – is improving productivity of current sources of funding. There’s significant opportunity in that regard for public broadcasting.

Paradigm Shifting

Posted by Christopher Dann
Tuesday July 3, 2012
Categories: Fundraising, Operations Management
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Diarists and the photographer Frank Hurley who accompanied Ernest Shackleton on HMS Endurance in his attempt to cross Antarctica from sea to sea in 1914-15 recorded graphically the loss of the ship to the forces of advancing, expanding winter ice. As if the ice understood the metaphor it would bequeath, it first took the ship’s rudder, then caused a flooding leak preoccupying the crew, and finally, as Shackleton himself observed, twisted Endurance out of shape before causing her to sink.

For many CEOs of nonprofit organizations, being in the nonprofit sector in 2012 feels like piloting the Endurance through advancing and expanding floes of Antarctic ice. Like the Endurance, a great many vessels on nonprofit missions are getting caught in ice and it is flowing in the wrong direction, taking them away from their goals and objectives by limiting their financial resources. Exacerbated but not caused by the Great Recession, it’s an environment characterized by ever-advancing competition for stagnating sources of funding.

We are reminded of a common but powerful statement of management advice: If we don’t change direction, we’ll wind up where we are headed. The situation calls for changing business models. For most, tweaking is out of the question and innovation is demanded.

The nonprofit sector hardly ever benefits from the disruptive influence that capital markets bring to bear on innovation in the commercial sector. Missions anchor the businesses of nonprofit organizations. They rarely change; changing them is rarely justified.  Business model innovation must come from within, and change must contend with the powerful current of mission and the course it sets for organizations’ resource development and management strategies.

Where program initiatives are monetized, there is a functional connection made between the nature and performance of mission and the financial stability and capacity of organizations. The most prominent examples are medical services and higher education. Yet even in these situations, capital is rarely transformative let alone disruptive.

In any case, most nonprofit organizations cannot, and some choose not to, monetize the programs that manifest their missions. And while higher education and health services account for lions’ shares of nonprofit assets and operating income, they do not account for proportionate shares of the nonprofit sector’s organizations.  For the majority of nonprofit organizations, business models have to do with commerce outside the castle’s moat, providing sustenance for those within. The tension between doing good and doing well financially quite often affects flammable friction within and public controversy without.

The most likely sources of funding substantial enough to be disruptive are private foundations. But while private foundations have the freedom to be entrepreneurial, they seldom exercise that freedom. They most always provide funding to organizations because of what those organizations are already committed to do and not because they have the capacity or wherewithal to do something else.

How, under these circumstances, does one bring about change to business models? Not easily. In his book, Change by Design, Tim Brown writes, “More good ideas die because they fail to navigate the treacherous waters of the organization where they originate than because the market rejects them.” He was writing about private enterprise, but his point holds true especially for nonprofit enterprise.

When gears grind in paradigm shifts at nonprofit organizations and progress stalls, the immediate cause is almost always isolation or segregation of program and financial strategies, and contributing cause is ignorance of what really makes organizations financially viable. What’s required are leadership that engenders management staff commitment to learning, collaborative senior management planning, and full partner ownership of the new model.

None of these requirements fits nonprofit organization norms. Nonprofit organizations are normally led by CEOs who are primarily qualified by their mission and program credentials. Just as it took a couple hundred years to understand that teachers – good teachers – were not necessarily qualified to manage the business of public education, it has taken much longer than the private nonprofit sector could afford to understand well enough the need for management-qualified CEOs or COOs to codify credentials in position descriptions or budget for the additional professional skills.

At the management level beneath the CEO, siloing of financial management, program management, fundraising, marketing and marketing communications is the norm. This doesn’t happen because senior managers in nonprofit organizations are characteristically isolationist people. It happens, first, because mission and program are preeminent and self-justifying; second, because the management of program expense and of funding are normally profoundly different from one another; and, third because senior managers are not normally trained or knowledgeable about their colleagues’ realms of work.

People – especially nonprofit organization board members who should know better – are often heard to say nonprofit organizations should operate like businesses. But the fact is operating nonprofit businesses is much more challenging and difficult. This isn’t to say that good management of profitable enterprise is easy; rather it is to say that managing to the bottom line is far simpler than managing to both often elusive mission objectives and to efficient and effective funding. Nonprofit organizations, even those with fungible programs like health services and higher education, have really two businesses to model and manage.

And the business of funding, even in those apparently simple cases, is made complex by the diversity of sources available to the nonprofit: individuals, corporations, private foundations, public foundations (such as community founds), public agencies, and even legislatures. The organization whose management doesn’t understand the range and variety of skills required to pursue all these sources will not fare well.

Of all funding sources available to nonprofit organizations – and not all sources are available to all organizations – the most complex and difficult to manage is individual support. One reason is because of the wide range of knowledge, skills, and experience required to work effectively across the spectrum of donor relationships, from first-ever gift to capital campaign participation or estate commitment. Another reason is because what we might call the retail part of fundraising, all that fundraising that is done through media of direct or mass communication, has become technically complex, economically confusing, and as cacophonous as a flea market in a concrete warehouse. And, third, individual fundraising is hard to manage and complex because the marketplace of individual donors is itself quite complicated.

Right now, in all three respects, the complexity of individual fundraising seems to be running amok. And while nonprofit executives don’t usually perceive of fundraising as something worthy of such grand terminology as fundraising business model the approach necessary to affect change needed is worthy of the term. It means that what’s required is a collaboration among those chiefly responsible for the four realms that we believe comprise the well balanced nonprofit enterprise: program, finance, financial resource development, and organizational competency.

That’s were change starts or it never gets started.

Next Generation Fundraising and Drakes Bay Fundraising merged in the fall of 2013, bringing the longstanding professional acquaintances of their four principals – Tim Oleary, Carol Leister, Cindy Germain, and Christopher Dann – into a single company and combining the special resources and experiences of each to provide clients greater breadth and depth of service.

For more information about Next Generation Fundraising, click here.