Should You Adopt Radical Transparency?

imgresThe idea of radical transparency has been a popular concept in the business world for around the last decade or so.  The term gets used quite a bit but in the context of the corporate world, it essentially refers to making decisions in public, being open about data, and generally being up front in areas where a corporation has traditionally tried to do the opposite.  The idea is that in the chaotic world of the internet the only way you can influence your own reputation is to be part of the conversation in an open way.  Increasingly, I’m beginning to see nonprofits adopt the same idea.  So, should you adopt radical transparency?

My friend Dora is involved with an organization called Razom.  The organization was formed a little over a year ago in response to the Maidan movement in Ukraine.  It’s been fascinating to watch the organization over that period of time.  First, the fundraising ROI is off the charts at less than $.01 expenses per dollar raised.  But more interesting to me is their philosophy of complete financial transparency.  For instance, their financial books are a publicly viewable google doc.  Sure, it’s in cyrillic but Google will helpfully translate it for you if you haven’t kept up with your Ukrainian.  For most nonprofits, having their finances down to every last expenditure displayed for all the world to see would send the CFO running away in horror.  Additionally, when Razom was first trying to get its books in order it decided to have a “financial hackathon”.  All members of Razom were invited to participate and help get the organization organized financially.  Now, when I say “members” I mean people who have joined their Facebook page, so more or less the general public.

I love that Razom has begun its organizational life with transparency as a core value.  While I am sure Razom faces its share of challenges just like any other nonprofit, I’m going to guess that trust between the organization and its donors is not one of them.  No need for donors to guess how their money is being spent; they can see it any day at any time.  Creating the Future, a social change research and development laboratory, conducts all of its board meetings via Google Hangout, open not only to viewing by the public, but participation by the public.  What a crazy, radical, wonderful idea.

Given how poorly the vast majority of nonprofits steward their donors, we could benefit from considering these and similar practices.  Most of those who are familiar with The Osborne Group know that we consider stewardship of paramount importance.  90% of the time we see a problem with an organization and its ability to fundraise, ad hoc stewardship or a lack of it all together features into the problem prominently.  As a sector, we are bad in this area and we need to get better.  Radical transparency might be the answer.  We are not saying that you have to conduct your board meetings in public; there is a lot of work that goes along with this.  But what if you video taped them and put them on the web?  Or maybe conducted one meeting a year open to the public?  What if you did make your P & L available on the web?  What’s the worst that could happen?

The problem, of course, is that the way philanthropy, especially institutional philanthropy from corporations and foundations, is perceived makes this concept pretty scary.  In essence, we are all terrified that if our funders saw all of our struggles that we risk losing funding.  In this day and age we are all so focused ROI and metrics that we believe deep down that if our donors know that we aren’t perfect they’ll just support some “better” or more “efficient” operation.

But what if the opposite turned out to be true?  What if the best way to show commitment to a strong ROI and social ROI was to have all of our struggles out in the open?  Wouldn’t that show and even greater commitment to being the best organization we can be?  Wouldn’t that build the most important of all bonds, trust?

Given how little most donors trust nonprofits, we would all do well to at least consider the idea.

 

The Foundation Screening List

Screen Shot 2015-02-13 at 11.24.46 AMI want to talk briefly about an important but underutilized development tool: the foundation screening list.  When we are first beginning our development careers everything we learn about foundations implies that they are pure meritocracies.  Have a good organization with a good project, write a good proposal and you’ll have as good a shot at getting funding as anyone else.  And to some extent this is true.  If you aren’t a well run organization and you don’t have a good project you probably won’t get funding.  But the reality is that you will be competing against many other meritorious organizations and not everyone one will get funded.  So, how do you stand out from the crowd?

The reality is the business of successful foundation funding is very much a “who you know” business.  I’m not saying that there is any sort of cronyism involved.  But I am saying that your ideas are more likely to be heard if you know the decision makers involved and have had a chance to talk over your work in detail.  I am saying that knowing trustees counts for a lot more than knowing program officers.  And I am saying that trustees and program officers knowing you and believing in your leadership and your ability to deliver on the promises of your proposal is critical.

So, a really valuable exercise for any organization is to know who you know on foundation boards and staffs.  How do we find this out?  The foundation screening list.

The foundation screening list is a packet of foundations (up to 25) likely to fund your organization based on their stated mission and its relevance to yours.  Each foundation gets it own page and on each page, triple or quadruple spaced, you’ll list every trustee and program officer.  If it is a large foundation then just list the relevant program officer.  You can see a sample layout here.

Now, what do we do with foundation screening list once we have one?  Sit down with your staff, your board and other volunteers, friends and anyone else willing to listen to you.  Ask them to flip through the list and see if they know anyone.  Ask them to write in the margins who they know and any important information about them.  Ask them if there is any foundation or anyone not on the list that they would be willing to contact.

Ask them if they’d be willing to help set up a meeting with anyone they know.

Over time you should get a pretty good catalog of who knows who and hopefully have people setting up meetings on your behalf.  Record everything in your database.

Webinar: Employing Metrics for Effective Course Corrections

It’s a great time to asses your development program to make adjustments and course corrections. Osborne Group consultant Laurel McCombs helps you identify key metrics to assess your development operations and walk through how to best put that data to use in developing your plan for the coming year.

Major Gift Lessons From My Grandsons

roundcube.intermediaI’ve had the privilege of speaking all over the world to groups as large as 900. Certainly, my adrenaline would pump. But never once did I feel nervous or worried. That is until my grandson asked me to speak to his second grade class.

“Grammie,” he asked, his face in a serious frown, “do you want me to give you some advice?”

“Absolutely,” I said.

“First, be sure to tell stories.” He gave me an encouraging nod. “You’re good at that.”

Storytelling, as you know, is at the heart of major gift work. Stories that invite questions, engagement and action. As gift officers, we all know how important this is. But are we making it easy for our board members, top donors, champions and influencers to tell our story? One way to make it easier is to have short videos available, under three or four minutes. Your volunteers can have them on their tablets and mobile devices. Make sure they know where to find them on your website. Professional videos like this one works well.

But amateur video is also effective. YouTube has provided us with a high tolerance for amateur video. Use your smart phone to capture your program staff at work or recipients sharing the change in their lives. And don’t forget the importance of making your fiscal story come alive.

The purpose of the story is to invite strategic conversations, not to pitch and sell. Which leads me to his next piece of good advice.

“Be sure to ask us lots of questions. Kids like that.”

We talk a lot about listening and asking questions but are they generative and/or strategic? Have you asked your donors some of these powerful questions? The first three are from Michelle Clarke. They work well at a vision meeting, strategic planning session, high-level donor meeting after your CEO has shared his or her BIG IDEAS.
1. What had real meaning for you from what you’ve heard? What surprised you? What challenged you?

2. What’s missing from this picture so far? What is it we’re not seeing? About what do we need more clarity?

3. What’s been your major learning, insight or discovery so far?

The next few questions, probe for more understanding about your donor’s motivations and values.

1. What do you expect from the charitable organizations in which you are involved?

2. What do you value most about your relationships with the organizations and institutions you support?

3. What values underpin your philanthropic choices?

If you would like a list of strategic and generative donor questions (updated for 2015) and tailored for your type of organization, contact me at karen@theosbornegroup.com

His third piece of advice was, “Don’t embarrass me.” Enough said!

I have a second grandson, aged three. He also knows something about major gift work. We were opening presents this Christmas. Trucks, helicopters, building blocks, and Thomas the Tank Engine trains and tracks. After opening each present, he said thank you and fell to playing with it. We had to move him to the next toy because he was so absorbed.

Every time he visits, we always read stories, which he loves. So also under the tree were three new books wrapped in Christmas paper. As we moved him from his new train and he tore the paper away he said, “Grammie I like books but they are not a good present.”

Reminder. Everyone is different. What we think is wonderful stewardship may not work for someone one else. Books for some are perfect but clearly not for all.

You have to tailor major gift stewardship and engagement. Canned doesn’t work even if it’s lovely.

Top 2014 Blog Posts From The Osborne Group, Inc.

Happy New Year!
Top 2014 Blog Posts From The Osborne Group, Inc.
Definitely worth a read (or re-read). What will you do with this great information? What changes have you made or plan to make? We want to know. Let us hear from you.
Building Great Relationships. Start Here.

The Case for the Fundamentals
Yes, fundraising is changing and there are lots of exciting ideas out there. Check them out, embrace the ones that make sense. But don’t do it at the expense of the fundamentals.

She was a GREAT woman. Smart, talented, generous, gracious. She left us with a treasure trove of good advice. Maya Angelou

High Net-worth Individuals: Your Inspired, Joyful, Generous Donors. Follow the money!

December Glass Balls for Major Gift Teams. Advice for January 2015 as well!

If it were easy, we wouldn’t need you!

Spring is coming believe it or not. And along with spring comes special events – magical or deadly?

Webinar: Building Social Capital to Increase Champions, Advocates & Donors

Join Bob Osborne on December 9th at 2:00 PM EST for an engaging webinar on building social capital.

Authors Shirley Sagawa and Deborah Jospin assert that social capital is our most valuable asset. Those organizations and institutions with a high level of social capital thrive in good and bad times, those that do not, continue to struggle. In this webinar, we define our terms, and learn practical advice for enhancing and maximizing social capital. You will leave the webinar with clear steps for increasing your social capital and strengthening your institution.

Click here to register: https://attendee.gotowebinar.com/register/2649097707904065794

Webinar: Ensuring a Successful Year-End Transition

Join Yolanda and Laurel on Monday, November 17th at 2:00pm EST for a one-hour webinar. During this webinar we will share tips and strategies for ending the year strong and getting the new year off to a powerful start.  We will cover topics that will help you, personally and professionally, take on this very hectic, and critical, time of year.  Click here to register now!

Ten Things Great Relationship Builders Do

Our goal is inspired, joyful, generous investments by our donors. We want them to be “all in.” Ambassadors, volunteers, providers of expertise and wisdom, networkers and connectors and of course stretch financial givers and fundraisers on our behalf.

To get there, we build relationships that are strong, life-long, productive for the organization and meaningful for the donors.

Here are ten things great relationship builders do:

1. Strengthen and use your emotional intelligence –
Emotional intelligence consists of our ability to monitor one’s own and other people’s emotions, to discriminate between different emotions and label them appropriately, and to use emotional information to guide thinking and behavior. It is critical for effective fundraising relationship building. In fact, it is critical for managing others and having strong and happy home and work relationships. What’s your EIQ? What steps are you taking to nurture and strengthen this essential competency?

2. Foster strategic conversations about mission, vision, and values
Our ability to ask strategic questions about attitudes, values, and feelings is more important than new information chitchat. We need to understand philanthropic motivations, passions, and interests. Who makes the decisions and how. How best to engage and communicate with our donors. Just as important, is to engage them in conversations about our mission, vision and values. We want them to TELL US about the impact we are having in the community, why our vision is the right one for the people and causes we serve, why we matter. Click here for our latest list of strategic questions.

3. Be thoughtful, intentional and strategic
People often ask me if our work is manipulative. Are we tricking people, pretending to care about them just to get their money? Yikes. No. Intentionality is respectful of both the organization that pays you and of the donors’ time. We are not in the friend-raising business. None of us should be. Not alumni relations or engagement specialists, or event planners. We are not developing friends; we are nurturing productive, meaningful and satisfying relationships. What are you trying to accomplish with this contact? How will you achieve it? That’s the job. It is a wonderful, noble profession. And an honor and privilege as a volunteer.

4. Be donor-centric by paying attention to both the little as well as the big things -Yes, every conversation and experience should be strategic and intentional with clear and measurable goals but we also need to remember the little things. Birthdays, anniversaries, favorite flowers, names of pets, children and grandchildren. Get that information into the database along with the big things. Capacity, inclination, giving readiness, engagement and stewardship preferences and so forth. And think like a donor. See your organization though donors’ eyes. Not through your silos, turf and needs.

5. Engage donors and potential donors and volunteers in meaningful and productive work
We know engagement leads to increased giving of time, treasure and talent. All the research supports this. I hate the expression, “We want our donors to feel engaged. No. We want them to be engaged. Engagement is two-way, it taps into personal capital (human, intellectual, network and financial), it has a think, feel and do component, it’s experiential, and mission infused. No one wants to be wanted only for his or her contacts and money. Do you have a suite of engagement opportunities that meet these criteria? Drop us a line if you want a list of potential engagement opportunities for your type of organization. mail@theosbornegroup.com

6. Steward all of the donors’ personal capital in tailored ways that demonstrate IMPACT
People give their time, energy, expertise and money because they want to make a difference. Stewardship includes thank you and recognition. But more importantly, it focuses on demonstrating IMPACT. Three, six, nine months after an investment and BEFORE the next solicitation or volunteer request, demonstrate the difference I made. Thank you is not enough. You lose points when you don’t say thank you. It is expected. What inspires greater investment is when you engage me, share with me, the difference I’ve made. You promised I would save or change a life. Now show me!

7. Inspire
Don’t offer donors a shopping list of giving and naming opportunities. Share the societal problems you are solving, the lives and conditions you are saving and changing. Lead with mission and vision. Who cares about your campaign goals, or your desire to be best in your market? Everyone, from the security guard to the admin to the mission staff to board of directors – everyone, has to be able to tell the story in a compelling and authentic manner. Work in this one! It is so important.

8. Think big 
“She won’t join our board. We’re small potatoes. Plus we’re a working board. Let’s just ask her to lend her name.” “Please join our board. I promise. You won’t have to do much.” “He doesn’t have the time to give. He’s too busy.” “We can’t compete with the big organizations. No sense in asking.” Turn around. Look at all the people standing behind you who are counting on you to achieve the mission, vision and work of the organization. They deserve the best board, the biggest inspiring ideas, and the most enthusiasm. Don’t let them down.

9. Believe and give
Work for, volunteer for organizations you care about deeply. Know the story. Meet the people you are helping. Have personal stories. Understand the cause. Care deeply, passionately. Be a generous investor. Generosity is not about wealth, it is about stretching, giving with a full heart, doing the very best you can.

10. Enjoy
Your energy and enthusiasm is catching!

A Case for the Fundamentals

About a year ago, I was complaining to my dad that my shoe laces kept coming untied. He told me, as unpatronizingly as possible, that it was because I wasn’t tying them right. You heard me, I wasn’t tying them right…

This got me thinking, how did this happen?shoe laces Did I learn incorrectly? Or, was I taught correctly and over the years my technique got sloppy? Did I start taking shortcuts? Whatever it was, something I considered to be so fundamental and automatic, I was doing wrong, and it was causing me a great deal of irritation.

How many other things is this true for, particularly when we think about the way we run our fund development operations. There are basics that we all learn at some point. These elements seem so fundamental that it almost seems silly asking about them, but over the years, I have seen a number of organizations that don’t have these things in place.
I know that we all want to talk about the latest trends and emerging strategies, but I’ve decided, in this post, to channel your middle school Phys Ed teacher and focus on the fundamentals.

I get it, it feels like a lot of work to stop what you’re doing and work on these things. Your days are busy, your to-do list is long enough. But how much time are you wasting by not having these fundamentals in place? How many missteps are you making? How can you know that you’re optimizing your return on investment or prioritizing your activities effectively? How much time did I waste stopping to retie my shoes? And, who knows what might have tripped me up while they were untied.

So, to help make sure you’re on track for success, here are five key fundamentals to make sure you have in place. Hopefully, you’ll be able to check off each item with confidence, but if you’re missing any of these elements or they are in need of updating, I encourage you to make their development a priority:

  • Vision for the Future: Your big, bold vision expresses what will be different in the world because your organization exists. Everyone in your organization should be able to articulate and share it with passion and conviction. Without a compelling vision you lack the inspiration required to motivate your investors to make transformational gifts.
  • Long-Range Strategic Plan: This plan maps out the next three to five years and how you will achieve your big, bold vision. Every organizations has things they would like to change, in their operations, systems and culture. But, change doesn’t happen just because we want it to, it happens through being intentional and strategic in our actions and your long-range strategic plan ensures that.
  • Annual Fund Development Plan: Your annual operating plan includes specific, actionable goals and objectives with clearly defined roles and deadlines. A strong plan is as critical to guiding your organization in focusing on the most critical strategies as it is in helping to inform decisions about what you won’t do. Make sure that once the plan has been developed you implement strategies for continually checking on progress and make course corrections.
  • Table of Gifts: Probably the key fundamental that is missing the most from development shops, the table of gifts is a powerful management tool. Imagine always knowing exactly how much you have raised to date, how much remains to goal, which gifts have been closed and how many new prospects need to be identified. Now, stop imagining and go put together your table of gifts.
  • Case for Support: Can everyone in your organization – staff, board members, volunteers – effectively convey your organization’s case? Your case for support is a single document that contains information on who you are, why you exist, what you’re trying to accomplish and why a donor should care. A strong, well-written case for support provides the foundation for all of your donor materials and marketing collateral and provides consistency and effectiveness in your messaging.

These elements might not be flashy, they aren’t built on the latest technologies and they aren’t trending on Twitter. However, they are guaranteed to have a significant impact on your development success. So, don’t put them off any further, because otherwise you may end up looking as foolish as, say an adult that doesn’t know how to tie their shoes properly.

Non-Profit Social Enterprise: What You Need to Know

Today we have a guest post from Laurel Rogal of Klamp & Associates, a law firm dedicated to representing charitable organizations.  She walks us through some of the do’s and don’ts of non-profit social enterprise.

Nonprofits are increasingly seeking alternatives to their traditional dependence on donations and grants. While such contributions are often essential sources of revenue, exclusive reliance on them may make organizations susceptible to unpredictable economic fluctuations.

Revenue-generating activities are an effective way to diversify and sustain income for charitable programs. For example, a homeless shelter may earn revenue by selling products made by its residents. An art museum may rent its building for private events such as weddings. A humanitarian organization may license its logo to a national retailer in exchange for a portion of sale proceeds.

If not done carefully, however, revenue-generating activities can have adverse tax consequences. First, the IRS may impose an “unrelated business income tax” (UBIT) on otherwise exempt organizations that regularly conduct a trade or business that is not substantially related to their charitable mission. Second, and more seriously, nonprofits that engage in a substantial amount of “commercial” activity can lose their tax-exempt status. This is because the IRS takes the binary view that activities are either charitable or commercial and considers commercial activity incompatible with 501(c)(3) status. While the IRS has broad discretion to determine which category an activity falls into, it often emphasizes (1) whether it competes with for-profit businesses and (2) whether it is priced at or above cost.

Nonprofits have three options to generate earned income without jeopardizing their exemption:

  • First, nonprofits can conduct revenue-generating activities that are charitable rather than commercial in nature. This means conducting the activity in a manner distinct from for-profit businesses. For example, a microfinance activity may be considered charitable rather than commercial if it takes more risk, offers more generous terms, and/or provides more support to borrowers than commercial lenders. Likewise, a publishing activity may be considered educational rather than commercial if the charity avoids paying royalties, sells the publication through its website rather than sales agents and paid distributors, and/or subsidizes the publication with donations.
  • Second, nonprofits can earn revenue that will generally be treated as an exception to the commerciality rules, such as (1) sponsorship income and (2) passive income. Sponsorship income is paid by businesses in exchange for acknowledgment as the charity’s official sponsor. Passive income includes rents, royalties, interest, and other income that accrues without ongoing activity by the charity. Please note that if either of these undertakings becomes vastly excessive in relation to the nonprofit’s actual charitable activities, the nonprofit may face IRS scrutiny and/or penalties.
  • Third, nonprofits can engage in revenue-generating activities that are an insubstantial portion of the organizations’ overall operations. The IRS has considerable discretion to determine whether an activity is substantial, since this term is not defined. In some cases, an activity that amounts to 10% of the charity’s revenue may be considered substantial. Please note that, unlike the previous two options, income from an insubstantial activity may be subject to UBIT.

Nonprofits should consider these tax issues when designing and implementing revenue-generating activities. Careful planning can protect the nonprofit while increasing its capacity to serve the public good.