Real and Lasting Good: A Culture of Philanthropy in Sustainability Planning

The numbers are in.

I know that you know:  Giving USA data was released this week. Researchers predict it will take at least five more years to raise as much as before the recession. When we look at imagesgiving over time, we see that bad economies can wreak havoc on our not-for-profits. Some die. Some cut services. Slashed government support doesn’t return at the same levels. How should NGOs protect themselves from the vagaries of the economy? How can YOU do better than the numbers predict over the coming six years?

Create a culture of philanthropy at your organization.

This isn’t pie in the sky stuff. It is powerful, successful, and sustainable.

First, let’s define our terms: a culture of philanthropy exists when everyone — your staff, your board, mission staff members like physicians, program leaders, faculty members, the CEO and other members of the c-suite – understands, believes in, embraces and acts on his or her roles and responsibilities in philanthropy in an investor-focused and co-ownership manner.

It starts at the top. Your CEO must be the first to get it. Philanthropy is a crucial component of the organization’s resource engine and therefore is everyone’s responsibility. Believe it. Embrace it. Act on it.

Co-ownership is the key. According to Cowan Global Consulting describes five levels of working partnerships starting at co-existing and moving past collaboration to the point five-degress-of-partnership-workingwhere everyone has stake, a share. Working with the fundraising team is an embraced responsibility, not a favor or something ones does when there is time.

That requires the CEO modeling the desired behaviors, celebrating successes, defining metrics, holding folks accountable and stewarding and rewarding outcomes.  Give yourself three years to achieve a true culture: 100% inspired, joyful, and generous giving from all staff, volunteers and board members;  everyone actively helping identify, engage, and steward donors and potential donors; everyone able to participate with adequate skills and understanding. Along the way, however, you will reap many benefits, starting in year one.

Here are seven steps to help you achieve a culture of philanthropy!

  1. Begin with a clear, compelling, aspirational and urgent organizational vision undergirded by shared, stated values. The mission and vision are the reasons the organization desires a culture of philanthropy. A driving institutional vision provides the urgency for change.
  2. Change requires a vision as well. Imagining the organization once it achieves the culture of philanthropy paints a picture all constituencies can embrace. What will everyone do differently with what results? Change is personal. The change vision must speak to what’s in it for the individuals who need to change. Get the word out. Spread the vision often and throughout the institution.
  3. Start with champions and modeling behavior. John Kotter, leadership guru, calls these champions a “guiding coalition.” Who are those influential people who already understand, embrace, believe in, and act on his or her roles in philanthropy and stewardship? We need them to help bring along the others. According to change expert, Jeanie Daniel Duck, “People believe because they actually see the new behavior at work and working.”
  4. Wow your team.  It is hard to make others feel great about giving and participating in philanthropy, if the proposed change agent feels beleaguered or under-appreciated. We must invest in our people first. Demonstrate great customer service internally if we want our staffs to provide it to others. Solicit your board, volunteers, and staff members in personal and inspirational ways. Provide them with impact reports, data, stories, and visuals. How can they help you achieve this with others, if they’ve not experienced it?
  5. Develop a plan. A vision without a plan is just a pipe dream. Assess your current strengths and weaknesses. Develop concrete, measurable goals for achieving a culture of philanthropy and stewardship. For example, if none of the senior administrators give, a goal might be 100% generous giving by a specific date. Strategies and tactics follow. Make sure the strategies include removing obstacles, changing systems, or structures that undermine achieving the desired culture.
  6. Institutionalize the new changes. Kotter stresses this. Document the new policies and procedures. Put philanthropy and stewardship on the institutional dashboard. Include it in performance measures. Make it a stated part of the values statement.
  7. Reward, steward and celebrate success.

The benefits of a culture of philanthropy are awesome: Faster recovery. Sustainability. Increased giving. Higher donor loyalty. Strong donor satisfaction. Viral marketing. Joe Connelly of the Wall Street Journal reported, “Donor retention is the new acquisition and customer service is the new marketing.” Achieve a culture of philanthropy and you’ll be on the cutting edge.

To request a copy of “The Common Thread”, from the April issue of CASE Currents magazine, where Karen speaks on this topic in greater detail, please visit our website.

Risk and Capacity Building: A Response To Dan Pallotta’s TED Talk

There are oh-so-many things to say about Dan Pallotta and his talk at TED.  The essential point of his presentation is that the nonprofit sector is at a disadvantage to the for profit sector because of the way we – as a society – think about nonprofits and charity.  Some of the many points he makes we can dismiss right off the bat.  For instance, his point that nonprofits can’t share profit to attract risk capital….  Well, yeah, they’re nonprofits.  And that means that they don’t have to pay taxes.  And that means that they can’t act exactly like a for-profit unless they plan on paying those taxes.charity

Many people have talked to me about Dan’s idea of paying top executives in the nonprofit arena more.  I won’t spend too much time on this either; this piece in the Stanford Social Innovation Review Blog makes some interesting points.  What I would point out is that many for-profit companies pay their top talent huge amounts of money and just as often as not they prove to be just as mediocre as the rest of us.  I think Dan exaggerates the impact that a single person can have on a nonprofit institution.

What I do think is really interesting about Dan’s talk is how we are much more tolerant of risk and long-term capacity building in the for profit world than we are in the nonprofit. Venture philanthropy is all the rage these days but the funny thing about it is that most venture philanthropy works and acts exactly like traditional philanthropy.  Yes, there is more of an emphasis on clear and measurable outcomes within a defined period of time. However, I would argue major investors in an organization have always wanted this.  What’s maybe changed is that lower-level investors now expect the same thing.

But aside for a demand for clear social outcomes, venture philanthropy still generally acts very differently then venture capital.  Major investments in fundraising and other capacity building is still exceptionally rare even though such investments can leverage a great deal more.

Patience on social returns that take longer than a couple of years is also a rare exception rather than the rule.  And then there is the complicity of nonprofits themselves.  We so rarely dream as big as we need to.  I was talking with a self-identified venture philanthropist recently that wants to fund riskier ventures and wants to encourage fellow philanthropists to do the same and I remember thinking to myself, “Would we believe a funder if they told us they were OK with failure?”  I’m guessing we wouldn’t.  I’m guessing that we would be thinking that if we want to have a chance at additional funding and a career going forward, we’d better show some concrete results pretty fast.  So we play it safe.  Privately, we all dream big but we seldom put it out there for funders to ponder.

So I agree with Dan wholeheartedly that our societal mentality holds the nonprofit sector back.  He’s very much right in saying frugality does not equal morality.  But, as Laura points out, money invested in marketing is only a means to an end.  The true output is the kind of social impact we have.  Sometimes that requires a lot of dollars, sometimes it doesn’t.  At times we may need to invest a lot in our marketing and fundraising but over time we are ultimately better off investing in our mission and its outcomes.  Many, many nonprofits (if not that vast majority) are able to keep their fundraising costs below $0.25 on the dollar and still be highly effective.  The fact of the matter is Dan’s organization engaged in the least efficient form of fundraising out there: event fundraising.  And while his cause lent itself to that model, most other causes don’t require this and can get a much better return on their dollars.  Even Dan’s organization could have done so by leveraging the people his walks attracted for major donor dollars instead of relying on a few big sponsors that left his organization fatally vulnerable.

Ultimately, I’m glad that Dan is raising these ideas.  It’s important that we talk about the respective roles of the for profit and nonprofit world.  And perhaps those people most in a position to be helpful will start to think of nonprofits differently and change the landscape.  But in the meantime, the nonprofit sector remains a market place just as the for profit sector does.  Efficiency does matter.  Diversity of revenue does matter.  Social return on investment is our ultimate metric, not dollars raised.  As Dan points out himself, ours in the market of love and you can’t measure that in money raised.

Laura’s Response to Dan Pallotta

Oh, Dan Pallotta… How I love what you have to say – and how troubled am I by the conclusions you draw!   For those who have read his first breakout work Uncharitable, you will recognize the introduction to this work in the 2013 TED talk that got so much play in Bob’s and my in-box.  Watching Dan Pallotta at work live gave me much of that same heady rush as when I first read that book:  here is someone saying out loud that the ill-conceived and misplaced vow of poverty that not-for-profit organizations are required to take is hampering social innovation!  Whoopee!

But, I thought, surely he will have moved beyond the conclusions he drew from what

was a devastating – and ultimately fatal – blow to his AIDS Ride organization?  He will have a more nuanced response to that now, right?  You can see in the video itself how choked up he still becomes by the memory of laying off his 350 employees.  I am entirely sympathetic and quite touched by how personally he still takes this moment in his life; how could he not?  However, I think this is where he’s got a blind spot that unnecessarily weakens his

argument about unleashing the social capital necessary to truly transform the world.

Let’s work through it:

Blackbaud Online Giving Trends by Sector

  • Are there some social challenges that defy monetizing?  Are there some problems that business will never find a financial advantage – or enough of a financial advantage in ameliorating?  Yup.  Check.  Totally agree.
  • Is the public pillorying of not-for-profit leadership compensation not only misguided but downright hypocritical, especially in light of recent for-profit debacles?  Oh yeah.  (I actually would like to intensify that agreement with a slightly more profane word, but not on the blog.)
  • Is the devotion to irresponsible expectations for overhead keeping many organizations ineffective and impoverished?  Yes, oh yes.
  • Should not-for-profit organizations have greater leeway in advertising and marketing?  Maybe.  But here is where things start to go off the rails for me.  I have found that the social sector is more complicit in this one, often seeking to move into advertising without a clear goal or measurable outcomes for “increased visibility”.  And, this point begins to unpack Dan’s prejudice within the not-for-profit sector:  huge money is only unleashed through wide-spread, grassroots fundraising.  Perhaps because of his brave movement in this arena, organizations that rely on grassroots fundraising (think American Cancer Society, Susan G. Komen For the Cure, other organizations that do walks, etc…) do have a visible marketing presence that doesn’t occur at 4am on public access TV.
  • Following on this fear of moving boldly into the marketing space, Dan also identifies an aversion to taking risk on new ideas.  Again, here’s a place where we could agree.  But we don’t.  Dan identifies the problem as an aversion to risky fundraising ideas.  That is not the problem.  The core problem is an aversion to planning and underwriting risky, innovative solutions to problems.  

He is right in recognizing that the same principles of venture capital need to apply to social innovation:  “risk capital”, investors with patience for a longer time horizon, ability and tolerance for trying and failing and trying again to solve social problems.  If the solutions were easy, we would have found them already.  Trite.  True.  But the challenge holding us back from solving these problems doesn’t lie in the fact that we don’t raise money for them in the right way.  Early attempts at crowdfunding not withstanding, social venture capital comes from a few, very rich, bold people at a much greater rate than it does.  Maybe funding from a broad swath of society will be the answer in the future, but it’s not now.  New ideas in the for-profit realm are started and nurtured by a few venture capitalists.  Why would the NFP market work differently?

Innovation in the social sector comes when leadership and bold investors team up to develop new ideas grounded in data and measurable outcomes, agree that the ability to fail is equally useful as succeeding in solving problems and that investing in the ability to go to scale in the impact realm (which may or may not include costly fundraising programs) is what really matters.

This also takes apart Dan Pallotta’s belief that “bigger is better” in all instances.  Is becoming a $50M+ organization the root to solving all problems?  Not necessarily.  Some problems may require big, centralized investment: diseases, social policy movements.  (But I think we can argue on that point too…)  Other problems are best solved at the local level, but small but appropriately well-capitalized organizations who know their market, know their community, know the issues they need to solve intimately and are nimble enough to be able to address that.   Or put another way, is the only beer we need brewed by Miller and Budweiser?  No way.  Keep my microbrews – and my micro-organizations – safe (and delicious.)

Agree?  Disagree?  I’d love to hear.

The Four Best Predictors of Major Gift Success

Projected Table of Gifts

A core part of our work here at The Osborne Group is helping organizations build fundraising capacity.  Very often our clients want to build a major gift program or strengthen their existing major gift program and our job is take a look at the best way for them to create major gift success.  This involves a detailed understanding of what makes major gift programs and efforts tick and taking a close look at how any given organization measures up. While we take a very comprehensive look at data provided by our clients, we interview staff, board and investors, and we look at marketing materials and marketing collateral, etc. we have found that the likelihood of major gift success boils down to a few factors.  I’d like to share four of them with you here.

Do you have sufficient prospects?  Fundraising is a very quantifiable business; there is no reason to ever guess at projected results or be surprised when your numbers fall short.  How many gifts do you need and at what levels do you need to make your goal?  How many prospects do you need to close each gift?  What does that add up to and do you have enough prospects?  It really is just that simple.  I am continually amazed at how few experienced chief development officers and major gift officers fail to have or make active use of a projected table of gifts or the more accurate name by name table of gifts.  If you have enough prospects, there is a good chance your major gift effort will be successful.  If you don’t, it probably won’t.

Do You Have a Vision?  Vision is a fancy word for answering the question “why should I give you any money?” or saying “this is what will be different tomorrow because you gave money today”.  A good vision promises specific outcomes within a specific period of time (usually 1-5 years), is a stretch for your organization requiring increased generosity by your core supporters, and is articulated in terms of the impact it has on the community and society in general.  Let’s be clear, most major donors have a clear sense of the amount of money they are going to give away in any given time period and when you ask for a major gift you are either asking that donor to not to give to something else or give more than they intended and thus make some other interest of theirs less of a priority.  People and institutions are open to this but only when the impact is clearly and specifically defined.  This is your vision and you need it or your major gift program is dead in the water.

What does your leadership level annual giving look like?  Typically leadership level annual giving is defined as gifts between as gifts from $1,000 – $24,999 or $1,000 – $49,999 depending on the size of the organization.  You can think of it as your mid-level gifts for your organization or your highest level gifts that you receive on an annual basis.  Another way to think about it is the level that a potential donor will give prior to making a major gift.  Explicitly or implicitly high capacity donors who give at this level are saying “let’s see what you do with this money.”  They are evaluating if they hear from you on a regular basis, if you’re communicating the impact of their gift to them effectively and regularly, and if they are appreciated.  If they have a clear sense that their gift made an impact and what that impact was they may start to consider a major gift.  If they don’t, they won’t.

This work is usually only effective if you have an actual plan.  What does your stewardship calendar look like for this group?  For your major gift prospects in this group do you know how they prefer to have you communicate impact?  Do you have an individualized cultivation plan for each?

Do you have a sufficiently large, motivated, affluent and influential volunteer corps?  Many organizations approach the creation of, or enhancement of, a major gift program as a exercise in strategic staffing.  Having well trained and high quality major gift officers certainly is very important for major gift success but the best major gift officers in the world can do little if they are not surrounded by sufficient affluent and influential volunteers starting with the board.  You don’t hire your hire major gift officers and development staff based on their personal connections (at least you shouldn’t).  You hire them because they are skilled at working with large numbers of people and getting them moving in the same direction in a motivated manner that results in large gifts.  But they need prospects to work with and those prospects must be generated by an army of volunteers.  The more volunteers you have with high levels of social capital the more prospects you have.  Again, it’s that simple.

There are many other factors such as engagement, culture of philanthropy, sufficient staffing, sufficient capitalization, etc. that go into major gift success but I would consider the above fundamental.  Without them, no matter how good everything else is major gift success will be difficult.  These four predictors are in many ways the hardest areas to develop but by far provide the largest payoff.

you can follow me at @bobosborne17

Stress and the Whole Human Fundraiser

Overheard in an advancement office near you:  “It’s business, not personal.”… “A pro learns to compartmentalize.”…“A bit of fear keeps them sharp.”  Is that true?  Or are we whole humans whom fear makes dull?  What impact does stress have on our ability to be not just good, but truly great at our important work?

Do you try to avoid messy emotions in the workplace?  Make goals and metrics scary- ambitious to drive effort in yourself and your team?

I get it—I’ve done it—we got here honestly.  From first grade on, we learned to ignore discomfort, focus on our left verbal brain, and ignore the wisdom of our right brain, our bodies, our emotions.  But advancement work requires that we learn to engage both sides again.

Living exclusively in the left, verbal brain ignores a big chunk of an advancement professional’s whole human system.  Anxiety results when our bodies get left behind.  As we pursue enormous campaign goals in competitive times,  neuroscience and positive psychology have much to share about the corrosive effects of unacknowledged anxiety in our development shops—and much to teach about learning to work with mindfulness and ease.

Human beings run on three operating systems—cognitive, emotional, and physical—that are designed to work in sophisticated synchrony.  When your mind has a thought, it creates an emotion that is felt in the body.  The body reacts.  The mind may overlook this response or heed its message.  We can learn to use this finely tuned system of checks and balances to achieve delicious productivity—but only if the system is kept healthy, open, and clean.

As a lifelong fundraiser, now a consultant and coach, I help my clients ensure that their thoughts, feelings, and physical sensations are not ruled by toxins like fear and harsh self-judgments that can inhibit their performance and cause exhaustion and pain.

Many campaign consultants sidestep the emotional and physical components of the human machine, providing benchmark reports and prescribing big jumps in total gift income and visits per month before fully understanding why fundraising progress is slow.  At organizations that anticipate this approach, my first visit can suck the air out of a room—until I breathe, make eye contact, and state my purpose.

I find in many under-performing advancement shops triple, intertwined threats: diffuse focus, insufficient training, and subterranean fear.  Sadly, the pervasive, contagious anxiety often starts within the very person who cares most about success—that dedicated leader semi-consciously driving herself with punitive internal messages every day.

You know that deer-in-the-headlights feeling that wears you out over time?  It starts in a flash.

Richard E. Boyatzis and Annie McKee (2005) and others have shown that in stressful situations, fear-based thoughts activate the oldest, most primitive part of our mind—the limbic system or “lizard brain.”   The almond-shaped amygdala at the base of the brain sounds the alarm and the sympathetic nervous system kicks in, releasing Epinephrine, Norepinephrine, and Cortisol that prepare us to fight, flee, or freeze.  Blood flow is directed away from the cerebral cortex to the large muscles, inhibiting memory and the creation of new neurons.

Living in our sympathetic nervous system erodes thinking and health. Ironically, the first casualty in the development operation’s stress fest quite often are those courageous, delicate major gift conversations we need most.   Survival anxiety keeps us busy rewriting metrics and churning reports instead of seeking out those crucial conversations that spell campaign success.   To the lizard brain, big solicitations seem black or white, all or nothing, win or lose.  Even if we know that solicitation is a process, not an event.

This energy impacts the donor interview.  Without proper preparation, those subconscious “win/lose, make/break, do/die” messages can narrow your visual field and aural acuity so timing suffers and subtle feedback is missed.  Adrenaline spikes blunt your ability to remember details and feel the donor’s truth.  The human body easily confuses excitement and anxiety—this is true for donors, too.

There’s a better way to build transformational gifts.

Joyful, stretch gifts are inspired by love, not fear—and they are born in the present, whole-hearted conversations that only become possible when the fundraiser’s thoughts, emotions, and feelings are calm, clean and clear.

Understanding and improving work teams’ emotional experience—their inner work lives—can seem a daunting investment.  But it pays off big both on, and off, the road.

It may feel risky to explore internal messages and odd to intentionally engage the parasympathetic nervous system at work – but the payoff is huge when your team gels, trusts, and stays.  The payoff magnifies as your committed team facilitates aspirational gifts that delight donors and heal the world.

So next time you sit down with a potential donor or a new hire, slow down.  Notice, with presence and compassion, how he is a whole human, and so are you.

You can follow Beth at: @EBHermanCoach

By Beth Herman, Principal, EBH Consulting   Guest blogger Beth Herman is an advancement consultant, advancement trainer and personal coach.  She specializes in how organizations can build their capacity by focusing on the individuals within the team.

Capitalize Your Development Operation!

by Robert Osborne

Every organization wants more money for its programs but I am constantly surprised at how few organizations are actually willing to spend money to make money. I know of organizations that have cut back their development staff even as they have raised their fundraising goals. I know of organizations that refuse to do stewardship because they think it is too expensive. And I know of “national” organizations that wish to fundraise across the United States but have no travel budget.

The problem becomes even larger when we talk about capital campaigns. Organizations that wish to raise 10x or more of their annual operating budget and tens of millions of dollars often balk at spending even a $100K to do so!

Your development office is a “profit center”, another way of saying that your development office makes you money. But only if it is properly capitalized. While different types of fundraising have different costs associated with them, a good rule of thumb is anticipating spending somewhere between $.15-$.20 for every dollar you want to raise. Events have the highest costs associated with them with a cost of roughly $.30 on the dollar and major gifts have the least with a cost of roughly $.12 on the dollar. But there is no such thing as free fundraising.

Every organization should ask itself what it needs to be successful to meet its fundraising goals. Do you have enough personnel, not just “front line” fundraisers but also administrative support? Do you have the proper technology to operate efficiently and effectively? Do you have the marketing pieces you need including video? Do you have a budget for any necessary travel? Have you built in contingency?

My suspicion is that organization try to do fundraising on the cheap because they do not have the cash on hand when they begin their fundraising. They realize that they are undercapitalizing the effort but are unsure what to do. Ideally, our supporters would help us in this area as Dan Pallotta discuss in this post in the Harvard Business Review and truly leverage their investment, but lamentably capacity building tends to be way down on investors lists of things to fund.

Sadly, there are no short cuts. An undercapitalized effort may even cost you more than not doing it at all. If you don’t have the cash on hand to properly capitalizing a fundraising effort you need to make raising the necessary capital part of your plan. This may take longer but it will be worth it. To not do so is to spend money on what is likely to be an unsuccessful effort. But the right investment can go a long way.

You can follow me on twitter:  @bobosborne17

Welcome to The Osborne Group Blog!

Welcome to the official blog of The Osborne Group, Inc. consultancy!  It is our hope that this blog will serve as a resource for not-for-profits around the world to get advice and learn best practices in the areas of capacity building, philanthropy and management.  We also hope this can be a gathering space for not-for-profits to share ideas together.