Friday, January 28, 2011

New Year's Top 10 List - Differences in the Charitable World

I got off the phone this morning with a woman who is thinking about making the move from the for profit world into the charitable world. At the root of most of our conversation was the question "just how do the two differ?" So in the spirit of New Year "Top 10" lists, here’s my Top 10 List of for-profit versus charitable differences. Note that I’m not going for the obviously different aspects, but what might surprise you on the "other side"….

  1. Passion – in the charitable world it’s about wanting to make a difference. People, inspired by their experiences or insight into a need, set out to change the world. Not make a profit: change the world.
  2. Mission – most corporate employees don’t know their corporate Mission statement. Most charitable employees live their Mission statement every day. This affects every aspect of the charity.
  3. Volunteers – are a key defining difference. Most charities simply could not exist without what volunteers bring: their skills, their passion, their heart and they’re free. This all has its own set of intrinsic pros and cons, but whatever the case I don’t remember many volunteers helping out the corporations where I worked
  4. Boards – sure big corporations often have Boards, but unlike the vast majority of businesses charities of all sizes have Boards
  5. Complexity – given that charities have Boards and volunteers, and structures or staff that parallel virtually all for-profit activities, charities of roughly the same operating budgets (size) as a for-profit business are more complex
  6. Structure – at the same time, in comparing most organizations of a similar size, my experience is that charities are relatively unstructured for their size (e.g. fewer policies and manuals, less robust Human Resources practices, etc.)
  7. Lean – if you think your for-profit experience was with a lean organization, I’m pretty sure there are still charities that can show you a trick or two. All funds (for better and for worse) are often pushed to the furtherance of the Mission
  8. Intangible – a bit of an "obvious" difference but with important implications, unlike many for-profit organizations what is "sold" in a charity is a feeling or outcome, not a "thing". For example, this difference results in different skills for fundraisers versus salespeople
  9. Voice – manufacturing has a sector voice, but in Canada non-profit is even bigger but with less "clout" (and same as the automotive sector) – Imagine Canada does great work as one voice (and in U.S. not even a single voice at all), but as evidence of this difference no Federal bail-out money was coming to struggling charities in this economic downturn
  10. Understanding – most Canadians have a fairly good sense of the ingredients in the food they buy, or the "value" of property they live in, but most don’t understand the causes they support as well. If buying something and making a gift are both transactions of a kind, the difference here is that purchases are often made first through the head, while donations are often made first through the heart.
Not better or worse, but very different indeed!

Monday, January 17, 2011

One Way Out of the Box

My last post before Christmas raised the issue of adhering to donor wishes, and given most people’s understandably imperfect knowledge of every charity, questioned whether the "donor always does know best". Since this generated some interesting conversations, and ultimately a question of what might be done to address the issues raised, today I’m revisiting this topic.

One conversation was effectively about what is known as the "Charity starvation cycle". This is the process where either due to the Charity’s desire to see every penny raised go to programs, or due to a lack of donor support for infrastructure and capacity (or a combination thereof), charities are "starved" of the basic necessities to effectively and efficiently run their operations. This harms long-term sustainability and even the actual impact of the very programs that are being supported so aggressively. One suggested solution was to aggregate infrastructure and capacity needs to make them more interesting to donors.

The other conversation was about donors, and in particular the expectations of donors of larger gifts as compared to annual campaign or "smaller" donors. We all know that different things motivate different donors to give, but the point was made that larger donations often come with expectations. Special recognition might be part of it (e.g. naming rights within Capital Campaigns, etc.), but it was argued that primarily larger donors primarily expect more "impact" from their gift. The sense was that their goal is to be "transformational", hoping to move the Charity to entirely new heights or in new underserved directions. The suggestion was that unless the annual campaign and "smaller" donors took care of the infrastructure the charity couldn’t expect these larger gifts.

And to a point I agree. By definition annual campaigns are all about funding the day-to-day operations of the charity. Yet if the annual campaign is only enabling the charity to live "hand to mouth" are they forever trapped without access to "big" gifts?

Obviously there are other fundraising streams to consider, and creative tools generate more revenue from existing streams. But I believe even within this big donor / small donor paradigm there is the potential to break out of this box. While I was with Junior Achievement we were successful in receiving a significant multi-year corporate gift that included infrastructure funding elements required to help implement the desired programs. I appreciate this isn’t exactly the same as an individual donor making a transformational gift, but there are applicable insights.

First, fundraising is a relationship game. You need to get to know your prospect long before they become a donor, and that allows for two-way communication, including discussing the existing capacity of your charity. In our case we were able to show we were very lean already, and without support for capacity we wouldn’t be able to act on the gift.  Thus, in some rare cases a charity may have to walk away from gifts that don't include the right balance of support, or are simply unexecutable at the time. And I note as a sidebar that this can actually be a big positive in the long run:

Second, truly deep donor relationships allow for education. This opens a whole new avenue for skilled fundraisers. I believe there’s an opportunity for good communication to show prospective donors of larger gifts how part of their gift can have even more impact – be even more transformational – if some portion of their gift goes to infrastructure and capacity building. So it need not be about aggregating the infrastructure needs or trying to ‘sexy’ them up in some way: simply being clear on the need can go a long way. Certainly that was my observation of the corporate gift we received.

Deep relationships. Solid communication. Complete transparency. Doing these things takes time, time that may not be cost-effective with every donor. But ultimately it’s the charity’s responsibility to help donors of all sizes to understand the charity's unique needs. And this is a key part of the solution to finding the way out of this particular box.