5 Benefits to Government Cutbacks

Government cutbacks to charities and non-profits will likely do a lot of harm and undermine many aspects of what makes Canada such a special place.  However, in a contrarian way I can argue there will be some benefits.

1. While it won't happen overnight, eventually the pendulum will swing the other way.  As valued charitable services and societal supports erode and disappear, the problems they currently address will get worse. Ultimately there will be a clamour to support (either through donations or "forced donations" via government financing) the highly cost-efficient solutions that charities bring to problems.  And when this happens we'll be less likely to forget their value again so soon.
2. There are too many charities. The bad news is that due to cutbacks some fabulous and innovative new organizations won't survive (or ever see the light of day), but without the fertilizer of government funding at least some portion of the over-abundance of charities will diminish.  Think of it as a very haphazard and unwieldy pruning if  you will.
3. Lean times will force innovation. Fact is, charities by their nature are driven by passion, and that same passion to help others and make the world a better place won't be stopped for long by fewer dollars.  Volunteers, Board members, staff and supporters will (like they always do) step in to help pick up the slack. In so doing they'll all learn new skills, and the organizations still standing will be that much more resilient.
4. Cutbacks will actually allow for greater freedom of opinion and unfettered voices for change. We all know the expression "don't bite the hand that feeds you", and very few organizations that receive government funding are eager to risk offending this funder.  Some do and have clearly been targeted for cutbacks (e.g. women's advocacy groups). However, for organizations that can survive they will less constrained in their ability to speak.  Greenpeace certainly is a good example of this freedom provided by how they're funded.
5. Diversified revenue streams will have a positive effect in the long-term.  Once a donor (or company) is engaged in giving, in my experience they generally enjoy the experience and continue to be philanthropic.  So if the cutbacks encourage entirely new donors to ultimately step in, then we'll see new faces at the funding table once government does come back.

Painful? Yes, and likely hurting a lot of people who most need the help in the first place.  But not without some benefits.

Top Three Charity Trends in 2012

Here are the top three trends to watch for in the charitable world in 2012.

1. Many small and medium sized charities will disappear in 2012.

As all three levels of government reduce spending, charities that have relied for much (or even all) of their funding from government will feel the pinch.  Sadly, some will actually go "out of business", but others will come up with creative solutions to continue their Mission. I'm already seeing (and have been part of) mergers, innovative funding models, partnerships, co-location, hubs, cost sharing, virtual offices, restructuring and other concepts. So your favourite small or medium sized charity might disappear, but actually still exist in some new form within a new organization or space.

2. Big Charities will get bigger in 2012.

The obverse of the first trend is that larger, better-funded and more media-savvy charities will continue to find ways to grow and fill social needs. The good news is that as the big charities get bigger their ability to weather economic turmoil usually gets stronger, and as they see service needs that are related to funding opportunities they generally seek to fill them.  The bad news is that larger charities often struggle with the balance of healthy reserves and program funding, and that their very marketing and fundraising strength can help force the demise of fledgling, smaller charities.

3. Charities will continue to think and in some ways act more like for-profit businesses in 2012.

As you’ve read in my posts, charities for years have tried to imbue themselves with the best practices of the for-profit world (often with mixed results).  This trend will accelerate in 2012 as two influences come to the forefront.  First, increasing numbers of for-profit talent joining charities will soon reach a critical mass, and second charities will increasing desire to show “impact”.  Charities are already starting to “sell” their impact, moving beyond merely quantifying results, to now pitching their value in creating a better society in a very direct way.  It’s worked in the for-profit world for generations, and now with staff that think this way already charities are increasingly giving this mindset a try as well.

I’ll keep you updated on examples and stories behind these trends all year.

The Only Metric that Matters!

As my inbox has filled with requests for donations and gifts to deserving organizations over the waning days of 2011, I've been reminded of a few insights from my clients and conversations this month.

My first observation was in response to a query about why we all get so many "Asks" around the Holidays. The main reason we all get so many Asks this time of year (whether by e-mail, direct mail, phone calls or other ways) is that people give this time of year.  Whether it's the "spirit of the season" or just the fact that taxable deductions for the calendar year ending force donors' hands, some charities will receive the vast majority of their donations over the last many weeks of any calendar year.  Fundraisers know not to miss a single opportunity to raise funds (particularly as their fiscal year end comes up!), so if this is giving season then you can expect to get a lot of requests!

The other observation was based on a reminder from a client conversation a few weeks ago. I was asked to give advice on which metrics were best used in marketing and communication with prospects in order to get their attention and sell the organization's value. My reply was that ideally you would want to highlight areas that were of most concern to this potential donor.  And my client's response was that this meant that all the other important measures of impact, effectiveness and efficiency weren't much good if we weren't addressing needs that were important to that prospective donor.

And that's a simple truth. If your organization if making a difference and changing lives, doing so efficiently and using every dollar well, then in the end the only metric that matters is what the donor wants done with their money.  If you are busy saving whales, and the donor wants to end hunger, you're unlikely to get their donations. So at this time of year as you get so many asks for your giving, ask yourself what impact do you want to have? In the end, so long as the recipient organization meets certain "baseline" criteria, then the only metric that matters is what you most want to see changed!

Wishing you a happy, healthy and prosperous 2012.

Change for the Better?

In November of 2000 (exactly 11 years ago), a newsletter from one of Canada's largest health care foundations included a variety of observations about "changes that are occurring in the not-for-profit sector."  It struck me as I read them that we've come a long way on many of these topics, but in several cases actually gone in the wrong direction.  I invite you to consider whether we as a sector have addressed these items, and if so, have things gotten better or worse?  On on macro scale, how have we as a society fared with respect to some of these concerns? Here is a shortened (but otherwise unedited) version of the newsletter.

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Donations are up, but the donor base is shrinking: In 1998, 202,000 fewer Canadians reported charitable donations to Revenue Canada than in 1991.

More Canadians are volunteering, but time is at a premium: In 1997, 72 percent of all volunteer hours in Canada came from only eight percent of Canadian adults, and average hours per volunteer had dropped 22 percent from 1987.

Fund raising competition is growing: More and bigger fund raising campaigns raise fears about 'crowding out' small charities. Do all boats rise on a high tide, or will some be swamped?

Values are shifting: Globalization seems to place competition ahead of communities, and consumers ahead of citizens - are compassion and sharing passe?

Our sense of community is fracturing: 'I'm OK, and you're not.' Rich and poor are growing farther apart, as poverty grows while the economy booms.

Charities have an identity crisis: Some are becoming more like businesses in order to 'earn' revenue; others are assuming the traditional roles of government.

'Impact' and 'outcomes' are in doubt: It's considered bad to be a 'do-gooder' who only applies band-aids, yet charities that work for structural, social or attitudinal change are branded as 'political'.

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So, how far have we come in over a decade? Clearly the view from a major foundation in 2000 was that our sector and those we serve were under stress. I'm particularly concerned that rich and poor have only grown further apart over the 11 years, and now the economy is not booming.  In the end, this only underscores the vital nature of charitable work in all its forms.

The Law of Unintended Consequences: Goal Setting 101

In September I wrote about the value of metrics and the importance of and processes for setting goals for organizations in both the for profit and not-for-profit worlds. However, this mindset can also have significant unintended negative consequences if the implications of the goals are not well thought out. We're all familiar with this idea in the context of the for profit world when goals or incentives are in place that inadvertently encourage short cuts or reduce safety. In the charitable world the impacts can be more insidious.

This is not to suggest that creativity in using data to set goals can't have wonderful effects. For example in sports a "re-thinking" of what makes a valuable player created new ways to manage a baseball team (as documented in Moneyball) and led to on-field successes. But in the charitable world we're often dealing with organizations that directly impact life and death - so how they're measured, funded and rewarded takes on an especially important meaning.

Consider these two examples.  Imagine you're a mental health organization and your provincial funding metrics include how quickly you "graduate" patients through your program. Sounds superficially like a good way to encourage efficiency. Or perhaps you're working with youth who have learning disabilities and you want to tout metrics with respect to successful "completion" of the entire process. You might argue that this helps keep the process moving along and encourages possible donors.

However, in both cases the leaders of these organizations may also be less likely to take on prospective patients or clients who present the most complex, most challenging and least likely to succeed characteristics.  Likely the very folks who need these services the most. This isn't to criticize those who have to make these tough decisions, but to highlight how metrics, efficiency incentives and goals need to be very carefully thought out.  Otherwise they can have the effect of leaving those who need it most out in the cold. Literally.

The Corporatization of Charities?

Charities can and should learn a lot from their peers in the for-profit world about best practices and management models. As I've written here in the past this sharing is not without risk of translation errors, while at the same time clearly too valuable not to pursue.  However, there is a risk of something far more worrisome within this corporate - charity relationship on the horizon.

It's clear that governments are stepping back from previous granting levels as they seek to further reduce taxes and simultaneously address deficits (Globe & Mail). The unstated assumption appears to be that someone else will step in to fill the funding void, lest we find critical supports failing. However, there are only so many revenue avenues and they all have limits or issues.  For example, charitable donations by individuals in the USA are often cited as a benchmark for growth here in Canada, but the aggregate numbers are skewed since a significant part of US giving goes to churches and religious groups. Giving levels in many other charitable sectors are actually already quite close, so based on US benchmarks there may not be much room for growth.

Growth in Corporate donations is also frequently cited as an anticipated source to fill revenue shortfalls for charities. However, as various articles have pointed out, this is not without its own challenges.  Here are some of the issues that arise as we pursue corporate donations as the bulwark for charities:

• Corporations are by definition focused on profits. Thus, for some corporations this will result in their "donations" being about what they can gain from their "gift". This has a real potential to mutate charities as they seek to obtain the funds they need.
• Metrics matter, and measuring program Impact for charities is the new normal. However, what Corporate donors seek to measure may not actually be well aligned with the true Mission of recipient organizations. The catch is the Golden Rule - the one with the gold gets to make the rules.  So there is a real risk that charities will measure what their corporate donors say matters, not what needs to be measured.
• Many issues that charities seek to address are highly complex and deeply rooted. These problems won't be solved quickly or easily. Corporations are well-schooled however in the world of ROI and quarterly results. This is not to suggest that there can't be learnings, but the risk is that as charities become ever more reliant on corporations this "short term" thinking will diminish true long-term Impact and solutions.
• Some corporations provide their support to charities through provision of their services and expertise.  It's a great model, but if governments steadily erode their financial support to charities, and corporations shift increasingly into this model of pro-bono work, who will fund keeping the lights on and pay the rent?

Many Charities would and do welcome greater corporate support. And there are many corporations that are already generous, thoughtful, strategic and energetic partners with the charities they support. The question that needs to be asked is how much should charities be forced to rely on corporations, and how do we avoid the pitfalls noted above? Most importantly, a public debate on what kind and level of support we want charities to receive through our government is clearly needed in the near future.

The Early Bird Gets the Worm

We've all heard the expression, the early bird gets the worm.  Except it might be more accurate to say that the bird gets the worm if it's early, or right after lunch, or even after a small snack!

According to a report earlier this year (which I read about in the NY Times Magazine) by Jonathan Levav of Stanford and Shai Danziger of Ben-Gurion University, something called "decision fatigue" can impede decision making.  Essentially this and other studies show that making many decisions can unconsciously make our brains "tired" and result in one of two situations. One, we make rash or poorly considered choices.  Or two, we defer the choice - in effect saying that anything that is risky should be put off until later in our present tired state.

The solution? It appears that a little break, particularly if accompanied by glucose (sugar) intake can recharge your tired neurons.

This presents some interesting implications for managers and salespeople / fundraisers...

• Before the big launch of your new project / initiative / program, maybe provide a little juice or pop to the assembled team
• Meet your prospect / buyer first thing in the morning or with a well-sweetened coffee (don't use artificial sweetener though as it has no effect)
• If the leadership team needs to make some big decisions pick your time (first thing or immediately after lunch) carefully

In a totally non-scientific study last week we bought fruit, nuts and tim-bits before a Campaign meeting with one of my clients.  All I can say is that the meeting went very well!

So now the logic of buying lunch for your prospect before the big Ask becomes clear.  It's not about the social interaction or building a sense of gratitude in advance: it's all about getting the glucose levels up so they'll  be less likely to put off (or even decline) your invitation to donate!