Having the Cake and Eating it Too

Seems to me that Americans who are concerned about any of our contemporary issues, and who express that caring by volunteering and giving financial support to nonprofit organizations, tend to want their cake and eat it, too. Here's what I mean.

On the one hand we read a lot in the press, see it in the media, and read it in the blogs of so-called "charity watchdogs," that Americans have a proclivity to want every last dollar they give to charity to go directly to whoever the target population is: the homeless, the poor, the needy, the people who we're trying to help. And this appears to be true whether the people we're trying to help are here in the U.S. or halfway around the world.

What do we want? We want our dollars to go where they will "do the most good " And I assume that by the phrase "do the most good" we generally mean that we want these charities to be effective in accomplishing their stated mission with their targeted client populstion. Right? Certainly a laudable motivation, to want your money to be used wisely, prudently, and in ways that get the most effective results for the dollar.

But then look at the other side of that coin. We also don't want our money to go to fundraising, salaries, overhead, etc. We've been trained that this is not good.

We've been cautioned that it's not good to have our contributions used for the salaries of those who help the poor and needy; we don't want our dollars to go for advertising and promotion; we don't want them to go for training for program staff or boards of directors. The charity dogs of the watch tell us, in their wisdom, that these things are wasteful. They caution us to use those "ratios" of money to recipients vs. money for the organization itself. As if any charity's staff and its capability were not synonomous with service.

You see, charities are not like businesses. In charities the people who work there ARE the service. Without the staff, without the boards, without the fundraisers and the fundraising, there would BE NO SERVICE. So you want to cut the charities off at the knees? This is nuts! But it's happening.

Consequently America's charities are operating, as Paul C. Light says in his book "Sustaining Nonprofit Performance," with less capacity than they need in order to be effective. Just look at the miserly way boards of directors pinch pennies on training and professional growth for their staff, or for their better governance, and for fundraising infrastructure and staff to do the fundraising job. Look at the ways these "charity watchdogs" try to get donors to use business ratios in deciding which charities are going to get their money. It's ridiculour!

What's wrong with it? It keeps the charities poorly equipped, it leaves them without the capacity to succeed. That's what's wrong with it.

And, at the same time, the baby boomers and Gen-Xers are very particular about giving to charities that they judge to be "effective" in mission accomplishment. They want to give to those enterprises that are succeeding, that are making significant and measurable dents in the problems they're trying to solve.

So can we have it both ways? Can we insist that charities use every last cent we give them to shower "services" (whatever we think we mean by that word) on the homeless, the poor, the needy, etc. and still expect that they be effective and produce measurable results, when we aren't willing for them to use some of our money to invest in doing those jobs well? That's what's ridiculous about it.

Take, for instance, the op-ed column in today's New York Times by Nicholas D. Kristof, entitled "The Sin in Doing Good Deeds." He discusses some of the points made by Dan Pallotta in his book "Uncharitable, as he "seethes with indignation at public expectations that charities be prudent, nonprofit and saintly."

The point Pallotta is making (and Kristof, I assume) is that if you want to raise a lot of money for charity in today's marketplace, you have to spend some money to find, identify and get a powerful, motivating message out to those who have a proclivity for the kind of charitable services for which you're trying to raise money. But in order to do that, it takes professional expertise and experience. It takes people who know design, printing and media production. It takes professional fundraisers who know how to give donors the kind of relationship and attention that keeps them excited about a project and giving to it. And then what do we want? Do we want all these people to work for free?! We don't want any of our money to go to pay for their expertise? This is nuts!

Charities cannot succeed in their mission without training, without sustenance, without the tools with which to do the job. And they can't do it without enough money to allow them to make serious and lasting inroads on the social problems they're trying to attack. And yet we insist "no money for training, salaries, fundraising, advertising, publicity" or anything else that might help get the job done in a businesslike fashion.

What is the American public, as led by the media and the "watchdogs," thinking of? We've got things confused here. We wouldn't operate a business that way. Why should we expect this of the charities we support?

Incidentally, as Pogo would say, "We have met the enemy, and they is us." 100 million of our 300 million people in this country work for, volunteer for or give to charity every year. So who is this "American public" anyhow? And since at least a third of us are presumably reasonably familiar with the ins and outs of charitable work, why would we have such contradictory attitudes about giving?

It's ridiculous!

OK,now, it's your turn.

How many personal visits per week to donors/prospects?

I have recently been asked, "How many visits to donors should I be making per week." This question might come from an executive director, or it might come from the director of development, or it might come from the major and planned gifts officer. So here's the answer...

Here's how I do it.
1. Go to the report forms that you're going to fill out -- your monthly activities report form. This is your accountability mechanism for reporting all that you do for the fundraising effort each month. You DO have one of those, don't you? If not, why not?

2. Decide what I want to have as the end report for a given month. Say 20 visits

3. Go ahead in the calendar to the point where appointments begin to thin out.

4. Figure a set period of time, on set days of the month, when I will intentionally prioritize personal visitation over anything and everything else NO MATTER WHAT
I used to look ahead and program 2 weeks in the field, 2 weeks in the office. I worked it around board meetings, staff meetings, and moved what had to be moved. Your situation will be different, but the principle is the same. Set aside time in advance and protect it with all the guns you have.

5. Figure that I've got so many hours. Let's say I set aside a day and a half a week, but I vary the days so as to accommodate peoples' schedules Tuesday and half of Wednesday on the first week of the month, then Wednesday and half of Thursday the next week, then repeat the pattern for the remaining two weeks.

6. Then I start with time needed to do an appointment. I need a half hour for the visit or one hour, whatever. I have time in transport from one appointment to another. I have lunches to schedule, etc. So, let's say I can do two appointments the first Tuesday, then a lunch appointment, then two afternoon appointments, get back to the office about 4 and go through the mail and email, return calls, etc. etc. So that's five people I've seen that day. Then Wednesday take morning and lunch or take lunch and afternoon. Three people. That's eight people that week, right?

7. Start a spreadsheet of open appointment times, so that I can fill in as I go

8. Take my average of 8 appointments per week, go to my database -- my list of prospects that I've picked out to visit -- for a variety of reasons, of course. Find my top 12 people. I know that if I start with 12 I can get 8 appointments on my schedule and will have to do the other 4 on THEIR terms.

9. Pick up the phone, call the first person. Slot their appointment in so that it meets my schedule and theirs.

10. Pick up the phone call the second person, etc. etc. Fill the appointment blanks of the spreadsheet you're using as the people decide what time is best for them

11. Pick up the phone; then pick up the phone again, then pick it up again. Keep this up for an hour. Fill in the spreadsheet as you go.

12 You're done for the first week.

NEXT DAY
1. pick up the phone (PUTP) repeatedly for just 1 hour. Make the appointments for the second week.

NEXT WEEK
1. Pick up the phone repeatedly for just 1 hour. Make the appointments for the third week

THE FOLLOWING WEEK
1. Pick up the phone repeatedly for just 1 hour. Make the appointments for the fourth week.

Keep this cycle going. You're basically working about three weeks' worth of appointments ahead. Once you get that going, NOTHING gets in the way of it. Because you've already sewed up those time slots, right? Simple.

In other words, once you have made the priority decisions necessary, block it out on the calendar. Keep it sacred -- absolutely NOTHING gets through this, OK? Anybody comes along with a different suggestion for your use of your time, they get a growl and bared teeth! OK? Seriously.

Then just pick up the phone (PUTP), fill the spreadsheet of appointment blanks. Keep going in the first round until all are filled. Then you'll know what that 1-hour thing up above is all about.

It usually takes me about an hour to fill somewhere between 8 to 12 appoitment slots. And so I'm actually making maybe 20 calls in that hour. The rest are people who will get back with me -- I've left messages with them, or they're duds, or whatever.

The biggest block, and the biggest indicator of success, is
a. how many times you pick up the phone in that one hour, and then
b. how many of those spreadsheet slots you fill in with peoples' names that means scheduled appointments.

That's the only trick there is to it. PUTP, PUTP, PUTP, PUTP. Pick Up The Phone.

It gets monotonous after a while when you get good at it. But it's the threshold you have to cross to get that absolutely WONDERFUL feeling of success in a task that you set yourself to do.

AND... to top it all off, you get to go out of the office on completely legitimate business, get away from the hassles, the meetings, the politics, and meet some absolutely MARVELOUS people, and spend some time in their presence learning about their needs, wants and values, their life's story, and how they feel about your organization.

It is, I must say, an EXHILARATING EXPERIENCE when you've done it. I would even say "addictive" in the sense that the next time it's so much easier that it was the first time, etc. etc.

Know what I mean?

So the answer to your question comes in the first six steps. Once you've got that psyched out, and have the days marked on the calendar.... that's it: That's how many you should be doing.

When I was doing it two weeks out and two weeks in, I did about 6 appointments, maybe seven sometimes, a day. Six days the first week out, then five the second week. So that was about 36 slots to fill for the one week and about 30 slots to fill for the second week. So that month I could visit about 66 people -- ON AVERAGE.

Not everything worked out so smoothly. Sometimes I'd have a two-hour drive to the next appointment, sometimes the guy was a no-show, sometimes I could only fit in 3 appointments in a day's time -- you know, depending on where it was, etc. So the process needs some flexibility in approach. But you can see how this adds up over time. Makes a REAL GOOD LOOKING activities report for the month! I can tell you that!

That's how it's done.

Starting a Charity? Reduce Strategic Plan to a Placemat

One technique that you might find helpful is to reduce your organization’s strategic plan to a placemat-sized document and have it at every board member’s place at the board meeting table.

The first reason you want to do this is that it helps each board member take a new look at the strategic plan your organization developed and then put on the shelf. First, you find out that it’s way out of date. Second you discover that there are many objectives that you have achieved. Third, you find out that there are some critical things that have been forgotten or not achieved. And, fourth, you will recall some of the discussions you had back then that led to various aspects of the strategic plan, and you automatically begin to compare them to the current board’s discussion of similar topics. These are all helpful discoveries from the staff’s point of view.

The second reason you want to reduce your strategic plan to a placemat is to have this representation present and highly visible at every board meeting, so board members have immediately available this view of the strategic decisions they made at some point in the past. This is one more way to keep them from feeling comfortable with discussions that dissolve into micro-managing and helps them to keep focused on strategic issues.

Here is a brief outline of the kinds of things that can be put on a placemat-sized plan:
1. Where we came from: activities, values, vision, mission
2. The context we found ourselves in when this plan was created
3. The major directions we set back then, plus the goals and objectives for each strategic direction
4. The resources we said we would need to achieve those directions
5. Operational and tactical plans laid to achieve the objectives, if any were set forth
6. The overall accomplishments of the organization since the creation of that plan

If you’d like some help on getting your board involved in strategic planning, I’ve found a few websites I think will be helpful to your process. The first is an article adapted from the Field Guide for Nonprofit Strategic Planning and Facilitation that gives a perspective you can share directly with board members.

Secondly, we sometimes use what’s called a “SWOT” analysis. This looks at the strengths, weaknesses, opportunities and threats that face your organization. I found an interesting representation of a SWOT analysis and its use and thought you might find it interesting, too.

Here’s a book you can buy from Amazon.com that will get you into strategic planning:
Strategic Planning for Nonprofit Organizations: A Practical Guide and Workbook by Michael Allison and Jude Kaye. They discuss questions like "What Does a "Strategy" Look Like?..." and use key phrases like: proposed growth strategy, detailed annual operating plan, annual operational plan, Strength Weakness.

We will deal more with strategic planning in future posts.

Starting a Charity? Tone at the Top Sets the Tone for All

You’ve probably heard it said often ‘The tone at the top sets the pace for the organization.” It’s just as true for nonprofits as it is for business.

Take, for example, the matter of clarity and transparency in the organization’s reporting internally and externally. If the Board President, and the Board of Directors, and the CEO are all pushing clarity and transparency, then that becomes the characteristic of the whole organization. And if that is not the case, then we tend to want to get away with whatever we can.

So, let’s say we’re dealing with the “cost to raise$1” standard of performance. There’s two ways to represent that: one is to report more obvious costs of fundraising, such as website and internet costs, printing costs, travel, hotels and meals, etc. The other way is to include salaries and benefits of the professionals and volunteers involved in cultivation and solicitation at all levels.

Case Study #1
George S., the ABC Charity’s grant writer sees that the I Care Foundation wants to know the organization’s overall cost to raise $1 for the application they are currently preparing to that Foundation. So George goes to his Director of Development, Mary, for that information, and she goes to the chief financial officer, Frank, in turn.

The first thing these three do is look at how the CEO, Herb T. has talked about the organization’s fundraising expenses in the past. The Annual Report had no listing for fundraising expenses at all. The narrative of that report spoke in glowing terms about the revenues raised, but not a word about expenses. The expense chart didn’t list fundraising expenses either; these were buried inside other, more general figures. Looking at the organization’s un-audited (“Too much expense!” said the CEO each year.) financial statement, one could not discern that there was anything at all expended for fundraising. It all looks like program and administrative expense.

Consequently, Mary and Frank work together to get just the figures for the upfront costs of special events and direct mail. They add in the special coffee-table brochure they made up last year and the cost of the planned giving newsletter and the corporate menu of benefits. Then they project those costs over all the money that the development department brought in: direct mail, special events, major gifts, planned gifts, grants and corporate contributions.

The result is that they come up with a cost of about $0.05 to raise $1 and look really golden. The Foundation loves it! They get the grant, because the foundation didn’t look into the details of how that cost to raise $1 was determined. And the whole thing starts at the top of the organization because Herb has repeatedly shown that he doesn’t want to tell the public how much is being spent on fundraising.

Case Study #2
Melanie Z, the grant writer for Long-Established Charity Enterprises applies for the same grant from the I Care Foundation. She goes to her D of D, Eugenia, for direction and she, in turn, goes to the CFO, Marty for help. They sit down at a similar conference table to work this out. And they all are aware that the CEO, Paula has repeatedly said that fundraising is an important, even vital, part of the organization’s work and has urged clarity and transparency in all reporting. In their annual report LECE has always separated fundraising expenses from other expenses and has included salaries and benefits there and noted them. In the pie-charts for revenue, we see fundraising revenue broken out, and we see a similar section of the expenses chart related to fundraising. Paula has set the standard that all fundraising is a “profit center” and should be accounted that way.

Consequently Melanie and CFO Marty put together a cost of fundraising that comes out at about $0.35 to raise $1 and they put that on the application to the Foundation. And they don’t get the grant, because someone at the Foundation failed to note the difference in reporting.

What’s the lesson?
Well, what it’s NOT is that Foundations are careless, so tell them what they want to hear.

The lesson is that leadership at the top determines how clarity and transparency in reporting is done throughout the organization and is reflected on things like grant applications. This in turn is reflected in how others outside view the organization. And, yes, if you hide the fundraising expenses your cost to raise $1 will look pretty good on paper and you’ll get the grant. But is that what you want to do? Is it ethical? Is it the truth?

The lesson ALSO is that, in this instance, you have to go to the foundation staff and interpret and clarify how you have arrived at that cost-to-raise-$1 figure, and make sure they are aware that there are different ways nonprofits can represent this cost. You need to tell them that while you’ve put in ALL the expense, other nonprofits may tend to skimp on clarity and put in only what they have to in the way of fundraising expenses, and help these foundation staff see the difference between the two methods of calculating this important performance index. In the application itself, you can break out all the various components and then create a commentary paragraph to explain the situation and head off unwanted and unwarranted comparisons between the reporting methods of various nonprofits.

Honesty is the best policy. And it starts at the top. AND it may take a relationship and some words of interpretation to help others understand the results of your honesty. So being honest, clear and transparent takes more work and is harder to do. But consider this, when you got into nonprofit work, was it ease of life you had in mind? Ask your CEO that question.

Starting a Charity? Create a Board Handbook

A handboork for your board members can be invaluable in the process of educating then about their responsibilities and the appropriate activities in which they engage their meeting time.

Let’s say, for example, that your board is given to micro-management in its meetings. The board manual is a source of information about board duties and responsibilities to which you can refer them when the going gets tough and micro-management is at its worst.

Or board members seem to forget the kinds of programs your organization runs, or is not familiar with staff. The board manual is the place to refer them for such information.

The board manual can become the primary reference document for your governing board. Some people call it a “handbook,” but it amounts to the same thing. It is a continually evolving document

What do you want to put in your board manual? Here’s a list of possible ingredients:
1. Short version of the organization’s strategic plan
2. Charter and By-Laws
3. The board’s job description
4. Board performance standards
5. A brief version of the performance review process; what will happen, when, by whom, with what result
6. Organization’s mission, vision and values statements
9. A précis of the most major decisions the board has made in the last 5 years
10 A listing of the organizations programs of service and brief description of each program
11. Listing of staff and contact information for each
12. A board roster with contact information for each board member
13. A digest of policies the board has established over the years
14. The past year’s financial statements
15. The organization’s annual budget for the past two years

You’ll find a good model for a board manual at the following URL. Just click on “Download Attachment” and you get a PDF file you can print out. It’s a very complete model. Click here.

Another good source for information about the appropriate contents of a board manual is available and can be found at this
link.

Why is it necessary to have such a manual? The reason is simple, it provides a written source of important information that every board member should have ready to hand. It is an orientation and reference point. It is a reminder of the board’s governance past and it points the way to the board’s responsibilities in the future. It also directs their attention primarily to strategic issues and turns them away from the tendency to micro-manage.

It is entirely appropriate to stop a micro—managing board session and suggest that board members refer to the board manual. They should bring the manual to every session, so they have it with them. One of the sections you will find you use most often is the one on the board’s job description. In the midst of the fray, I’ve found that many board members forget what they’re supposed to do at board meetings. They tend to get bogged down in the minutiae of business and forget to take a strategic view.

I’ve also found that many board members not only don’t know much about strategic planning but don’t like to do that very much. Consequently, they find almost anything else to get into that diverts their attention from the planning task. They also don’t know much about program evaluation or setting policies that delimit the executive’s work. Consequently, again, they gravitate to things they’re more familiar with. But the board manual is a way to bring them back to their essential function and help them find the handles that help them center down on their appropriate tasks.

Starting a Charity? Whistle-Blower Policy is Needed

What if you have a research associate or a database entry person who gathers information that leads him/her to the conclusion that something untoward and possibly illegal is going on in your nonprofit organization? What are you going to do about that if this person decides to “blow the whistle” on whatever practices are being observed? Whatever you do, you can't ignore it.

I don’t know about your situation, but in all the situations in which I have worked, and in the organizations of many clients over the past twelve years, the answer would have been simple: They would have been fired on the spot, and their concerns would have been buried, the issues forgotten and whatever the questionable practices that were done would be continued.

Sad, but true. Let's face it: many nonprofits are just as stubborn as businesses in publicly admitting fault. Everything they do has got to seem like it’s just the very best thing that could, should or ought to happen. But we know a different story: board members and executives of nonprofits, seeing no directly imposed standard of public accountability, have come to feel as if they operate independently and without accountability. What they do is “nobody else’s business,” right? Organizations, whether business, government or nonprofit, just don't get their knuckles rapped.

That’s the attitude from the top that I have experienced in many nonprofits over the years. Therefore, whatever they do is “right.” The fact that they do it makes it so. And their public face will always seek to justify whatever’s going on as being the truest, best and most appropriate action that could be done. In other words, the boards and executives of charities, just like businesses and units of government, tend to paint themselves as correct and infallible at all times.

But this situation is changing, gradually. And it’s being helped along by the Sarbanes-Oxley Act. One of the sections of that Act has to do with whistle-lowers, i.e. those who “blow the whistle” on bad or harmful or illegal practices. Often they have been fired for their trouble. But no more. Now the organization must listen to these harbingers of trouble and must act properly on their statements and accusations, whatever they are. And this is coming to nonprofits, too, and not a moment too soon, in my opinion.

Sarbanes-Oxley is raising the issue of public accountability for nonprofits for the first time really since the Senator Joseph McCarthy era. In the 1950s and 1960s there was considerable unrest in Congress about foundations and how and why they were set up an managed. Today we’re seeing a broadening of that accountability concern about nonprofit public accountability.

So, what is your organization’s whistle-blower policy? What would you put in one if you decided tomorrow you should create one? How does a nonprofit organization publicly declare that it has made a mistake?

Here’s some recommendations from Board Source and from Independent Sector in their report entitled “The Sarbanes-Oxley Act and Implications for Nonprofits.”

“Nonprofits must start by protecting themselves. They must eliminate careless and irresponsible accounting practices and benefit from an internal audit that brings to light weak spots and installs processes that are not vulnerable to fraud and abuse.

“Written policies that are vigorously enforced by executive staff and the board send a message that misconduct is not tolerated. These policies should cover any unethical behavior within the organization — including sexual harassment.

“Each organization must develop procedures for handling employee and volunteer complaints, including the establishment of a confidential and anonymous mechanism to encourage employees and volunteers to report any inappropriateness within the entity's financial management. No punishment for reporting problems — including firing, demotion, suspension, harassment, failure to consider the employee for promotion, or any other kind of discrimination — is allowed. Even if the claims are unfounded, the organization may not reprimand the employee. The law does not force the employee to demonstrate misconduct; a reasonable belief or suspicion that a fraud exists is enough to create a protected status for the employee.

“RECOMMENDATIONS
Nonprofits must develop, adopt, and disclose a formal process to deal with complaints and prevent retaliation.

“Nonprofit leaders must take any employee and volunteer complaints seriously, investigate the situation, and fix any problems or justify why corrections are not necessary.”

Here’s the link.

Starting a Charity? Writing an Ethics Policy for Fundraising

Have the leaders of your nonprofit organization written an ethics policy or a “Code of Ethics” for the group? Not yet? Better get started. You want to be able to assure your donors that your fundraising practices follow strict ethical guidelines set down by a reputable international organization of fundraisers.

A good place to start is with the Association of Fundraising Professionals Code of Ethics developed for fundraisers. Here’s the code that we all subscribe to when we become members of the AFP:

Code of Ethical Principles

Adopted 1964; amended October 2004.

The Association of Fundraising Professionals (AFP) exists to foster the development and growth of fundraising professionals and the profession, to promote high ethical standards in the fundraising profession and to preserve and enhance philanthropy and volunteerism.

Members of AFP are motivated by an inner drive to improve the quality of life through the causes they serve. They serve the ideal of philanthropy; are committed to the preservation and enhancement of volunteerism; and hold stewardship of these concepts as the overriding principle of their professional life. They recognize their responsibility to ensure that needed resources are vigorously and ethically sought and that the intent of the donor is honestly fulfilled. To these ends, AFP members embrace certain values that they strive to uphold in performing their responsibilities for generating philanthropic support.

AFP members aspire to:
• practice their profession with integrity, honesty, truthfulness and adherence to the absolute obligation to safeguard the public trust;
• act according to the highest standards and visions of their organization, profession and conscience;
• put philanthropic mission above personal gain;
• inspire others through their own sense of dedication and high purpose;
• improve their professional knowledge and skills, so that their performance will better serve others;
• demonstrate concern for the interests and well being of individuals affected by their actions;
• value the privacy, freedom of choice and interests of all those affected by their actions;
• foster cultural diversity and pluralistic values, and treat all people with dignity and respect;
• affirm, through personal giving, a commitment to philanthropy and its role in society;
• adhere to the spirit as well as the letter of all applicable laws and regulations;
• advocate within their organizations, adherence to all applicable laws and regulations;
• avoid even the appearance of any criminal offense or professional misconduct;
• bring credit to the fundraising profession by their public demeanor;
• encourage colleagues to embrace and practice these ethical principles and standards of professional practice; and
• be aware of the codes of ethics promulgated by other professional organizations that serve philanthropy.

View the Standards of Professional Practice that accompany this Code of Ethics.

Starting a Charity? Be Aware of Sarbanes-Oxley Legislation

While many nonprofits have probably heard of the federal Sarbanes-Oxley Act by this time, some four years after its enactment, apparently few have implemented changes in response, according to a new survey.

The following information was reported by the Association of Fundraising Professionals on its website:
“In an electronic survey of 300 nonprofit executives and board members, 57 percent were familiar with the Sarbanes-Oxley Act. However, only 38 percent of respondents said they have had any discussions concerning the act, and only 20 percent have made changes because of the act, according to the survey, The 2003 Grant Thornton National Board Governance Survey for Not-for-Profit Organizations. Grant Thornton, based in Chicago, is one of the largest international accounting and business advisory organizations.

"Of the 20 percent that have made changes, 24 percent instituted a conflict of interest policy, 20 percent developed organization-wide polices and procedures for internal controls, 17 percent wrote a code of ethics statement, 16 percent created an audit committee charter and 11 percent instituted a 'best practices' for board governance, according to the study.

"Only 16 percent of respondents said they had a whistle-blower policy, and of those without a policy, only 21 percent were considering instituting one. Answers were more promising when asked about a records retention policy or a policy on the destruction of documents. Seventy-seven percent said they do have such a policy, while 23 percent said they did not. However, only 41 percent without this policy were considering adopting one.”

So the question is, how’s your nonprofit doing on Sarbanes-Oxley? Here are the items you’ll want to review:
1. Conflict of interest policy
2. Policies and procedures for internal controls
3. Code of ethics statement
4. Creation of separate audit committee
5. Change auditors periodically
` 6. Written “best practices” for board governance
7. “Whistle blower” policy
8. Policy on records retention and destruction of documents

I recently surveyed a class of 30 fundraisers I was teaching in mid-Michigan. Only five of the thirty organizations said they were working on or had worked on any of these 8 points.

Sarbanes-Oxley, in one form or another, is coming to nonprofits. And it is likely to be sooner than later. Why? Congress has been more concerned in recent years with the lack of public accountability for the rapidly growing “Volunteer Sector” of our society – our nonprofits and other voluntary organizations, tax exempt organizations.

There are now about 2.5 million of these organizations and they are or tremendous help to our society, while accounting for something on the order of 20% of the GDP. But there is no established public accountability for nonprofits except the IRS Form 990, and a huge percentage of nonprofits do not file that form either due to ignorance or because they have fewer than $25,000 in assets. Consequently, Congress is going to be taking a look at nonprofits in light of the Sarbanes-Oxley accountability standards, and this is likely to affect our sector greatly.

Two prominent organizations in the fundraising field, Board Source and Independent Sector have combined to produce a report that may well prove helpful to your nonprofit. It’s called “The Sarbanes-Oxley Act and Implications for Nonprofits.” Here’s a short quote from that report:

“The Sarbanes-Oxley Act has now been in force for several years. The legal climate has intensified in the nonprofit sector as Congressional committees and state legislatures are actively proposing new legislation to regulate organizations. Individual nonprofits have begun to identify loopholes - and figure out how to eliminate them. Watchdog agencies and other nonprofit field-building organizations are reconsidering assumptions and standard operating procedures in an effort to identify guidelines, standards, and best practices in the sector.

“Regardless of the present scope of existing and potential new legislation at the state and federal level, nonprofit organizations have heard the wake-up call. For all of us in the sector, the Sarbanes-Oxley Act spearheaded a renewed realization that nonprofit organizations rely on - and must protect - the indispensable and unequivocal confidence and trust of our constituents. Self-regulation and proactive behavior will always prove more powerful than compulsory respect of laws.”

Here’s the link to the Board Source Report

Get ready, it’s coming!

Starting a Charity? Check for Conflict of Interest in the Board

If you're starting up a new nonprofit organization, you're probably thinking about prospective board members you want to recruit for your new charity. In that process, it's wise to consider potential conflicts of interest.

What does it mean for a member of the board of directors of a nonprofit organization to have a “conflict of interest?” I’ve heard this discussed in a number of board meetings over my years of working with nonprofits, and usually the kinds of things people have to say about it indicate that they don’t really understand what this is or know how to helpfully deal with it.

Most everybody has the general idea that a “conflict of interest” has to do with a situation where, for example, the board member in question is leading the charge for an action that will stand to benefit him/her personally. So there does seem to be that common understanding. After that the deiscussion tends to deteriorate.

So let's confirm that a conflict of interest exists when there could be an opportunity for an individual to benefit from, or might have a business interest in, an action by the board on which that person serves.

But what to do about it?

First, conflicts of interest are not “bad.” They happen. Nobody’s fault. Often times they can be helpful. Let’s say, for example, that the nonprofit organization is looking for a way to get its parking lot paved. On the board sits the owner of a construction business that just happens to do paving work for a lot of their customers. He’s willing to heavily discount the paving job for the benefit of the charity. So there’s a conflict of interest. The business owner sits on the charity’s board, the board is about to make a decision to pave the parking lot, and this businessman stands to benefit from the positive decision to use his company.

What should this board member do? Well, obviously, the first thing he is going to do is to state openly to the rest of the board members that he has a conflict of interest in the matter of paving the parking lot. On the one hand he has a interest in the board’s doing its fiduciary work diligently, and, on the other hand, he has an interest in promoting his business. So he first needs to say that to his fellow board members. Second, he will abstain from voting in any decision, action or contract approval for that paving project.

What’s harmful is when such a business owner refuses to make plain his interest in having the nonprofit choose and pay his firm to do the job. Especially if this kind of thing happens regularly, so that the nonprofit uses this business owner’s firm to construct the new office building, then to pave over the parking lot, then to build the finance tower, then to provide a satellite office, and so forth. That kind of repetitive use, or “mis-use,” of the position of board member is where the “conflict of interest” goes sadly wrong and benefits the individual board member personally.

Second, when we choose members for our boards of directors for nonprofits, we often include people with strong business interests. For one thing, we need their networking ties and relationships in the community. For another, we need their resources for financial support. So conflicts of interest are bound to arise. Therefore our responsibility is to have these stated publicly and to have the board member(s) in question abstain from voting on matters in which he/she/they have a personal or professional interest.

The term “nonprofit” is not a business plan, it means that the profits of the business will not be used for private inurement -- that is, to benefit individuals materially. The excesses of revenue over expenses will not be doled out to the individual board members for their use. That’s all “nonprofit” means: no private inurement. So this is what we want to avoid. Openness and transparency are the best policy in dealing with conflicts of interest.

Starting a Charity? Fund Development Planning -- Cultivation and Solicitation of Contributions

We're working our way through a Fund Development Plan for a new charity start-up. We descrived the use of the strategic plan and the development of the case for support. Then we saw how projects need to be selected to focus donors' attention, and how prospect pools are created to provide potential donors to our cause. We also saw how volunteers can be used to cultivate and solicit prospective donors in ways that expand the capabilities of staff far beyond what they otherwise could do. Today we delve into the various methods of cultivating and soliciting the gifts we need to assure our new charity has the financial resources to carry out its mission.

Cultivation through marketing efforts
The new charity’s donor cultivation effort starts with our marketing and advertising materials and media. We will deliver our Case for Support to prospective donors through our newsletter, our website, our direct mail program, our special events, and any other media we can use. Further details of our marketing and public relations program can be found in our Strategic Plan and in our marketing and public relations plan.

Cultivation through personal relationships
Each volunteer and each staff person will be asked to provide a list of their family members, friends, colleagues, associates and business acquaintances who might be likely prospects for giving gifts to our new charity.

The sequel to providing this information is that each volunteer and staff member will also be assigned one or several donor prospects for cultivation and solicitation. It is likely, but not necessarily the case, that a prospect whose name appears on the list provided by a specific volunteer or staff member will be assigned to that person. Assignments will be made on the basis of criteria such as the following:

• Who is closest to the prospect in a way that promotes giving?
  
• Who is most clearly able to form the kind of relationship that motivates the prospect?
  
• Who has the personality and behavioral style most appropriate to a given prospect?

As we are able, we will provide training to both staff and volunteers so they will know how to do this fundraising work.

Cultivation through direct mail efforts
We will use our direct mail efforts to deliver our Case for Support to donors, friends and prospects in a variety of ways. This would include our newsletter that goes out to interested people, as well as our direct mail solicitation any time during the year.

Cultivation through the new charity’s website
We will create a donation portal on the new charity’s website and will provide articles and other information relative to how donors can achieve their objectives through our programs of service to the community. We will describe our programs, show what measureable results we are getting, and will suggest to viewers that their assistance is not only needed, but will produce good results in the community. The website will be one of the primary ways we get our Case for Support to donors and prospects, and also one of the ways we deliver key program and results information to the public.

Cultivation through Special Events
One way that we anticipate cultivating major gift donors is to use our special events program to generate new prospects and bring older prospects closer to us. Volunteers and staff will be assigned to follow-up each special event with donor prospects by personally phoning them and asking three questions: 1. “What did you think of the event last night?” and 2. “Are there other people you know who should have the opportunity to learn about what we do and how they can serve the community through our program?” and 3. “Can you see yourself becoming closer to our organization in the next few years?”

The responses we find to those questions will guide us in our approach to our donor prospects. We will encourage donor participation in a variety of ways, and will remain flexible in our ability to use volunteers both in fundraising and in our mission accomplishment and service to the community. In this way, the people we are cultivating will have a motivational, hands-on relationship to our new charity and its programs of service.

Determining when donors are “ripe” for solicitation
Part of the responsibility of the volunteers and staff of our new charity will be to determine when the people on their list for cultivation and solicitation are ready to be asked. It is important that we not ask too early in the relationship, before the prospect has had a chance to grow in their enthusiasm for what we are accomplishing in the community. But it is equally important that we not pass up opportunities to request significant donations from our prospects when they are ready.

Individual volunteers and staff will not be required to shoulder this responsibility alone, however. We will make an effort to provide training, help and assistance to each person so that we are making these judgments as a group when this is appropriate and necessary. If, and as, individuals are comfortable proceeding on their own, they are encouraged to do so.

Soliciting donors by direct mail
As we are able to afford to prepare and send solicitation mailings to people we think will support us, we will use this method of requesting donations. We will be judicious in selecting the names and address of those to whom we want to mail, so that we can be as efficient as possible in our direct mail effort.

We are aware that mass mailings to a large group of otherwise unqualified donor prospects is very inefficient and a waste of money. Therefore, we will attempt to gauge each direct mail prospect’s ability and motivation to give. We will also prepare as many letters as we need in order to meet the fairly wide variety of individual behavioral styles and personal needs for information of the people on our mailing list. We acknowledge that this is somewhat time consuming, but we know that it will bring us better responses and more money in the final analysis.

Soliciting donors by website
We will prepare the donation portal of our our new charity’s website in a way that is inviting and motivating to prospective donors, so that they are compelled by the information we share to identify with the community’s need and make generous donations to our work.

We will attempt to gather as much contact information about our Internet donors as we can, in order that we may provide more information that they will use, and in order that we can provide further personal follow-up where this is appropriate.

Soliciting donors through personal requests for donations
We anticipate that one of the primary sources of significant revenue to the our new charity’s operation will be that of major gifts from individuals. The volunteer and staff who are assigned to individual donors will have this goal in mind, so that we have a growing and fruitful major gifts cultivation and solicitation effort.

Soliciting donors through special events
As we are able, we will create a series of special fundraising events that both call attention to community need and provide our friends, prospects and donors with opportunities to give in support of our work. Annual dinners, auctions, awards presentation, chicken dinners, and a wide variety of other special events will help us join fun and fundraising in ways that will attract and motivate our donors.

For further information on the approach to special events donors, the reader is referred to the section on “Cultivation through Special Events” above.

Soliciting corporate and foundation donors through proposals
We will research a variety of local businesses and corporations, and regional foundations, in search of those who are interested in supporting the kind of mission our new charity seeks to accomplish in our community. We will make a list of these prospects, and will attempt to qualify them in terms of the extent of their interest and the likelihood that our programs fall within their scope.

When we have created this list of prospective grantors, we will assign volunteers and staff members to create, maintain and enhance relationships with the contact persons in each prospective institution or business. Over time, we anticipate that these relationships will demonstrate that the our new charity’s programs of service are both relevant and attractive to these prospective large donors. Out of these relationships we will devise a set of strategies of approach, cultivation and solicitation that we will use with each of these prospects. These strategies will be written down and entered into our donor database for further use and adaptation as we move forward.

When the time is right, we will approach each corporate or foundation prospect with a grant request or proposal that is appropriate to their style of operating. In this proposal we will give the prospect the information they need to make a positive decision to make a grant to our new charity. This will be in accord with their specifications as to what they require and how they wish us to proceed.

Soliciting corporate marketing sponsors through personal contact
Using our research on corporations, we will also approach marketing and advertising departments to see if there is interest in using our organization and the special events we put on as a means of advertising the products and services of these businesses throughout the community.

We will create a menu of benefits for our corporate and business partners, and will generally proceed in much the same way we will do for grants. We will form relationships with the contact persons in these organizations, and will attempt to involve them in our organization as volunteers, or to by inviting them to come to our various functions. As our relationship grows with each prospect, we will prepare short proposals to them for sponsorships and offer them the opportunity to give in support of our work in our community.

Starting a Charity? Fund Development Planning -- Engaging Volunteers in Fundraising

As we said before, there is much in fundraising that seems counter-intuitive. One of the first thoughts that may be on the minds of individual members of the Board of Directors is how the staff will raise the money necessary to keep the organization financially stable. In fact, this is not far off the mark, in that in many nonprofit organizations the fundraising activity is carried out largely, sometimes even solely, by the organization’s staff.

However, we must ask two questions:
1. What is the appropriate fundraising involvement for every member of the organization’s structure that will lead to the kind of optimized fundraising that will provide maximum revenue of the organization over time?

2. Who among the organization’s invested volunteers and staff are likely to be most effective in producing the revenue needed by the organization?

Our answer to the first question is that every member of our new charity family, whether staff or volunteer, has a role to play in fundraising. Not all can do the same kinds tasks or carry the same level of responsibility. But everyone associated with the our new charity organization will be involved in some aspect of fundraising in accordance with their capabilities, learning and motivation. The reason for this is that our existence, and therefore our ability to serve the community, is heavily dependent on our fundraising capability to keep our organization financially stable and allow us to serve the community. This is the expression by all of us that fundraising is critical to our success as a public trust.

Our answer to the second question is twofold:
The first answer is that volunteers who have already made their financial gifts tend to be much more effective than even a program person, an executive director or a director of development, especially with their peers. Generally, volunteers are seen by the public (and their peers) as having more motivation and less self-interest involved in their cultivation and solicitation efforts.

The second answer is that typically fundraising staff and the organization’s executive director have limited time that they can spend on their fundraising tasks; thus their ultimate effectiveness will be limited. Volunteers open up considerably the organization’s ability to reach out to larger pools of donors with increasing diversity over the years. Thus volunteers significantly enhance and magnify the organization’s ability to raise contributed funds from the public. Without volunteer involvement the organization’s fundraising capability can be severely truncated after a certain point, because staff can only do so much in a day’s time.

Therefore, our new charity will endeavor to involve volunteers at all levels of fundraising activity. To do this, we will commit ourselves to the following seven components in our management of all our volunteers

• Identifying likely volunteers from within the community
  
• Recruiting the most appropriate volunteers from those identified
  
• Bringing these volunteers continually closer to the organization’s work
  
• Training our volunteers in fundraising methods and techniques and in the work of cultivation and solicitation of contributions
  
• Deploying our volunteers with reference to our cultivation and solicitation strategies for individuals, corporations, sponsors and foundations, so that each volunteer has a continuing group of persons or institutions they are responsible for cultivating and asking for gifts.
  
• Evaluating the work all our volunteers do on an annual basis, and providing both evaluation mechanisms and further training to assist those who need these supports.
  
• Debriefing, thanks and recognition for all volunteers, both annually (for continuing volunteers) and at the end of their respective terms of service.
  

Starting a Charity? Fund Development Planning -- Identifying Prospect Pools, Pt. 3

We're discussing the establishment of pools of donor prospects who might give to our new charity. Today we focus on some of the strategies of implementation that can be used.
Prospect Pools – Strategies for Implementation
During the next year, we will want to take the following steps

1. Individuals
We will gather together the names and contact information of individuals in the community who have been sympathetic to our cause and mission and who have been willing to give us contributions. We will send these individuals a direct mail appeal at the end of the year, as well as individual requests for contributions whenever special needs arise for which their gifts can be helpful.

We will keep this information in an appropriate donor database, which we will upgrade on a forecast schedule according to our strategic plan and our advance budget projections.

We will create a subset of the above individuals who we believe have major gift potential, and will devise cultivation and solicitation strategies for each of those individuals. These cultivation strategies will include the assignment of each donor prospect to either a staff member or a volunteer for continued relationship building and follow-up, and for eventual solicitation.

2. Corporations – Community Responsibility Grants
We will gather together the names and contact information of various businesses and corporations in our community, county and region who have been or whom we think might be willing to give us contributions. This information will be uploaded into our donor database for further use and reference.

We will establish strategies for approaching, cultivation and solicitation of these business owners on behalf of our new charity. In this process we will assign each corporate prospect to a staff person or a volunteer for continued relationship building and follow-up, and for eventual solicitation.

We will develop these prospects in three subsets among our corporate responsibility donors as follows:

1. Those who make and/or sell a product or service that has a direct affinity for our mission. These financial institutions, mortgage companies, other lenders, real estate agents and brokers, and the like, will constitute a “direct affinity” group that we will consider primary donor prospects.
   
   For this group, we will craft a special version of our Case for Support that is designed to help them see the logic and the good sense and stewardship involved in making contributions to our mission, so that all members of our community become more knowledgeable and more capable of dealing with and purchasing services from these businesses.



2. Those businesses or corporations that are close to us geographically and share our concern for the well-being of our neighborhood. These retailers, wholesale outlets, service businesses may not have a direct affinity for our mission, but they will undoubtedly greatly appreciate the fact that more stable, knowledgeable community citizens means a better business climate and greater chance of business success.
   
   For this group, also, we will craft a special version of our Case for Support designed to motivate and compel these business interests to make contributions to our work.



3. Those businesses and corporations who are not necessarily close to us geographically, nor have any affinity with us, but whom we believe may be motivated to help us make our community or our regional society a better place to live.
   
   For this group, we may not necessarily create a special version of the Case for Support, but we will attempt to approach these prospective donors in ways that motivate them to give.

3. Corporations – Gifts of Sponsorships
We will gather together the names and contact information of various businesses and corporations in our community, county and region who have been or whom we think might be willing to give us contributions.
We will establish strategies for approaching, cultivation and solicitation of these business owners on behalf of our new charity. In this process we will assign each corporate prospect to a staff person or a volunteer for continued relationship building and follow-up, and for eventual solicitation.

We will establish strategies for approaching, cultivation and solicitation of these business owners on behalf of our new charity. In this process we will assign each corporate prospect to a staff person or a volunteer for continued relationship building and follow-up, and for eventual solicitation.

Following the method above of dividing businesses or corporations into three sub-sets, we will work out different strategies of approach, and a variety of Case for Support nuances that are designed to help corporate marketers and advertisers see the value in giving to our cause and mission.

We will also create a menu of sponsorship benefits as follows (suggested):
Sponsorship Levels:

• Corporate Angel Sponsor $10,000 annually


• Platinum Sponsor $7,500


• Gold Sponsor $5,000


• Silver Sponsor $2,000


• Bronze Sponsor $1,000


• Benefactor Sponsor $500


• Attraction Sponsor $250


• In-Kind Sponsor In-kind

Sponsor Benefits
"Corporate Angel Sponsors" will have their logo imprinted on all educational materials developed for our service delivery clients. Their logo will be featured on our stationery and on our promotional materials for marketing and advertising purposes, as well as on our fundraising literature. Public mention will be made of these sponsors at every public presentation, press conference and public event that we create. Recognition of these sponsors will occur in all media coverage and promotional materials, and will be prominently displayed and features in all of our special events. Their names and logos will also appear on our website and on the donor wall in our new charity’s general offices

"Platinum Sponsors" will have their logo imprinted on all educational materials developed for our service delivery clients. Their logo will be featured on our stationery and on our promotional materials for marketing and advertising purposes, as well as on our fundraising literature. Public mention will be made of these sponsors at every public presentation, press conference and public event that we create. Their names and logos will also appear on our website and on the donor wall in our new charity’s general offices

"Gold Sponsors" will have their logo imprinted on all educational materials developed for our service delivery clients. Their logo will be featured on our stationery and on our promotional materials for marketing and advertising purposes, as well as on our fundraising literature. Their names and logos will also appear on our website and on the donor wall in our new charity’s general offices

"Silver Sponsors" will have their logo imprinted on all educational materials developed for our service delivery clients. Their names and logos will also appear on our website and on the donor wall in our new charity’s general offices

"Bronze Sponsors" will be listed on our website in a special category and their logos will appear in a special panel in close proximity to the listing on the site. Their names and logos will also appear on our website and on the donor wall in our new charity’s general offices

"Benefactor Sponsors" will be listed on our website in a special category and their logos will appear in a special panel in close proximity to the listing on the site, as well as on the donor wall in our new charity’s general offices..

"Attraction Sponsors" will be listed in a general donor listing in which their corporate names will be accompanied by a checkmark or other visible designation that tells viewers that these sponsors have given to our new charity.

"In-kind Sponsors" will be listed at the end of our donor listing on our website, in our annual report and on our donor all in our new charity’s general offices

We will create a small, inexpensive sponsorship brochure that tells about our work in the community and describes the menu of benefits that are available to our corporate donors. As time moves along, and as we have more money available for fundraising. Our new charity will involve our corporate sponsors in other media, such as display books, videos, public displays, kiosks and other marketing and advertising strategies. We will also add sponsorship benefits as we enhance and enlarge our organization and its work.

This rounds out the description of work that needs to be done with regard to creating or identifying pools of donor prospects. In our next post we'll discuss the use of volunteers in our Fund Development Plan.

Starting a Charity? Fund Development Planning -- Identifying Prospect Pools, Pt. 2

We're in the midst of putting together a Fund Development Plan for our new charity; we've dealt with the strategic plan, the case for support and the identification of specific projects; now we're into identifying or creating prospect pools, where we will find our donors. Yesterday's post had to do with individual donors. Let's see who else is in our pool of prospects.

2. Prospective Corporations, Community Responsibility – are there businesses or larger corporations in our community who could be persuaded to share a bit of their corporate responsibility money with our new charity? This, typically, consists of the contributions decided upon by the corporate or business owners or officers. These gifts are a way the corporation or business has decided it can demonstrate that it is a good corporate citizen in the community, and is supportive of efforts to create a better society.

3. Prospective Corporations, Marketing – would some of the businesses or corporations in our community be willing to “invest” in our new charity’s mission in return for some promotion and advertising of their services and products through our organization’s reach into the community? Contributions here are made chiefly for marketing and advertising reasons, and corporations making such contributions want to know how positively making such contributions will add to their bottom line – the profit they can make through sales.

4. Prospective Foundations – are there a variety of foundations in our southeastern Michigan region that would be attracted to our mission, and which would help our new charity accomplish its mission by way of grants? We acknowledge that today most foundations have their own program objectives which they want to accomplish, but we are confident that some of these will have internal objectives that are compatible with our own cause and mission. These will be the ones with whom we can create partnerships to accomplish our mission in the community.

Tomorrow we will put together some specific strategies about each of our four types of prospects.

Starting a Charity? Fund Development Planning -- Identifying Prospect Pools

Now that we have our project and our case for support, the next step in our Fund Development Plan is to identify prospects to cultivate and solicit for gifts.

There are typically several kinds of donors to which we may turn for financial support: individuals, businesses or corporations, foundations and government agencies.

We know from many years of observing the contributions given to nonprofit organizations that individuals tend to give the most to charity. Typically, about 75% of all the donations made to 501-c-3 nonprofits come from individuals. In 2007, the Center on Philanthropy at Indiana University reported in “Giving USA” that of the $306 billion given to charity, individuals gave $230 billion. The next largest type of donor, foundations, gave 12 %, while corporate donors gave about 5% and 8% came from bequests (which are also made by individuals).

Our Fund Development Plan for A new nonprofit will include a section that addresses each of these types of donors. As we delineate these constituents, we will focus our attention on the geographic area involved, with some reaching out to the larger region of southeastern Michigan.

1. Prospective Individual Donors – who are the people we can identify in our community that would have both the capacity and the motivation to give to a new nonprofit? We need to identify who these people are, how we reach them, and what we expect from such donor segments.
a. There may be individuals we reach through our direct mail
b. Sine undividuals we know from association with them, such as board member contacts in the community: relatives, friends, colleagues, acquaintances are all potential donor prospects. We also have staff contacts in the community that result from pursuing the organization’s program goals.
c. Then, too, there are individuals who hear of us through various marketing and public relations strategies we will employ

Even before we begin our cultivation and solicitation work, it is important to note that every gift has, essentially, three identifiable elements: capacity, motivation and relationship.

Without the capacity to make a gift, there can be no gift – a person, business or foundation cannot give what they do not have.

But even prospective donors who have capacity may not yet be motivated to think in terms of a new nonprofit. So motivation is a powerful mechanism for directing a donor’s largesse – he/she will give to the causes that motivate them, inspire them, or give them the inner rewards they seek.

What, then, is the way a nonprofit organization can affect motivation? The answer is that relationship is a key to motivation. Individuals (even at foundations and corporations) give to people, give to causes they love, give to get their own objectives accomplished in the world. Therefore, the way to positively affect their motivation is through the creation, building and maintenance of relationships with our donors.

This means that our fundraising plan for focusing on our donors – of whichever type – will be to create and maintain relationships with them over time. Relationships can be created in several ways.

For example, a donor may receive a letter from a new nonprofit that contains pictures of families being helped by our program staff. Let’s say that person is moved, for example, by seeing those pictures plus the text that explains our mission and our work, to write a check for $50. That is the beginning of a relationship to our organization. But it is only a beginning. Much more must be done to help that donor make repeated gifts and to give more, over time, to help our staff achieve service goals.

Another example involves a nonprofit Board member who has a relationship with a colleague in business, in a social situation or in a service club. Having heard the Board member relate all the good things our nonprofit accomplishes, this person has a growing respect for the organization. At a certain point in time that Board member offers to his/her friend the opportunity to make a significant (for that donor) gift to our new charity, and shows the prospect just what can be achieved through making that kind of gift.

One aspect of relationships we will keep in mind is that they tend to stagnate and must be kept fresh. So our Fund Development Plan will include providing our staff and volunteers with new and fresh ideas about cultivation that can keep these relationships we have with people, businesses and foundations fresh and motivating so that our donors will give more.

We'll move on to corporate prospects tomorrow.

Starting a Charity? Fund Development Planning, cont'd

The fundraising process has seven distinct steps, as follows:
1. Define the project
2. Write the case for support
3. Develop or identify prospect poools
4. Deliver the case for support to prospects
5. Enlist and train volunteers for cultivation and solicitation
6. Deploy staff and volunteers in cultivation and solicitation
7. Recognize and thank your donors

So having begun our Fund Development Planning process with the organization's strategic plan and case for support, we now turn to the selection of a specific project (or projects) that can focus the donor’s attention and giving.

We know from a wide variety of research data available that donors give more consistently, more frequently and with greater internal satisfaction when they can focus on a specific project.

One of the reasons for this is that focusing the donor's attention on a specific project enables a donor to see and feel good about alleviating specific need in specific areas of the community’s life. Identifying the good that one does is more easily accomplished with specific focus on a project. In the end, that brings with it more personal satisfaction to the donors and often larger gifts to the charity.

A second reason for having a project on which to focus is that it is easier for donors to identify with the specific persons in the community whose need is being alleviated by the charitable organization. And when donors identify with visible program recipients they have the sense of more fulfilling personal relationships with those who are helped. All of this promotes better and more lucrative giving to the nonprofit organization.

For example, take the homeless. Many people in our communities don't know who the homeless really are. A charity dealing with the homeless can focus, for example, on the project of temporary shelter they provide homeless families; it can show a picture of a homeless family that looks just like the average commmunity dweller. In some areas the average age of homeless persons is 9 years old, because so many families are experiencing homelessness. Including such a project in an organization's annual fund drive gives the charity time to spotlight, lift up, give the important details of who the homeless are, and why they benefit from temporary shelter. This not only heightens the prospective donor's sense of community need, but informs the donor's understanding of exactly who the homeless are; it helps the prospective donor understand that homeless people are not very different at all from themselves.

Therefore, Our start-up charity will benefit from identifying certain specific aspects of their service programs or program locations as the basis for its fundraising, whether this be seeking grants from foundations and corporations, or asking individuals to contribute to what is essentially an “Annual Fund” campaign for operating funds. Those operating funds will be identified with, and represented and symbolized by the individual program initiative being lifted up.

Tomorrow, more on this theme: the part played by oxytocin in giving.

Starting a Charity? Fund Development Planning, Case for Support, Pt 2

We're working on the Fund Development Plan of a start-up charity. And we're in the section having to do with the organization's "Case for Support;" this is the set of reasons why anyone would or should give us any money. We've discussed the reasons why people give, and the fact that these reasons will be the basis for writing our case for support.

It is vital to the success of our fundraising efforts to remember that we are seeking funding from our constituents not only for mission accomplishment, but for capacity-building, infrastructure acquisition and maintenance and fundraising. We need to be well aware that our revenue targets include money for administration and for the salaries and benefits we pay our staff as well. In fact, we will need to constantly and consistently interpret to our prospects and our donors and friends that the the nonprofit organization cannot do its work, and cannot achieve its mission or its aims in society, unless all aspects of the organization’s life are funded together.

It has become fashionable in recent years for some members of the public (particularly those with knowledge of business enterprise) to attempt to designate their giving and to hold nonprofit organizations hostage to their personal preferences. We read stories in the media and hear anecdotes about people who want to use “ratios” in judging nonprofits they help; we hear sometimes that people dislike giving to “administration” and “salaries” and want their money to “go directly to the poor and needy.” Many of the charity “watchdogs” whose websites attempt to help would-be donors get the biggest bang for their donated buck, encourage such comparisons and the use of ratios.

But we know that while such compartmentalization and use of ratios may be appropriate for certain business enterprises, these techniques do not work well at all in the voluntary sector. We know from experience that the rendering of services to those in the community who need what we provide involves time, careful management, increasing costs to deliver, as well as the required infrastructure and capacity building necessary to deliver services that truly make a different in the lives of those we serve.

As part of The nonprofit’s Fund Development Plan, therefore, we will resist these efforts by donors to separate out various components of our program so that they can fund just those pieces, and not all the rest of the organization’s work. We will make every effort, through all the media available to us, constantly to interpret to our friends, prospects and donors that the accomplishment of The nonprofit’s mission, and the nature and quality of service we provide to the community, depends on having a solid foundation of growing fundraising capability, expert management, qualified service providers and continual capacity-building and infrastructure enhancement; and that without these components the community’s needs cannot be well served. We will construct our financial reports with simplicity, candor and transparency, and will share this information broadly with our constituents and our public on a regular basis. In so doing, we will demonstrate the unity and integrity with which our nonprofit organization is managed. We will constantly ask donors to fund our total operation as a service in meeting the community’s need.

Tomorrow we'll work on selecting projects for donors to fund.

Starting a Charity? Fund Development Planning, Case for Support

The second main component of the Fund Development Plan is the organization's case for support. As we stated in the last post, the case for support is critical to fundraising success and derives its foundation directly from the strategic plan.

The case for support comprises the set of reasons why any donor (or all donors) should give the organization any financial support. In short, it makes the case for – or demonstrates why – contributions should be given.

As a result of extensive research by many fund development practitioners and reporters over the last 20 years, we know what donors describe as their top reasons for giving. Therefore, we will fashion our case for support in a way that allows us to speak directly to those reasons for giving money to charity.

1. People give to organizations that are well known in the community and have done extensive work that has been recognized over many years.

2. People give to organizations that produce clear, measurable results.

3. People give to organizations that help the community deal with certain kinds of crisis, such as earthquakes and tornadoes. They also give to organizations that assist members of the community to take advantage of certain kinds of opportunities, such as education and training, art and cultural events, or human services and public policy-related offerings.

4. People give to organizations that have laid careful, workable plans to either deal with a crisis or help a community take advantage of an opportunity.

5. People give to organizations that ask them for money.

6. People give to organizations that tell them how their money will be used, tell them what specifically their contributions will provide or “buy” that meets community needs, and tell them afterwards what their gifts have accomplished.

7. People give to organizations that carefully, thoughtfully and frequently thank them for their gifts and recognize that their contributions have helped alleviate crisis or offer increased opportunities to the community.

8. People give to organizations that are careful to include them in their communications networks, giving their donors the right information they need at appropriate times and in ways they can appreciate and use effectively.

Therefore, we will draft our case for support around these eight reasons why donors give, so that we are sure to meet the needs, wants and values of our donors. This will make our case for support stands out in the philanthropic marketplace and will help us attract more donors than otherwise would be the case.

More on the case for support in the next post.

Starting a Charity? Fund Development Planning, Strategic Plan

In the last post we had an overview of some of the major ingredients of a Fund Development Plan. How let's delve further into each of the ccmpontnes. And the first component of a Fund Development Plan is the organization's Strategic Plan. This may seem counter-intuitive, to include elements of a strategic plan in this fund development plan, but it is necessary to understand that without first having a strategic plan, a fund development plan is of little use. The new charity needs to have a firm grasp on the strategic elements before trying to raise any money in support of their effort.

Strategic planning is, admittedly, a difficult and time-consuming first step, which may, at first, seem repugnant to a Board that urgently needs to raise cash today to cover past debt and bring fiscal stability to the organization. The intuitive thing to do would be to immediately go out and try to raise the funding so urgently needed.

However, as we shall see throughout this process, fundraising is, at times, very counter-intuitive. And at this stage, the first step is just that. When we are beginning to be serous about our fundraising effort, discipline and hard work on the strategic plan is the only way that the organization can so position itself that it will attract any significant contributions.

The strategic plan is a detailed description of the social aims the nonprofit organization wishes to achieve and the strategies and tactics it will employ to accomplish those goals. Without that, the donating public may come to see the organization as just another directionless nonprofit in an over-crowded, under-funded philanthropic marketplace. The consequences of not completing the step of strategic planning will be financial disaster and, eventually, the closing of the organization.

The ability of any charitable organization to accomplish its mission is predicated on several vital ingredients:

• the original vision and values of its founder
  
• the ongoing, evolving vision and values of its Board of Directors
  
• the specifically named social aims the organization desires to achieve
  
• the needs of the community the organization seeks to address
  
• the surrounding circumstances that affect mission accomplishment
  
• the way the organization states its mission
  
• the outputs that will be necessary to measure the success of missional strategies
  
• the outcomes that will measure and define progress toward the stated social aims
  

Initially, in a new nonprofit organization, these elements are often given verbally and in a somewhat fragmented form as occasion demands. Moving through the steps of founding a nonprofit organization the vision and values of both founder and Board of Directors often develop in response to external problems or opportunities, and are articulated only as need arises.

The strategic plan, however, brings these elements into focus, and forces us to write them down. This codification process allows us to objectify them, examine them, sharpen them and prepare them to be used in both program and fundraising efforts.

Not only that, but these elements also provide the basis by which the Board of Directors will devise specific programmatic strategies to accomplish the organization’s mission, as well as the policies and procedures used throughout the organization’s management practices, financial records and reporting, and its fundraising efforts. These are the strategies that, in the Board’s best judgment, will take the organization from where it is today and permit it to accomplish its mission and achieve its social aims.

Strategies for a new charity might include such steps as providing educational seminars or workshops for given program constituents; they might also include direct help to constituents who need specific types of services.

These strategies will comprise the programmatic efforts of the organization, but will also reach into the management and financial arenas and the fundraising efforts of the organization. What strategies will we use to see that we are well and carefully managed? What strategies will we use to assure financial stability and transparency throughout our existence? What strategies will we employ in fundraising? These are a few of the questions the strategic plan must answer.

One of the chief reasons it is necessary for a nonprofit organization to have a written strategic plan is that this plan forms the basis for writing a “Case for Support” for the organization’s work. That is, it translates rather directly into the set of reasons why donors should give the organization any money. Donors are concerned to know that their gifts will be used for what the organization advocates or for its services and in its work, and they desire a high degree of transparency in organizational reporting. Donors can and often do ask strategic questions to which we need to have ready answers before they ask.

For example, if we are going to offer educational programs with a certain kind of content, we then say to our donors that when they give to our organization they are providing necessary education to the community’s members.

When we say that there is a community need, this translates into a case for support that tells donors they are able to ameliorate community need through their gifts. When we say that we value knowledge and education for our program constituency, we can say to donors that their contributions are used to promote the values of knowledge and education, and that through their gifts, members of the community are better able to cope with situations they face on a daily basis. The strategic plan translates, through the Case for Support, into ways that Donors are making their community better by way of their gifts.

Always the Case for Support is expressed not in terms of what our organization does, but in terms of what the donors can accomplish through our work when they give to our organization. It is the donor’s perspective, needs, wants and values that are uppermost in our minds, not the needs of the organization.

One of the aspects of strategic planning that we will want to include in our Strategic Plan that powerfully affects our fundraising capability, is our commitment to investing in our fundraising process and in the acquisition and continual enhancement of fundraising infrastructure.

The purpose of this commitment is to ensure our ability to raise the money we must have in order to provide high quality service to members of our community. We acknowledge that without such a commitment, and without such increasingly enhanced fundraising capability, we will be unable to serve the community and thus fulfill our responsibility as a public trust residing in our state.

Therefore, we will represent our continuing needs for enhanced fundraising and fundraising infrastructure in both our Strategic Plan and our future budget projections, so that we have firmly before us the cost of ensuring our organization’s financial stability and missional capability.

We'll deal with the Case for Support aspect of our Fund Development Plan next.

Starting a Charity? Fund Development Planning

We have been exploring the area of the nonprofit board's work and responsibilities, its interactions and performance evaluation. This has been good preparation for a new nonprofit organization's first steps in fundraising, since the foundation for asking the public for financial support starts at the top of the leadership pyramid of the new charity. Let's turn now from governance and get right to the heart of the fundraising process, which is the creation og a fund development plan.

We're going to be talking about a Fund Development Plan that the founder, board and executive director can use as a guide to having a more intentional, reasoned and systematic approach to raising voluntary contributions from the public in support of our new charity’s mission.

It may well have been hoped by the organization’s leadership that this plan would consist of a simple timetable by which a consultant or staff would be approaching specifically named donors for contributions. And, in fact, the Fund Development Plan will include these kinds of specifics when we're done. But there is a great deal more involved in the planning process than that.

The very first steps that must be taken by the new charity start-up, if it expects to raise voluntarily contributed funds on a consistent basis for the fulfillment of its mission, are the following:

1. Strategic Plan -- The organization must develop for itself a written strategic plan that sets forth clearly and completely the direction that our new charity is going to move in the next 5 to 7 years. This plan will contain not only a description of the organization’s direction, but a series of specific strategies by which it will accomplish the social aims it sets out to achieve, accompanied in each instance by the series of tactics that are intended to be employed as staff and volunteers pursue each strategy.

2. Selection of Project -- Only when that basic groundwork is complete can the organization move on to the next step, which is to select one or more projects around which to mount specific fundraising efforts. The reasoning behind this and the procedure to follow is further discussed in the section below on “Projects”

3. Case for Support -- When the strategic plan has been completed, the next step will be to develop a written document called a "case for support," which comprises the reasons why anyone should or would give money to our organization. This is discussed more completely in section we will see later on the “Case for Support.”

4. Pool of Prospects -- Upon completion of the selection of project(s), the next step will be to look at developing a pool of prospective donors, delineated by type, such as individuals, foundations, corporate grants, corporate sponsorships and government grants or contracts. This strategy is also further explained in its own section.

5. Enlistment of Volunteers for Cultivation and Solicitation -- At the point where a substantial pool of prospects has been identified, the next step will be to create a plan, policy and procedures whereby volunteers, especially the Board of Directors, will become involved and invested in the fundraising process.

Volunteers are vitally and strategically necessary to the fundraising effort for three compelling reasons:
1. Existing staff, particularly in a brand new nonprofit organization, cannot carry the fundraising load alone, and it is unreasonable and unproductive to expect that they should do this. THere are too many other issues and concerns that need attention on a daily basis.

2. Volunteers have networks of relationships with friends, colleagues and associates throughout the community. These have been developed and cultivated over many years. These relationships are key to identifying, cultivating and soliciting prospective donors whose contributions are so urgently needed. If the organization is deprived of the ability to use these relationships, there is, quite literally, no hope of mounting a successful fundraising effort that will supply enough revenue to effectively carry out the organization’s mission long term.

3. Volunteers are much more effective than staff in cultivating and soliciting the people they know. With a little training and coaching, most if not all the Board of Directors can be effectively brought into the fundraising effort.

6. Cultivation and Solicitation -- It is at this point that cultivation and solicitation of specific donor prospects can be discussed and decided. This is the step that will match specific strategies of approach with each donor prospect and give each strategy a person who is responsible and a timeline or schedule on which the approach will be made. This is further discussed under the section on “Cultivation and Solicitation.”

7. Thanks and Recognition -- Finally, but no less important than the strategic plan and the case for support, considerable thought must be given to deciding and codifying a system for giving donors appropriate and abundant thanks and recognition.

Particularly as we are engaging the Baby Boomers and Gen X cohorts, this step can be delayed or omitted only at great peril to the organization’s fundraising efforts. The reason for this is that research demonstrates that, even more than their “Ike Generation” forbears, the Baby Boomer and Gen X cohorts desire and need thanks and recognition for their philanthropy as a prelude to their next gift. This work is further delineated in the section below on “Giving Thanks and Recognition.”

Having prefaced our plan with this summary of its content, let us move on, in the next post, to setting forth the contents of each step of the plan.

Starting a Charity? Board Performance Evaluation, cont'd

So now we come to this aspect of our thread on board performance: What are appropriate elements of measurement for a board's work? What kinds of ingredients should we put into a job description and performance standards that can helpfully and effectively be used in board performance evaluation?

First, I would say that any board performance measurement vehicle needs to comprise two distinct parts: The job description and standards of performance for the board as a group; then also the standards of performance for each member of the board.

For the performance evaluation of the board as a group, we might delineate the following areas of performance to be measures:
1. Strategic planning on a regular basis to reaffirm the social aims desired by the board for the institution and to update and provide mid-course corrections for the strategies that the board believes will bring about those social aims. This is also a good time to make sure that the policies the board has set are really achieving the results they thought would happen.

2. Management of the executive director – a regular procedure should be developed for the performance evaluation of the executive.

3. Program overview -- the board should be kept abreast of happenings locally and nationally, and within the organization to make sure that the strategies delineated in the strategic plan are actually working the way the board hoped they would. Otherwise mid-course corrections should be programmed into the board’s strategic planning review process. Staff should be providing regular reports on the agency’s programs and on local and national trends in the field of service.

4. Financial overview – the board should be reviewing the financial condition of the organization at least quarterly to ensure proper financial management. Staff should be providing regular reports to the board.

With regard to performance evaluation of individual board members, I think there would be at least the following specific areas:
1. How much money has the board member given personally or been able to raise from others?

2. Attendance at board and committee meetings should be well above 50%.

3. The extent to which the board member has advocated for and publicly supported the organization throughout the geographic area in which the charity is situated. board members should be attending gatherings of other organizations in order to promote their nonprofit in the most appropriate ways.

4. Each board member attending board training sessions. These sessions should be a regular part of board meetings and should be programmed by the executive working with the board president. Topics might range from the latest strategic planning techniques to program developments, to fundraising techniques and strategies, to government and policy concerns in the field of service. Training sessions should be short but packed with information the board members need to know to do their work effectively.

Starting a Charity? Board Performance Evaluation, cont'd

At the end of last week, we were discussing the question of why board members would resist the use of performance standards and performance evaluation. We brought up the subject of Eric Berne’s mid-1960s book “The Games People Play,” and were suggesting the one of the reasons board members of nonprofits can and do play games is that through those types of interpersonal transactions they can and do derive personal psychological aggrandizement, or achieve advantages over other members through a series of “adult-to-child” or “child-to-adult” transactions during the process of the board’s conduct of its business. But what, exactly, does such a transaction look like?

You may remember that one of the “games” Berne identified was called “Now I’ve got you!” (Actually, Berne called this game “Now I’ve Got You, You Son Of a Bitch!” and gave it the acronym NIGYYSOB. But we’ll shorten to NIGY, for now.) In this game the object is to embarrass the other person by catching him/her out. The person playing the game sets up the other person for a fall or an indiscretion, then springs the trap and catches the other person as he/she stumbles.

In the board room, Harry might set up the situation with Phyllis by suggesting that “the auction this year really needs to have travel packages.” And Phyllis might reply, “But those are so mundane, I don’t like them and many of my friends don’t like them. Let’s just skip that for this time.” To which Harry replies, “I’ll bet you didn’t know that a recent survey by the American Travel Agents Group found that 85% of people who go to charity auctions think travel packages are the best items offered.” So this makes Phyllis and her friends look either stupid or uninformed. Harry’s inner parent is satisfied that he has “one-upped” Phyllis, and Phyllis’ inner child responds with frustration and rage.

The psycho-dynamics are never directly addressed, never said out lout, and may not develop to a conscious level. But they are operating all the same. The gain Harry has experienced comes at the expense of Phyllis and thus is, so to say, “ill gotten.” That is to say, the gain for one person happens at the expense of another person. For more on this, I recommend you get Berne’s book.

The significance of this for setting standards of board and individual performance in preparation for regular (annual) performance evaluation is this: If the board members are playing transactional games with one another, they are not going to be sanguine about the presence of objective standards by which their conduct and their contribution to the organization’s governance and mission might be judged. They are going to want to continue to get away with their various games, instead.

So, for example, if they’re involved in micro-management, and thus putting aside and procrastinating on their strategic planning responsibilities, they are going to want to continue their micro-management games because this is where they’re getting their inner personal fulfillment – in the illicitly gotten personal gains of game playing. They are not going to want to be held accountable as “adult-to-adult” for having done a good job in strategic planning, because they haven’t found out how to play their games in that kind of arena, so it will seem foreign to them.

Performance standards, and the application of those standards during performance evaluation, will have the effect of breaking through the games board members play, and getting to the heart of the real reason these board members have been assembled: nonprofit governance.