Starting a Charity? 10-Year Crisis Starts in the Board Room

I once knew an executive director and founder of a nonprofit who was a voting member of the board, made up the agenda, brought it to the board meeting, ran the board meeting (even when the chairman was there) and wrote up the minutes a few days later and mailed them out. Nothing was going to get by this lady, and she would brook no interference with viewpoints other than the perspective she brought to the boardroom table.

But the board members were also complicit in this behavior. Everyone on the board was a personal and social friend of the founder/executive. So no one was really inclined to do much that would mar the surface of that continuing friendship.

More than that, there was an implicit trade-off in the relationship. The founder let the board members off the hook, so far as giving to the organization was concerned, in exchange for nobody pressing on any governance issues. And, in fact, all the board members were busy with their own problems and affairs, so none gave the time to finding out what charitable boards should be all about. No one delved into the operations of the organization, beyond approving the annual budget as presented by the founder herself. The board allowed her to do as she pleased, giving bits and pieces of advice here and there along the way, helping out where possible and necessary. But the whole board process consisted of letting the founder run things as she saw fit. They also let the founder carry all the burden and do all the work.

Dysfunctionality doesn't exist in a vacuum. It takes "two to tango," so to speak, and it is necessary for the board of a dysfunctional nonprofit to be complicit in the dysfunctionality.

Now, here, I want to take a bit of a digression to say that over the years I've seen many small nonprofits who aren't really dysfunctional to that degree, go about the process of recruiting and installing board members in such a way as to subvert the real power that good governance can bring to a nonprofit. These are the nonprofits whose executives use a process of recruitment that I would call "If it moves, put it on the board."

For example, if someone gives a $500 check a couple of times, "put her on the board." If someone volunteers frequently, or turns out to be a major help with the annual fundraising event, "put him on the board." If someone makes a suggestion that turns out well for either fundraising or program, "put her on the board." If the founder/executive is looking around the community for donors with capacity, and she finds Mr. and Mrs. Successful, then "let's get them on the board, maybe they'll give to us." If she can fog a mirror, "put her on the board."

That's the way to develop a board that
a. has no idea of its function;
b. knows nothing about governance, and
c. has a very good chance of dissolving into fractious disputes over time that detract from any true governance that might have been possible, unless the founder/executive keeps a tight hand on running the show.

So by the very nature of this type of board member recruitment process, the executive sets up the board for failure at is primary task. The trick is that financial failure may not come for 10 years, and may only begin to happen during the 6th or 7th year. So the board and the founder/executive live under the illusion that all is well for quite some time.

More on Monday.

Starting a Charity? Seven Steps to Dysfunctionality

What's going on here is that our founder, now called the Executive Director or CEO. (he/she is actually in charge of something now, and that feels good) is going to go right for the jugular of the perceived problem or lack in the social order and begin work with the target population. That's where the payoff is going to be: feeling all that warmth and goodness when we've served the hungry their meal, educated the mentally disabled children, trained the dogs, taught the kids to read, or whatever it is that we're doing.

I've heard this from so many: "This is what I'm really good at; this is what I enjoy; all the rest of it [such as: fundraising, governance, marketing, planning] is stuff I don't like to do; let's get on with giving the service. That's where the rubber meets the road."

But this is just the beginning of a path that develops and has the potential of taking the founder ever further from public accountability. Here are the seven steps I see on that path to fundraising dysfunctionality:

1. In the start-up phase these individuals who are founders of nonprofits are in a hurry to start service, and are very much not in a hurry to find or demonstrate significant public support for what they are doing.

2. They gather a group of like-minded (or even just supportive) people around them as a board of directors. No job description; no governance direction; no performance standards, no public accountability. We only need to satisfy the IRS regulations. Not important, right?

3. Then the next step is to be "all things to all people" – a broader and deeper reach into the problem. This results because "nobody can do it as good as I can" and the new founder is at pains to make sure all volunteers and the few staff that are needed to help with the work are fully indoctrinated with the "founder is right" mentality.

4. Next comes the turf-building "We're the best; people should support us" mentality. This is helped along by the fact that the founder sits alone late at night or early in the morning writing grant proposals to foundations – not out in the hustings meeting and greeting and talking with lots of donors and prospects. So the viewpoint can become a bit jaded.

5. And as we descend further into dysfunctionality, we see that a plethora of daily tasks cannot be delegated because "nobody thinks like I think on this issue." So the executive/founder does more and more, getting busier and busier. This occasions lots of "fires" and minor/major crises that need to be put out and resolved.

6. This leads to a perfectly valid excuse, "I don't have the time" when it comes to contacting and personally cultivating donors and prospects. Fundraising is limited to what the founder can handle: events and grants; maybe a mailing once a year to friends. But doing point-of-entry events for multiple prospects, marshalling volunteers in support of a serious fundraising program, and personally cultivating prospects is now almost completely out of the question.

7. And as we slide even further, "I don't need a team on this; I know what I'm doing. And if we must have a team, then let it be a board I can control. I'll nominate my friends; but I definitely don't want to have someone 'governing' me." This is one of the strongest signals of dysfunctionality in the organization. When the founder/executive gets to the point where it is of critical importance that the board NOT bring good governance principles to bear, then we really have another dysfunctional nonprofit on our hands.

So, speaking of governance, let's move from the "doing good" arena into the Board room and see what's happening there. Here's another area where a different strategy in the start-up phase could make a big difference in keeping a nonprofit from becoming dysfunctional in their fundraising.

See you tomorrow!

Starting a Charity? Here's an Alternative

At this point, let's take a wider view, and we can see why so many of the foundations are carrying on a dialogue (have you followed this in "Foundation News and Commentary" magazine?) about cooperation, consolidation and coordination of charitable efforts within discreet fields of charitable interests.

Why is it that we have "248" (whatever the number is) human services groups in a city of less than a million people? Why is it that arts institutions duplicate services and vie for the limited money that is available to them? How can foundations, or any donor for that matter, make grants/gifts that use resources wisely and efficiently as well as effectively? In short, how can we rid ourselves of all these little "mom and pop" charities that are sprouting up all over the place demanding financial resources that are already scarce?

I remember that (back in the 1980s) it used to take a couple of years and you had to jump through a hundred hoops before you could get a 501-c-3 status letter from the IRS. Now they give 'em out like candy and figure that if you mis-behave, they'll get you sooner or later, and beyond that taxable interest they really don't mind what happens out there in charityland. So now anybody can be a nonprofit organization.

But what's the alternative? Well, how about changing the way we proceed to the initial concept in the first place, and having those individual founders refrain from the temptation to set up another nonprofit organization just because they have an idea for service? Why not set in motion a series of steps that help such nonprofit founders stop and think seriously about the possibility that seconding themselves to some already-established charity might better serve their interests?

--Why not, for example, have them defend, in some sort of public forum, their plan of service, their plan of fundraising, their tests of the marketplace, the commitment of their initial boards of directors?

--Why not require an initial capitalization that would take the charity through the first three years of service?

--Why not require a start-up to have a minimum amount of fundraising infrastructure in place and, again, a public demonstration that they have the necessary pool of donors/prospects, who not only agree with them, but will financially support them in the future?

There's a concept for a charity start-up that might work a little better, and would avoid fundraising spinout and dysfunctionality due to founder-itis. A little public oversight might, a bit of regulation and a lot of accountability would go a long way to help this over-saturation of the economy with nonprofits.

But to ask, or even demand, this more reflective and collaborative approach of the literally thousands of founders of new nonprofits would, most likely, violate three primary factors:
a. it would violate the individual founder's belief that their perception, their plan, their way of doing things is the right way (This is the "I have a better mouse facilitation method than anybody else" routine);

b. it would in many instances publicly demonstrate the individual founder's inability to deal with, or determination to cut through and cut out, all the politics and problems found in existing charitable organizations when it comes to correcting their problems and making them more effective and efficient servants of the public interest (This is the "I don't have the time, skills or inclination to deal with these peoples' problems in existing charities" view);

c. and it would stymie the ability of the individual to get more immediate personal satisfaction in meeting a problem head-on with action today rather than having to deal with the much slower process of researching and thinking things through carefully and then perhaps deciding that the best approach might be to second oneself to others and to process (This is the "I want my jollies now, thank you very much, and don't get in the way" stance).

But let's move on to the next phase – getting to work as a newly minted nonprofit. What's going on there?

Starting a Charity? "On This Rock, I will Build..."

What often turns up as "Founder-itis" later in a nonprofit's journey starts with the initial concept: "I can serve this need, I ought to serve this need, so therefore I will serve this need." Certainly a noble and self-giving sentiment; the kind of sentiment wea ll need more of in this world.

Why is this wrong? Isn't that the way all great projects for assisting and improving the human condition start? Isn't that the kind of personal initiative that allows "better mousetraps" to be invented?

It's not that the sentiment is "wrong," but that it is centered on the self. It is a way of discovering a method of controlling significant parts of one's universe. It does bring forth good works on behalf of humanity, but it also gives rise eventually to a kid of personal self-perpetuation, and can even have the effect of shutting out others from participation. This is when we see "Founder-itis" happening in the nonprofit organization. So, if we want to prevent that from happening somewhere down the road, we need to find a better basis on which to found a nonprofit organization.

Let's step back a bit. The reason a public charity in the U.S. works (back to Lawrence Lindsey's quote a few posts ago) is because a whole bunch of people come together to meet a community need. They all work on it; they volunteer for it; they give to it, they sustain it, they manage and govern it. It's a community effort; a team effort. People coming together, particularly in times of crisis, to meet a need; the community rallying around those of its members in need and helping ease pain or hardship or strife. That's the essence of the public charity: people coming together, forming a multi-faceted team, pooling resources of time, talent, skill and money.

What happens in a world where every Tom, Dick or Margaret is free to start up a "public charity" is that the founding person's individual idea (and ideology) forms the core of the new nonprofit. It isn't a community response at all; it's the response of one single individual, or one small group of like-minded souls who think they see a need, feel compelled to meet that need, and then want to try to get others involved in doing what the founder wants done the way the founder says it should be done. In my view, that's not a very "public" charity. It may turn out to be so legally, but it is not so in terms of functionality. Because what so often results is dysfunctionality. And that's what we euphemistically refer to as "Founder-itis."

So what we have here is a two-pronged problem:
First, what is ideally a community response to a crisis or need is now manifested as a single person's idea of what should be taking place in the community, regardless of what the wider community perceives or feels.

That's a "problem," because it results in the formation of an organization that purports to be a "public trust" that is in fact based solely on putting the individual's values, perception of need and drive for action ahead of actual publicly held values, publicly perceived need and publicly supported action. The true public charity is an efficient way to deliver services. The individual's charity is a relatively inefficient way to deliver services because it ends up in so much duplication of time, effort and use of financial resources.

Second, this results in a plethora of little charitable fiefdoms across the fabric of society, each one out there trying to arrest our attention and grab our cash to do what they want to do with it. So it becomes a kind of turf battle, with many smaller charities being set up in a community, each of which may be serving similar and overlapping populations. Actually, this is a sort of "bum's paradise," if you're in the temporary shelter business. It means you can go to multiple charities and receive multiple benefits and instances of personal assistance.

We will get into this further tomorrow.

Starting a Charity? Here's a Case Study, Part 2

So let's examine this case study a little more closely and see if we can identify some elements of founder-itis in nonprofits that might be avoidable with patience, thought and planning.

Before we do this, however, it must be said that this case is not that unusual. I can think of four other organizations with whom I have worked on similar problems where the essential ingredients were very nearly the same.

Here are some of the key ingredients found in this case study:
1. The charity is a one-person show: governed, managed, staffed and programmed by one person. Certainly there were volunteers, but they were recruited and trained by the founder to do her method of teaching her way. There were two staff persons who, again, were under the total control of the founder.

2. The Board of Directors was formed of persons loyal to and personal friends of the founder; they had little motivation other than the relationship, no training, experience or skills for nonprofit governance; they were willing to let the founder do whatever she needed to do. The Board was set up to satisfy the IRS rules and regulations that call for public charities to have a board of directors in order to be granted the 501-(c)-(3) designation.

3. Fundraising was limited to activities the founder approved and was able to carry out on her own. Her daily schedule was a whirl of crises and putting out fires. She had little or no time to spend on planning or careful, methodical execution. There were no resources that could be appropriated to enhance fundraising infrastructure. Grants, special events and one or two dear loyal friends plus the founder's own bank account were the key sources of revenue.

4. The founder's personal and management style was scattered and frenetic, one reminiscent of autism accompanied by attention deficit disorder; this became the style of doing business both at the staff level on a day-to-day basis and in the work of the board of directors. Consequently, there was little planning, few instances of deliberative thought, no consistent follow up on matters of business, and an inability to set even a meeting agenda without constant interruption.

5. The founder's word, preferences, style and scope of options became those of the organization, and everyone associated with that charity publicly avowed that essential posture.

So this was the set-up in our case study of founder-itis: a dysfunctional organization badly needing to have a productive fundraising effort, but unable to get a a process going.

Tomorrow we'll deal with some of these elements in more detail, looking for ways to advise new start-up clients and keep them from falling prey down the road to founder-itis

Starting a Charity? Here's a Case Study

I am often approached by would-be start-up nonprofits. People come looking for whatever advice they need. Sometimes people seek fundraising advice, sometimes they come to find out what governance alternatives are available to them.

Other times they want to know how to set up the new charity with the IRS. But rarely, if ever, does someone come and say "I'm thinking about doing this kind of work. What are some of the blocks and barriers going to be, and do I stand a chance of surviving long term?"

Mostly people seem to want self-affirmation more than anything else; they want to know that their ideas about starting a new charity are, generally, in the right direction. They are rarely prepared to accept criticism or negative comments; they don't seem to like a cautious or conservative approach that asks too many hard questions, and they seem to have little tolerance for much analysis of their plans and ideas, particularly if it cuts across their grain of an idea about how things should be.

One case I worked with is typical enough that I'll lift it up as a case study. The charity's request for assistance in fundraising involved a long-time school teacher who had developed over the years a marvelously effective method of teaching youngsters to read. This woman has some of the highest scores available today in teaching kids to read, write and think. The results this nonprofit gets each year are unbeatable, and they do improve over time. This gives the organization a great case for support.

I was enlisted by the founder's board to assist them in fundraising, with the first step in the process being a development audit to determine past and current fundraising practices and results. In the process of the development audit, it quickly became apparent that the organization had a serious case of founder-itis.

The founder was the executive director, as well as an officer and voting member of the board. The board members were all long-time personal friends of the founder, pretty much ready to approve whatever she wanted to do. The organization's management pattern tended to follow the founder's personal pattern of disjointed, unfocused thinking and planning. No idea was acceptable unless it fit the founder's personal preferences.

Fundraising had come virtually to a halt after the first six years of operation. The board was allowed not to give; personal friends couldn't be solicited for major gifts, simply because of the "embarrassment" that would accrue to the personal relationship.

As I explored further into the organization's history, it was revealed that the founder had early on became embroiled in local school politics around the issue of the knowledge gap between white and African American students, advocating that the school system should be responsible for bringing minority students back into the literate mainstream.

At some point the frustration of dealing with the political and bureaucratic process became too much, and this woman made a precipitous decision to go out and start a literacy charity on her own, letting the schools stew in their own juices, but moving ahead to solve the problem on her own, at least for a few youngsters. Direct service to a few was preferred over an institutional solution.

Whether because of impatience, lack of political skill, lack of supporters or whatever, this charity was created to get action, now. And the resulting situation gives us a good case study in which to see the ingredients that eventually can lead to Founder-itis. More on this tomorrow.

Starting a Charity? Why not a Business instead?

Today we start a series on nonprofit startups. There are some issues here that need to be addressed, the first of which is found in an email I received from M. McElroy of Brighton, MI, the other day that speaks to this examination of start-up charities that get into fundraising problems early in the game. She related the following story, in which the names have been changed or deleted to protect everybody concerned:

“When I first started my career [in another state], I worked as a clinician with adolescent boys and girls at a place [that] has been in business for over 35 years.... It grew from a halfway house into a major nonprofit which focused on drug and alcohol rehabilitation. The innovation of programs were fantastic ....

“The reason I left... was because the executive director/founder had a severe case of founder-itis. The board of directors were his friends, his entire family worked [there] and there was no oversight. Although his legacy will live on, he almost ran a great organization into the ground... Discussing founder-itis is very key because it can save nonprofits from possible destruction. [I witnessed] a tragic and severe example of founder-itis.”

In my practice, I see this kind of thing on a regular basis. It must be said that some of these nonprofits that develop founder-itis do manage to change, particularly when their boards seek help from a fundraising consultant. But it usually takes some kind of outside influence, working with the board and the founder/executive, to resolve and “fix” the strategic components of the situation that were ineptly put in place early on.

On quite a few occasions, when people contact me about providing them assistance with start-up charities, during the course of the conversation I have asked them, "Why don't you just start up a business in this area and come at the problem from an entrepreneurial stance?"

Generally, the response is shock and disbelief that a fundraising consultant would ask that question. Shock, because they desperately want a charity, not a business; disbelief because they come to me for help in fundraising and here I'm implying by my question that they should be in a business where they sell a product or service rather than give it free to those who need it. Most of the people who come to see me cannot understand why such a question is relevant. Their immediate answer is: "We want to set this up as a nonprofit so that people can give to us and get a tax deduction for their gift. Why in the world would we ever want to go into business with this idea?"

Well, there's a perfectly logical reason why you might consider doing that. More on this tomorrow. We're getting down into the heart of the issue here.

Does a Bad Economy Hurt Fundraising? Part 4 of 4

A recent client of mine, R. Hatter, sent me an email asking what the appropriate response would be to a key donor who had expressed irritation at the increased number of requests for contributions and the steady flow of information from that charity to his mailbox in recent months. "What can I tell him when he complains that we send him too many appeals and too much information?"

My response was this: On the guy who says "too much" -- I suspect the reason he's saying this is because his commitment to your charity is faltering a bit. He sounds like he's out of touch, hopefully only temporarily. What I would suggest is that you get him directly back in touch with "the kids." Let him touch and feel the urgency that these young lives contain, let him get back in touch with the urgent realities of their situation. And the reality is that the reason we ask more often, ask more people, and ask for more money is that the costs of keeping these kids moving towards being fully participating citizens (in a society that otherwise would just dump 'em in the garbage) is getting more expensive each year.

Let him see a "life on the mend," so to speak. Let him see that while "God don't make no junk" it's really generous and self-giving human beings who provide sustenance for the lives of these abused and neglected kids. Let him see that little girl's face, let him read the poem she wrote or see the video or view the new invention that was born in that young child's mind as a result of his past gifts. He's out of touch. That's all. And you can fix that.

My further suggestion is that you really don't need to answer his more "obvious" objection, having to do with mailings, and asking too much. That's not where the issue is. And arguing the "facts of the case," such as the number of mailings, etc., in the terms in which he has couched the discussion, won't really get anywhere because he will just continually come back with the same answer. His question sets it up that way. The increased efforts of your staff in fundraising can only encounter objections among those who haven't seen, felt, touched the power of these young lives. Because, for any of the rest of us, there is only one answer -- "ask more, get more, use more, save more kids."

Another thing to consider is whether all those mailings he's receiving and objecting to have been written as creatively as possible; whether the way you state your case for support is truly compelling and motivating, and whether you have the ability to capture peoples' imagination in your fundraising letters. Maybe his eyes have glazed over once too often when receiving your letters, and maybe he's really telling you he doesn't like what you're writing.

What would your response have been to this question, dear reader? Let us hear from you! Get in on the dialogue.

Does a Bad Economy Hurt Fundraising? Part 3 of 4

We've been discussing this problem with the economy and charitable giving, and I think we need to take a look at the donor's or prospect's view of this situation.

It seems to me that in a down economy it's pretty easy to get into a mode (or maybe it's just a mood) of "scarcity," as opposed to a mood of "plenty." Resources seem scarce, rather than plentiful. Whether this is reality or in the mind, mostly depends on the particular donor.

On the home front, for example, there's all the defensive budgeting we have to do to meet our decreased income level – tightening the belt and depriving ourselves of those expenditures we'd really like to make to achieve our various materialistic goals or obtain the kind of gadgets, environment or accoutrements we need to bolster our self image.

And then there are the cuts we experience in our places of work in both budget and programs, the re-prioritizing of objectives and the re-directing of scarce resources to the "things that count."

Together, on the home front and in the workplace, this begins to look like a wonderfully perfect excuse to also deal with those nonprofits that bug us for contributions but don't give us anything to be excited about. Now we can just tell them we simply don't have the cash to help them. And we can feel good inside about doing that because, after all, isn't that really the case? I can't afford to give to charity because I have to eat, right?

For example, for several years now, I've been giving to what in other times has been a favorite charity, my alma mater, in central Pennsylvania. Great place. They dealt with me, didn't they? Took a rough, provincial kid and drummed an education into his brain? This MUST be a great place. And they continue to take hundreds of central PA's rural and small-town, provincial, unfocused kids and make thinking, discerning, creative adults out of them. With what more laudable program could you ply a vision for our world's betterment?

But, truth to tell, in tight financial times, my giving there goes down. Why? Well, frankly, it's an excuse to save a little money for something else. Either that new computer I want, or maybe to get involved with a new charity that has captured my imagination. But what is really happening is that when I read the letters, when I read the bulletin, when I get on the website to see what's happening, and even though there's a whale of a lot happening there in terms of the type and quality of education you can get at this institution, the fact is that the way they describe it in the letters that ask for money make my eyes glaze over; it just wipes away all motivation to keep giving there.

So, does the economy affect fundraising? I think it does: it allows donors, and some of the people we think could be our best prospects, the perfect excuse to use the economy as a reason to give elsewhere or to use resources for things they want when we cannot come up with anything that sparks their continued interest, meets their needs, matches their values. Sure the economy affects fundraising….. or does it!? We take on another example tomorrow.

Does a Bad Economy Hurt Fundraising? Part 2 of 4

I well remember Robert F. Sharpe, Sr., who said to us back in about 1984, as we were in training to become major and planned gift officers in our respective nonprofits, that "giving follows compelling ideas."

Just as in business and industry the money tends to follow the leading edge of ideas that make what we euphemistically refer to as "better mousetraps." If Google comes up with a better search engine, the money to develop that comes their way, then followed by hugely increasing use of that engine when developed, and then followed by the ad dollars as advertisers finally catch on. Better ideas lead to better products, lead to booming economy. Right?

Can we apply that to charities? I think we can. But from what I've seen, the boards and staffs of nonprofit organizations don't seem to share that point of view. For example, I've started collecting fundraising letters again this year. From the ones I've received so far, it's pretty obvious there are not too many compelling ideas for fundraising letters out there in the southeast Michigan philanthropic marketplace.

-- Over here we have another gala – "please give to our cause and come to our gala."
-- Over there we have another human service agency that writes a letter two pages long giving a long diatribe on all the aspects of their many-faceted program.
-- Then we have the dogs and cats that need homes, and the "gee-whiz" statistics that show what the organization is doing. Makes my eyes glaze over after the first paragraph!
-- Then we have the hospital campaign – they're short and sweet: never mind what we're doing with your money, just pay up! Your pledge is past due.

The case for support for most of these can be reduced to: "We do this, we do that, we do the other thing." or "We need, please give."

During last year's holiday season I racked up 57 fundraising letters that I got in the mail. I can't complain about this. Comparatively, not all that many have my name and address, in light of the fact that there are over 4000 agencies in southeastern Michigan that have the 501-c-3 IRS designation! But of the 57 letters, only 3 of them had any real appeal at all, to my way of thinking. The rest just didn't have the ideas, the program, or the way of describing their efforts or success that appealed to me as a donor.

So I gave to those three. I could have given to all 57, and would have, IF any of the other 54 had shown a spark of creativity about them, or presented their case for support in some way that was involving, compelling, motivating.

So my question on this is, does an economy in the tank mean, then, that all the creativity and all the good ideas suddenly vanish from the minds of those in charge of our nonprofits? Is the economy to blame for the fact that dull fundraising letters keep being produced? Does the economy dictate whether or not a given nonprofit thinks up a compelling, tantalizing or creative twist to its case for support?

I don't think so, because this stuff happens – the dull fundraising letters, the lackluster descriptions of program, the failure to talk about exciting results people are having with their program – these all happen in GOOD economic times as well as in bad. Somehow I don't think creativity and compelling cases for support are tied that much to the economy. I'll bet an agency head could come up with a creative and compelling way to capture a donor's heart in any kind of economic circumstance. What do you think, dear reader? Have you been reading the fundraising letters you get in the mail? Do your eyes glaze over after the first paragraph?

Bob Sharpe Sr. also said that there was never such a time of economic difficulty that someone couldn't raise a dollar, and there was never such a time of economic well-being and abundance that some nonprofit or other wasn't required to close its doors because of lack of contributions. And I'd like to add to that the comment that the most likely reason any nonprofit has to close its doors would be that it failed to create a compelling, motivating case for support that attracted resources to its cause.

We'll explore the donor's response to the economy tomorrow.

Does a Bad Economy Hurt Fundraising? Part 1 of 4

We have a new topic today. It concerns the flagging economy. First in Michigan, with the auto makers, and now across the country, we have an economy sorely in need of repair, thanks to selfish and overreaching business interests getting out of control and being able to influence Congress to the point where we have little if any in the way of regulatory restraints to keep them in bounds.

In the past year, I have received many inquiries from clients and others about whether the slow economy, particularly slow here in Michigan, hurts fundraising. The most recent of these inquiries came in November from a prominent reporter for a business publication who was doing an article on philanthropy matters locally.

The proposition was this: "There are so many capital campaigns going on right now, but will a slow economy hurt these efforts? Shouldn't these nonprofits wait until we have improved economic circumstances? Are there more campaigns going on than there is money to fund them?"

My response to this was that philanthropy is not like a pizza. A pizza is a finite, unexpandable entity. You slice it up. When you eat all the slices, the pie is gone. If there are 8 pieces of pizza and Joe has three, Bill and Mary can't each have 3 pieces. Three people can't divide an 8-piece pizza evenly.

That's great for pizza, but that's not what philanthropy is. Many people I've talked to over the years, especially a lot of Board members of nonprofits, seem to assume that if there are "too many charities in town" then there just can't be enough money available to be donated by the local populace for all of them to survive and thrive.

But that's just not the case. Philanthropy is like an amoeba. An amoeba reaches out to where the food is, forms itself around the food, then ingests it. Philanthropy -- the love of humankind -- is similar: it grows out toward the "food" of good ideas; the more good, compelling ideas to give that there are out there in the marketplace, the more the "amoeba" of philanthropy thrives. The more compelling reasons there are to give, the more great and wonderful programs that really help people and achieve the ideals we all generally share about the advancement of humankind, the more people are willing to give to those ideas.

Conversely, when there is a paucity of food, the amoeba shrinks up and, eventually, dies. Similarly with philanthropy, to the degree there is a shortage of compelling and motivating ideas happening in an area's nonprofits, when all is more or less ho-hum and same-ole-same-ole, that is the degree to which more and more people find excuses not to give. They become disinterested. Or they flock to the nonprofit that has the most compelling case for support and the one that gets the best results.

So philanthropy is like an amoeba. We'll continue this tomorrow.

How Nonprofit Boards Can Make Good Decisions -- Part 12 of 12

Should the CEO have his head examined? The size of his headache resulting from the discussion so far might give a clue that at least his method might need to be adjusted.

What will the CEO do next time there's something he wants from the Board? Bury it in the budget? Make a formal proposal? Take a board member to lunch? What are the learnings from this situation?

Will the CEO avail himself of the learnings? Will he sit down and write down what he has learned? Probably not. He doesn't see himself as a student, here, in the learning process. He sees himself as put upon, as underdog, continually having to wrestle the slightest advancement for the organization out of the Board's discussion.

What would you do different in this situation, dear reader?

You know what I would do? I would make or find a way to do the deliberative thinking necessary to make a good decision, but use the board's brainstorming and story telling capability to help board members have input to and develop ownership of the decision.

First, I'd take my idea to each and every Board member individually, long in advance of the board meeting, and in advance of making up the budget that would include the proposed infrastructure expense. I would demonstrate the situation now and what it is producing; I would show the need our organization has to raise more money; I would clearly state what we could expect in the way of results from an infrastructure investment.

Then I would demonstrate the financial facts of the case, the situation as we now have it and how the financial picture could change significantly for the positive. Then I would show each board member the vision of what could happen in our organization with new revenue and why this is important to do. And then I would demonstrate how that vision could become if we had that donor software and somebody to enter and massage the data.

In short, I'd build a case for support with each of those Board members, tailor-made to each board member's personality and understanding. I would make sure any questions they have are answered first. I'd ask each one whether they were ready to support the proposal unanimously, and if any said "no" I would not bring it to the Board until all objections were fully satisfied. I would wait until I knew I had board approval before even bringing it to a discussion.

At the board meeting, I would present the issue with a one-page summary of what I had told each board member privately, detailing the need, the vision and the solution. I would bring this as a separate issue before the budget discussion, so that the issue could be addressed on its own as an infrastructure issue, not as a budget issue. By the time we got to the board meeting every board member would understand the relationship between budget and infrastructure clearly and completely, and would be assenting to the conclusion of my one-page description that the infrastructure was needed and would promise to produce effective results.

But you'll probably say, "John, that's a pipe-dream. It'll never happen. It takes up too much of the CEO's time and too much of each board member's time." Perhaps you're right; perhaps you know whereof you speak. But if you don't take this route to an affirmative headache-free decision by the board, tell me, send me an email, how else would you get a decision that's based on deliberative thought, one that involves the Board members around the issue of infrastructure and engages them where they are? How would you get a decision that will move the organization ahead in a positive direction?

Boards only do two things well: they can brainstorm and they can tell stories. Boards cannot do deliberative thought. There are too many impediments in the group's process to allow deliberative thought and sound reasoning.

Tomorrow we'll see how this works in more detail.

How Nonprofit Boards Can Make Good Decisions -- Part 11 of 12

Picking up from Friday, we can see that everybody around the board table is getting into the act now. Paul made such a noise about the increase in spending for the Development Department's budget that he alienated his colleagues.

Tempus fidgets and Gloria's got to leave, we've spent the hour allotted and still are nowhere close to a decision to approve the next year's budget.

Even laid-back Sam is starting to feel some irritation and begins to say things that don't exactly lend themselves to constructive examination of the issues involved.

Each person has his/her own image of themselves and who they are, which needs constant polishing. Everyone in the group is either consciously or unconsciously working on this and the way they perceive others see them.

Each person is also trying to get something done by way of enhancing their own role and standing in the group. To top it off, there are professional agendas operating, as well as constraints on and (mis-)management of time for each of the board members.

Then there's the politics of the situation: like the matter of the way the CEO "sprung" this on the Board through the budget process. There's also the demand that the budget be approved because of the fact that the fiscal year is about to end. We have at least three components in this discussion, each of which has multiple aspects. It's complex situation. But not unusual at all.

As the discussion proceeds, we have to ask a question: Can any of the board members really see clearly enough through all the "stuff" that's on the table, all the fog generated in peoples' minds by all these factors, to suggest a way of proceeding that will lead to a decision that is wise and fair and effective at moving the organization ahead strategically? Can they, in other words, really settle down and do deliberative thought on this issue of fundraising infrastructure? My experience says that it's impossible. That's why boards do two things well: brainstorm and tell stories.

Paul's in a sweat to make himself heard, raise his point and keep it foremost. He now has a lot at stake and feels he must personally drive home a decision to scrap the database project, even if only because he first saw it as a "hidden agenda" by the CEO.

Gloria's really put off by that, has sided with the CEO, and now must bear the burden of the fact that he buried the bone in the budget even though she would rather have had it done another way. Neither she nor Paul can afford to "back off" for fear of losing "face" in the group.

Sam has really given it a try, he knows this is needed, but he's getting anxious because he sees not only the discussion falling apart, but the board's effectiveness as well. He's worried that, once again, Do-Good Charity might be in for a resignation surprise, and he doesn't want that to happen. He's looking around for some sort of way to interject an alternate plan into the discussion.

Melinda has already moved; she's putting on her coat to leave. She said her piece, her mind is no longer on the discussion at this point, she's in a rush to get outta there! Her boss is waiting. Besides, she's seen these kinds of discussions before and knows this one is going nowhere; she's convinced that it's a waste of time.

Mary doesn't know what to do. She's never comfortable in a politicized situation like this. Her peers never do this kind of thing. Knife in the back, clever manipulation, power plays, she's seen it all, but never in a loud discussion. It's always done behind the scenes in her crowd. So she's at a loss to keep up with this group.

Tom suddenly sees the incredible difference between business execs arguing like this and the members of a charity board doing it. With the business guys there's a lot of money at stake and the guy who loses or wins the argument has a lot at stake. Even if the decision isn't made well and thoroughly, it will be made and the business will either sink or swim – people will either go broke or come out with unbelievable riches. In the charity, he sees, the argument is over a few thousands of dollars and no matter who wins the outcome won't cost anybody anything except some face, a few headaches and an ulcer.

In this situation, how can deliberative thought be done on an issue as complex as the enhancements planned for fundraising infrastructure? In fact, the board members have not really yet gotten any deeper into the infrastructure issue than to dicker about the price tag. They still don't know what infrastructure will do for the organization, what it is composed of, and how it is necessary for the organization to move ahead. So they haven't really come to grips with the issue at all, in terms of being able to understand the complexities and possibilities involved.

We'll finish this thread tomorrow.

How Nonprofit Boards Can Make Good Decisions -- Part 10 of 12

More reactions of board members as they discover the real situation with the budget:

Yesterday we saw that the CEO came to the board meeting with a budget that contained a substantial increase in expenditures for fundraising infrastructure components. We've see what's on Paul's mind, and Melinda's. Now let's climb into the psyches of the other board members.

Mary's problem is that she's in a hurry. Not just today, but every day, any day. She breezed into the meeting about 15 minutes after the meeting started, which was a half hour after the meeting was supposed to begin. And she is ready to leave right after the budget discussion because her boss has an appointment lined up with a new client and she needs to be there. Mary's idea of giving priority to Do-Good's work is to allow about 2 hours for getting to, being in and getting back from any board meeting. Her office is a half hour's drive away from the board meeting location.

Now we're beginning to see just how the psycho-graphics are complicated by the board person's job responsibilities, their internal agenda and personal objectives, and their various levels of ability in managing time and attention. We're beginning to get to the heart of this issue of why boards (as groups larger than 2 or 3 people) can only brainstorm and tell stories, and cannot do deliberative thinking. Could you see it coming? The issue has been set up by the CEO in such a way that it doesn't have a prayer of succeeding. Or if it does, somebody's going to develop an ulcer over it. You've seen this before in board meetings you've attended?

Who else is around the table? Can the CEO look to Mary? Well, that's a matter of some speculation. She didn't notice the increase in the Development Department budget. She doesn't like that area; she concentrates on service delivery and likes to see how her gifts, which are not insubstantial, are being used, as represented in the various service delivery budget categories. She likes to imagine all the people being served, since it gives her a sense of satisfaction and "return on investment."

The fact that Mary didn't notice the budget increase is, of course, embarrassing; so when Paul brings this up, she has to find a way to adjust her own image of herself within the group and get their perceptions back on track. So she's working on that, plus it's doubly irritating that, once again, she's going to have to try to tone down the Development Department's penchant for bothering her wealthy friends for more money. She's preparing her multi-point speech as the discussion proceeds, looking for the right opportunity to jump in, but carefully choosing her words. She's nothing if not a diplomat in these circumstances.

Sam didn't see it coming either. But once the CEO began his explanation he could see that what is being asked for is not only reasonable but will have a long-term payoff that is very much needed by the organization for its future health. Sam is laid back on this one, because he knows the homework has been done. He also considers that he is "one up" on most of the rest of the board because he just committed to a five-year pledge and feels a little smug about it. But he won't play that trump-card in the discussion unless he needs to.

Gloria, too, is in the CEO's corner, because she knows the financial need. She hasn't yet connected with the fact that sooner or later she, too, is going to be asked for a really big multiple-year commitment, because she still feels safe hiding behind the old standby that "accountants don't get paid that much." Besides, Paul really ticks her off, the way he comes on, the way he talks about things. The two of them have knocked heads before. And she lost the last bout with him, so this time she's got it in for this arrogant attorney.

So what's your thought, dear reader? Does the CEO have a prayer of succeeding with this group? Is he going to get his database software and his new-hire? We'll find out on Monday. In the meantime, have a great weekend.

How Nonprofit Boards Can Make Good Decisions -- Part 9 of 12

OK, so we know who some of the players are as we come to the Board table to discuss whether or not to use significant resources this year to purchase donor software and hire a data entry and retrieval person.

How has the CEO, working with the Chair of the Board, set up the decision? It's buried in the budget figures for the Fund Development department. Anyone who has read the proposed budget in advance will have seen that, compared to previous years, there are significant increases in the Development Department's budget.

There is no formal proposal for this change of management direction. It's predicted to be brought up by whoever first sees the budget increase and asks about it. Then the CEO plans to explain what he sees as necessary and why. If no one raises the question, so much the better, and the budget will be passed, and this, then, gives the CEO and staff license to move ahead with the plan. If questions are raised, "we'll deal with them as they arise," said the Executive.

So Paul gets his budget, and immediately sees the increase over last year (the figures are presented side-by-side in a spreadsheet exhibit prepared specifically for the Board's consideration and approval of the budget, and because the auditors have traditionally presented the financial figures this way. (Having annually audited financial statements resulted from Gloria's work with the financial staff.)

Paul is curious to see what this expense will mean, so the first thing he does is calculate the cost of fundraising. And he discovers that the cost of raising $1 has risen from about 21 cents to about 50 cents. And he wants to know why.

Here's the first hint that not only are the psycho-graphic factors working here, but additional factors as well. Pauls' job is business, law, knowing quickly the effect of changes in the balance sheet. He also has some personal objectives he wants to accomplish in Do-Good Charity. He has felt for a long time that charities typically spend "too much" on setting up to raise money. He has had some lunch conversations with Tom, who has complained about "always being dunned for money" and, to some extent, shares that viewpoint. So the discovery of the new Development Department budget figures set off alarm bells and give him a surefire bully pulpit from which to set and accomplish his own agenda.

Melinda, on the other hand, takes the opposite viewpoint. She saw the increase, too, and called the CEO and talked with him about it. She very much supports what he wants to do, because she has the ability to think business, think long term, and she wants Do-Good to be able to double it's operating budget within 5 years, so she knows it has to raise more money. She understands just enough about fundraising to know that multiple-year commitments from individuals is the way to go on this.

We'll explore the reactions/responses of the other board members tomorrow.

How Nonprofit Boards Can Make Good Decisions -- Part 8 of 12

So what's going on around the boardroom table?

Here's Paul: Paul's a lawyer. Corporate: mergers and acquisitions. He knows a business proposition when he sees it, has seen it all in terms of financial investments gone sour or turned for the good. He's hooked on Do-Good because he knows that if you don't pay at least some attention to the poor down-and-outers, you haven't fulfilled your obligation to society. And he wants to be seen as doing that. He's a bit rough around the edges with people when he isn't in a negotiating position. He claims that "being totally honest even if it's brutal" is the way to go. Inside, Paul is a born contrarian; whatever position someone else has, he labors to find the opposing viewpoint and offer it for everyone to see.

Here's Gloria: Gloria is an accountant. She's here because she is involved as a volunteer keeping an eye on the finances of the organization and giving frequent bits of advice to the financial officer and her staff. She came in 8 years ago when financial matters had deteriorated a bit and helped straighten things out and get Do-Good back on the right fiscal track. Inside, Gloria is suspicious of any new expense that is proposed; she lives with a constant perception of scarcity.

Here's Sam: Sam is a retired school superintendent who has been on this Board for 15 years, since its founding. He's a rock, a stalwart, volunteering for many kinds of jobs in the organization's life over the years. He has confidence in the management team presently in place because he helped put them there. He's a little more laid back, too, and very accepting of many kinds of people and their personalities. Inside, Sam has a geologist's sense of time and knows the nonprofit is likely to progress in little steps, but will take great strides over long periods of time.

Here's Melinda: She's in marketing, a principal in a firm she helped found, and very successful in the radio and TV marketing business. She has a very heavy schedule but takes time out of her busy day to attend at least 4 of the 8 Board meetings that occur each year. A little high strung, Melinda knows business, and knows nonprofits. She has been a board member on one or another of the community's nonprofits for 18 years, and says she loves it. Inside, she's glad for this outlet for her energies, because she often thinks she would like working in the nonprofit sector better than in business.

Here's Mary: She's the wife of a very wealthy businessman in the community. She and her husband are scions of wealth. She's a socialite, knows everybody worth knowing, and is marvelously defensive about protecting all her friends from being, as she says, "pestered" by all the charities in town. She will not fundraise with them; she refuses to open doors with her friends for the organization. But she wants to be on the Board as part of what she sees as fulfilling her "duty" to charity. Inside, she's wary of the fact that if she asks for money from her friends, they will all come looking to her to share her own wealth.

Here's Tom: He's a manufacturer's rep, and very successful at what he does. He's high-powered in his approach to everything, always punctual, always involved in a lot of things, always the "driver." He knows business inside and out. He also knows he's sick and tired of so many charities asking for more and more money, and wishes they would stop pestering him about giving and giving more. Inside, he feels guilty that he can't give more, but his cash flow is often fairly thin because of his investment in his business.

Get the picture? We'll see something of their interaction tomorrow.

How Nonprofit Boards Can Make Good Decisions -- Part 7 of 12

Now, for our Example #2, we’re going to do an analysis of a more complicated board decision: the decision whether or not to give some major resources to bolster the organization’s fundraising infrastructure. That means this series on Board Development, where we're dealing with how boards can make fair, wise and practical decisions, will be extended to 12 parts rather than seven.

First, let's do a short review, just in case you've joined us recently and haven't had a chance to read previous posts on this subject:

In a previous post, Example #1 concerned a Board making a decision about enhancing its own level of giving to their nonprofit organization. What we dealt with there was a set of psycho-dynamic factors that make it literally impossible for a board, or any other group of more than 2 or 3 people, to do deliberative thinking. And we've tried to describe the kinds of effects these psycho-dynamics have in the context of this decision about the board's own giving.

We've had a few digressions along the way, but, ultimately, I think the best way to help a board do what it does best – which is to brainstorm and tell stories – is to be prepared to do most of the work on any serious issue coming before a nonprofit board in the background, outside the board meeting, but in a way that involves board members and takes seriously their various kinds of input, needs, wants, values and their points of view.

Now, in Example #2, this decision about whether to invest in fundraising infrastructure, and how much, we are going to see an additional set of factors that, once again, make it impossible for a board or any group of people to do deliberative thinking.

Previously, we enumerated the following elements of the psycho-dynamics affecting each board member's ability to do deliberative thinking:

Factor 1: my view of myself,
Factor 2: my view of you,
Factor 3: my understanding of how you view me,
Factor 4: my grasp to whatever degree on the image of me held by the group, and
Factor 5: my desire and strategies for changing, to one degree or another, either your view of me or my image within the group.

The effect of these, for each member around the table, tends to overpower each person's ability to do deliberative thought on a complex issue or problem facing the group.

Now, we're going to see how some additional factors come into play in a decision about funding fundraising infrastructure. As you can see, when we combine the psycho-dynamics of the board's process with additional factors, this is going to get a little complicated. But that's precisely why we say "boards can only do two things: brainstorm and tell stories." Let me set up the situation as I have seen it many times over the last 27 years of fundraising.

It's budget time, once again. The Board of Directors for Do-Good Charity is assembled for a regular meeting of the board, in which the budget discussion has been given a generous 2-hour slot. Typically, for this board, and many others, items are given 15 minutes. But today the CEO has something special in mind.

There's a proposal, represented in significantly adjusted budget figures for the fund development department, to expand fundraising infrastructure by purchasing new donor software and hiring a person to do both data entry and data retrieval. This will, as the CEO believes – and rightly so – facilitate the stewardship of donors and the start of a major gifts program that will cultivate and solicit a whole new group of donors for major 5-year commitments to the institution.

The CEO plans, over time, to turn this little investment in infrastructure into a $5.5 million increase in revenues for the organization through multiple-year commitments. Got the picture? You've probably seen it yourself, either as a fundraising professional or as a volunteer serving on a board.

You think $5.5 million is impossible? Not at all. We recently helped a client find that much in their present donor database and start cultivating and soliciting major five-year gifts. And that client was doing about $30k per year in direct mail and another $500k in special events along with a substantial grants program. Pretty elementary, yet they had enough friends to whom they had not been attending carefully but whose potential amounted to that much.

Your organization may similarly be missing the boat by not carefully analyzing the giving patterns of your donors. It takes time, it takes some investment; above all, it takes organizational commitment to fundraising. But if you don't do it, you're leaving a ton of money on the table. This CEO in our example is taking the budgeting step necessary to make it happen for Do-Good Charity.

We continue our example tomorrow.