Starting a Charity? Standards of Performance for your Board

Why is it that we are reluctant to provide our nonprofit governance boards with standards of performance and regular performance review?

During more than a quarter century in the fundraising profession, with 10 of those years in my own practice, I have come across maybe two or three nonprofits that have devised performance standards for their boards of Directors. Why do you think that is? For one thing, the reluctance to provide a board standards of performance flies in the face of all we know about human nature, and best practices in board governance.

For instance, one of the things we know about human beings, and board members especially, is that they really enjoy the feeling of success. They like to do the job that is required of them and know they've been successful at it. This is one of the rewards for volunteering our time: that we can achieve goals that help make society better.

The way people achieve a feeling of success is to have their work measured as they go along. It makes life simpler and easier. It tends to discourage deviation from the norm and saves time and aggravation. If you've been assigned the task of governance of a nonprofit, that's an awesome responsibility that has several rather complex sublevels within it.

For example, there's the strategic planning task, the job of managing the organization's executive, the task of financial oversight, and the job of overseeing program goals and objectives and keeping those in line with the strategic plan. That's a lot to keep track of on a week-in-week-out basis through many board meetings. It's easy to get bogged down and lose sight of where we are in the process.

Consequently, any board member could be expected to welcome specific standards of performance as the easiest way to stay on track in terms of fulfilling the assignment for which he/she was selected. The job performance standards are going to point out the limits of board deviance from a certain norm of tasks and how they should be performed. And these, in turn, are ultimately going to be set by their peers – their fellow board members – as a way to express the greatest success as the board has defined that term for itself and its work.

Of course this is all within the context of the full realization that the board of directors of a nonprofit (which is, after all, a public trust) are responsible to the public for providing a well-managed, efficient, cost-effective social good or service to the community at large. Standards of performance, for the board as a group and for individuals within the board, are, therefore, something most people are going to welcome as a way to help them see, through the complexity of doing their jobs, that they are doing that job well. And that leads to a sense of being successful.

Another thing we know about human nature is that most of us can tend to slack off and take the easiest way out of particularly sticky situations if someone isn't keeping our feet to the fire. Board members are no different. If you don't point out to them that they need to stay with the more difficult tasks of strategic planning and measuring progress programmatically and financially toward the strategic goals, it won't be too long before they've lapsed back into micro-managing the organization and tinkering with day-to-day operations.

Consequently, a set of well-written performance standards, keyed to the four main jobs of a nonprofit board, can be expected to be a welcome reminder of what the board is NOT supposed to do, and of how easy it is to slip into the mire of micro-management.

Since this kind of deviation detracts from the management of a nonprofit, and since such activity robs the nonprofit of the kind of strategic planning that allows it to fulfill its commitment to the public, board members could be expected to welcome such yardsticks as will keep them from diverting time and attention away from their governance tasks.

More on this tomorrow.

Starting a Charity? More on Staff Accountability

As we said yesterday, there's a big difference between the effect that a nonprofit organization's lack of planning, ignorance of the fundraising process and their lack of infrastructure has on the organization's bottom line, and the effect produced by the fundraising professional's daily pursuit of activities and responsibilities. Here's how we can tell the difference.

What we want to measure in fundraising staff performance are these elements:
1. Relationship building activities – are we building significant and productive relationships between our organization's leadership and an increasing number of donors?

2. Prospecting activities -- are we bringing increasing numbers of new prospects within the sphere of influence of our organization, and are we informing and cultivating these prospects on a frequent, regular, persistent and consistent basis?

3. Cultivation and solicitation activities – are we personally cultivating and personally asking an increasing number of prospects and donors for more contributions?

4. Use of Donor Database – are we using the donor database to give us the information we need about donors to produce ever more successful cultivation and solicitation activities?

5. Volunteers – are we working hard to identify, recruit, train, deploy and evaluate an increasing number of volunteers within our organization who can engage in delivering our case for support to prospects, and who can cultivate and solicit prospects and donors for more and higher gifts?

6. Money – OK, yes, we are interested in the financial rewards the above five activity areas will bring in. But, if those activities are being pursued correctly, and if the Board has done its vital work of strategic planning, and if the executive has invested in fundraising infrastructure that ALLOWS those activities to be pursued effectively, then the money will, in fact, be no worry. It will be there.

So, what we want to measure, in terms of fundraising staff effectiveness, is the number of calls, letters, visits to donors and donor prospects.

We want to measure the depth of the relationships we have with donors and prospects. So we'll use a three-digit scale of measurement: On a scale of 0-9, what is the prospect's relationship with our institution? On a scale of 0-9 what is the prospect's relationship with a specific person in our institution? And, on a similar scale, what is our judgment of how close the prospect is to making a gift?

We want to measure the number of volunteers who are ready and deployed in the field doing cultivation and solicitation work on our behalf.

We want to measure now many cultivations and solicitations are actually going on in a given week, month, quarter or year, and how many volunteers are involved in that process.

We want to measure the number of times the donor and prospect database actually produce the vital information we need in order to keep all these activity levels going.

If we're measuring these kinds of activities, not just the money, we'll soon find out whether the Board's planning is adequate and in the right direction; we'll soon find out whether the executive has been investing adequately in fundraising infrastructure; and we'll also find out if the new director of development is any good at what she/he does. This kind of evaluation will definitely show whether it's the institutions' problem, or whether it's the lack of work or experience on the part of the newly hired fundraising professional.

Starting a Charity? Staff Accountability is Important

Why is it that we don't see much accountability process provided by charities for their fundraising staff? This is something I see all the time in my practice and in my association with fellow fundraising professionals. From what I hear, and have the opportunity to observe firsthand in my clients, it seems Boards and executives of nonprofits measure the productivity of a fundraising professional in terms of the amount of revenue generated for the charity. Horrors! What a thought!

But, seriously, consider, for example, the small nonprofit or the larger charity struggling with fundraising capacity. Typically, the Board and executive are going to be out in the fundraising marketplace looking to fill the Director of Development position with someone who will come onboard cheap and to the job of fundraising for them in ways that don't involve them. So they're going to go for the combination of most experience they can get for the least money. So "money" is a criterion to begin with. Not financial stability, not infrastructure building, not long-term financial success. But only "how much money do we have to lay out, and how much money can that person raise?" That's the main criterion.

The other thing is that these Board members and this administrator want to do this as quickly as possible because they desperately need incoming revenue, new revenue, more revenue. They have a budget they need to balance.

So they go out and get someone with 3 to 5 years of experience whom they can snag for $35-$55,000, and they put that person in the position, and then tell them – not in the job interview but only after they're in the position – that they have to raise a quarter or half million dollars. Right Now. And, no, there's no fundraising infrastructure in place. "After all, you're the person who's supposed to know how to raise money, right?" That's their argument. "Just go out and raise money. And don't involve us. We don't want any part of it. Just get us the money we need to operate."

Sometimes, of course, they will mention that financial goal in the job interview, so the candidate, wishing to please, and wanting to get the job, will promise just about anything. Not wanting to offend in any way, the candidate doesn't ask the hard questions about "Do you have the fundraising infrastructure in place that will allow your organization to accomplish that goal?"

So here we are on day 1 of week two on the job and the truth finally is brought down that this organization is in trouble, needs to raise substantial sums of money through voluntary contributions, and hasn't any fundraising infrastructure in place with which to do that job. But they're counting on Ms. Newhire or Mr. Gogetem to do the job single-handedly and without any support. And the way they're going to measure success is whether or not Ms. Newhire or Mr. Gogetem helps them balance their budget for that fiscal year!

This is nonsense, but I've seen it so often. Boards and executives really seem to think that a new fundraiser on the premises can actually make up for their sins of omission – bad planning and lack of knowledge. More than that, however it is simply bad practice, fostered by being in a hurry and uninformed about the real nature of the fundraising process.

But what do we really want to measure in the fundraising process? What, besides the amount of cash in the till at the end of the year, tells us the fundraising process is really doing well? And, especially, what will separate out the difference between the effect that the performance of the fundraising professional is having on the organization's bottom line and the effect that the organization's bad planning and lack of infrastructure are having on that bottom line? More tomorrow.

Starting a Charity? Don't Leave Money on the Table, Pt 2

What needs to happen after the special event is that the major gifts staff member steps in and starts working to turn all that wonderfully good, warm feeling of the day/night before into some really good gifts to the organization. If we did that, the true cost to raise $1 for each of our fundraising events would drop like a stone, and the money raised as a result of the event would skyrocket! Here's how I see it working.

The day after the event, the major gifts person calls all those who attended the event and asks those three questions that our friend Terry Axelrod of Raising More Money (now called "Benevon") fame has by now taught all of us to ask, if we didn't know before: "What did you think of last night's event?" Then pause to listen and take notes. "Do you think any of your friends or associates ought to be on our list for next year?" and, again, pause to listen and take down the names and contact information of people. Then "Is there any way you could see yourself becoming more involved in our organization as a result of what you saw and heard last night?"

In short, the nonprofit organization may not be able to use the special event staff, because they're all worn out and frazzled after the event, but they're missing the gravy boat if they don't put someone immediately on the trail of those event guests and sponsors and donors from the night before, to help them translate all their good warm fuzzy feelings into some real hard cash for the organization.

First of all, the names and contact information for anyone who attended the event should be entered into the donor database if it is not there already. And each record should be given a special code indicating that they were a participant in some way in this particular event, whether they just attended, bid on something, donated an auction item, were a sponsor, bought a ticket, etc. etc. A code for the event, then a code for each role a person could play within the event itself.

Next, the staff person (or it might also be a prominent volunteer) makes the above phone call and asks the three questions.

Now it's time to arrange personal visits with those whose commitment to the organization is growing to the point where we want to involve them in the cultivation and solicitation process. There are those we want to talk with about their involvement growing and what they would or could do for our organization. Face-to-face is the best way to handle this. There are those we want to involve in the cultivation of their friends, family, colleagues and associates. Again, a personal meeting is going to keep the motivation, the good feelings from the event, motivating the person longer. Then there are those who have been cultivating gifts who need assistance now in asking those people for money. Once again, a personal visit does more to inspire and motivate, refresh the case for support, than any other means.

Sure it takes a lot of time and work! But not as much time and effort as planning and executing the event. And it is so much more rewarding work! You've got to go out there and make those appointments, see the prospects and donors, motivate them, ask them for money. But, if we don't do this work, we leave so much money on the table! It's money that is there for the asking, and that will be given elsewhere if we don't corral it for our organization.

Starting a Charity? Don't leave Money on the Table

When you're planning a special event, it's important to consider that there's money left on the table after the event, and that you should make the effort to go out and get it.

Here's what I see fairly frequently: The staff and volunteers of a nonprofit organization work hard to conceive, plan and put on a successful fundraising event. It may be an auction, an awards dinner, a golf outing or any of the hundreds of things Board members and staff dream up as a way for people to have fun while charities raise some money.

Putting on a special event is a huge involvement of time and energy. It takes a fairly large group of volunteers and places high administrative demands on the most dedicated and stalwart of staff members. In the end, what do you have for all that time and effort? A few more dollars in the till.

Special events, like direct mail, are heavy on the cost to raise $1, and therefore are pretty inefficient ways of raising money. An auction might bring in a couple hundred thousand dollars in an evening. But the time involved is thousands of hours of preparation.

Finding, cultivating and soliciting sponsors and donors of auction items; publicity; making the physical arrangements; providing the food and entertainment; putting together the invitation lists and sending the invitations; thanking the donors; all this must be done. In the end the nonprofit is spending anywhere from $0.45 to $0.75 to raise each dollar – IF they're doing the job in a relatively efficient manner; and many charities spend far more than this.

We must acknowledge, however, that special events – the "fun" of fundraising – are a necessary part of a well-rounded, multi-faceted fundraising effort. More than anything else, they are "friend raisers" because they bring together the charity's friends and supporters in a way where informal networking and "meeting and greeting" can be done. This permits time for cultivating and building relationships, which are so fundamental to the fundraising process. They allow new people a place of entry into the life of the nonprofit. They provide an outlet for the energies and passions of volunteers. So special events do play an important role in the overall development of the nonprofit organization.

But here's the rub: After putting in all that time and effort, when the auction or dinner or golf outing has been declared a resounding success, the nonprofit's staff are completely worn out and frazzled. They're glad simply to put the file in the drawer, go on to the next priority on their to-do list, and wait until next year when they must start the event process all over. "Thank God that's over!" is an expression one hears frequently the day after a special event. And rightly so, considering the intense work and energy that went into making that event happen.

From the standpoint of long-term fundraising success, however, this process of putting the event away until next year leaves tons of money on the table. After we bring all those people to the table, the golf links, the auction, what do we do with those names? We shove them into a drawer, or maybe give all the attendees of the event a code on the donor database, and let it go at that. In reality, the fundraising process has just started. But don't tell that to the special events people! They'll be after your head with an ax! No, this is the time for the calm, cool, collected major gifts specialist to step in and intensify the cultivation and major gift solicitation process with all those people who attended the function and with all those volunteers who helped make it happen.

More tomorrow…

Starting a Charity? Here's a Strategic Planning Model

The final item that I think would be appropriate for a new charity start-up is the strategic plan developed by the founder. Having seen the plans developed by several charity start-ups in recent years, I know that what these founders have understood by "strategic planning" is not adequate to the task at hand.

Strategic Planning must be done according to a model, and the model I like most includes the following topics:

1. Who are we, in terms of our past? Where did we come from? What are our traditions, our symbols and our customs? How and why did these develop and over what kind of time?

2. What is our present situation? Where are we located geographically and conceptually? What is our current purpose, mission and vision, and what are our values? What programs of service do we presently offer and why do we offer these, and to what target populations? What resources do we have available? What is our Case for Support?

3. What are the current trends in our arena of service? What's happening to change the picture in which we find ourselves?

4. What, going forward, should be our new role and mission? What are the ways we want to affect the society around us? The environment? What is the greater social good that we seek to serve?

5. How do we define the steps we will need to take to get from where we are now to where we need to be in order to fulfill our role and accomplish our mission? Over what kind of time? Using what resources – human and financial?

6. What strategies and tactics are we going to need in order to achieve the objectives defined by those steps? How will we structure ourselves for work? How will we program our organization? What procedures and policies will be needed, and at what conceptual levels?

7. What resources will we need (including those we have now) and how do we find or make a continuing source of those resources? Particularly, the fundraising strategic plan comes in here, as well as the plan for human resource procurement and management.

8. How will we know when we have succeeded in accomplishing our mission? What units of measurement will we use? What process of measurement will we use, in the short run and over longer periods of time? To whom will we report these accomplishments?

9. What means do we have in place to make mid-course corrections within the framework of the organization's structure, budget, policies, procedures and human limitations?

10. What are the means by which we will make our strategic plan operational on a day-to-day and week-by-week basis so that we understand every action and every policy in the context of our strategic plan?

If you have in hand the details of such a plan, you can identify immediately any potential flaws that could mean trouble down the road for the new nonprofit. That would save the donors, the taxpayers, the service recipients, the board, and, ultimately, the founder him/herself a lot of time and wasted effort.

Unfortunately, if this strategic planning system were in wide use today, there would be less work for us fundraising consultants to do!

Starting a Charity? Is There Really a Need for your Group, and How do you Know?

Our fourth objective, as we said before, is to help donors easily find the information they need to assure themselves that their gifts will be effectively and efficiently used for the purpose the donor intends. This information is of two distinct types.

1. The first kind of information needed is essentially demographic in nature. It would consist of the number of potential service recipients in the start-up charity's geographic area, along with a determination of the number of charities already serving that population. Arts, environment and public service organizations will have a harder time coming up with such figures. But human service networks can readily provide such information and much of the work has been done in the collection of census data.

2. The second type of information needed that we need to know is the number and nature of service program already in operation and their relative effectiveness with the people they serve. The result should be a number of those who comprise the target population that is NOT now being served by program agencies. Here, the founder of a charity start-up may need to do a little digging. But this is relevant work when starting up a new nonprofit, and the founder's feet need to be kept to the fire to investigate the field thoroughly before putting together the plan for a new nonprofit.

Through these numbers we can see the relative need for the new charity, both in terms of numbers of target population, and in the extent of programming needed to complement or assist that which is already in place.

Starting a Charity? What is your Case for Support?

Our third objective is that we want to help ensure that prospective donors in the community have reasonable clarity about the mission and accomplishments of the charities they are asked to support.

Part of the strategic plan of any new or continuing nonprofit organization is its mission statement, its case for support, and its method of disseminating that case for support among its constituents on a regular, frequent, persistent and consistent basis. So these will be good ingredients to give to the organization that is certifying the new charity start-up.

1. There should be a mission statement developed for the organization, so that should be shared with the start-up certification panel. Along with that mission statement there would also be the plan of mission accomplishment, or service delivery. That would describe in some details the scope of service delivery and the methods the founder envisions being used. It will also need to include anticipated outcomes so that there is something to measure effectiveness from the very beginning. These items should also be part of the certification review process.

2. Instead of waiting several years until a convenient time presents itself (or even never getting around to it), the organization's case for support should be developed and written down right at the beginning. The case for support is basically a list of reasons why anyone should give any money to this new charity. This document will contain a complete and detailed set of reasons why anyone should or would give any money in support of the organization's work. It should state the set of features offered to individual, foundation and corporate donors, as well as the benefits to be derived from making a contribution. This is going to include the schedule of benefits for corporate sponsorships, and the recognition system, along with any naming opportunities that can be devised. We'll explore the case for support more thoroughly tomorrow.

Starting a Charity? Avoid Mission Overlap

I said in Friday's post that our second objective for regulating a new charity start-up is to discourage the creation of new charity start-ups in geographic locations where similar charities have already been set up. We want to avoid duplication of effort, while, at the same time, encouraging new charities to care for needs that have been left unmet.

I think one way to care for this would be to gather specific information about target populations and the numbers of charities serving those populations within the geographic area where you're thinking about starting your new charity. That information might have been gathered in the approval process as we described in yesterday morning's post.

But a second step would be to have conversations with other charities already operating in the territory about whether another nonprofit in that specialty is, in fact, needed in order to serve the target population.

This would mean that as the founder of a new nonprofit you would need to go meet with the leadership of other, similar charities that already exist, and obtain the support of those existing charities for your new start-up. That looks difficult, but it's a necessary step to make sure you're not duplicating services that are already taking place, and it will tend to force the issue of "turf" out in the open right from the beginning. Remember, if these other guys are having trouble getting funding, you addition of another similar charity is going to make money even tighter. That's not good for you or for the other nonprofits.

This means that the human service charities, or the arts charities, or the health groups or educational institutions need to meet with would-be founders of new nonprofit start-ups to decide together whether there is 1) an urgent need in the geographic area for such a new start-up; 2) sufficient support available from within the community to fund the work of both existing charities and that of the new start-up; and 3) an adequate strategic plan devised by the new start-up that is likely to ensure its success. Experience is a good teacher, groups on the ground, in the locality – however cumbersome – are more likely to be better regulators of charitable activity within a given specialty in a given geographical area.

Now, I would agree with you that this might tend to blow the lid off of new charity start-up effortss. Where "turf" is an issue, it's going to be extremely difficult for a new charity to get started. But those groups will need to show that they are covering what needs to be done, and the onus of that burden should be great enough to forestall turf-based greed among existing charities.

Where "turf" is NOT an issue, and progress holds sway, you're going to be giving this a careful assessment of just how a new start-up will contribute to the ultimate success and advancement of all such groups in the geographical and program area. It's difficult, but it must be done.

Starting a Charity? Five Strategic Steps to Take

What strategies can give new charity start-ups a better chance at avoiding fundraising capacity problems down the road?

Here are four strategies that can help:
1. Ensure the right strategic ingredients are present at the very beginning
2. Avoid charity overlap withing the same geographical area
3. Obtain concrete information about mission performance in existing similar charities in the area
4. Give donors accurate information on how their gifts will be used right from the start

To care for the first objective – making sure the necessary strategic and financial ingredients are in place – new charity founders should seek out the following information as part of their strategic planning process:

1. You will want to gather analyze and evaluate information regarding prospective board members. That's more than just name and contact information, of course. But you also want to be clear about their fields of professional work, their relative capacity to give or solicit contributions to the new nonprofit on a continuing basis, and their estimated previous experience in governing nonprofit organizations. You'll want to know that the skills and experience background of the initial board is diverse and strong enough to manage a charismatic founder and provide good governance despite the founder's best intentions. We want to know that the board members selected are going to be independent of the founder/executive.

2. Work up a 10-page summary of their strategic plan – or your "business plan." What you would want to include here is a summary of the organization's mission and vision statement, the group's strategic objectives, the program strategies that will be used to accomplish the strategic objectives, and the organization's budget for the first five years of its existence, including all sources of revenue. You would also want to have a comprehensive fundraising plan to ensure the continuing sustainability of the new nonprofit. You'll want to know that your group has done their strategic planning and financial homework.

3. It's also important to know how, and the extent to which, the founders of this new nonprofit have ascertained that there is, in fact, a community need for this anticipated mission, and that the community and its leadership are supportive of and ready to undergird the new nonprofit and its work with their contributions of time and money. This may require some sort of means testing and some affidavits from typical community leaders in government, education, business, media and nonprofit sectors.

4. Another critical ingredient would be a summary of the competence areas and the experience depth of the organization's founder or starting executive or other program staff that will be employed as the new nonprofit gets underway.

5. Once the new nonprofit is set up, you might want to issue a series of follow-up reports on financial status and mission accomplishment for up to five years after approval. This should be done at least annually, and distributed to all stakeholders. You might want to provide comparative budgets vs. actual revenues and expenses, as well as an annual balance sheet itself. In other words, give the stakeholders a full, audited financial statement for each of the five years of the start-up charity's existence. You'll also want to provide complete, audited figues relative to programs of service provided, the target populations served and the results obtained in service.

It is better to take the time and effort to prepare and disseminate this information up front and for the first five years, and to set up the mechanism for doing that on a long-term basis. That can go a long way to ensuring that your charity start-up will be in existence five years from now, and that your service will start out and continue to be efficient and effective. That way you will be using the public's contributions well.

In my view, this kind of hard work up front serves the public interest well – both in terms of the society at large and in terms of the donating public. To have charities out there whose start-ups have been properly certified as having the right ingredients from their beginning means that society's interests are kept uppermost in the minds of the founders and initial boards of directors.

It comes down to this: if new charity start-ups don't get off to a good start, of what ultimate use are they going to be to society?

Starting a Charity? Getting a Better Chance for Success

As I was teaching a public policy class at Easten Michigan University on the sources of revenue for nonprofit organizations. During the discussion, one of the students raised a most interesting question. Readers will remember that these students come to the subject of nonprofits from the standpoint of "what makes good public policy" and not from the view of what makes good fundraising practice.

This student asked "With money getting tighter from both feds and state, and with increasing need of existing charities to sharpen their cases for support and go to the giving public for increased contributions, why are 40,000 people a year opening new charities? Won't that make it nearly impossible for anyone to raise the money they need to sustain their operations?"

Her question was right on target. Since the early 1980s, starting with Ronald Reagan's presidency, the Republicans have been trying to find ways to cut taxes for the rich and have, therefore, embraced the idea that nonprofits should be allowed to do many tasks that government had been doing in the late 1960s and 1970s. This is made all the more palatable because nonprofits can typically deliver $6 worth of service for every $1 contributed. They do what government cannot do, and what business won't do.

This idea was fostered by the writings of people like Stephen Berger who posited that nonprofits stand as a kind of benign intermediary between "big business" and "big government" and the family or individual in the community, helping them get the benefits they need to live.

But then the GOP also wants to cut taxes, too. The idea in shifting the burden of programs that do social good from government over to the nonprofit sector is so that only those (presumably few) people who want social services and want to emphasize community values) actually pay for them, and they do so by making voluntary contributions, not through taxes, which are compulaory for all. Essentially AMerica's business interests are saying "Look, we don't care about society and community values. We just don't want to pay taxes. What we want to do is make money, and we want to keep all the money we make. So let those people who care about that sort of thing go ahead and have their fill, but let's make it voluntary"

Consequently, that means the charities have to go to the public for increased contributions in order to keep the wide array of services available for that public. And we know that the American public, having experienced a growing number of services of all kinds in the previous 30 years when government was involved in providing them, now demand so much more of these services

But the public isn't psychologically ready to shoulder this burden of paying for those services. Don't forget, too, that inflation and professionalism of the service delivery mechanisms have greatly increased the cost for all the services that make society better. Education, health care, social services, arts and cultural services, public and environments, animal shelters. It all costs more to deliver these days. For the past 50 years the public have been increasingly aware that it's government's role to support such things as human service, health, education, the arts, etc., and that their voluntary contributions only supplement what fees for service and government can regularly provide. So are citizens aare saying, "Wait, I gave on my Form 1040, didn't I?"

We return to the student's question: With charities proliferating wildly, what will the philanthropic marketplace look like in 10 or 20 years? "Even more highly competitive than it is today," would be my response. And we have the task of informing the donating public that nonprofits will be relying on them for perhaps as much as two to three times the contributions they're used to giving as donations in order for nonprofits to keep providing the array of services and the quality of service the public now considers normal.

And, now, back to our thread on the subject of the proliferating of charities...

As we start to figure out how to deal with the proliferation of nonprofit organizations in our society, especially when we focus on the problems many of them get into because they are not planned and structured properly, I think we need to start with the premise that "it's a free country, and anyone should be able to do whatever he/she wants to do." Individual human liberty should not be abridged or constrained, unless the action anticipated is going to cause significant harm to others or to the society generally.

But for the good of society, we do generally regulate human endeavor. You can't, for example, keep gaming arcades out of town, but you can use zoning ordinances to regulate where they can or cannot be placed. On the other hand, you can pass an ordinance forbidding something like prostitution or gambling in your town because that action is deemed harmful to individuals and to the society at large. Let's see how we might apply that to charity start-ups in a helpful way without abridging the freedom of individuals to do what they wish to do.

Let's start with what it is we want to accomplish with regard to charity start-ups, then we can deal with how we might accomplish those objectives in a way that gives new charity start-ups a better chance at avoiding fundraising capacity problems down the road.

First, we want to ensure that every charity start-up begins its life with enough of the right strategic ingredients to keep it on an even keel financially and ensure that it will be able to perform its intended mission, thus bringing considerable good works to society over the long run.

If and as we continue to think of the nonprofit organization as a public trust, we need to ensure that each one has the best chance of success, and we need, as a society, to ensure that each charity actually accomplishes the mission for which it is created. If we have 20 drunks in town and two de-tox units, are they both doing a good job, and are they working to, but not being pushed beyond, their capacity for service?

Second, we want to discourage the creation of too many new charity start-ups in geographic locations where similar charities have already been set up. We want to avoid duplication of effort, while, at the same time, encouraging new charities to care for needs that have been left unmet. We want to avoid the situation where there are more homeless shelters, or more drug and alcohol treatment facilities than are needed by the target population in a given geographic area. If you have 20 drunks in town, you may not need more than one de-tox unit. So we need information about target populations served by nonprofits vs. the number of nonprofits established to care for various classes of target populations.

We also want to avoid the situation where there is so much demand on the giving public that they simply "rebel" and give up trying to meet the demand for contributions through rash and inadvisable local ordinances or other measures that stifle local charity start-ups in strange and new ways.

Third, we want to help ensure that prospective donors in the community have reasonable clarity about the mission and accomplishments of the charities they are asked to support. We want to know that of the 20 drunks in town, 17 are under treatment and ten of them are now well on their way to getting off and staying off alcohol. So we need readily available information about, and some standards of measurement for, mission accomplishment by the nonprofits currently serving in our community.

Fourth, we also want to help donors easily find the information they need to assure themselves that their gifts will be effectively and efficiently used for the purpose the donor intends. As a member of the general public, can one easily find out how many drunks there are, what proportion of drunks are taking advantage of the de-tox units that exist, and how many are in what stages of treatment? So we need information on target populations, standards of performance, and numbers of charities serving.

Can you who read this think of other objectives that should adhere to a system of regulation for new charity start-ups? If so, let me have your comments. Or if you have objection to talking about regulating charity start-ups, let's have you point of view.

More tomorrow...

Starting a Charity? Is that Really a Good Idea, After All?

We've been dealing with a variety of problems and situations that confront those who are contemplating setting up a new charity, including those that can lead to condition I have called "founder-itis" down the road.

This condition can develop when a nonpforit founder, who also is probably still acting as the executive director, has either set the charity on its present course with a series of well-meaning but inappropriate decisions, or has contributed a variety of management errors along the way that have now resulted in a situation where governance is impossible, fundraising is faltering, and the organization is in strategic trouble.

Part of our analysis of this type of situation has tried to demonstrate the role played by a Board of directors that has been set up without a written job description or without performance standards and regular self-evaluation. Where job description and performance standards are clearly delineated and provided in writing to all board members, governance is more successful. When this is not the case, trouble can occur.

We found that another contributor to "founder-itis" has to do with the lack of a real managemment team. This may be the result of personal "turf" issues with the founder/executive, or with the lack of a community that is able to stand supportively behind the fledgling charity start-up.

Yet another aspect would be the founders whose planning lacks sufficient study and reflection that then leads to the founding of "another" charity in a given field of work where there are already many others doing the same or similar work – this may be an instance of founding another charity because "no one is doing it the way I can do it."

Certainly, "founder-itis" is exacerbated, too, by a founder's failure to discover, relate to or amass a broad base of community support – both verbal and financial – behind the cause and the mission of the organization.

The results of some or all of these various factors, then, can manifest themselves as lack of true governance and strategic planning; and also as a proclivity for limiting fundraising to "foundation and fun" (by which we mean reliance on foundation grants and special events) at the expense of a broader approach to fundraising that would involve heavier emphasis on individual and family giving. And this, in turn, may occasion, or may even be occasioned by, repeated decisions not to invest in fundraising infrastructure.

It would seem that all these conditions are preventable. And, in fact, it must be said that out of some 40,000 new nonprofit start-ups that happen each year, quite a few may well manage to avoid "founder-itis." But how can we help the situation from the standpoint of public policy about new charity start-ups? Are there ways we can act as a society to improve the chances for survival of our new nonprofits?

Question: should we, as a society, let so many of these nonprofits proliferate without some rather stringent guidelines, peer review and regular accountability for management of funds? A charity, after all, is considered a public trust.

How can we build into new charity start-ups the quality of accountability? I think we must do this for the sake of the philanthropic marketplace (both charities and donors), and I'll tell you why in the next post.

Starting a Charity? Board's Role May Deteriorate if Proper Roles Are Not Understood

Continuing with the problems that occur when the Board of a nonprofit develops and inability to fulfill its roles…

4. Board remains ignorant of, or eschews their true governance role. As they are micro-managing daily operations and not doing any strategic planning, the Board, by this time, has lost sight of its governance function. They no longer know what that role is, if they were ever so informed by the founder – most I've seen really don't have any idea. Since it was the founder "roped us into this," they have no sense of themselves as a body responsible to the general public for getting a specific kind of mission done for and in the community. They have little sense of "achieving a greater social good" and, much less, a willingness to be held accountable for the organization's performance of its mission.

5. Board members give up public advocacy when organization falters in fundraising. As revenue decreases, while there may be considerable pressure for increased expenditures to enhance and deepen the organization's missional effectiveness, the Board members cringe when it comes to vocal public advocacy for the organization's cause. No more passionate speeches at Rotary and Kiwanis meetings; no more going around to the local churches; no more political advocacy and lobbying local officials on behalf of the cause and the mission. Board members who may have once vociferously defended the founder's motives and program, now quietly take a back seat and let someone else take the advocate's role. And that someone else is most likely going to be the founder/executive.

6. Board members let founder/executive do as he/she pleases. As the organization gets deeper and deeper into financial trouble, the Board members are much less likely to be able to devise new corrective measures or suggest specific changes in management methods. The result is that the Board members will step back, let the founder/ executive carry the ball, alone, on every front. The end result is that the founder/executive, who by this time urgently needs board backing and needs the board to do its work and be part of the team, finds he/she has to do it all – from service delivery, to fundraising to governance. That's ultimate trouble, because what started out looking like "a team" is now really a one-person show. And if that person gets sick, wants to retire, or shift roles significantly, there is no way the organization can handle any of those possibilities without significant intervention or possible collapse and re-building.

So this is how the Board of Directors of a nonprofit find themselves unable to fulfill their appointed role when the organization is in the grip of a real case of "founder-itis."

Starting a Charity? Board Must Understand Its Role

There's another thing that I have seen happen in newer nonprofits that eventually suffer from "founder-itis." That is the inability or the unwillingness of the members of the Board of Directors to understand and take seriously their role as supervisors and managers of the organization's chief executive officer. This happens principally for the reason that the CEO is the founder who originally recruited these board members to serve.

The CEO is the charismatic presence that dreamed up the idea, motivated other volunteers, put the organization together, and maybe even invented the methodology used in serving the target population. Thus the CEO is someone the Board members believe in, and someone to whom the Board members look for leadership. They believe in the founder's cause, in the person and the rationale for service. Why, then, should they want to manage, much less try to discipline, their founder/executive? They find themselves in a role that permits no easy solution. The result? They basically ignore that role, and let the founder/executive do as he/she pleases. And that's a major source of trouble on several fronts.

1. Board become micro-managers. The Board, having refused, albeit informally, to be the founder/executive's supervisor or manager, now becomes the micro-manager of the organization along with the founder/executive. Together they focus on the daily issues of program details, budget, hiring practices, the staff, and even staff hiring and performance. They focus on the special event details, and on the grant proposals written to foundations. They take apart, digest, mull over and discuss every aspect of the organization's life; every aspect, that is, except the founder/executive; that position is left untouched, because it wasn't in the unwritten job description when they started, and the political situation doesn't lend itself to such work.

2. Board relinquishes the fundraising role. Since the Board is micro-managing the organization, it has little time, but also little inclination, to perform as the chief fundraising arm of the organization. Once you see all the inner workings of any nonprofit, all the bad stuff and the good stuff together, it's so complicated and so multi-dimensional, that a board member has a hard time climbing back up to the kind of eagle's-eye view of the organization's work that gives them the excitement and motivation necessary to go out and cultivate and solicit friends and colleagues. The view of all the minute details is also very often counter-productive for the continued personal giving by many of those board members. So they stop giving, and they stop cultivating and soliciting gifts.

3. Board never has time to do strategic planning. They don't really think through the social ends they wish to accomplish with their nonprofit. They don't consider how society should look after their mission is accomplished. They never get down to grappling with the next steps the organization needs to take to make those social objectivesw a reality. Each meeting is full of micro-managing details of running the organization. It's the golf outing, it's the auction. Maybe it's the hiring of a new staff person. Maybe it's the production of the annual report. It could also be the new program, with the matching grant application to the local foundation. Whatever it is, no matter how often or how long the Board meets, this type of agenda fills the time.

They never give themselves a chance to step way back, take the eagle's-eye view and ask the strategic questions: "What do we want to accomplish in the society." "What steps must we take to ensure that this result happens?" "What are the ways we will evaluate progress toward this goal, and how will be define and initiate mid-course corrections that need to be made in our strategies?"

By the time it gets to this stage, the Board is so mired down in daily operations that they have completely forgotten about the organization's Strategic situation. Thus it does no strategic planning. After all, it's easier to leave that up to the charismatic founder who really has the answers on what we need to be doing and when and how and for what purpose. It's easy just to buy into that dream, that vision, as originally articulated very long ago. But that's going to spell no end of trouble for the nonprofit within a relatively short time. And this will be especially the case with regard to fundraising and the ability to build capacity in that area.

Still more on this to come on this complex aspect of governing a new charity start-up.

Starting a Charity? Here's An Administrative Albatross

Another example of "my way is the best way" was an organization early on in my practice that asked me to do a development audit to show them new fundraising capacity. This was not by any means a new charity start-up, but it did have a bad case of "founder-itis." The founder/executive had been in place for more than thirty years. The genius of the organization was that it had developed an organization management model that successfully allowed it to continuously diversify its human service offerings to an increasing breadth of service recipients.

The problem was that this woman had stayed in place so long because she believed that her administrative style was working, that it was superior to any other management procedure, and that no one could learn it from her to her satisfaction.

Over time, this administrative or management style, which had in early years been so unusually helpful to the organization's life and growth, became something of an albatross. When changes in the style were needed to keep up with more modern management practices and the demand from funders and government for more accountability, she refused to change. By the time I got there 99% of the people interviewed for the development audit said it was long past the time when she should step down. But she wouldn't budge.

This is another example where you have both a "turf" issue and a "my way or the highway" issue working together. The lesson I learned from the encounter with this client was that you can have a Board that knows its work, wants to do its work, and is (relatively) independent of the founder/executive, but this is not always enough to provide the kind of supervision that has the political strength to fire the founder.

What was the sticking point? The roots the organization had in the local archdiocese – had that founder/executive been fired, the founder had the power to, effectively, replace enough of the Board members to keep her in office, and there would have been a community-wide upheaval that none of the Board leadership was prepared to endure.

See you on Monday! Have a great weekend.

Starting a Charity? Beware the Effects of Too Much Self-Investment

There's a corollary to "turf." If we say that "turf" is "stay off my property, don't tread on me," then the corollary to that is "My methods are the best; nobody can do this as well as I can."

The level of self-investment by the founder/executive can be a source of "founder-itis" down the road. For this reason: if you're convinced and invested in the belief that you're the only one who can do what your organization is doing, then any message – whether from donors, regulators or consultants – that there should be coordination, collaboration or merger with another existing charity – is going to fall on reluctant ears.

It may be the case that any given founder's methods really are "the best." Such methods may be recognized by those who are experts in the field; or the measurement of "best" may be in terms of the results being obtained by these methods. I was once asked to serve as consultant to a nonprofit whose work with child literacy was simply outstanding. Year after year, their numbers were stellar; they could teach kids to read at incredible rates in unbelievably short times. That's what gave them an outstanding case for support.

But because the founder had developed this method, which involved enhancing the self-esteem of her students along with teaching them to think about what it was they were reading, that founder was reluctant to become involved with any of the six or seven other literacy charities in the area. She had an issue with the public schools locally, and it was a crusade with her. So much so that as funding dried up, it was impossible to move her to consider a wider geographic area or coordinating or combining with other literacy groups so that service could be delivered to more people in a more efficient way, and in a way that would involve and motivate more donors.

This meant that the organization's sphere of influence was never enlarged, and the number of students coming to the agency shrank, while its per-pupil expenditure each year increased. So the strength of the case for support as found in the results she could obtain with her pupils was diminished by the high cost and the limited number of illiterate children in the community she was able to reach each year. Not only did this founder/executive have a "turf" problem, she also had a "my way or the highway" attitude that impeded chances of enhancing and enlarging this nonprofit's base of funders. That provided trouble down the road in the form of limited fundraising capacity.

We'll delve more into this corollary to "turf" issues tomorrow, with another example.

Starting a Charity? Turf Battles Cause Troubles, Part 2

So, talking about "turf" as a factor in new-charity startups, we've tried to delineate the meaning of turf, something of its possible origin, and how it operates in a general way. Now I want to describe some of the deleterious effects I see that this "turf" situation has on a nonprofit's fundraising activity and on the organization's ability to enhance and enlarge its fundraising capacity.

Right from the beginning "turf" allows a proliferation of nonprofits, all of whom want to accomplish relatively the same kind of work, but none of whom want to work with, and especially not work under, any other group like themselves. The effect this has on fundraising is that in the immediate geographic area where the charity is located, among donors and prospects who might be called upon to financially support that nonprofit, the waters become muddied by the proliferation of several, even many, nonprofits, who are all doing the same or similar work.

Questions like "Who do we give to?" or "Who's doing the best, most efficient work?" are increasingly difficult for a would-be donor to answer the more nonprofits there are in a given field. If a donor is trying to ferret out the best way to invest dollars for an anticipated result, the decision becomes more frustrating each year. Eventually, that donor may stop giving, or may choose another cause. The long-term effect is that there are fewer dollars with which to do charitable work, and fewer donors/prospects for whom our work is relevant. After a while, they just don't care and give up. So money is left on the table that could be given to charity, and the nonprofits go begging, have to tighten their belts further.

Another effect of "turf" on the life of a nonprofit is that it makes relying solely on "foundations and fun" (foundation grants and special fundraising events) so much more of a temptation for local charity boards, executives and fundraisers. But the more they rely on foundations and fun, and the less they get involved with individual and family donors, the more these charities find their fundraising options restricted. Therefore, the result is stultified fundraising capacity.

Three strikes and you're out. If you get "turf" operating together with "foundations and fun," and this is, in turn, complicated by a management process that makes repeated decisions against investing in fundraising infrastructure, you have a combination that is certain to provide trouble for the nonprofit. And it is from this troubled position that many charities have contacted me through these last ten years as they need help in extricating themselves from this predicament so they can enlarge fundraising capacity. They're starved for revenue, but they can't make headway because they cannot undo the mindset that led to unidirectional fundraising, that was coupled with non-investment in fundraising. Sort of a vicious circle.

The problem, then, is that the intervention that must be made to rectify the situation is so major, and the changes required are so massive, that the executive and the board may well not hold together through the intervention. I don't think it's any accident that, as the old cliché goes, that "capital campaigns are notorious board cleaners."

I think this happens because in a capital campaign most organizations will employ a fundraising consultant to play a variety of roles. First, there is the feasibility study, which requires a keen and objective view of what community leadership thinks about the organization and its campaign project and goal. Next there is the internal assessment of past and present fundraising practices and results, fundraising infrastructure, and board readiness to support and work hard in the campaign. There is also the training that makes plain the conditions under which nonprofits typically succeed in their campaigns. The result of these rolls played out by the fundraising consultant is an exposed, dead-honest, objective revelation of the organization's fundraising problems in expanding fundraising capacity. Many executives and board alike don't like what they see, and it's not uncommon for many to be asked to leave or simply to jump ship as the campaign swings into action.

I should acknowledge, however, that with the small or start-up nonprofits in their first five or more years of existence, it doesn't have to be a capital campaign that forms the intervention. These charities come to a fundraising consultant because they know something is "out of whack" but haven't the ability, the knowledge or perhaps even the political will to do what has to be done. As a recent client of mine put it in our initial interview, "We know what has to be done, but we have not been doing it. We want you to help us do what has to be done" And so we begin a process of organizational intervention that will undoubtedly have far-reaching implications for every aspect of the organization's life and work.

How does this relate to "founder-itis?" Because the trouble starts with "turf" in the original decision of the founder/executive to start a new charity in the first place, when that new charity is going to duplicate efforts already underway in the community. It is exacerbated by the founder/executive's choice of board members who are not coming on as true governors but simply because they're friends of the founder and are giving use of their name for IRS certification purposes. And it stems from the fact that many founders are either unknowledgeable about or unwilling to invest in fundraising infrastructure at the beginning of the venture and this becomes a habit. So "turf" + "Foundations and fun" + lack of infrastructure investment are major reasons why founder/executives get into fundraising trouble.

Starting a Charity? Turf Battles Cause Troubles

Having dealt with the issue of whether charity founders are people-oriented or more individualistic, and the effects of those characteristics on the subsequent fate of their respective nonprofits, we now turn to the issue of "turf." This issue, centering around the proprietary feelings of nonprofit founders and board members of new charities, accounts for a good deal of the fundraising problems new charity startups seem to experience.

I will frankly admit that I don't know much of what the rest of the country's nonprofits experience with regard to personal and organizational "turf." But I do know this: that in Illinois, where I lived and worked in the 1960s thru 1980s, turf was always secondary to progress. You could get all kinds of projects done because people from one camp were willing to come together with people from another persuasion in order to get some new projects done.

In Michigan, however, it's a different story. Here, where I have practiced now for the last two decades, turf is held above all else. It is practically impossible to accomplish a new project or achieve some new direction because people are falling all over themselves protecting their own personal, conceptual or organizational "turf."

This has a peculiar and often daunting effect on fundraising; and one can see it most clearly in start-up charities that get into fundraising problems relatively early in life. I will comment on how this works in a moment, but first let's take a look at a definition of "turf" as applied to nonprofit organizations:

My "turf" is my territory: my personal or organizational landscape and context; Turf is all that which I have built for myself within my nonprofit organization, including my accomplishments and the personal learnings that have resulted from my daily experience here.

Similarly, Our "turf," speaking as a group of people involved in the nonprofit, is our territory; the organization's landscape that we have built together, the missional area we have carved out for ourselves, the learnings, policies and procedures we have developed together as a result of our experience in the trenches of service delivery and fundraising. Turf is sacred ground, not to be violated. Turf is our "place" in the world. We protect our turf at all costs, including the cost of not getting anything progressive done.

Turf is seen among board members who vie for the CEO's attention, or who compete in their leadership of committees or auxiliary groups that support the organization. The turf battle becomes hot when a given committee's or auxiliary's work is seen to be duplicative and a move is made to try to combine or coordinate those competing bodies and make the organization more effective, efficient or streamlined.

Turf battles can be seen among nonprofit staff especially when budget is tight and departments need to be downsized. We're fighting for survival of an idea, a process, a department, as well as for our paycheck and personal privileges. No one wants to be the one who has to give up a function or combine that function with someone else's. There's not room enough in the world or enough things to do that there are any alternatives for me (or us) than doing just what we're doing in the present situation.

Turf battles take place between organizations when, for example, foundation grantmakers insist on coordination, collaboration or even combining and merging organizations operating in the same field, doing essentially the same work. The excuse might be methodology, or ideology. For example, if your organization and mine are both half-way houses for battered women, and we're at the table to try to combine and coordinate our services, both organizations may claim to have the best methodology for service delivery, and so neither wants to "give in to" the other.

In fact that's what "turf" often means: a worldview that insists that "my approach" is right while "your approach" is wrong. Or, "we're the biggest and best, so you must give in to us." The phrase "give in to" is the key. One must win and the other must lose. There is only so much territory, we both claim that territory, therefore there must be winners and losers.

Where do we get that? I've spent the last 20 years looking for the answer to that question. At this point, I would have to say that it seems to have come from two sources: the first source would be those settlers who came to the Michigan area from Boston and New York in the 18th century to claim new territory for the making of their own personal fortunes. These folks staked out their territory first against the indians, then against each other. Ideology was definietely a part of the process. The scond source would seem to be the major rift between "labor" and "management" that has expressed itself in the countless battles between unions and, most especially, the auto companies.

It is instructive to reflect that "turf" is a by-product of the desire to exploit resources and fellow human beings for one's own gain. Through timber, shipbuilding, railroads and automobiles, our state of Michigan has been noted for the exploitative capacity of its leading citizens and business operators to take and to use our natural resources, along with the lives of the people who did the work, for individual personal and company gain.

But that was not a phenomenon exclusive to Michigan. Yet we're the ones who have the turf problem today while other areas, like Chicago, among mid-west areas, do not. Why is that? I imagine that it has to do with an understanding that life is win/lose rather than win/win. In Chicago, where progress generally trumps turf, one can see alliances forming between otherwise very unlikely partners just to get a project or an advancement accomplished. Referring to the famous lifelong (Richard J.) Daley Democrat, I've heard it said, "Even Ed Verdolyak can become a Republican when there's progress to be made." He made this switch briefly to achieve ends that benefited the whole Chicago community, then went back to being a staunch Democrat. But here in Michigan, turf trumps progress, and "you stay off my turf" is more important than "I'll come join you so we can be more effective together getting this project done."

More about the effects of this on nonprofits on Wednesday.