"Fundraising? – We'll Get Around to That"

Apologies to readers for having missed yesterday afternoon's post.

One of the first fundraising mistakes that a founder/executive of a nonprofit is likely to make is to start out using a spreadsheet to enter donor contributions and report these gifts to the board. Sure, it's cheap, easy and doesn't take much time to work with a spreadsheet.

With a little thought, the founder/executive could see ahead a couple of years to the time when there would be a need for a real donor database,. These contributions could just as easily be entered in an Access database, so that at some point they can be massaged correctly, and later could be transferred rather easily to some form of donor management software. But spreadsheets are easy and quick, and that's just what most any founder/executive needs to lighten the daily burden.

Right along with this is a tendency I've seen in my practice for these founder/executives to spend much more time with the nuts and bolts of running the operation than to be out with the community building the base of individual donors and soliciting friends, family, colleagues and acquaintances for significant, multiple-year gifts. Most of the founders/executives who end up getting in trouble neglect this work because they are not, essentially, oriented to being with and nurturing people as donors and supporters. So it's easy to avoid this responsibility and stay with the grants and special events, hoping, each successive year, that these sources will hold out just a little while longer. Meanwhile the task of running a growing organization multiplies, stress builds and, eventually, the founder/executive simply has neither the time nor the inclination to cultivate and solicit major individual gifts. "Fundraising? That would be nice, but we'll get around to that later, when we can afford more staff."

But the fledgling organization will never get to the point where it can handle more staff if it can't raise money! The problem is that foundations fall away after a while. They're interested at first, but most don't see themselves in a continuing relationship with any charity. They want to spread their money around, get the most bang for the buck, get involved with a lot of charities, give a little help here and there and everywhere. The result is that the foundation pool dries up within a few years. The community foundation and a few individual foundations around town, maybe several larger ones, too, in the larger cities, run their course with the start-up, and then the money dries up.

Looking at special events, these fundraisers tend to take on two characteristics rather rapidly: first, they get old and have to be freshened up, and, secondly, they involve increasing amounts of time and money to keep them new and fresh. Consequently, the founder/executive and whatever staff there are find they are beating a horse that only returns about thirty-five cents on every dollar invested, and that's not counting the hundreds or thousands of volunteer hours involved in putting on these events. The cost of fundraising is escalating. The return on investment is decreasing. The ability of the young nonprofit to invest in fundraising is practically non-existant. Trouble is brewing.

Couple this with the fact that direct mail donors, especially in this day, expect a lot more information and nurturing than ever before. But the founder/executive just doesn't have the time or staff to do that, while board members generally eschew such tasks; after all they're friends of the founder, so they should be treated in this special way that lets them off the hook.

So the contributions from direct mail tend to decrease as the years roll along, not to mention the fact that the list of people isn't being increased from year to year with new prospects. The fundraising infrastructure doesn't exist that will keep a continuing stream of prospects coming into the non-existent donor and prospect database. So, as gifts go down, and the number of people mailed decreases, the "take" from this method of fundraising dwindles and the cost of mailing may well exceed the revenue coming in. More trouble.

That's when they call in the fundraising consultant. We like that, but it's hard on everyone at the new nonprofit.

More tomorrow..

Preparing to Have a Board

Here's the way I'd like to see nonprofit boards set up right from the beginning. I think this way would virtually eliminate dysfunctional nonprofits, it would nip founder-itis in the bud; it would result in a much more efficient and effective nonprofit serving the community; and it would broaden and deepen the community support for mission accomplishment. Here's the way I would do it:

1. At the very beginning, when thinking through the concept of the charity's role and mission in the community, I would become seriously involved in volunteering for several charities who are serving my target population or serving people in some way like the people I want to serve with my charity. I would get into their problems and see, both from the program side and the fundraising view, what those problems are and how they are caused.

2. Next, I would take a year to find board leadership for my charity. I would go to community leaders and those who support other charities and ask them their opinions about a new start-up in the arena in which I want my charity to serve. I would ask them what they see the needs are; would ask them what governance qualities are needed; I would ask whether they would financially support such a start-up.

3. Then I would write a board job description so that my incoming board members would know right up front what was expected from them. I would also draft a set of performance standards and a process of board member evaluation, and put that before prospective board members. That job description would contain at least the following elements:
1. Give active and visible support for the nonprofit throughout the life of the community
2. Significant personal annual giving to the nonprofit
3. Strategic planning as a regular board agenda item
4. Attendance at board meetings, special events
5. Take on ommittee assignments and attendance at those committee meetings
6. Satisfaction of other evaluation measurements

Now, here, I'll just bet you're saying, "Yeah, and you'll have no board members, too!" And you might be right. But many times I have seen a nonprofit board adopt this kind of job description and with a year or two everybody in town wants to be on that board. Why? Because when the job description is rigorous, the board gets a lot done and the nonprofit starts to move in healthy directions. People in the community can see this; they hear about it from the grapevine. And leaders will tend to go where leadership is needed and appreciated.

Now, if it does happen that leaders identified by a nonprofit board as potential board members do balk at a more rigorous approach to their job description, there's significance in that, too. Either we're asking the wrong folks, or the community's leadership isn't appropriate for board membership. Either way, it's a sign we need to pay attention to, and deal with. Not by cutting down on the charity's governance, but by finding leadership that will really lead and govern. It's tough, yes. But if we did it that way, we wouldn't have so many little mom and pop charities springing up all over the place. And a lot of would-be founders with great ideas would be satisfied with volunteering for and working within existing organizations, making them better and more effective instead of going off and founding their own charity and expecting it to grow into something useful to society.

Ah, but we must return to the steps of building a governing board. More tomorrow…

10-Year Crisis Starts in the Board Room

I knew an executive director and founder of a charity once 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 or 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.

But 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. So they pretty much allowed her to do as she pleased, giving bits and pieces of advice 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, but 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." 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 fundraiser 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 he can fog a mirror, "put him 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. 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.

I'm in real hot water here, right? Goose is cooking. More this afternoon.

Six Steps to Fundraising Dysfunctionality

What's going on here is that our founder, now called the Executive Director (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 serve 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 [fundraising, governance, marketing, planning] is stuff I don't like to do; let's get on with giving the service."

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 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 for not getting very involved in good fundraising practice: "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 nonprofits from becoming dysfunctiona in their fundraisingl See you tomorrow!

Is there an Alternative to Proliferating Small Charities?

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 seconding themselves to some already-established charity?

Why not, for example, have them defend, in a 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 avoid fundraising spinout and dysfunctionality due to founder-itis. A little public oversight might 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" stance);

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" point).

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

"On This House I will build…"

Founder-itis starts with the initial concept: "I can serve this need, I ought to serve this need, so therefore I will serve this need." Why is this wrong? Isn't that the way all great things start? Isn't that the way "better mousetraps" get invented? Well, in the past, yes, but founder-itis is older than the hills, too, and if we want to prevent that from happening, there is a better way to proceed, or at least I think so.

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 ideal) 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 valid public charity. It may be so legally, but it is not so in terms of functionality. Because what so often results is dysfunctionality.

So what we have here is a two-pronged problem: First, what is ideally should be 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. I supposed some would say that in the era of "bowling alone" we should expect that. But I see it as a problem, because it results in the formation of a whole host of little fledgling organizations that purport to be "public trusts" that are, in fact, mostly based sonly on putting the individual's values, perception of need and drive for action ahead of any 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. But I have not once seen individuals wanting to start up local nonprofits stop to realize the importance of the fact that nobody but a few friends and well-wishers are behind them; that they don't have the community's support and encouragement, that they aren't leading a charge of public energy. ANd then they wonder why they get into trouble trying to raise funds from the public; they wonder why nobody supports the really good work they're doing.

Second, this results in a plethora of little charitable fiefdoms across the fabric of society, each one out there trying to serve the needs they perceive, 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 can result in a sort of "bum's paradise," if you're, for example, in the temporary shelter or prescription drug, or human services business. It means you (the "bum") can go to multiple charities and receive multiple benefits and instances of personal assistance. So now we have computerized systems set up across the county that track Joe and Sal and Mary as they go from one agency or charity to the next, and we electronically keep them from "double-dipping."

But that doesn't really solve the problem, it just polices the tendency of some to mis-use an already problematic situation where multiple charities and agencies are doing the same thing for the same people for the same three reasons: turf, turf, and turf.

I just know am going to get into further hot water tomorrow. My goose will be thoroughly cooked by the time this bit is finished! But we've got to deal with this. I think it's an important issue.

Case Study: "I don't have the time for this"

So let's examine this case study a little more closely and see if we can identify some elements of founder-itis 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 almost exactly the same.

Here are some of the key ingredients from 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 one that reminded of an autistic child with attention deficit disorder, and this became the style of doing business reflected 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-it s: 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.