"How the 2 Types of Nonprofit Founders are Seen in Comparison"

So this situation we've been describing leaves the "individualistic" nonprofit founder with a severe dilemma. If you can't start up a business, you'd better be prepared to give up your individualistic approach and get with the community – both the board community and that of the donors you depend on. If and as you try to thwart this situation, you make a whole lot of trouble for your charity start-up right from the beginning with the first few strategic decisions you make: go for the easy money ("foundations and fun") and stay away from individual donors and getting the groundswell of community support and contributions you're going to have to have for the long haul.

Is it any wonder that these charity founders don't have the fundraising infrastructure and the orientation towards individual and family giving that could get the charity off to a good start?! To me, it looks like the problem begins with the "individualistic" impulse or type of founder who is not oriented towards people and communities.

Let's see what happens with the other type off charity founder/executive, the "people-oriented" type of person.

Here we might have a different scenario. Feeling more comfortable with the community, this founder/executive may well be more naturally oriented towards two types of activities: the first is going into the community to test his/her idea of service and perceived need. This person will, in many ways, ask the community to rally around the idea of service to the poor, education, dogs for pets, starving-artist exhibitions, or whatever. If the groundswell of community perception of need and support of service isn't there to start, this person will more than likely spend the time and effort necessary to educate and motivate the wider community into learning about that need and supporting that service.

The second type of activity the "people-oriented" charity founder is likely to take on more naturally is the motivation, cultivation and solicitation of many individuals within the community, whether these be community and business leaders, or individuals and families found within the wider community. It's kind of like running for office, going door-to-door, church-to-church. This person will be naturally oriented to doing this start-up work in order to ensure long-term community support.

Consequently, the drive towards "service first and fundraising second" may now be reversed so that the initial strategic decisions for "foundations and fun" can give way to a broader base of support for the charity start-up.

More than this, however, this people-oriented charity founder is going to be setting up a board of directors that represents the leadership of the community, not just a board composed of his/her cronies. And that board will most likely be given the power to really manage and control the founder/executive, because of the confidence the people-oriented founder has in the community's leaders from the start.

The result? We're likely to find here a charity start-up that has a wonderful chance for success, and one for which fundraising infrastructure and best practices are of paramount importance. It will succeed because the community will rally; the community rallies because of the nature of the founder/executive.

The lesson? Well, I think we can say, and this is only based on my own limited experience in 27 years as a fundraiser and only 10 years as a private practitioner, that the "people-oriented" founder/executive will be more likely to succeed with a charity start-up, while the "individualistic," breakaway, entrepreneurial type, will have more chance of running into trouble because fundraising will be given a priority lower than that of the personal satisfaction that comes from doing the service work.

If you can understand these terms, we might say that the "priest" gets further than the "prophet" with a charity start-up. The so-called "prophet," or individualist, may well get better results with a business. Why? I think this happens because with a business the community can rally around and support an "individualistic" entrepreneur who gives an excellently crafted product or much-needed service for a fee. That is, the person gives something of value in exchange for value received. And even though we might also speculate that the "people-oriented" business owner might eventually become wealthier faster than the "rugged individualist," in fact the individualist does make a fairly good living without having to rely so much on the community from which he/she wants definition and separation.

Now, we have to deal with this: that there have been a lot of "rugged individualists" throughout American business history who have made millions and billions; but it has often been done at the expense of many others in the community and at the expense of the environment in which that community has to live in the future.

So what are we saying? It seems to come down to something like this: that those of us who like to consider ourselves "rugged individualists" and who seek the ways to survive and thrive without the community – to whatever degree we try to do that – (and I count myself among these fine folks) may well be in for something of a surprise when trying to start up a nonprofit organization.

But you might say, "What about Galileo, Newton, Edison, Barnard, Salk and all those whose individual work through the centuries of human development has so advanced humankind even though, and maybe even particularly because, they were 'individualists?' Have we all not prospered, eventually, as well from the work of the "robber barons" like Andrew Carnegie, Henry Ford and J.P. Morgan?" And I would have to say you're right.

But then, what's this about global warming? Does "individualism" get us in the end?

But, on the other hand, what about Jared Diamond's "Collapse" (or even look at his "Guns, Germs and Steel") in which he details the struggles of "communities" to solve complex environmental problems, and these communities have failed to find the solutions that more "individualistic" entrepreneurs may have been able to ascertain?

Is it not a fact that, in the long run, we need both the types of founder/executives in the nonprofit sector? Don't we need charities founded on strong individual impulses to serve as well as charities that thrive on community support? But how can communities – whether boards or donors -- tolerate, nurture, support and healthily inform their "individualist" founder/executives? how can the "individualists" tolerate, receive nurture and gather support from their communities in such a way as to be able to make sound strategic decisions?

This is where I believe the two threads of this blog over the last 6 weeks come together: the fundraising problems experienced by charity start-ups, and the problems that Boards have doing deliberative thought. The two threads come together as follows:

In case you don't recall, we said, back about November 23, that nonprofit boards, like any gathering of 3 or more human beings, can only do two things well: they can brainstorm and they can tell stories. But they cannot do deliberative thought. Now we're saying that charity start-ups founded by people-oriented persons are not as likely to make the strategic mistakes that more "individualistic" founders typically make that get them into fundraising problems down the road. The two threads have a common theme. Here's how these two threads are connected:

Boards are communities or groups; founder/executives are individuals. Each has a role that is vitally important to the well-being of a nonprofit organization. If the community has the right self-discipline in its work, it will fulfill its role well. If the individual, particularly the founder/executive of the more "individualistic" type, has the self-discipline to keep focusing on doing the deliberative and strategic thought the Board needs to have done, and then letting the Board do its more general brainstorming and story-telling work it does best, then there is harmony. And the founder-executive must also be continually involved with and referring back to the community of donors that support the organization, even though that may not be his/her personal inclination. We can achieve not only harmony but success in nonprofit management and governance.

What needs to happen to keep both founders and boards working well and producing to capacity? I think there are four self-disciplinary functions that must be performed continuously:

1. Boards will give the organization better governance if they refrain from acting like individuals and trying to do deliberative thought, because doing that frequently ends up in micro-management of the organization, confusion over strategic direction of the organization, a lack of resources for the organization to use in its mission accomplishment, and a tendency to focus on internal politics, sometimes even internecine warfare.

2. Boards that have the self-discipline to stick to setting the strategic and policy context for the nonprofit's work, and who do not override the deliberative thought provided form them by the executive and staff, will produce a better "governance product" that is more useful to the organization. On the other hand, the executive and staff need to do the essential work of strategic planning, and find ways to involve the Board in doing what the Board does best: brainstorming alternatives and options, and telling stories. So the Board would not be asked to do the deliberative thought that individuals do best, but would focus on the essential tasks that can be accomplished by brainstorming and story-telling: determining what is good for the future well-being of the organization, setting policy and limits for the executive's work, gathering resources that undergird the organization's mission accomplishment, and managing the executive's conformance with policies set.

3. Individual charity founder/executives will do well to learn, especially when it doesn't already come naturally, to live within, and even thrive on, the boundaries and limitations set for them by the two critically important groups of people in the organization's life: boards and donors. They must have the self-discipline to help the board do its brainstorming and story-telling in creative ways that result in decisions that are truly helpful to the nonprofit. They must also be involved in the sometimes complicated process of preparing and setting up every decision the board must make in such a way as to assist the board to make the very best decision possible on each issue that comes before it.

4. Individualistic nonprofit founder/executives will also find greater success in moving ahead with deliberative thought and the strategic planning necessary to do things like investing in fundraising infrastructure from day one, staying away from too much "foundations and fun" and getting involved and engaged with the individual and family donors whose support is critical to the organization's work throughout its existence.

In the event, self-discipline within each of these two critical roles is the key to success for both boards and founder/executives of nonprofit organizations. Boards whose members are wise and self-disciplined enough to do what groups do best and stay away from trying to act like individuals, accomplish better governance. Founder/executives who learn how to mesh the individual effort of deliberative thought and laying strategies into the lives and process of governors and donors alike will steer clear of strategic and fundraising trouble down the road. It takes two to tangle, and the proper role of each involves a great deal of self-discipline.

And with that thought, dear readers, I hope you have a wonderful holiday and I'll see you in the New Year with more thoughts about "All Things Fundraising."

The "Individualist" vs. "People-oriented" Founders of Nonprofits

Before we start today's blog post, let me take a moment to wish you a wonderful and personally satisfying holiday and a prosperous and really fun-filled New Year ahead. I'm going to take a week off now and won't be back until January 2nd after the post this afternoon.

The issue we're dealing with today was raised in a most interesting conversation I had with my wife, Bonita, the other day. She has very often been able to help sort out some of the deeper issues we've faced together in ten years of helping charities raise more money, and I do so appreciate her ability to analyze what's going on in difficult situations. That's why we're such a good team.

Well, we got to talking about charity start-ups and the motivations of their founders, and we tripped across this little problem: It seems the founders of new charities that have come to our shop can be divided into two types. There may be more out there, but these are the two we have seen.

One type of founder is very people oriented, and is open to the community's leading, able to freely communicate with others, receive their guidance and nurture, and return the favor with loyalty and gratitude. For these folks, amity and friendship take precedence over, or are able to inform and alter, self-initiative and personal drive. We might say that these folks are very "people-oriented;" they seem to love to congregate together, rely on one another for self-image, and for the clues to life's possibilities, dilemmas and hardships, and set group-determined standards of conduct and performance.

The other type of founder we've seen over the years is more oriented towards being an individualist, may actually be driven to individual effort, is often rebellious against the community and the ways it tends to delimit and impose its will over the individual's drive and impulse. These people could not be typified as "people lovers," and they don't tend to like the ways groups of people or communities act when they are together. It's not that they're "loners" necessarily, but when you hear that one of the reasons they want to form a new charity has to do with the fact that they want to get away from group (read "board") decisions, group pressure, etc. you know you are dealing with a person of this more individualistic type.

For purposes of this discussion, and for want of a better typology at the moment, let's just say that the first set of founders are more "people oriented" while the second group tend to be more "individualistic" in their approach.

Here's the crux of the matter, then: If you find yourself within a community (almost any kind will do: geographic, religious, interest group, political, educational, whatever) and you are of the "individualistic" persuasion, then when you start developing an idea about how you can serve the pressing needs of a specific group of people with your talents and experience, you basically have two options. You can start up a business and charge a fee for service to those who can and want to afford that service. That's the most "individualistic" expression you can have in our society. Or you can start up a charity and give the service for free.

but, if you start up the charity to give away the service, then you are immediately thrust back, again to relying on the community, and you will, like it or not, be governed by the community's needs, wants and values. That includes governance by a group of people (the Board); it also includes the donations you seek and must have for your charity to survive and thrive.

That is not going to sit well with the "individualistic" type of nonprofit founder. It is something they will assiduously try to avoid. But it will happen in many ways, chiefly through the phenomenon of Board governance (where the group manages or supervises and evaluates the performance of the founder/executive), and through having to defer to, relate to, cultivate and solicit the wider community of donors. A further problem complicates the picture: individuals and families have most of the money you will need, and foundations and corporations will have a lot of institutional strings attached that make your life difficult. Out of the frying pan, into the fire!! The more 'individualistic" type of founder is going to rather naturally run into strategic difficulty when setting up a nonprofit organization; it's just "the nature of the beast."

You see where we are? The choice of relying on "foundations and fun (special events)" for support, and the choice to form boards that are going to be naturally subservient to the founder/executive, is a strategic choice that is a natural choice that comes out of an orientation that is essentially antagonistic towards community, one that is essentially more "individualistic" rather than community- or "people-oriented." The problem comes down to this, once again, that running a charity on "foundations and fun" as a support base, and denying the charity true governance by a "community" that is a board of directors, just will not succeed in the long run. Trouble is around the corner and not very far down that street.

Let's deal with the "people-oriented" ftype of ounder this afternoon....

How the Independent, Entrepreneurial Founder of a Nonprofit Depends on the Public for Donations

So, really, why not set the "charity" up as a business, run it yourself the way you want to, and be done with it? Well, of course nobody would or could purchase the service, such as literacy education, training for developmentally disabled kids, finding lost puppies or rabbits a home, etc. So they are left with the option of starting up a new nonprofit to get done what they want to do.

But here's another angle on this: If the answer is that the easiest course is to ask the public for the money to offer the service free, then why not do the strategic planning necessary to get the fundraising process started on the right foot from the very beginning? If you're going to depend on the public's generosity and pocketbook to help you do your service to the poor, hungry or illiterate, why not forgo the satisfaction of mission accomplishment long enough to start take the strategic step of cultivation and solicitation of the donors on which you're going to depend right from the start? Why not build fundraising infrastructure right from the very beginning? It doesn't make sense to start teaching or healing or exhibiting or pet placement first, and then give only hindsight and a few crumbs of resources to your fundraising effort, when, in fact, you're going to need that public, individual, family support in increasing amounts as the years roll on.

Well, the most common response that I've heard to this is that "the foundation I just applied to for a grant is adamant that they want all their dollars to go to mission accomplishment. We only have about 10% we can use for administration, and they do not want any of their dollars to be used for fundraising – that would be anathema to them, and we would lose the grant. Besides that, we want to be able to tell our sponsors for the golf event and the auction that their money goes to serve people, not that it goes for fundraising" So you can see where this dialogue is going to go, can't you?

The situation is set up as an impossible proposition right away. Nobody wants to fund fundraising. And in their haste to find the "low-hanging" fruit (mostly defined as foundations and special events) they have failed to notice that the foundation or the imagined sponsor is seen holding the "sword of Damocles" over their heads and making it impossible for them to move strategically in the ways they need to do before moving ahead with accomplishing their mission with their target audience. It's a catch-22 situation, precipitated because the founder is unwilling or unable to take the time to do the strategic planning necessary to work through this dilemma right from the start.

Ah, but we now need to back up a bit and discuss a really thorny little issue that has to do with the motivations for start-up founders as they come to their work. We'll tackle that tomorrow.

More on "Why Not Start up a Business"

OK, so we've asked that fearful and mostly mis-understood question: "Why not start up a business rather than a nonprofit?"

That's not an idle question; and the answer to it is often very revealing. It gets to the heart of the motive for wanting to start up a charity in the first place. Most people tell me right away that the only way they see the mission they want to accomplish can be supported is by using other peoples' money to do it.

So, number one, right off the bat, they're off to a bad start by placing themselves in a situation where 1) they haven't tested their mission concept within the community to see if there is a groundswell of heightened awareness within the community and the financial resources that people are willing to prioritize to make this mission happen over many years.; and 2) they are nevertheless intent on relying on public support to make this thing go and give it the support it will need to survive and thrive. This is a strategic contradiction, and, very frankly, a mistake.

In trying to push the would-be founders of this new nonprofit, I suggest that setting up and running a business is generally a lot easier than establishing a nonprofit organization. And they are often aghast that anything so crude might be suggested by a fundraising consultant. "how can you suggest that!?" goes the response. "Don't you know that we can't charge the families of these [illiterate kids, or poverty-stricken families, or whoever is the target audience]. They could never afford to pay!" And indeed that's probably so. But which is easier? Setting up a fee-for-service business, or asking the general public for money to help you give the service away free?

Either way, part of the answer is that we must take a serious and strategic look at what this will mean. We're going to have to delve into what the extent of the need is, what services we're going to provide, and how much it will cost over a 10-year period to provide service to whatever percentage of the market we think we can reasonably serve. Then we're going to have to cost out how much financial support the service we provide to each member of the target audience will take. Then we have to go to the marketplace – of either purchasers or donors – and determine what the extent of that population is and how much they might reasonably be expected to pay or give. And we will need a marketing plan that will continually motivate and compel either the buyers or the donors to continue their support for significant periods of time.

Strategically, the issues are the same for setting up a business as for setting up a charity. With one exception: governance. That's the big one. Because in a business the entrepreneur is his/her own governor, but in a public charity, the board of directors is supposed to govern. And one thing I have learned from working with many of these start-up founders is that they do not really want to be "governed" by anybody, especially if they are already coming from serving in a nonprofit situation and have grown "sick and tired," as they often say, of the intrusive way their past boards have nosed into operations and stayed away from true governance and strategic planning. "This time it's got to be different," they say. But, in reality, they are setting themselves up for serious trouble down the road, if not complete failure.

But we have still more to do on this little problem, later this afternoon…

Why Not Open a Business Instead of a Nonprofit?

I received an email from M. McElroy of Brighton, MI, the other day that speaks to this examination of start-up charities that get into fundraising problems early in the game. She related the following story, in which the names have been changed or deleted to protect everybody concerned:

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

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

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

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

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

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

"Strategic Planning? What is That!?"

I remember very well the first interview I had with one particular board that was calling in a consultant because they were in fundraising trouble. The members of the board all agreed that while they knew what they should have been doing, they hadn't done it. What did they want the consultant to do? Tell them what they already knew; and presumably infuse some kind of new motivation into them that would compel them to take the steps they knew very well had to be done; and hold their feet to the fire while they took those steps.

So what do we have here? Three strategic mistakes. First is the fact that the founder/executive did not test to see if there was a significant groundswell of community support that would provide many years of continuing support from individuals, corporations and foundations. The second mistake was that the board of directors was hastily put together by the founder/executive from a relatively small pool of friends and acquaintances and people he/she could control. The third mistake was that there was no early investment in fundraising infrastructure that would support and lead directly to a multi-faceted fundraising program headed by a solid major gifts effort among individual donors.

In previous posts we have dealt with the matter of how the board should be recruited and structured, given a written job description and performance standards, and allowed to really be the governors of the organization. Now let's deal with lack of financial support – the way these start-ups get into financial trouble within approximately 5 years of their having been founded..

The root of the problem as I see it lies in the fact that when the nonprofit was just starting up, it was the idea of the founder, but not a pressing and urgent need felt by the community at large; there was no groundswell of community perception and desire for this need to be addressed. Consequently, here we have a service being performed, but few people to support it.

This has resulted, in my view, in a lot of "boutique" or "niche" charities coming into being to address specific needs that are generally unsupported by the communities in which they exist. This means that the funding available to each of them is relatively limited and, most likely, will not last for years to come. What are these founders thinking of? Obviously they're not thinking of the long-term practicality of running a fully functioning nonprofit.

The problem is exacerbated by the tendency of the founder/executive to eschew investment in fundraising infrastructure, however elementary, and further developed with the decision to forego solicitation of individuals on a regular, persistent and consistent basis early in the game. But you may ask, "Why are you being so hard on the founder? What do individual donors have to do with a start-up charity?" Well, individuals give over 75% of the money gathered by nonprofits in this country every year. Corporations give about 5%, foundations give about 8 to 11%. So the "easy" money, if indeed that's what people think it is, goes quickly. The mainstay of a nonprofit is going to be its individual donors.

So my question to start-up founders is "Why don't you go spend time and resources where the money really is?" And a second question: "Why don't you start with strategic planning, and make that activity a regular involvement throughout the life of the nonprofit, right from the start?"

We'll continue on this thread in a bit. But now we have to deal with an email response on this topic. We'll do that this afternoon.