Sunday, January 27, 2013

Is Fundraising a Fail? New National Study Paints a Pretty Dim Picture of Nonprofit Fundraising

"‘The most significant regret I have in looking over my 15 years as a leader of two big philanthropies is that while we thought a lot about sustainability at the Open Society Foundations and at the Atlantic Philanthropies, we rarely made grants to strengthen organizations’ fundraising in a way that encouraged innovation and democratization."  
- Gara La Marche
CompassPoint and The Evelyn and Walter Haas, Jr. Fund released a national study last week, which presents a pretty dim picture of nonprofit fundraising.  Underdeveloped: A National Study of Challenges Facing Nonprofit Fundraising, shows an industry in crisis with:
  • too few qualified fundraising professionals;
  • long vacancies for Development Directors at many nonprofits;
  • lack of appropriate fundraising infrastructure; and,
  • lack of a fundraising culture at many nonprofits.

Fundraising is HARD.  This is not news. 

What is news is that there are trends across charities that point to real difficulties in nonprofit fundraising as an industry, i.e. this is not an organization-specific problem.  (You are not alone!)

What is also news is that there are marked differences between high and low performing nonprofits.

If you are struggling with fundraising at your organization (and who isn't?), there are things you can do to improve outcomes for yourself and your organization.  See, in particular, pages 21 - 27 of the report.

Also, check out my thoughts below on what the industry needs to do to ensure that all fundraisers and the organizations and causes WE love have the money and donors WE need to succeed!

1) Show fundraisers some respect. - In the same way that sales is vital to the success of any for-profit enterprise, fundraising is vital to the success of all nonprofits.  No money.  No programs.  It's that simple.  However, in many organizations, fundraising is not given it's due both from a compensation and leadership perspective.  This is VERY short sighted.  In my view, fundraisers should be the highest paid people on staff, especially since they cannot receive commissions for their work - a common practice in for-profit sales.  Money isn't everything but if you want A-Talent on your fundraising team, be prepared to pay and let these folks lead.

2) Don't give fundraisers unrealistic goals. - Goals for fundraising are often set by the finance department and this is a BIG problem.  Sure, bills have to be paid but setting goals by determining your Expense Line is a bad practice because fundraising is about more than cash.  It's about building and stewarding relationships over the long haul and relationship management CANNOT be measured by financial metrics.

"Nearly one third of development directors in this study reported that they have been charged with unrealistic performance goals. All experts agree that goal-setting should be a collaborative effort inclusive of the development director from the start. Moreover, performance expectations defined in financial terms alone deny the reality of what it takes to get givers, not just gifts, as Kim Klein reminds us. Expectations might include, among other dimensions of performance, the development and maintenance of the development department, cultivation and stewardship of relationships, staff and board relationship-building, and contribution to the vision, strategy and overall leadership of an organization."
Goal setting for fundraising should ALWAYS start with an analysis of your donor database, be done FROM THE BOTTOM UP, and include Non-Financial Metrics.
To set REALISTIC fundraising goals, ask these questions.
  • How many donors do we have? 
  • What is our median gift?
  • How much attrition can we expect in our donor base this year, i.e. who will NOT give?
  • How many new donors can we expect to acquire?
  • What is our capacity to steward and close new and old gifts?
  • What is our fundraising cycle?
By building your goals and budget FROM THE GROUND UP (Yes, I'm saying it again!) you will have a much more realistic sense of what your organization can raise at this time, in this economic climate.  You will also generate BUY-IN from your fundraising staff, since they are the ones setting the targets!

3) Fix the fundraising system. - Ask any fundraiser how they feel about their fundraising systems and you'll get an eye roll.

Most of the fundraiser I know HATE (I'm not being hyperbolic here) their databases.  This is partly due to the fact that nonprofits are under capitalized when it comes to technology and IT.  It also reflects the woeful lack of competition in the market for affordable nonprofit databases/CRM. 

I'm not sure how to fix the sector's fundraising systems but it's important to acknowledge the vital roll that your fundraising structure plays in your fundraising success!  It's nearly impossible to build a seamless fundraising operation without tools that INTEGRATE, provide STRONG ANALYTICS and REPORTING, and AUTOMATE repetitive but necessary tasks. 

Better systems would alleviate a lot of frustration in most development shops.  They would also allow for more time to FUNDRAISE.

4) Incentivize fundraising performance. - One of the real differences between for-profit sales and nonprofit fundraising is that incentives are not always aligned with performance.  For example, in a for-profit context, you can incentivize acquisition or prospecting by paying higher commissions on new deals. In a for-profit, you can also push revenue by providing healthy year-end bonuses. Fundraisers don't have the same incentive structure, i.e. often there is no upside (or downside) for performance and this is another problem for our field.  I'd like to see more nonprofits use creative, albeit ethical, incentives to reward fundraisers based on performance.

4) Create a fundraising budget. - It takes money to make money.  Again this is true in for-profits too.  The challenge is that in many nonprofits, 90% of the budget for fundraising is tied up in staff salaries.  This is maddening.  Fundraisers need marketing dollars to tell people about their organizations, travel budgets to visit donors, technology budgets to build solid operations (see 3 above).  Without these investments it is very difficult to scale your fundraising operation.

5) Make fundraising a team sport. - In the same way that you don't expect a single Program Manager to plan, manage, execute, analyze and report on your nonprofit program, you cannot expect one person to do Development.  Fundraising is a team sport.  Develop a culture and PROCESS where everyone can take part in pitching the organization, finding and stewarding donors, and "making the ask."

"The development director’s success is inextricably linked to staff, executive director, and board success. One of the tenets of a culture of philanthropy is deep and passionate engagement across the organization, which translates into shared accountability for the organization achieving its fundraising goals. Executive directors should consider setting clear expectations for staff other than the development director—identifying specific activities in which all can participate. One simple mechanism to reinforce accountability is to include development goals in the annual performance evaluation process for staff. Just as important, boards of directors—with strong leadership and modeling from the chair—should include fund development goal-setting as part of their own annual work planning and monitor their own performance regularly.
Again, fundraising is not easy but it is vitally important to the success of ALL nonprofits.
By identifying critical challenges facing most nonprofits and offering solutions for improving the nonprofit fundraising, we can enhance results for our field.

I hope that you will read the report, discuss it with your colleagues, and start improving your fundraising operation today.

Warmest regards,



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