Aligning Nonprofit Strategy with Donor Preferences

Last week I attended the "What Really Matters" webinar from Abila to discuss the findings in their latest Donor Engagement Study. There were a few surprises in their latest findings, and several confirmations of what we've always known, or at least should have sensed.

On of the key points that should be obvious, but bears repeating, is that Content is King. What you say is more important than the frequency with which you communicate, or even what medium or channel you are using.

And, when it comes to that content, what donors are most interested in is stories. Again, many of us have been harping on this for years, but too many nonprofits have still not heard the message: Your data may help get a signature on a large check, but to get to that point you need to share just one personal story of how your nonprofit has helped one individual.

When it comes to Abila's findings that should come as a wake-up call, the most startling is the how misaligned most organizations are with the preferences of their donors.

For example, while many nonprofits are dividing their donor lists by gift range, and are differentiating their strategies for large versus small donors, only 3% of groups are always dividing and strategizing differently by age group.

Age of donors matters! Each generation has different communications preferences, from what channel (mail, email, social media...), to the frequency, to the message. If you have the same strategy for reaching millennials as you do for their grandparents, one of them (at least) isn't going to be impressed.

As presenters Tad Druart and Rich Dietz pointed out, our donors are consumers as well, and they are used to communications from companies like Amazon or eBay that are highly differentiated and targeted based on dozens of factors. When we, as nonprofits, treat all donors like just another member of the herd, donors are noticing and turning away from us.

There's a lot more in the report, but I'll leave it up to you to discover. You can visit the Abila.com website to download the full report (it's free).

Did LinkedIn help nonprofits & leave nonprofit professionals behind?

Some time back I blogged about LinkedIn's (then new) Board Connect Service as a great new resource for nonprofit organizations. In the couple of years since, LinkedIn has built upon and expanded their vision of "LinkedIn for Good" and their offerings to nonprofits. I have taken part in a couple of free nonprofit technology trainings provided by LinkedIn and have enjoyed meeting their enthusiastic and caring team.

One of the great nonprofit tools they have is being able to search for professionals who are interested in volunteering or board leadership opportunities by their job skills, education, location, industry, and a host of other factors. Related to that, nonprofits can also use LinkedIn's job posting function to advertise for volunteers at 90% discounts.

As great as that is, and as much as I recommend the organizations I work with check that out, that's also the source of a potential problem.

It has recently been pointed out to me that these volunteer listings appear along with regular employment opportunities when LinkedIn members conduct a search.

On the plus side - and I'm sure this is why it was designed this way - it puts your volunteer listings alongside in front of job hunters who have not previously thought about volunteering. It grabs their attention and presents them with an opportunity they might otherwise have missed.

On the down side, for those of us who are nonprofit professionals, and who may be looking for (paid) career opportunities, it has made LinkedIn nearly useless as a job hunting tool. Simply put, the number of volunteer opportunities that come up in any search so greatly outnumber the (real) jobs that weeding through them all is a frustrating mess.

After learning of this problem I did a few test searches, from broad searches to highly filtered narrow ones. Each time I was overwhelmed with volunteer positions. In most of the searches I was finding only a handful of paid jobs for each 100 volunteer listings.

Using their advanced search tools, I was able to choose only jobs for experience levels of "mid-senior," "executive," and "director." While that dramatically cut down the total number of results, it still included volunteer opportunities.

To narrow my search to what should have only been paid opportunities, I searched for "Industry: Nonprofit," "Function: Consulting," and "Location: within 50 miles." Of the 146 results, there were only 4 paid jobs, and they were all listed on the final page of results. Of the four jobs, one was listed as being in Beirut, Lebanon... a little greater than 50 miles from my zip code.

It seems that with all their zeal for helping nonprofit causes, LinkedIn has neglected to take into account that it takes professionals who are dedicated full-time to those causes to make the organizations function.

Two suggestions:

1 - LinkedIn should make it easy to filter out volunteer opportunities. Yes, they do offer the ability to filter listings by salary range, but that is a premium feature to paid members only ($29.99/month), perhaps out of the budget for many nonprofit staff.

2 - LinkedIn could expand their LinkedIn for Good efforts by offering discounts to nonprofits on regular job ads as well. Perhaps not the same 90% they discount for volunteer opportunities, but something close to it. I know there are nonprofits hiring that I'm not seeing in my search results. Price is a factor.

The Business of Philanthropy - A Rant

I apologize in advance that today's posting here is going to be more of a rant than a helpful article, but I hope you will sympathize with my frustration. This comes from two articles I read yesterday that left me shaking my head, wondering if the world's gone crazy.

First, yesterday morning, I read Poor customer service at charities 'a key reason for high attrition rates', about a report released by Donor Voice called Donor Churn - How to stop it before it starts and why current approaches prevent this from happening.

Actually, I very much agreed with the thrust of the article and report, that you need to pay attention to your donors, and be responsive to their questions, before they drop you from their giving, not trying to make up after. The line that got me frustrated was this:

"Service in the non-profit sector is too often relegated to some distant corner of the organization and/or treated as a cost center."

Well, yes. It is a cost center! Donor relations is not free. The folks at Donor Voice know that - they make their living selling donor retention services to nonprofits. Not only is this not free, it is not program related either. It is overhead, and that's where my frustration lies.

With all the attention given lately to the overhead myth - the idea that looking at a nonprofit's ratio of overhead to program expenses is the best way to judge "effectiveness" - I found it baffling that this report could say their research finds donors want organizations to be more responsive to their inquiries, without mentioning that donors apparently don't want to cover the cost of that response.

If you've removed your phone number from your website to reduce inquiry calls (a finding of the report), explain why. If it was to save on overhead, say so! Or, just answer the phone, and educate your donors about the true costs of running your organization, and why your overhead is what it is.

But that article was just a minor irritation. What got me angry enough to write this rant was this:

Yesterday evening, I read the news about Lincoln Center getting set to rebuild - and rename - Avery Fisher Hall, the home of the NY Philharmonic. Fine. The hall was built in 1962 and renovated (and named) in 1973. I was built in 1961 and I could use a little renovation as well.

It turns out, however that the Fisher family isn't giving up their naming rights quietly or cheaply. While their original gift in 1973 was for $10 million, the ransom they will receive to release the Philharmonic from the deal will be $15 million (plus other perks).

Patricia Illingworth has summed up the situation perfectly:

"... Philanthropy is understood as the giving (and sometimes volunteering) for the love of humanity... The fact that the family required $15 million (plus other things) in order to relinquish their rights underscores that this is business and not philanthropy..."

The Fisher family received four decades of worldwide recognition, publicity, thanks, and kudos for their investment. Now they're also getting a 50% return on their money.

Not a bad deal for them. But what about the donors to the new hall? Who will be making the $15 million donation that won't produce a single note of music, and won't lay a single coat of paint on the rehabbed building, but will go entirely to the Fishers? Would you like to be the one making that pitch to one of your donors?

And what does that say to all of our potential donors about how our arts organizations (and other nonprofits) are being run? What does it say about how we manage our money or negotiate deals? No wonder donors are curious about our overhead rates and want to keep them low!

It's almost enough to make you want to remove your phone number from your website and stop responding to donors altogether.

Or, maybe, we could stop fearing our donors, stop babying them and trying to protect them from the realities of our world, and stand up to them when they have ridiculous demands that make a joke of philanthropy.

Top Three Takeaways from the Nonprofit Overhead Challenge

If you're not already talking about overhead, you should be, and you will be soon. Overhead, of course, is shorthand for what nonprofits spend on general management and oversight, fundraising, and membership development. In other words, anything that isn't directly mission-related programming.

Seems pretty basic, but there are often fuzzy lines between what we consider "overhead" and what we consider "programming" - a line that is not only fuzzy, but politically charged as more and more donors (individuals as well as foundations and government) are looking at our overhead-to-programming ratio as a means of judging our "worthiness."

Last Friday, I attended Stronger Together, a conference produced in collaboration by CalNonprofits, CompassPoint Nonprofit Services, and Nonprofits' Insurance Alliance of California (NIAC). Among the sessions I attended was The Nonprofit Overhead Challenge: Action Lab for Change, moderated by Jeanne Bell, CEO of CompassPoint, and paneled by Jan Masaoka, CEO of CalNonprofits, Hydeh Ghaffari, Partner, DZH Phillips, and Ann Goggins Gregory, COO of Habitat for Humanity Greater San Francisco. Here are my top three takeaways from the session:

1 - Hydeh Ghaffari: "The organizations showing 6% are playing with the numbers and the ones showing 60% need technical assistance."

Nonprofits have to educate themselves, and their staffs, about what qualifies as program, and what gets lumped in with overhead. Don't be afraid of asking your staff to complete more detailed timecards that accurately track how much time they spend in each program area, and when they are doing "general" or "oversight" work.

Learn what your true ratio is, understand it, and embrace it. You can't use a single rule-of-thumb ("14%!") to determine if your overhead is too high or too low. You need to understand the true cost of running your organization, and be able to defend when spending more on overhead is necessary to achieve growth and deliver on your mission.

2 - Ann Goggins Gregory: "Be willing to walk away from grants and contracts that have egregious reporting requirements and too strict limits on overhead. And share that reason, respectfully, with the funder."

A hard lesson - walking away from money on the table - but as a consultant I can attest to seeing many of my clients nearly ruined by contracts that cost more to administer than they were worth. Once you know what your true overhead costs are, be honest about them with your funders. If you need to subsidize a contract with other donations that cover the overhead, that's entirely fine and your choice, but you do yourself (and all of us) a dis-favor when you cover that up.

Remember, any contract that includes any Federal money (even when passed through your local municipality) has to include at least 10% for overhead. Is that enough? Consider that most service businesses run about 30-35% for their overhead.

3 - Jan Masaoka: This is important because there have been repeated attempts to pass laws saying too much overhead means a loss of nonprofit status.

In several state legislatures there have been moves (some more successful than others) to determine whether to limit tax-exempt status only to those organizations that have a low overhead. Whether or not your state has already discussed this or not, this is not a conversation that is going to go away anytime soon.

We cannot be afraid to talk to our legislators about why this is a bad idea, why overhead ratios are not the ultimate measure of a nonprofit's worthiness, and why ratios differ from nonprofit to nonprofit based on a number of factors. If we fail to act now to educate the public and the politicians, we risk losing our nonprofit status, and with it, our ability to achieve our missions.

Coincidentally, last week another collaboration was also bringing attention to the issue of overhead. GuideStar, BBB Wise Giving Alliance, and Charity Navigator released a public letter as part of their Overhead Myth campaign.

The members of the panel I attended Friday had mixed feelings about this. Many in the sector believe that the uber-focus on overhead is largely a creation of these organizations and their systems of ratings for nonprofits (particularly Charity Navigator). Jan was the most blunt, saying, "It's like the Gap saying 'Clothes don't matter, it's what's on the inside that counts'."

Jan is my former employer and a long-time associate and friend, but I'm a little more moderate in my criticism. I don't believe that they ever meant for overhead to become the single-most important measure of what nonprofits deserve funding. Still, it is undeniable that that is exactly what has happened. A study released today by the BBB Wise Giving Alliance found that "donors care more about how money is spent than results."

I have been in contact with the folks at GuideStar, offering this space for a guest blog from them about the Overhead Myth campaign. Hopefully we can present that soon, and continue this open dialogue.

Nonprofits as the Equalizing Force

Today is Blog Action Day 2014. Each year, BAD organizes bloggers from over 100 countries to write on a single theme for one day of coordinated action. This year's theme is Inequality.

As I searched around for a particular subject to write on, it hit me that I could not narrow it down to a single aspect of inequality that I could relate to work in the nonprofit sector.

I considered writing about education, noting the disparity in the range of annual per-pupil spending (from $6,206 in Utah up to $19,522 in New York - a range that is politically inspired at least as much as it is a recognition of the range in cost of living), or that, on average, states spend four times as much per prisoner as they do per student (talk about priorities!).

Of course there is economic inequality. We've all heard (and in many cases written) about the growing gap between the 1% and the 99%... Despite the election of a Black President, racial inequality still persists, as shown these past months in Ferguson and elsewhere, also pointing out inequality of justice... Do I need to mention gender inequality, including the most basic question of how we define gender and the gender of who we love? Yes, I do.

For each of these issues there is a nonprofit connection, with agencies and activists working tirelessly to right these wrongs. But I also realized that virtually all nonprofits are addressing some sort of injustice or inequality. Arts groups seek to bring beauty and hope to places where neither exists. Health nonprofits seek to heal those without access to insurance. The list goes on.

As I've written before, much of what the nonprofit sector is about is to address market failures: the operation of a free market society will always create a certain number of citizens who fall between the cracks. If there were economic equality and equality of justice in all areas of our lives, there would be no need for many of our services, a profit-driven model for providing other services, and no justification for our tax-exempt status.

By and large, the nonprofit sector exists to address inequality. But does your organization just put a temporary band-aid on those harmed by inequality, or do you work to change the system and eliminate inequality?

And, getting to my point here, do you vote in line with that mission? Election day is coming up in less than three weeks. For the last several years CalNonprofits has reminded its members and constituents of the power of their vote and encouraged them to "Vote With Your Mission." Of course, you don't have to live in California to appreciate, and act on, that message.

Study the ballot in your state. Think about how each decision on that ballot might effect equality in your community. And then remember to vote.