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Fundraising as Governance: True, False, or It Depends?

Okay, let’s all agree that the board’s primary job is that of governance. And if you don’t agree, fight with me on your own time. Whether we like it or not, the conversation about the board’s job will eventually turn to fundraising. And, when it does, some board members invariably get a little uncomfortable. Why? Because they know—or fear—that one of these days, if not today, somebody’s going to ask them to raise some money. And lots of people just hate, fear, and freeze up when they’re asked to do so.

But the board needs to be involved in the fundraising effort somehow, doesn’t it? The answer is yes. But first we have to define what board involvement really means. You’re not being fair to your board—or if you serve on a board, you are not being fair to yourself—when involvement in fundraising only means “go out and browbeat your friends into writing a check.” Ugh. I won’t do that either. There are better ways.

Important!

Boards really need to put some effort into defining their fundraising role, which is not about going out and browbeating friends into writing a check!

Boards really need to put some effort into defining their fundraising role. They need to understand that it’s an integral governance responsibility to set direction, exercise leadership, and hold the CEO accountable for the performance of the agency. And this means setting financial direction, establishing income objectives, and maintaining accountability for funding the organization at a level that ensures the organization’s sustainability and its potential to build capacity.

This article reviews the five primary levels of fundraising involvement that every nonprofit board ought to consider. The first three of these levels should be embraced by every board; they are mission-critical elements of governance. The last two levels relate to direct solicitation and cultivation of donors. These two levels are not related to governance; they are “optional.” In other words, they’re not required governance tasks but boards may choose to take them on.

The Essential Levels of Involvement

Let’s begin by reviewing the essentials . . . the three levels of board involvement that are part and parcel of effective governance.

Level 1: Set Fundraising Targets

Level 1 is the lowest level of fundraising involvement for the board, but it is highly strategic. The board should participate in setting goals and objectives for income to ensure that the operations of the organization are being funded adequately and properly. This sort of work is a normal part of strategic planning anyway. Somebody needs to create the marching orders with a realistic operating budget and projections for income for the future. Whether you serve on the board of an all-volunteer organization, or the institution is large and has a big professional staff, a classic and valuable role for the board is to participate in setting fundraising targets.

I’ve been conducting a long-term study of fundraising effectiveness. So far I’ve found that only a minority of those nonprofits participating in the study have established and documented their fundraising targets. Working without a target or goal for total income, total number of funders, or proportions of funding diversification is really like working without a net. The board is not fulfilling its governance charter unless it sets these targets as part of the strategic plan.

While it’s usually the staff’s job to prepare a budget, the board needs to oversee that budget, considering whether adequate funds have been allocated for all the right things. Sometimes staff either overlooks key expenditures (such as the cost of fundraising), or understates them (such as the cost of designing and maintaining a website). The board can contribute by having a big picture view of what it should take to run operations at desired levels of capacity, challenging line items that seem to be over- or under-estimated and otherwise bringing a more objective point of view to the budgeting process.

The board need not micro-manage, looking over the staff’s shoulders trying to save a few bucks here and there on office supplies. But it is the board’s job to collaborate with staff in order to define fundraising goals that satisfy operating requirements that everyone can live with. Board members are likely to have a broader perspective since they act in an advisory role, not as staff. They have the objectivity and often the business acumen to set more ambitious targets—erring on the side of funding the agency at more generous levels rather than going about it with a cost-saving mindset. When the board sets out its recommendations on the amount of money to be raised and how that money will be allocated, it makes a wonderful contribution to the agency’s staff morale and ability to perform.

Level 2: Monitor Fundraising Outputs and Achievements

Level 2 represents a slightly higher degree of involvement, but still doesn’t require that individual board members go out and “make an ask.” This focus area is directly connected to the board’s general fiduciary role. Rather than being the passive recipients of a boring fundraising report, board members should review progress against the fundraising plan regularly. This means, at least once a month, scrutinizing the delta between planned and actual results. A monthly review is just often enough and not too often. After all, out of sight, out of mind. It’s too easy to lose focus and motivation if you review progress quarterly or—worse—annually. A monthly review provides enough insight for the board to recommend course corrections and observe the impact of those changes. If the board doesn’t meet monthly, then it would be wise to create a committee to conduct the monthly review. These reviews can be handled by web or telephone conferencing for the sake of convenience.

Practical Tip

Suggestions for Monitoring Fundraising Performance

Ask the CEO to prepare a spreadsheet showing annual and monthly fundraising targets, including total income from all streams combined, as well as by income stream. The spreadsheet should also include the current actual performance for total income as well as per category. (See Illustration 1.)

Ask the CEO to prepare a simple report showing all current fundraising opportunities, broken down into several simple sequential stages, such as “newly opened opportunity,” “gift/grant proposal presented,” “gift/grant proposal under review,” “proposal accepted.” The report should list the opportunities by name, date first entered, estimated amount of gift, and latest stage achieved. (See Illustration 2.)

Simple reports like these help to avoid so-called “management by anecdote” and offer greater insight into the efficiency of the fundraising operation.

Remember, governance includes accountability, namely holding the executive director and the board itself accountable for achieving the organization’s goals and objectives. Provide a way for the board to monitor progress against the fundraising plan, and your board will be able to exercise such accountability based on realistic, timely, and accurate information. With no key performance indicators that measure and monitor both activities and results, accountability is really tough to create.

Illustration 1: Fundraising Target Report

Income Categories

Annual Target

Month 1

Month 2

Month 3

Annual

Year to Date

(Thousands)

Target

Actual

Target

Actual

Target

Actual

Target

Actual

Major Gifts

$75

$25

$37

$25

$18

$25

$55

$75

$110

Individual Donations

$75

$25

$14

$25

$29

$25

$35

$75

$78

Grants

$50

$10

$6

$10

$42

$30

$10

$50

$58

Corporate Gifts

$25

$5

$4

$10

$19

$10

$0

$25

$23

Corporate Sponsorship

$50

$0

$10

$25

$8

$25

$0

$50

$18

Fee-for-Service Income

$25

$5

$5

$10

$14

$20

$25

$25

$44

Total Income

$300

$70

$76

$105

$130

$135

$125

$300

$331

 

Illustration 2: Pipeline Report

Funding Source

Purpose of Gift

Forecasted Income

Type of Gift

Current Opportunity Stage

M. Moneybags Annual Campaign $25,000 Major Gift Gift Proposal Provided
D. Dollars Annual Campaign $45,000 Major Gift Gift Proposal Provided
B. Bigbucks Annual Campaign $100,000 Major Gift Gift Proposal Under Review
Scrooge & Scrape Law Firm Gala Program Prime Sponsor $90,000 Corporate Ready for Proposal
Acme Widget Gala Sponsor $75,000 Corporate Ready for Proposal
D.O. Nation, Inc. Gala Title Sponsor $75,000 Corporate Sponsorship Paid
Department of Redundancy Dept. Federal Behavioral Health $150,000 Grant Invited to Bid
Fat Cat Fund Capacity Building $47,500 Grant Invited to Bid
The Binky-Blanky Foundation Neonatal Care Project $50,500 Grant Grant Application Provided
F. Flintstone Teen Program $100,000 Grant New Opportunity

 

Level 3: Offer Guidance on Funding Priorities

Level 3 is the last governance-related area of the board’s fundraising role. When the board sets income targets and monitors outputs and achievements, it is also in an excellent position to re-assess funding priorities. Sometimes staff members become so close to the daily grind that they can’t see the forest for the trees.

With its ears and eyes in the community, the board is poised to evaluate the popularity or achievements of various programs and services. For example, maybe Program A is losing its audience even though the organization continues to fund it at a high level, while many more people have been clamoring for service in Program B, but it has been under-funded for several years and struggles to handle its current client load. These are the sorts of issues where the board’s perspective can be pertinent.

Furthermore, by offering guidance on funding priorities, the board is utilizing its governance authority. Board members, thanks to their varying outlooks and expertise, bring differing viewpoints on how the institution’s money should be spent. Discussions about funding priorities will enhance the board’s governance role and raise the level of collegiality and mutual respect between board and staff.

The Optional Levels

It’s very popular to have the board involved in direct solicitation activities, but let’s be clear . . . these may be desirable activities but they are not by any means governance activities. They are optional to the governing role. Whether you adopt them for your board will depend on a number of factors. For instance, some organizations need their board members to raise money and others don’t. Some boards and some board members are ready to take on the role of direct solicitation and cultivation of donors, while others are nowhere near ready. The advantage of involving your board at these levels, however, is that it’s likely that board members have connections they could leverage and people they could solicit. Such connections certainly make it easier to win over additional funding sources.

Let’s review what would be involved in each of the final two levels of board involvement.

Level 4: Leverage Connections

At Level 4 board members start to do the heavy lifting of fundraising. Many board members are local business leaders or well-known philanthropists. Folks like these tend to have lots of contacts and connections, people whose names they can share with the agency as potential leads for cultivation. These introductions are valuable to the fundraising effort since they turn “cold” calls into warm calls. Such leads are already pre-qualified by the referring board member and thus it’s easier to get positive responses. By simply sharing their contacts, board members make a significant contribution to the fundraising effort.

However, it’s not uncommon for board members to resist requests to leverage their connections, or even to become defensive when such requests are made. So it’s important to be respectful and diplomatic when asking for introductions, making clear why the request is being made, and how the introduction will be used. Board members themselves must appreciate that there is no real downside to introducing their personal and business connections to the organization they govern. Such introductions are opportunities to bring attention to the agency in a positive way and improve its standing in the community—whether the board member’s contact gives money or not. Simply extending knowledge about the institution’s good work is all that’s being asked.

Finally, remember that some board members may lack influential connections in the community. For example, some community development organizations may recruit board members to represent the disadvantaged populations served. These board members deserve respect for the contribution of their perspectives. Make sure to treat them with esteem and avoid making them feel awkward or left out.

If no one on your board has any such valuable connections, however, it might be time to rethink the make-up of the board and recruit others who can and will utilize their networks.

Level 5: Raise Money for the Organization

Level 5 is the deepest level of involvement that board members can have in fundraising. And there are a couple of ways to fulfill this role. One is for the board member to play “supporting actor,” accompanying a staff member on prospect visits to reinforce the value of the call. Another is for the board member to play the “lead” role by establishing the relationship, cultivating the gift, and closing the deal. In either case, make sure that the organization has put together a fundraising toolkit so that donor cultivation is not being reinvented every time.

Who’s In Charge Here? Why Peer Solicitation Can Be a Challenge

Boards that embrace their governance authority will understand that the board is “the boss” and that the executive director is the board’s employee. This works out just fine until we get to the point of peer solicitation. Then it can get confusing.

Fundraising requires a lot of coordination, planning, and activity-tracking. These complex and ongoing tasks really deserve to be managed by a staff executive, where there is one. So when the board agrees to engage in peer solicitation, even simply to leverage their own connections, we have a form of circular management where the staff member holds the board accountable to a previously established protocol.

The best approach for peer solicitation may be for the board to define the protocols with staff input, including thoughtful definitions of the staff’s responsibilities for coordination and other forms of support. Include specific performance targets for peer solicitation, such as targets for number of peer-solicited prospects and total income desired from this category. Once the protocol and targets have been documented, the potential for board/staff conflict will recede.

The board’s fundraising role is first and foremost related to its governance responsibility for ensuring sufficient resources to meet the organization’s vision. Boards contribute to consistent fund development not simply through peer solicitation, but by governing the amounts of income raised, the speed and efficiency with which income is acquired and retained, and the priorities to which it is assigned. Levels One through Three are true governance obligations that oversee the agency’s fundraising function.

But once the board elects to act at Levels Four and Five—leveraging connections and participating in peer solicitation—its members venture out of the governance role. They choose optional responsibilities that have little to do with governance, no matter how desirable the outcomes may be. Should your board decide to participate at Levels Four and Five, it must prepare its priorities, preferences, targets, and methods for doing so ahead of time, with the participation and support of the organization’s staff.

Without such careful analysis, thought, and preparation, there is a high risk of conflict and frustration around the board’s role in fundraising. Both the board and the staff may point fingers or hold unrealistic expectations of the other party-or even of themselves. But when the board addresses fundraising issues from a strategic perspective, wonderful things will happen.

Ellen Bristol

About the Contributor: Ellen Bristol

A classic late-bloomer, Ellen Bristol spent the first twenty years of her career selling zillion-dollar computer systems. Only after she launched Bristol Strategy Group in 1995 did she discover her true calling: building organizational capacity with a focus on the capacity of the fundraising function.  Since that big “aha!” moment, she has become a true performance-management geek and a nut for metrics.

Ellen started her consulting practice thinking she would consult with individual nonprofits and small businesses, but soon found herself building methodologies, conducting research studies, and writing books on her work. Today she is the proud developer of Fundraising the SMART Way™, a fundraising practice combining research, technology and innovative management practices, to bring about predictable, consistent income growth. Her research project, the Leaky Bucket Assessment for Effective Fundraising, is the largest popular study of fundraising-staff productivity.

Charity Channel Press published her first book about this study, co-authored with Linda Lysakowski, ACFRE.  It’s called The Leaky Bucket: What’s Wrong with Your Fundraising, and How You Can Fix It! She has also written a book on the SMART Way methodology, numerous articles and white papers, and benchmarking studies on fundraising productivity.

Contact Ellen at [email protected] or by phone at 305-935-6676.

 

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