Nill's Amazing Truths of Fundraising: A Series (Part 1)
Author's Note: This series of articles grows out of a session I conducted at the CharityChannel Summit 2003 in Palm Springs in March. In this series, I will present a strategic perspective on fund development that will, if adopted, substantially increase the volume of funds raised in the near-, medium-, and long-term. Warning: My perspective does not come from a text book on fund raising. Rather, it is a perspective gained in my two decades in the trenches, where I've built, managed, and/or advised several hundred fund development programs. My having a front row, center seat at CharityChannel these past 10 years, where I've carefully followed thousands of forum submissions around the topic of fund raising, convinces me that it's more important than ever to gain clarity on the role of the fund development function for nonprofit organizations and educational institutions. I hope this series will stimulate new thinking and help more than a few substantially to increase fund-raising effectiveness.
I will start with a simple and to some, startling, premise. The fund development officer—especially the officer in charge of the development program—is measured on how much money his program raises. Period.
To those outside the nonprofit world, this may seem rather obvious. Yet, in the strange calculus of our sector, development officers often live in a pink bubble where the bottom line is not the bottom line. When asked to define their roles, too many believe that their job is to cultivate prospective donors. And cultivate. And cultivate some more. They tell their superiors that their program is progressing despite anemic results in the one true measure of their effectiveness: dollars raised. Their superiors, too often snowed by the "development speak" of the development officer, acquiesce for a while. Eventually, the development officer's lack of results becomes apparent, and management casts about for a replacement. And the cycle starts over.
The role of cultivation is one of the least understood in development. In a future installment, I will show where and how it fits. Suffice it to say, at this juncture, that cultivation is a means to an end. If properly understood and applied—too often, it isn't—cultivation is an essential tactic. However, cultivation is not the measurement of the success of the development office. Dollars raised is the only relevant measure.
In this series, I will not speak in terms of "major gifts" or "planned gifts." These terms come with too much baggage that clouds thinking. Rather, I will focus on total of funds raised by a development office. To the extent that I attempt to characterize a gift type, I will use "big gift" and "small gift." I will define a big gift as one that approaches or exceeds six figures given by an individual, and a small gift as one that doesn't. That is rather arbitrary, I know, but it is what I will mean, in the series, when I speak of a "big gift" or "small gift."
That brings me to Nill's Amazing Truth of Fundraising #1:
Nill's Amazing Truth of Fundraising #1 : It is better to receive a big gift than a small gift.
Which is more valuable to a nonprofit organization, a small gift or a big gift? It is a central principle of this series that it is better to receive a big gift than a small gift.
I know, I know. This seems obvious, right? In fact, in this series, I will present quite a few of my immodestly-named "Nill's Amazing Truths of Fundraising." Each will seem obvious. Yet, the fact is, far too many development officers deep down do not believe them, or ignore them for one reason or another.
Too many development officers focus on the spiritual aspects of giving. They believe that it is just as valuable, or nearly so, for a person of modest means to give a small but sacrificial gift as it is for a person of substantial means to give a big gift. In a spiritual sense, they are right. There is something more laudable when a person of modest means gives sacrificially—even though the amount was not significant. Indeed, I once taught a Sunday School lesson on this very thing, a lesson drawn from the New Testament. But that misses the point. Here is the point, which I dub Nill's Amazing Truth of Fundraising #2.
Nill's Amazing Truth of Fundraising #2: It is more important to raise big gifts than it is to introduce "philanthropy" to the masses.
Development officers are not employed to introduce philanthropy to the masses. Development officers are being paid a salary to attract funds. To the extent they are spending their finite time on introducing the joys of giving to persons of limited means, they are squandering the resources of their employer. They are failing in their duty to the organization that employs them.
In my view, development officers owe a high duty to their employer to efficiently and effectively raise funds, not impart spiritual lessons. (In a future installment, though, I will describe how things change within the context of faith-community "fund raising.")
I summarize this as Nill's Amazing Truth of Fundraising #2: It is more important to raise big gifts than it is to introduce "philanthropy" to the masses.
I have, over the years, spoken to hundreds of development officers at all kinds of nonprofit organizations and institutions. In programs that are struggling, there is a common theme: Development officers are spending as much or more time cultivating donors who can afford to give, say, $100 or $500 a year as with donors who could give big gifts. When asked why, they say things like "all supporters are equally important to us" or "John is young and if we get him used to giving to us, some day he can afford to give much more" or "once we get them into our system, we'll move them up the ladder to larger and larger gifts."
It is in this area that the single biggest mistake of ineffective fund development programs may be found. There is a failure to understand that the key to effective fund development is to focus on those who have the capacity to make big gifts. Instead, we see fund development officers wasting inordinate amounts of time cultivating their own board members or trustees in a pursuit of gifts, trying to educate them on gift techniques, and trying to motivate them to do gift solicitation. We see annual-fund programs that devote resources to large numbers of individuals who can afford to give only small gifts, only accidentally producing the occasional big gift. We see special events, which by their nature expend precious development resources and produce only tiny returns. We see grant application writers expending significant organizational resources in pursuit of one of the statistically smallest returns: corporate and foundation grants. There is more, but that is enough for now.
This leads me to my next Amazing Truth:
Nill's Amazing Truth of Fundraising #3: It is better to spend $1 in salary on a development officer to get $1,000 than it is to spend $1 to get $10.
The thing about fundraising is that there is nothing like it in the private sector. In the private sector, a business that produces widgets, for example, requires a substantial investment in capital and resources and yet will produce only a relatively small percentage return against the capital invested. To make a lot of money, it is necessary to sell lots of widgets. Businesses that fail to earn a profit go out of business. Simple.
In fundraising, however, the return is, or can be, considerably higher on a given investment in fund development resources than in producing widgets in the private sector. In more efficient development offices, success is measured not as a fraction of the resources invested, but as multiples of resources invested. It is because fundraising is so inherently "profitable" that so many fund raising methods work. Even the most inefficient, ill-focused fund development office is unlikely to actually lose money and may well accidentally produce just enough big gifts to give the appearance of success.
The central criticism I have for many fund development programs is not that they aren't raising money, it is that they are so ill-focused in their operations that they are falling far short of their potential. If they were to focus their efforts on the segment of the population that has the capacity to make big gifts, and reduce or eliminate the expenditure of resources devoted to seeking gifts from those who don't have the capacity to make big gifts, they could do one of two things: They could reduce their expenditure of resources to achieve the same level of giving, or they could keep resource expenditures at the same level and substantially increase funds raised.
So, where should fund development offices focus their resources? Simple. Rich people. Not just rich people, but rich, older people.
In the next installment, I will start with Nill's Amazing Truth of Fundraising #4: Rich people have more money than others. No kidding. They do!