Tag Archives: transparency

What Do Donors REALLY Want? Information!

Reposted from eJewishPhilanthropy – May 21, 2012

Nonprofit leaders face tremendous pressures today: living, operating and succeeding in a competitive marketplace of ideas, programs and services presents innumerable challenges. Donors who are guided by a passion for certain aspects of an agency’s mission and vision might be unaware, or unconcerned, about the everyday deliverables the agency must produce to achieve certain goals. Keeping both supporters and constituents happy is often a delicate dance.

Nonprofit leaders must continuously upgrade and strengthen their abilities to translate their mission into a “selling proposition” for a variety of interest groups. This selling proposition involves creating a case for support that clearly communicates what the agency does, their goals, and the methodologies used to achieve these goals.

All of these complexities must then be translated into “everyday language” and communicated in the fundraising context to donors of all shapes and sizes, from national foundations to individual givers.

In today’s economy, customers drive the marketplace, and in the philanthropic world, donors drive the discussion around sustainable funding. The essential question then becomes, “What do donors want?”

What are their motivations to give, and what do they expect from the agencies they support and the staff who run them?

How are decisions made in the current giving climate, and what are the “deal breakers” today?

We thought that it would be most helpful to address these issues through questions that are often raised during our interactions with donors across North America. Let us predicate this conversation with two basic assumptions about why people give:

  • They care about the person making the “ask.” Despite advances in technology and the way people give to agencies (text to give, online fundraising websites, etc.) the dictum “people give to people” is still as true as ever.
  • They care about the impact of their gift. The vision of the organization and the resulting impact of the contribution are critical to encouraging a donor to make a gift. The difference that the gift will make in the lives of people, the life of the community and in the life of the donor remains essential parts of the “selling proposition.”

Now, let’s move onto the top three questions we receive as fundraising consultants.

DONOR QUESTION #1: Do you have a Business Plan?

We first heard this question more than ten years ago during a meeting with a prospective major donor to a prominent Jewish arts group in New York City. Nowadays the question seems intuitive enough, yet the organization’s Artistic Director who was leading the meeting was taken aback.

“Well, we have a budget,” she responded.

“I’m not looking for a budget,” the prospect responded. “I want to know that my investment will not be swallowed up because the organization – as much as I love what you do – won’t exist five years from now. Show me that you believe and can demonstrate that you will be around and in good health and I will make the gift that you are asking for.”

SOLUTION #1: Be prepared with current facts and long-term vision.

Be ready with the facts: your nonprofit is a business with a “selling proposition” that provides demonstrable benefits within your community. Know what those benefits are and how they will change over time. Luckily for our example organization, the Director had considered the long-term viability of the mission and vision and was able to communicate it to the donor, who then made a significant gift.

It is essential for nonprofit leaders to consider the long-term vision for your nonprofit: where it is today, where it will in five years, and in ten years. This long-term vision (which will often include grand plans such as new programs, services, and resources) will inspire and motivate your donors.

DONOR QUESTION #2: Why does it take so long to understand what you do?

“It is like I have ADD sometimes: I cannot listen to long explanations,” complained a leading benefactor to a growing Israel-based organization. This individual, a successful entrepreneur and philanthropist, made a good point.

In today’s fast-paced and hyper-competitive world driven by smart-phones, tablets, and the demand for instantaneous responses and results, donors want the information now. In addition, loyalty is an almost-dying commodity; unlike in decades past when someone picked one cause and stayed with it for a lifetime, today’s donors spread themselves around.

SOLUTION #2: Make your point quickly and use varied communication channels.

Modern nonprofits needs to be deft and nimble, framing their”selling proposition” in small, understandable bites through a variety of communication channels. Create an “elevator speech,” no longer than 30 seconds, that explains your organization’s mission, vision, and deliverables, and distribute it to your executive staff, Board of Directors, and leading donors. Utilize online tools, such as Facebook and Twitter, as well as traditional media like newsletters, press releases, and direct mail.

You must always be ready to make your case quickly, because donors who notice that you are slow to respond to their interests might move on to the person or organization that best fills that philanthropic vacuum with easily digestible information.

DONOR QUESTION #3: I cannot ask my friends for money; can’t you just do it for me?

This is the question we most often receive from leading donors and Board members. For example, a committed Board member of a Jewish day school was recently approached to set up meetings with his contacts for the head of the school, who would then present the school’s “selling proposition” and hopefully engage these prospects as donors. The Board member was devoted and generous with his contacts but would not attend a prospect meeting with a contact he knew personally.

“Just tell him I said he should give,” the Board member offered. “If he hears that, and knows that I am also supportive, then he will give.”

“Come with us,” we implored him, knowing the power of personal connection. “We will help you prepare and role play for the meeting. Tell him yourself how much you support this cause, and he will be moved and surely respond.”

“I cannot ask my friends for money,” he lamented. “What if they say no?”

“He agreed to a meeting and knew why we requested the meeting. If he was going to say no, he would have done so already,” we advised.

We went to the meeting without the Board member and made our presentation.

“I really like what I am hearing and am interested in supporting the school,” the prospective donor replied, “but I really need to speak with my friend who set this up to know why he’s giving and how much before I’ll give you a final answer.”

SOLUTION #3: Conquer your fear of the “ask.”

So many leading donors do not want to ask their contacts to support their favorite charity. What drives this phenomenon? Fear! Leading donors are afraid that if they ask friends for money, these friends might then turn around and ask them for money. That sometimes happens, but is typically for a good cause, and should not be considered reason enough to NOT ask.

Secondly, leading donors fear of losing a friend when they ask for money. In our 21 years of consulting, this has never happened. Strong prospect research eliminates candidates who do not want to give, so that by the time a leading donor asks his/her friend to help support a cause, the answer is always yes. The amount varies, and sometimes it takes more than one ask, but at EHL Consulting we have never seen a friendship dissolve because of this situation.

Remember, the mission and not the market drives the donor, so know WHY your agency is in business and be clear and concise in how you communicate your “selling proposition” to your stakeholders. Use ALL of the tools that you have at your disposal … from online marketing to far-reaching contacts of your Board members and agency leadership. They all have their role in helping communicate long-term vision.

Also, don’t be afraid to ask others to support your passions. The real reason a donor supports a worthwhile cause is because he/she receives a formal request. Finally, if you want to close a major gift, take a deep breath and meet face to face.

Don’t rely on technology to do what humans do best.

21 Years…and Still Going Strong!

As The EHL Consulting Group enters our third decade as a firm, it’s encouraging to see not only how much we’ve grown, but also how much the nonprofit sector has matured and evolved as well. Both domestic and international nonprofit organizations have changed markedly since the early 1990’s . . . in terms of the numbers of agencies, the levels of sophistication, the work required to attract significant philanthropic support, and the amount of transparency that donors demand.

Helping so many different nonprofits in so many different ways has been – and continues to be – meaningful beyond expectations, and has made our work at EHL Consulting an effort that has been rewarding personally and professionally. 

As a longstanding member firm of the Giving Institute, EHL Consulting abides by a strong code of ethics that ensures our clients are treated with respect, and that their campaigns are always honest, heartfelt, and powerful. Working closely with enthusiastic and devoted men and women from all walks of life and from all parts of North America and elsewhere motivates us to keep improving our services and hopefully make a positive difference in the world at large.

We have seen the philanthropic marketplace grow and strengthen remarkably over the past 21 years. From a “slap on the back” network of unseen agreements and elite charitable circles, it has matured into a sophisticated, more scientific, accountable and increasingly transparent (though not enough) environment. Giving is now a $300+ billion dollar industry, accelerated by committed professionals with a drive to achieve substantial, measureable results.

The fact remains, however, that with all of the tools and the science, the real work is still built around relationships and connections with people. Giving is an act of passion, not a business transaction, and the connections between people are, and will always remain, the driving force.

Successful organizations know that connections are key, and always work hard to cultivate those personal bonds. Those who rely on technology and “arm’s length” communication will be forever doomed to struggle with difficulty. And besides, connecting with people is far more fun!

Our team at EHL Consulting is very optimistic about the future of philanthropy and we look forward to ever greater growth and productivity in the months and years to come. Thank you to all of our past and present clients for their hard work, enthusiasm, and dedication. For all of you who we have not worked with yet…we hope to meet you soon!

With gratitude,

Robert I. Evans, Founder & Managing Director

Avrum D. Lapin, Director & Principal

Transparency and Financial Oversight

Reposted from eJewish Philanthropy – January 24, 2012

“We think that the foundation should have glass pockets.”
Russell Leffingwell, Chair, Carnegie Corporation, 1952

Effective oversight of financial systems in nonprofit organizations is key to their proper and effective functioning. This philosophy, however fundamental, has not always been universal practice nor have donors always expressed more determined expectations about the transparency of organizations they support.

In today’s marketplace, nonprofits that watch over finances and share financial, programmatic and other information with their constituents build stakeholder confidence and are thus far better suited to fulfill their missions, deliver effective services and adequately address donor concerns. Nonprofit finances not only include fiduciary elements but also address reporting of capital, personnel and programmatic expenditures.

But no organization is immune from the high standards of financial transparency. Within the last few months, two rabbis were accused of mishandling precious donor dollars for organizations they headed, and the headlines in various media and across the internet were, well, ugly.

Therefore, in today’s fast-paced and accessible environment, the landscape is changing and standards are rising. In fact, while we eschew “gotcha” scenarios, we do encourage every one of our client organizations to establish a financial oversight committee – apart from the agency’s treasurer and CFO – for major campaign efforts and ongoing operations, especially to assure donors at all levels of proper procedures and practices!

At the heart of increased transparency and accountability is the widespread belief that, in return for public support, nonprofits have a special responsibility to the public: a responsibility to earn and maintain trust instilled by donors to properly utilize funding to fulfill their stated mission. Today, no nonprofit leader, professional or volunteer, could be considered exempt from scrutiny; and we suggest that nonprofits today must be diligent in setting policies and adhering to best practices to assure donors that they are in force and the guide organizational decision making at all times.

Media reports abound with the financial shenanigans undertaken by some nonprofit staffs and boards. And we know that the Jewish community is not immune from various recent horror stories that validate the importance of nonprofits establishing formal policies to promote transparency. In this context we are often stunned to hear that some people claim that they do not want to receive information even when agencies produce extensive annual reports or other detailed materials.

Here is a review of only a few recent examples of alleged bad practices:

Excessive spending on luxury travel, jewels and clothing appear to be the habits of a New York-based educational and charitable organization in the Orthodox community.

A Birmingham, Alabama, nonprofit that provides computers to needy kids was treated as a “personal piggy bank” by the founding board member who traveled, gambled and lavishly spent charity money for years. During this time, this nonprofit did not even file the requisite IRS nonprofit forms.

Embezzlement of nearly $1 million by an outside accountant was treated as an internal matter by the CEO and other high level staff of a nationally known community organizing operation. Neither the Board nor law enforcement was initially notified as the CEO sought to cover up the misuse of funds. The outside accountant also happened to be the CEO’s brother so the drama continued unabated.

A Chicago-area nonprofit providing affordable housing dedicated nearly $700,000 to the director’s salary, three times as much what other nonprofit housing leaders in the region made.

Clearly, no sector, whether Jewish or not, is immune from scandal. So what should nonprofits do?

  1. Damage to the public perception of the organization and the loss of the public trust is often irreversible, rendering an organization incapable of functioning. Nonprofits rely on the trust and good will generated through fulfilling compelling missions that advance the public good to cultivate and sustain support from donors and clients. Contributors are less likely to support an organization with a history of poor financial oversight or worse.
  2. Today’s donors demand greater transparency; they want a financially accountable and open organization. The legacy of the rubble of Enron and financial deals crafted in “quiet rooms,” at the outset of the latest economic recession is a societal push for accountability and transparency. We hold our schools accountable and we expect our government to be open in how it operates and more accountable for its actions. Now, donors view their charitable contributions less as a gift and more like a strategic investment. Therefore, they demand more honest information about how their investment is utilized. It will not take much for sophisticated donors to be turned off by an information vacuum or the perception that the business side of the organization is being handled improperly. The more you share, the more your stakeholders will understand, and the more likely they are to support you.
  3. Rules governing charitable organizations, namely from the IRS, require honesty and compliance. IRS Form 990 requires annual reporting on a nonprofit’s mission, governance, programs and finances as well as the organizational compliance with relevant state laws. In addition to the Federal reporting, most individual states require annual reporting of finances and governance. Oversight by local government also ensures tighter controls over nonprofit organizations. After a local charity providing low-income housing and facing mounting financial problems received hundreds of thousands of dollars in grant funding, the city of Glendale, California, approved the requirement for two years of financial statements and audit reports for any nonprofit organization competing for social service funding from the city.
  4. Transparency is the basic foundation for collaboration. Openness fosters collaboration with staff, donors and volunteers and the efficient use of resources to fulfill the organization’s mission and increase giving.

Transparency is not easy. In the hectic world of nonprofit management, transparency and financial oversight are often relegated to non-urgent status as staffs and boards may view these as “chores” as not advancing the mission. But as the notable examples consistently show, time well spent on creating and implementing financial oversight systems and a culture of openness are significantly beneficial in the long run. To maintain relevance and stability (or growth), nonprofits should act now and consistently to be more open, compliant and diligent. Below are some recommended steps for openness:

  • Nonprofit boards should institute formal policies and procedures to ensure the prudent and responsible management of all financial documents (e.g. budgets, audits, expense reports, compensation, petty cash and invoices). Board members and relevant staff should review, approve and track budget and organizational financials on a monthly basis.
  • Accurate and complete financial records should be maintained at all times. Nonprofit organizations should undergo annual audits or reviews by an independent and qualified financial expert.
  • Clear policies for reimbursement of documented business and travel expenses should be created.
  • Board members should question patterns of spending that seem at odds with stated organizational policies and objectives.
  • Boards should create or enhance their audit or finance committees and recruit directors or committee members with relevant professional experience.
  • Charitable organizations should use the Internet and other electronic media (e.g. blogs, Twitter, Facebook, website, Flickr, YouTube, Linked In, e-newsletter) to disclose information such as an annual reports, names of board members, as well as mission and vision statements.

Clearly, the nonprofit sector has come under increased scrutiny by the government and private contributors. Establishing consistent and transparent financial oversight systems will go a long way in maintaining the public trust and cultivating financial support.