The Butterfly Effect
Did the ACLU take your donors after the election?
One question asked of me more and more in the recent months is how the election is shaping charity. How can we, the local nonprofit doing what might be considered “non-essential” work—arts organizations, independent schools, small service organizations—compete with established national organizations that have a renewed relevance? How do we go toe to toe with the ACLU, Planned Parenthood, the International Rescue Committee?
The 2016 US President Election changed the landscape for charitable contributions. That’s an undeniable fact. It overturned established order in the United States across the board. In particular, it mobilized a groundswell of grassroots efforts. More than ever, people are putting their money into third sector solutions, looking for help in applying pressure to the public and private sectors.
So, yes, the ACLU, Planned Parenthood, the International Rescue Committee and others saw an uptick in donations in the last quarter. Often a huge increase as many donors went into emergency spending. I would not expect that to persist at quite this level for the next four years. I do think they’ll continue to have a prominent place in many donors’ minds (and their checkbooks) for that time.
You, the smaller nonprofit with a local or regional focus, may well have seen a decrease in donations at the same time those national organizations were seeing record contributions.
But did the ACLU, Planned Parenthood, and the International Rescue Committee take your donors away from you? The answer to that is, unless you provide the same services as those organizations, probably not.
Because they weren’t your donors.
A donor who, when faced with an emergency, chose to redirect their charity from a local organization they have a giving history with to a national organization they had no history with was not that local organization’s donor. Not in real, practical, terms. They were not a partner in the work. They were unconvinced by the case for support that the organization’s mission was worth funding.
It’s a mistake to view that as the success of the ACLU, or Planned Parenthood, or the International Rescue Committee in attracting those donors away.
That’s a failure in not convincing those donors to stay.
This election, and many of the donors who have been most called to action by it, put a high premium on grassroots efforts. If that’s the narrative takeaway, then how can it be that large national and international nonprofits hoovered up those donor dollars from grassroots nonprofits? If you’re a nonprofit, your job is to effect change. Your job is to overthrow the established order, to take people’s complacency with the way things are and blow it up.
The question you should ask yourself is not, “how do we compete with huge nonprofits?” The question should be, “Why is it that our donors didn’t perceive our work as vital, even in an emergency?”
Then go and tell them that you’re vital.
Because you are.
Direct mail, smiling kids photos, Arab-American founders – the fascinating fundraising of St. Jude Children’s Research Hospital
You’ve heard the advice. No happy kid photos, they raise less money than sad faces. Focus on larger gifts. Millennials don’t do mail. I heard a counter, fascinating fundraising story Friday.
It was shared by the closing keynote speaker at the 2017 Yale Philanthropy Conference .Richard Shadyac, Jr., President and CEO Of ALSAC. ALSAC is the fundraising and awareness building organization whose sole mission is to raise funds for St. Jude Children’s Research Hospital. ALSAC provides three-quarters of the funds that support St. Jude.
With a theme of Transformation, Mr. Shadyac generously shared his story and a lot of ALSAC fundraising data that might challenge some of your assumptions.
First, a little background on ALSAC and St. Jude:
St. Jude Children’s Research Hospital was founded by Danny Thomas, an actor, comedian and star of the The Danny Thomas Show. Danny Thomas was the stage name of Amos Muzyad Yakhoob Kairouz, an American citizen of Lebanese heritage. You can read the story of St. Jude’s founding here.
When Danny Thomas founded the hospital, he didn’t want the doctors and researches to worry about raising money, which he took on as his commitment. As part of his fundraising, he approached other Arab-Americans to give back to their adopted country. Folks came together to found ALSAC, American Lebanese Syrian Associated Charities, a 501c3 with the sole purpose of raising funds for St. Jude.
Today, the donors to ALSAC represent folks from all backgrounds. But this remarkable founding story by Arab-Americans other than Danny Thomas was unknown to me.
Mr. Shadyac,whose father was the first CEO of ALSAC, said that when he took over in the 2009 as the third CEO, the recession was taking its toll on giving.
So he made some gutsy decisions.One in particular was to invest heavily in direct mail, as everyone else was pulling out due to declining returns and rising costs. But that decision was the right one for ALSAC. Direct mail works for them, he said, including mail to millennials!
He described a data-driven department, investing in technology, donor service and research that drives their fundraising. He and his staff are driven by a passion for the mission, taking seriously the commitment they make to the children and families they serve, who pay nothing for their treatment, travel, food or housing during the 3 year average stay.
Here are the remarkable fundraising statistics:
- ALSAC is on track to raise $1 billion (with a B) from 10 million donors this year.
- 68% of their giving comes from households making $75,000 a year or less. If you’ve read the Gilded Giving report on the drop in giving by middle and lower income households, this statistic bucks that trend.
- The average donation… hold on to your hat… is just $34.
- Their biggest solicitation source is direct response, with 45% of their donations coming this way. Second biggest at 20%, is planned and major giving.
No pathetic children
Mr. Shadyac started his talk with a video and photos slides throughout his talk. I noticed immediately that these were upbeat images, images of hope, caring, and even happy, smiling faces. The types of images we are cautioned not to use in acquisition mailings.
So I asked the question about the images being shared with us. Mr. Shadyac said that if you had a spectrum, with harsh images of children sick with cancer on the left, and those smiling, joyous faces on the right, their philosophy starts in the middle and runs to the right. “We are selling hope.” Not false hope, as children are still dying from cancer. But when St. Jude started most childhood cancers were death sentences. Today, that’s an 80% survival rate for cancer. St. Jude’s shares all of its research and treatment protocols for free.
Yes, the children are bald, signaling immediately that they have cancer. But at the same time, those faces beam hope.
And one more, Mr. Shadyac wanted us to know, you’ll never see St.Jude use a child to ask for money. Never.
One more opportunity from Mr. Shadyac for you: PSAs, Public Service Announcements, are highly under-leveraged for communicating your cause.
The board’s role in approving the budget provides a great teaching tool for the difference between management and governance..
Okay board, what are you really approving?
In the typical organization, your Executive Director with her leadership team have crafted the budget to review with the board of directors. But when the budget gets to the board level, what exactly is the board approving? Is it that $10,000 printing expense? The $6,000 you are spending this year on electricity?
Here’s what a focus on governing would lead you to consider:
Does your spending match your priorities?
Your budget is a reflection of your annual plan. It shows what investments you are making in the organization. Have you decided that you want to grow your education program, yet your advocacy work is eating up all the personnel? Or was this the year you decided you had to deal with your antiquated technology, but there are no dollars included in the budget to support this work.
Can you pay the bills?
This can be determined in many ways. First and foremost, does the income projected for the year cover the expenses you have outlined? Does your income receipt and expense spending schedule cause cash flow problems at various times of year? If you’ve decided to take on a deficit, what is the implication on your financial reserves this year, and into the future?
Are you spending donor restricted dollars as required?
This is a subset of the above. It may look as if you have a lot of revenues coming in this year, but cash is not always fungible in nonprofits. That grant that doesn’t arrive until the third quarter and can only be spent forward could leave you with a deficit in your unrestricted assets. Or your expenses are meeting the promises of those grants. Or are revenues meant for your capital campaign hiding income shortfalls in your operating budget?
How much risk are you accepting in your income projections?
What is the data behind those revenue projections? Is there a well-defined plan based on past experience and carefully projected new revenues? Do you have the capacity to execute the level of effort behind those growth numbers? Or are you carelessly plugging holes with fictional new revenues because you don’t want to cut expenses that really should be cut.
What are the implications of compensation and benefit increases in the budget?
While I’m not one to want to deny staff well-earned pay increases, I also know that when you raise salaries you are fixing personnel at a higher level for years to come. On the flip side, did you budget staff increases but forget to make any provisions for an increase in compensation for your Executive Director or leadership team? Remember to document the level of your ED’s compensation based on market and any other considerations to justify should the IRS inquire.
What’s Plan B?
If you don’t make your revenue projections, when and what do you start cutting? Do you have another solution, say a line of credit? How much debt are you willing to take on?
Are you following your spending policy?
If you’ve got investment income, what is your policy for moving earnings into your operating budget? Are you staying in those guidelines or making an exception? Why? What are the long-term implications of this decision?
Is there anything suspect or unjustified among the line items?
Theft does happen. More than we want to imagine. So a quick check on growth in expenses from one year to the nest should pop out anything that seems highly unusual and may need a second look. If there is a completely new line item, its okay to ask how that was calculated and if other options were considered.
Do you have a overhead to program spending ratio? Is the budget within that guideline?
Yes, overhead ratios are highly controversial in this sector. Yet for organizations that submit to charity watchdogs or participate in state or federal payroll deduction programs, there are ratios you need to stay within. If you are part of an international federation, there may be nationally mandated limits in other countries that influence your spending ratios. Does a full cost look at your budget meet those guidelines?
What else? What does your board consider when it reviews the budget?
Yes, the election left me gobsmacked.
But this is no time to act like a deer in the headlights. Hundreds in my community and across the US are already thinking and planning to prepare to act strategically.
You don’t have to be for or against the incoming administration to recognize that a lot is going to change.
As a board and strategy consultant, I’m troubled that very few of the boards with whom I’m working are talking about planning for scenarios that might be heading their way. While front line advocacy organizations are already moving forward, I’m not seeing discussions happening in very many other sectors.
I understand that there is considerable uncertainty. I recognize that it might feel like a waste of time to talk about the unknown.
But isn’t that your job as a governing board? Shouldn’t you be considering best case, worst case and starting to prepare a plan of action? Haven’t you enough evidence of the policy changes that are likely to be made to start planning for those changes?
Your board has a lot of thinking and planning to do.
Need an example? We’ve already in a profoundly new world order. Jobs are vanishing fast, not necessarily because of global trade, but because what can be automated will. And there are very few jobs that can’t be automated.
What does this mean for your clients? What about your donors? Your community? Your employees?
Here’s another: How is the shifting landscape of philanthropic giving affecting your organization, where the rich are giving more and the rest of everyone less?
And the big one: What policies have the new administration and the majority party been championing over the last eight years or eight months? How will that affect us?
If there was every a time for both strategic and generative thinking, it’s now.
When the proverbial sh*t hits the fan, it may be too late to mobilize a satisfactory response.
- I’ve felt that way at least three times before in my voting life. But yes, this one seems completely different. Having been a member of Amnesty International for more than four decades, I’ve read the stories on how democracy can be lost seemingly overnight.
With a challenge from the December 2016 nonprofit blog carnival, I thought I’d update my “self-portrait of a donor” from 2009 to see how my own giving might have changed since that time.
Why do I give? And why do I give to the groups I give to?
The top tier
Because I strongly believe that board members should make leadership gifts, it’s not surprising that the organizations on whose boards I sit are at the top of my giving. They include:
- WaterFire Providence. WaterFire Providence jumped to the top of my giving list from 2009 when it was in tier 2. I have such profound respect for the genius and generosity of its artist creator Barnaby Evans, our dedicated board and staff team and WaterFire’s critical role in rejuvenating my hometown, Providence. So I give to this one-of-a-kind arts and community building hybrid. Not to mention that I’m vice chair of the board, we have a minimum giving commitment, and I’m making an additional pledge over five years to our growth campaign. My annual gift I pay in monthly installments.
What are the basic principles of nonprofit governance?
Friday I attended an ARNOVA colloquium called A Pluralistic Perspective on Nonprofit Governance: How should context be taken into account?
Four non-US academics cautioned us to think about the many factors that influence how governance is practiced in civil society organizations. They hailed from the UK, Southeast Asia, Reunion and Sweden.
Ola Segnestam Larsson of Ersta Sköndal University College asked the provocative question I repeated at the opening of this post.
A question yes, but really it was a challenge.
- What are the principles that guide governance in our organizations?
- Does our approach to governance flow intentionally as an expression of those principles?
For example, we’ve all learned that boards act as fiduciaries. Fiduciary embodies the principle of stewardship, or having in your care something you don’t own. This fiduciary role requires the duties of loyalty and care in making decisions. Behind the duty of care are the principles of reasonableness and prudence.
Yet, the principle of stewardship is likely not enough to sufficiently guide your governance practices.
Some nonprofits place high value in being democratic. If so, it’s very likely that your organization would spread the ability to influence decisions beyond the board. At Amnesty International USA members have the opportunity to propose and debate policy at regional meetings, at their annual general meeting and in the international body.
In the colloquium, Ola Larsson suggested other principles at play, such as independence and transparency, He did not suggest that there was one prescription for what those principles should be.
If you were to describe the principles of nonprofit governance guiding your board’s practice, what would they be? Would all directors agree?
I’m hearing you say: but we have articulated our values as part of our strategic planning.
Yes, that may be a starting place. But do those values translate to the way you approach governance?
I know I’m going to start this conversations with the boards with whom I work and serve.
The tough challenge for all volunteer nonprofits is finding people to do the work that isn’t so much fun to most people, jobs like fundraising, membership, financial management, communications, human resource management, IT support — you get it.
My colleagues and I are still digesting the lessons to be learned from the Voices of Board Chairs research. (I served on the research team, a subgroup of the Governance Affinity Group of the Alliance for Nonprofit Management.)
One area our research team wanted to learn more about was board chair succession.
Very interestingly, what we heard from these chairs was:
- Fewer than half of our chairs had previously held the role of vice chair, a position commonly accepted in our sector as the primary precursor to the board chair.
“The board chair and vice chairs just quit one day and I was left.”
“.. I was a member of the Executive Committee when the Vice Chair, who was to take over as Chair in three months, had to resign from the board for a significant family health situation.”
- 16% of our chairs had been on the board of their nonprofit for less than a year, and just over half for three years or less.
“I had been on the board for 9 months. Because of my profession, and also my dedication to the group, I was a natural choice to become chair… but it was really early…”
“…all the members of the Board of Trustees, with one exception, indicated they were resigning. I was not on the board, I was a volunteer.”
” the board chair … needed to vacate the position for family reasons, and since I was vice-president of another nonprofit, I was asked to step in.”
My take-a-away from this:
Even well-crafted chair succession plans hit unexpected bumps in the road, such as health issues, new family or work responsibilities, or job relocations.
That left me thinking a lot about building a deep bench of potential leaders.
- What would your board do differently if right from the start it considered every director a potential leader?
- What would you do differently to nurture a big bench of future leaders rather than just one or two?
- What do you do now? How is it working for you?
Other research tells us that boards have come to count on their chairs for ensuring their good functioning. We wanted to follow that up by asking chairs how they prepared for their position and how they understood their roles.
The 635 chairs in the study told us:
- 51% did nothing specific to prepare for this particular chair role
- Many haven’t been on their boards very long
- In hindsight, they say they would have benefited from mentoring, etc
- Yet most report they are focusing on the top priority areas for their boards and have a good relationship with their CEOs.
I’ll have more to share on the results later this week.
P.S. Did I mention that I was part of the research team?
I’ve been thinking about the strategic insight that can be gained through the Johari Window*.
The Johari Window is used to improve interpersonal communications and team work. It was developed by and named after psychologists Joseph Luft and Harrington Ingham in 1955 (Joe + Harry =Johari).
One idea behind the Johari Window is that we all have blind spots about ourselves that we want to diminish. Reducing these blind spots requires seeking out feedback from others.
We also have information about ourselves that we hold back from others or that they are not aware of just by interacting with us.
The Johari Window provides an opportunity for self-awareness and trust building by asking us to be more forthcoming and transparent as well as soliciting feedback through a process of self-discovery.
Sounds like a great organization strengthening tool, doesn’t it.
Understanding the Johari Window provides insight on how our organizations can be more strategic.
And more effective.
It strikes me that the Johari Window can be useful when applied to our own organizations.
Here at Cause & Effect we preach the importance of seeking information outside of your organization. That involves staying up-to-date on what is happening in your field, understanding societal trends, and having critical knowledge about what is happening in your community (at whatever scale you define community).
Yes, some of this can happen by being an informed consumer of the news and professional journals. Other parts of this need to come from listening to your supporters and other critical constituents.
Having these conversations is firmly embedded in our work in strategic planning and fund development. Every once in a great while we get talked into short changing this process and regret it immensely. Why?
Because not only are these conversations wonderful ways to engage your constituents, you and I actually learn stuff that matters to your organization by seeking out their experiences and wisdom.
Important stuff. Strategic stuff. The kind of stuff that is a foundation of intelligent opportunism, one of the five bedrocks of strategic thinking.
Strategic Insight of the Johari Window worth discovering
In the worst and rarest cases, you might discover truly incorrect or damaging information floating around about your organization or its people.
More likely, you’ll find that despite your ongoing communications, very little of your message is being absorbed. Knowledge about your work might be very limited.
You may discover how limited your own knowledge is of what’s happening in your field or your community.
Most importantly, you can discover what matters to other folks in their personal or organizational lives.
With this information in hand, you’ll be able to reflect on how well you are delivering value to your constituents.
And what you need to do differently to matter more.
*There is much more to learn about the Johari Window. Here’s an excellent read:
And for ideas on who to get started, see