Category Archives: Fundraising

George Overholser Responds: Sustainable Nonprofits

April 7, 2008 – 8:55 am

In response to my recent column in the Financial Times, Reader Jeremy Gregg has been asking what makes a nonprofit “sustainable”. George Overholser of the Nonprofit Finance Fund (profiled in the FT story), has sent an email my way that breaks down the distinctions between earned income, donations, and what makes a nonprofit sustainable. I think his line of thinking is a wonderful example of drawing on business thinking without committing the sins of “philanthrocapitalism”.

Although a nonprofit is driven by a mission to help others, it is inescapably in the business of turning funders’ money into program execution.

If I buy a tutoring session [from a nonprofit] for my own kid, that’s called “earned revenue”. If I make a donation that results in a tutoring session for someone else’s kid, that’s “unearned”. But in both cases, the nonprofit firm does the same thing: it turns someone’s money into a useful tutoring session. And it ought to be that good tutoring begets a sustainable flow of loyal paying customers, earned or unearned.

For this reason, I think it’s often best for philanthropists to avoid a “support the organization” mindset, in favor of a mindset that says “buy program execution from the organization”. That way, the earned vs unearned distinction stops being (incorrectly) mapped into the sustainable vs unsustainable distinction.

All this plays directly into the question of sustainability, because an organization that sells a product (superior program execution) is inherently more stable than one that asks for generic support (“we need your help… again!”). Likewise, funders that “purchase” program execution will come back for more (if they think they got a good deal) whereas funders that “support” an organization may begin to ask why the organization can’t seem to get past its difficulties.

All this to say, so-called “unearned” philanthropic revenues can be a fine source of sustainability.

[Not to be confusing, but all of the above excludes what I think of as Builder type funding relationships (as opposed to “Buyer”). Builders are the ones who provide one-time equity-like growth capital. Builders are decidedly not the source of an organization’s financial sustainability. Rather, they help pay the bills while an organization learns to attract Buyer types. Our SEGUE methodology is designed to attract Builder capital.]

When George writes about “Builders vs. Buyers”, he’s making a distinction between “investors” in the nonprofit and “customers” who buy from the nonprofit. This concept was discussed in the FT column and you can read George’s excellent paper on the concept titled “Building is not Buying”.

By Sean Stannard-Stockton | Also posted in Effective Giving, New Philanthropy, Philanthropic Capital Markets, Philanthropy, nonprofits | Comments (6)

Sustainable Nonprofit Operating Models

April 2, 2008 – 2:47 pm

In my recent Financial Times column on VolunteerMatch’s “growth capital offering”, I state that the organization’s prospectus says that the new capital will fund a plan to make VolunteerMatch self-sustaining and generating an operating surplus by 2012. Reader Jeremy Gregg, who writes the blog The Raiser’s Razor, leaves a comment asking about this claim:

I would be very interested to know how a non-profit can design a plan that meets these standards: we are so used to annual operations plans and short-term proposals that it is hard to envision such a concept. Are they tied to social enterprise and earned income strategies that can make the organization self-sustaining?

The VolunteerMatch prospectus does a good job laying out their self-sustaining operating model. Before I proceed, I should note that other than reading the prospectus and speaking with their president as well as some other related parties, I am not intimately familiar with VolunteerMatch. So please take my comments as my own personal opinion and realize that I am not speaking on behalf of VolunteerMatch in any way.

The VolunteerMatch proposal does not suggest that their model will earn a profit. There are three core areas where they will receive support, 1) payments from corporations that use their corporate volunteer program services, 2) payments from nonprofits who pay for premium access, and 3) reliable ongoing contributions from volunteers who use the network. This is not a “profitable” model, but it is a sustainable model. VolunteerMatch should be able to track what level of donations they can expect from the users of their service (the volunteers) and then count on that fundraising as they bring more users to the network.

A sustainable nonprofit operating model does not mean that the organization must charge for their services. I do not agree with the idea that nonprofits should seek to build models that earn income unless that model is the most effective way to further the nonprofit’s mission. Fundraising can and should be part of a sustainable operating model. Unfortunately, I too often hear of a nonprofit who will generate a loss (as is expected) and then “make up the difference with fundraising”. That is not sustainable. A sustainable fundraising plan should be built into the operating model. Note that VolunteerMatch does not just say that they will raise money; they relate their goals to their experience with their actual user base and then make projections based on certain growth plans.

Fundraising is something that organizations can invest in. The growth capital that VolunteerMatch is looking for is not sustainable funding. It is a onetime investment that will be used in part to build a sustainable stream of fees and donations.

A sustainable operating model that relies on fundraising (as most all nonprofits must, otherwise they should ask why they are not a for-profit), must be able to budget on certain fundraising goals. Not a fundraising budget that is whatever size fills the gap between expenses and revenue, but a budget that is based on reliable projections.

By Sean Stannard-Stockton | Also posted in Grantmaking, New Philanthropy, Philanthropic Capital Markets, Philanthropy | Comments (5)

Letting Donors Vote for Board Members

March 27, 2008 – 8:43 am

A couple weeks ago we discussed the idea of letting donors vote for nonprofit board members. Some people liked the idea, others were concerned that nonprofits should be serving the needs of the broader public, not simply responding to donor’s desires. I’m mixed on the idea. On the whole, I think that to the extent nonprofits want to access social capital market money, the form of that capital must be designed differently than a donation. A lot of imagination still has to go into this process, but I have a hard time understanding how a nonprofit could ask for an “investment” instead of a “donation” and yet treat the transaction the same. That’s just marketing. If investing in a nonprofit is more than just spin, than the transaction involved must live up to the words that describe it.

Jeff Brooks, at Donor Power Blog, writes regularly about how nonprofits can “empower” donors in ways that help the nonprofit further their mission. Yesterday, Jeff weighed in on the donor voting debate and he’s given me permission to repost his thoughts here:

I think it’s a dynamite idea, even though the choice of board members is not likely to be very exciting to most donors. Really, on what basis would the average donor choose one board member over another?

Even so, I’ve never yet seen giving donors power of any kind not work. My guess is very few donors would exercise their proxy vote. But that they’d appreciate the chance, and that would lead to more giving, higher gift amounts, and better retention. That’s what happens pretty much every time you show donors that you respect them.

Commentary at Tactical Philanthropy seems to be running against the idea, because of the assumption that given the chance, donors are going to do something stupid. Like elect a moron to the board. Or force the nonprofit to betray its own mission.

Worst-case scenario thinking always takes you to such bogus places.

If I ran a nonprofit, I’d look for every way possible to involve donors. I’d want more than their money. I’d want their ideas, their hearts, their thinking.

If you’re afraid your donors are going to screw you, you’re in trouble. While you’re protecting yourself from your donors’ predations, they’ll be flocking to the smart organizations that respect them.

In the comment section to Jeff’s post, some reader suggested that it is unrealistic to think that donors would be able to make an informed decision about which board members to support. I think this is correct UNLESS the nonprofit was able to effectively communicate the organization’s mission, the steps the were taking to further that mission and the progress and setbacks that they faced. That sounds like the kind of nonprofit that I would be excited to support!

By Sean Stannard-Stockton | Also posted in Philanthropic Capital Markets, Philanthropy, Transparency, nonprofits | Comments (2)

Do Donors Want to Provide Operating Support?

March 5, 2008 – 8:24 am

Conventional wisdom says donors do not want to provide operating support to nonprofits. But Jeff Brooks of Donor Power Blog thinks maybe donors just want some power to decide. In his post following up on Kiva’s supply & demand problem, Jeff suggests that maybe Kiva should give donor/lenders the option to provide operating support (an idea I suggested to Kiva founder Matt Flannery, but which he says he’s not interested in).

Says Jeff:

One organization that handles this well is DonorsChoose. They add an optional “fulfillment fee” of 15-25% to donors’ gifts, which donors can pay or not. As their How It Works page says:”Donors’ inclusion of the fulfillment fee is essential to the existence and success of DonorsChoose.org. Thankfully, 90% of our contributors choose to include it, and income thus earned allows us to continue our work.”

The magic that Kiva is missing out on here is giving donors the power. You just might be amazed at how open-minded, helpful, and flexible donors will be when you put the reins in their hands.

By Sean Stannard-Stockton | Also posted in Philanthropic Capital Markets, Philanthropy | Comments (4)

Beth Kanter & Michele Martin

February 22, 2008 – 8:11 am

The America’s Giving Challenge Champions have been announced. This experiment/competition to see how web 2.0 tools can be used for fundraising has gotten a ton of national coverage. Here’s the thing: Beth Kanter and Michele Martin won. Beth, who I know from NetSquared events and from her blog, is someone I’ve always thought got web 2.0 and nonprofits better than anyone else. I’ve referred the media to her and called her the Queen of all things web 2.0 on this blog. Michele I only know from her blog, but she clearly knows her stuff.

If you are a nonprofit interested in how to use social media tools to fundraise or advance your mission, there’s no question who you hire. Go to their blogs (Beth’s is here, Michele’s is here), check them out, and hire them.

And if you work at a foundation, you might have noticed that nonprofits are way ahead of grantmakers in learning how to leverage social media tools. They’re generally way ahead of for-profit companies as well. So if you’re a grantmaker, check out Beth and Michele as well. Maybe you can talk them into helping you out.

By Sean Stannard-Stockton | Also posted in New Philanthropy, Philanthropic Technology, Philanthropy, Social Media, nonprofits, nptech | Comments (3)

Alumni Giving Trends

February 20, 2008 – 8:48 am

Inside Higher Ed covers alumni giving trends today in “Donations Are Up, But Not From Alumni”. Examining the behavior of younger alumni, the site quotes an entry to my One Post Challenge:

Writing last year as a guest at the blog Tactical Philanthropy, Sam Huleatt, co-founder of a company that builds social networks for private schools, wrote that many colleges “instantaneously lose their relevance upon a student’s graduation.” New graduates have little interest in the alumni magazines, he wrote, that are a major way colleges communicate with alumni. “Why wait four months for ‘class notes’ when you could simply check Facebook to see what a friend is up to?” Further, while many colleges have online giving programs, many also still communicate with alumni as if writing a check is the normal way to give. “It likely shocks most development officers as to the percentage of young alumni who don’t write checks, or own stamps,” he wrote.

Huleatt also suggested that colleges need to think about ways to engage alumni who may not want or have the ability to make a financial gift. “Schools need to reevaluate what constitutes ‘giving.’ A recent graduate may not be able to afford an annual gift of $200, but if they help a rising senior find a job, isn’t that worth something? When was the last time a school published a list of alumni who helped find other alumni or students jobs over a given year? Don’t these people deserve credit?”

Blog content and user generated content continues to increase its mainstream relevancy as Mitch Nauffts notes today.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Philanthropy, Social Media, Youth | Comments (0)

Kiva.org & The Social Capital Markets II

January 31, 2008 – 6:36 pm

The New York Times recently reported on the fact that Kiva.org has too much money from donors/investors and not enough people to give/lend the money to:

Over the last few months, some visitors to the Web site of Kiva, a nonprofit that lets users make interest-free “microloans” to entrepreneurs in low-development (that is, poor) countries all over the world, were greeted with a surprising message. “Thanks Kiva Lenders!” it began. “You’ve funded EVERY business on the site!!” Has a charity ever announced that it had enough money? Would-be lenders were dumbstruck, says Kiva’s public-relations director, Fiona Ramsey: “They’re stunned for a second — ‘Here I am, I have money, I want to help someone, and you’re telling me that I can’t?’ ” The note encouraged the visitor to check back soon, as a new batch of loan-seeking entrepreneurs will often appear mere minutes later. But still, Kiva is a philanthropic organization facing an extremely unusual challenge: maintaining adequate supply (people who need help) to meet demand (people who want to give it). “We don’t want people coming to the Web site who want to make a loan and there’s no one to loan to,” Ramsey says.

On Saturday, the newest edition of my column in the Financial Times comes out and in it, I feature Kiva.org, DonorsChoose.org, and GlobalGiving.org as examples of “websites have sprung up that seek to match donors with nonprofits and projects that match their unique outlook.” These sites are examples of the growing social capital market that I believe will make it easier for donor/investors to find projects to fund and projects to find funders.

I’m intrigued by the implications of Kiva’s problem (and yes, getting too much money is a problem for a nonprofit, especially if they are unable to put the money to an effective use). For instance:

  • Kiva and the other sites I mention above have different missions. But would Kiva’s mission be better served by refusing donor money or by pointing donors to these other sites?
  • Is Kiva’s mission better served by treating these other sites as competitors and not referring donors to them with the premise that Kiva can best further their own mission and therefore should hope the donors will come back later if they do not give the money first to another site?
  • In the financial markets, there are rules that if a particular exchange is unable to execute an order, they must route that order to a competing exchange immediately. Does Kiva have a similar obligation to “re-route” their clients order to another “exchange”?
  • While Kiva is different from most nonprofits, it is still striking to hear about a nonprofit organization turning donors away. Does this problem stem from Kiva’s failure to identify “demand” (people to lend the money to) or from Kiva’s success at attracting “supply” (the lenders)? If the issue is on the demand side, does this suggest that microfinance cannot address as large as a market as proponents believe? If the problem is on the supply side, does this mean that we can expect Americans to provide much higher levels of support to the social capital markets if we can find more effective ways to engage them (as Kiva has)?
  • Rather than turning people away, Kiva could change the terms of their loans so that rather than getting full payback (Kiva loans do not carry interest), only 90% of the loan is paid back. This would then make the excess supply a benefit to the borrowers. Weaker terms for the lender would drive some lenders away and bring the market back into balance through reducing supply rather than increasing demand. Is this a better idea than refusing new money? If so, better for who?
By Sean Stannard-Stockton | Also posted in Effective Giving, New Philanthropy, Philanthropic Capital Markets, Philanthropy, microfinance | Comments (3)

Linnea Noreen

December 11, 2007 – 1:58 pm

I enjoyed the One Post Challenge so much that I’ve decided to make guest posts a regular feature of Tactical Philanthropy. The first guest post comes from Linnea Noreen. Linnea is the Managing Director for TisBest.org. She has worked over 7 years in nonprofit and project management, directing programs at the YMCA and Seattle Works, and nonprofits such as the Rainier Chamber of Commerce, among others. TisBest was the sponsor of this year’s runner up prize in the One Post Challenge.

If you’d like to submit a guest post, just email it to me for consideration.

By Linnea Noreen

What are we doing? Organizations are funded based on how great their development department tells donors their nonprofit is. It’s as if Amazon made money because a group of donors believed they should, so gave them their revenue for the year. No, Amazon makes money because customers value their service and want to purchase the products they offer. We should expect the same thing of our nonprofits: deliver a product or service that people want to buy, using surveys as a proxy for payment.

That’s the accountability problem in the nonprofit world: currently, customer experience doesn’t factor into the funding process. Successful nonprofits raise money because a skilled grant writer, coupled with elaborate metrics (meals served, children tutored) and a few tear-jerking client stories convinced someone that the organization was worthy. (How can any of us resist those starry-eyed children?)

Let’s change that. If a nonprofit served 1,000 at-risk teens, survey those teens to discover whether their experience was worth the money. If funding is tied to customer satisfaction, the nonprofit can be free to focus on making customers happy, instead of diverting precious resources to satisfy donor criteria. Forget about those overhead numbers, and focus on whether the money is changing people’s lives. So, let’s ask them!

I’m not suggesting that no customers are happy – in fact, many are, or nonprofits couldn’t support program fees (as an industry, roughly 50% of operating expenses). What I am suggesting is that from a macro perspective, very little of the $295 billion we give to nonprofits is spent on exactly what is needed or wanted. This doesn’t serve the people in need, donors, or even nonprofits themselves. As a former nonprofit director, it would have been much easier to receive funding based on what our customers thought, than how compelling we made our program descriptions and how rosy we made our “outcome” numbers and overhead percentages. (Trust me, everyone does this. I’ve worked at enough nonprofits large and small to know what needs to be done to get the money).

And, as an individual donor, wouldn’t it be great to see reports on the program’s effectiveness—in the eyes of their participants? Say, 70% thought the program made a difference, versus a nonprofit where only 30% thought it helped. Then it becomes an easy decision to give because you know that the program really works.

By Sean Stannard-Stockton | Also posted in Effective Giving, Guest Post, Impact Measurement, New Philanthropy, Philanthropy | Comments (0)

The Futures of Philanthropy, Fundraising, and Advertising

November 28, 2007 – 12:50 pm

This entry to the One Post Challenge comes from Peter Deitz. Peter writes a blog called About Micro-Philanthropy and is the founder of Social Actions, a community website that aggregates person-to-person fundraising campaigns and helps people to start their own. Deitz also works as a consultant to nonprofits and philanthropists interested in leveraging the power of social networks.

By Peter Deitz

The Futures of Philanthropy, Fundraising, and Advertising

The futures of philanthropy, fundraising, and advertising are looking remarkably similar. In all three fields, technology innovators are turning to real people to do the hard work of moving money.

Foundations are asking non-specialists to “crowd source” their grant recipients. Development teams are using “wired fundraisers” to increase online donations. Companies are relying on “fansumers” to promote their latest products.

The online marketing guru Seth Godin first reported on this trend in a series of e-books entitled Flipping the Funnel. In three versions of the same e-book, Godin addresses companies, nonprofits, and politicians. He instructs them on how individuals can be empowered to sell products, raise money, and recruit votes respectively.

Godin could easily have written a fourth version of Flipping the Funnel, one tailored to the needs of foundations and private philanthropists. The hypothetical e-book would have emphasized the important role that non-wealthy and non-specialist individuals can play in awarding grants and redistributing wealth.

Flipping the Funnel for Foundations and Private Philanthropists would have noted that:

  • Real people are often excellent judges of innovation and long-term impact;
  • If provided with the right incentives, individuals may back their grant recommendations with donations of their own, resulting in larger grants and more grantees;
  • People who are involved in grant-making are more likely to recognize a philanthropist for his or her contribution to the field.

Today, only a handful of nonprofits are effectively using wired fundraisers to raise money. Companies experimenting with fansumerism are drawing criticism for their attack on consumer privacy. And only a handful of foundations and private philanthropists are actually crowd-sourcing grant-making.

And yet, the innovators in these fields are continuing to experiment with new technologies that enable person-to-person communications and discernment. Overtime, the pioneers who balance privacy and fraud concerns with the opportunity for greater sales, donations, and grants will reap rewards for their early adoption.

Compared to fundraisers and advertisers, philanthropists have been the least exuberant in their embrace of the peer-to-peer economy. The sector needs leadership and technology innovation so that more wealth can be moved, and more effectively.

This post will hopefully serve as a starting point for discussing the trend as it pertains to philanthropy. Lessons from person-to-person fundraising and advertising will no doubt inform the discussion and provoke more innovation.

I look forward to exchanging ideas with the Tactical Philanthropy community and the larger world of emerging philanthropy bloggers.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Effective Giving, Foundations, New Philanthropy, One Post Challenge, Philanthropic Technology, Philanthropy, Social Media, nptech | Comments (2)

I’m Moving to Erie PA!

November 28, 2007 – 11:52 am

This entry to the One Post Challenge comes from Dorian Adams. Dorian is the Publisher of Just Cause and the founder of Benefit Magazine.

By Dorian Adams

I’m Moving to Erie PA!

For the last four years I’ve channeled my publishing background in creating media about philanthropy, making a difference, giving back, volunteering, social entrepreneurs, corporate social responsibility, socially responsible investing, etc. The result has been Benefit, the Bay Area magazine about the philanthropic lifestyle and, just recently, Just Cause, (www.justcauseit.com) the social-networking website dedicated to the greater good. It’s been a great ride so far and I’m inspired daily by the good news that people make in their chosen fields—be it the environment, education, the arts, health, civic causes or international affairs—and the opportunity to bring these stories to light.

Reader interest is undeniable. But media coverage about the passionate people who give time and money to good causes is limited. Sure the media-at-large will cover Bill Gates and Warren Buffett whenever they make news with their largesse.  But most individual stories go unnoticed. That’s why I was bucked up by the one-off story about the $100 million mystery donation to the town of Erie, PA. What a grand gesture. And how intriguing that the donor insists on anonymity!

Happily, the mysterious donor of $100 million to the Erie Community Foundation has caught the attention of major media outlets. “There has been amazing interest across the world,” foundation President Mike Batchelor said Tuesday. “I’ve been contacted by lots of national and international press. They are interested in this story, from the BBC to San Antonio to Buffalo, Boston, Cleveland.” (reported on the Go Erie website)

The Associated Press picked up the story, which first appeared in the Erie Times-News on Oct. 6, and Batchelor started getting calls on Monday from news organizations wanting to know more about the donation. Batchelor was on ABC’s “Good Morning America” and has been contacted by Fox News, CNN and MSNBC. “The bottom line, it’s a great story, and people are looking for great stories,” Batchelor said. “They’re happy to see success and charities benefiting.”

Here is the original AP story as reported by Jennifer C. Yates:  “Mike Batchelor invited the heads of 46 charities into his downtown office for one-on-one meetings to personally deliver the news. Nearby, on a small table, sat a box of tissues. And then he proceeded: A donor had given a staggering $100 million to the Erie Community Foundation, and all of the charities would receive a share. That was when the tears began to flow—and the mystery began—in this struggling old industrial city of 102,000 on Lake Erie, where the donor is known only as “Anonymous Friend.”  Continue reading Mystery $100M Donation Lifts Pa. City

Two Related Topics:

What does the future of Philanthropy Media look like?  Since the 2000 election, the public sector has failed to provide the social resources and the support that America needs. This has spurred the civic sector, private individuals and corporations to expand their support for nonprofits across the board.  The business sector has found that corporate social responsibility resonates with consumers—CSR has grown dramatically and will continue to do so.  In turn, this has created the need to communicate this goodwill to the public.  Corporate advertising, whose message is “we are good citizens,” has increased both on television and in print.  This is most evident around the subject of the environment, but I predict that editorial coverage about philanthropy, CSR, and giving back will grow apace.  Most magazines will continue to have their April Green Issues (Earth Day is April 22nd) but coverage of health, education and international issues will grow as well.  Additionally, visionary entrepreneurs who made their fortunes in the last decade recognize the power of the media to act as a catalyst for change.  They are the impetus behind the new magazines and websites dedicated to the greater good like Benefit, Contribute and Good magazines.  Moreover, social entrepreneurs like Jeff Skoll are bankrolling movies and documentaries aimed at raising public awareness about the environment, health issues and global concerns.  Skoll’s Participant Productions is behind An Inconvenient Truth, Darfur Now, Fast Food Nation, Jimmy Carter A Man from Plains, Syriana, Good Night and Good Luck, Luna, and American Gun among others.

Anonymity: What are the pros and cons?  The Mystery Donor of Erie PA is a wonderful story, but without names on museum wings and university buildings, modern philanthropy would suffer.  What’s your opinion?

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Media, One Post Challenge, Philanthropy | Comments (2)

Charity Navigator’s Vital Mission Hides Flawed Rankings

November 20, 2007 – 11:23 am

This entry to the One Post Challenge comes from Michael Soper. Michael is President, TeamSoper and the Development & Marketing Management Corporation. Formerly, he was Senior Vice President, Development at PBS and WETA.

By Michael Soper

Strong Marketing of a Weak Success Measure: Charity Navigator Vital Mission Hides Flawed Rankings

Everyone wants to figure out how to evaluate nonprofits. Grantmakers, donors, volunteers, journalist, and nonprofit leaders.

Individuals who contribute and the nonprofits that use those funds to provide vital services would both benefit from ranking of effectiveness and efficiency. Such evaluations would encourage nonprofits to constantly improve their performance and allow funders to make smarter investments.

Those were the driving motivations behind the creation of Charity Navigator and other nonprofit rating / ranking services. Yet, if you believe Charity Navigator or others have found the holy grail of evaluating nonprofit organizations you’re sadly mistaken — and I encourage you to keep reading.

For-profits have one thing nonprofits do not — a clear set of financial measures of success. Across for-profits is it relatively easy to measure and compare profits. Yet, it is much tougher to measure effective and efficient service – the mission and goal of all nonprofits.

Charity Navigator’s rankings are the result of gross oversimplifications. For example, Charity Navigator’s:

  • Evaluation process begins and ends with creating ratios based on almost any two numbers found in nonprofit organizations’ IRS Form 990.
  • Presumption is that all nonprofits complete their IRS Form 990’s in the same manner, using precisely the same definitions of what income and expenses are reported in response to a given question on Form 990.
  • Ratings do not include an “affirmative confirmation” from nonprofits’ top management to guarantee the accounting basis of specific figures or that the resulting ranking is both correct and fair.

Imagine a nonprofit institution raising capital funds for a new facility. Simply looking at the IRS Form 990 could lead one to believe the organization had a dramatic increase in revenues. That’s good news to the nonprofit — unless, for example, Charity Navigator decides to use that year as a “base year” on which to evaluate future year’s revenues. Future ratings and rankings could show the nonprofit in decline as a result of the decreasing revenue.

Or, consider how you would rate a nonprofit whose mission is to care for people during and immediately following natural disasters? Funding for the organization is like winding a clock-spring. All of the investments in infrastructure are “waste” if there are no disasters.

On the other hand, if there is a disaster and the expensive infrastructure doesn’t exist, the organization will fail to react instantly when conditions demand nothing less. Only when the spring is wound can the organization deploy resources and services when they are most needed.

These situations have me reflecting on the age-old loaded-question, “Are you still beating your wife?” Charity Navigator’s ratings, rankings, and top ten lists are all presumed to be true as published until and unless they are challenged a nonprofit that was damaged by an overly simplified ranking system that is not based on an apples-to-apples comparison.

In my view, Charity Navigator, its ratings, and its top ten lists are nothing more than great merchandising of a weak underlying product.

For example, wouldn’t any donor or nonprofit be interested in the following “Top Ten” Charity Navigator lists?

  • 10 of the Best Charities Everyone’s Heard Of
  • 10 Highly Rated Charities Relying on Private Contributions
  • 10 Charities Routinely in the Red
  • 10 Charities Stockpiling Your Money
  • 10 Charities Expanding in a Hurry
  • 10 Charities in Deep Financial Trouble

These lists — while attractive — are the “National Enquirer” approach to a topic that demands more substantive evaluation of nonprofits’ effectiveness and efficiency. While not as quick or easy as Charity Navigator’s overly simplistic rankings, it’s fascinating to see Charity Navigator’s own recommendation on how to evaluate nonprofit institutions that it does NOT rate (listed below) far more closely represent the time, questions, and interaction with nonprofits that are required to evaluate their effectiveness and efficiency.

Charity Navigator’s Suggestions On Evaluating Nonprofit Success

  1. Can your charity clearly communicate who they are and what they do?
  2. Can your charity define their short-term and long-term goals?
  3. Can your charity tell you the progress it has made (or is making) toward its goal?
  4. Do your charity’s programs make sense to you?
  5. Can you trust your charity?
  6. Are you willing to make a long-term commitment to your organization?

I give up! If these are the questions that Charity Navigator recommends you and I ask of nonprofits, why don’t they use these same questions themselves?

I can think of four answers:

  • It would require an enormous investment of time and money to gather the answers.
  • Even if answers to the above questions were collected, they don’t lend themselves to numeric ratings;
  • Without numeric ratings, it is next to impossible to produce apples-to-apples rankings, and, finally;
  • Without low-cost, easy to produce nonprofit rankings, there is no Charity Navigator.

Regardless of their size, the rating of a nonprofit’s service is complicated and highly subjective. The list of provided above by Charity Navigator is a good starting point for discussions with a nonprofit’s leadership, top management and key professionals.

But here in all this complexity and subjectivity is the beauty of making an individual decision to support a specific nonprofit organization.

Over time, you learn about those organizations dealing with the causes you care about most – and are passionate about their mission.

After all, if it were that easy to determine the most successful nonprofits, everyone could invest in nonprofit mutual funds and fund managers would make the investments in only those organizations’ services rated at the top of the list in terms of effectiveness and efficiency.

Large donors and small donors. Very well funded and not so well funded nonprofits. In all of these cases, half of the fun of investing in nonprofits – in giving away your hard earned cash – is learning about the similarities and differences between the half-dozen organizations meeting needs you believe are essential.

In the end, a significant contributor only has two good options.

  • They can become involved, get engaged, and learn about the organizations they fund.
  • Or, they can simply hire me (just teasing) – or any other consultant with substantial hands-on, nonprofit experience, to collect information on nonprofits of interest and provide them with a thoughtful narrative report.

My real concern is that Charity Navigator’s rankings appear to be so powerful and easy to use that:

  • Individuals will fail to take the time and gather the information to determine which ratings may be solid and which are gross oversimplifications or just plain wrong.
  • Potential contributors will simply discard a deserving nonprofit from their list of giving priorities, and / or;
  • Donors will fail to use the rankings provided by Charity Navigator as one of many topics to discuss with the top management of the nonprofit that interests them.

Charity Navigator’s (and other data aggregators / information providers) current ratings, rankings, and practice of publishing the “truth” until proven otherwise fails potential donors, some nonprofits, and its own mission.

I’m not suggesting that every poor rating of a nonprofit by Charity Navigator is incorrect or undeserved. I am urging the nonprofit industry to create better measures and / or methods of evaluating nonprofits’ mission-driven services in terms of effectiveness and efficiency.

Until that time, I would urge all nonprofits to be open and accountable and all current and potential contributors to become more involved with and knowledgeable about the nonprofits engaged in the causes that interest them the most.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Effective Giving, Impact Measurement, One Post Challenge, Philanthropy | Comments (18)

When Technology Trumps Philanthropy

November 18, 2007 – 5:11 pm

When Technology Trumps Philanthropy

This entry to the One Post Challenge is from Valerie, an Alumni Relations Associate at a major university.

By Valerie.

Gone are the days of keeping track of donors on 3 x 5 cards and marking return envelopes on the side with a red swipe of the marker to know that it is the “ABC” appeal (although I heard someone say nary a year ago that they did that!).  Computers are here, we have databases, printers, the web and the ability to track, analyze and reach people in ways that were not possible a decade or more ago.

Yet, I find that with all this technology, if the IT department is left in the driver’s seat, it can hinder marketing efforts rather than help them.  What is “convenient” or makes sense technologically is not always best for Development or - more importantly - the donor.

Two examples have happened recently that illustrate this constant struggle.

In every online marketing class I have taken, it has been emphasized that the donor must be engaged to, well, DONATE first before asking them all sorts of superfluous questions such as “How did you hear about us?” “When did you graduate?” “Does your company have a matching gift program?” and so on.  Therefore, when I redesigned the online giving form for simplicity, I asked the donor for their amount and credit card information first.  Once this has been entered, they are much less likely to disengage - they will fill out the entire form.  (I also reduced the number of overall questions from the previous form.)

Scrolling endlessly is also a no-no, so page 1 is money - amount, credit card - & fund designation, page 2 (next) is donor name, & contact information (next) and page 3 is extras that few people fill out, such as matching, tribute, etc. (submit).

I’ve been informed by the IT department that our particular software doesn’t like placing the credit card information on page 1, so they’d prefer to move it to page 3.  It CAN be on page 1, but it’s DIFFICULT to do, so they’d prefer that each of my online donor forms just have it on page 3.

I’ve explained my reasons, but have been told that “the programming/software makes it difficult…”

Likewise, a different IT person doesn’t care for my requests for multiple redirects (which goes to these many forms).

So that I can track responses to multiple appeals, I have asked for redirects such as

www.company.org/donate
www.company.org/contribute
www.company.org/scholarship
www.company.org/stock
www.company.org/alumni
www.company.org/future

I have been told that this “has to stop” because “it’s creating too many folders” on the website.  The alternative I was given is that I could have as many redirects as I want…under one folder: the “Donate” folder, which would give me the following options:

www.company.org/donate/(appeal1)
www.company.org/donate/(appeal2)
www.company.org/donate/(appeal3)
www.company.org/donate/(appeal4)
www.company.org/donate/(appeal5)

When I tried in vain to explain that it has to be “marketable and memorable” to the donor and can’t go on and on, I was informed that “We can’t have this many folders on the website.”

So, accommodating the software’s preferences appears to trump the donor’s preferences?  This is how we came up with voicemail that says, “If you want ________, press eighteen…”

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, One Post Challenge, Philanthropic Technology, Philanthropy, Social Media, nptech | Comments (2)

Impact Through Inspiration

November 13, 2007 – 3:23 pm

This entry to the One Post Challenge comes from Rich Polt. Rich is president of Louder Than Words, a Boston-based PR agency that works with foundations, nonprofits, and mission driven businesses. When he’s not communicating good for his clients, he can be found with his family, on his bike, or with the NY Times crossword puzzle.

By Rich Polt

First let me applaud DontTellTheDonor on their blogging coup. I recently cast my vote for Aid to Artisans on that thread, but my “Spidey-Sense” tells me that Pride at Work might be running away with the prize. Congratulations (potentially)! Don’t Tell The Donor showed us that there is power in numbers on the Web. I believe that there is also power in ideas (and would like to place some internal resources against that assertion… read on).

I believe that inspiration is the greatest commodity this sector has to offer.

Blogging should not just be about casting a vote, but advancing ideas and inspiring others to action through those ideas. Two weeks ago, I attended a great conference in Miami that was sponsored by the Communications Network. The theme of the event was What We Know (Or Should Know) About Effective Communications in the philanthropy sector. The penultimate plenary session included a presentation from the Skoll Foundation about how they have leveraged storytelling to build the successful Web site Social Edge. Check out this amazing example (produced for Social Edge) of how unembellished storytelling can elicit a visceral response.

What I would love to know is this:  What deserving, undercapitalized nonprofit has a story to inspire the masses AND a few sentences on the source of that inspiration (i.e., the “why”). Feel free to either name nonprofits or to comment on other people’s suggestions. Hell… I want to know why Pride at Work inspires so many people! If this post wins the “One Post Challenge,” Louder Than Words will donate the $500 gift card as well as $2,500 of in kind time and services to the nonprofit with the most inspiring comments/story (as determined by us after reading your posts). It’s all about the inspiration…

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Media, New Philanthropy, One Post Challenge, Philanthropy, Prize Philanthropy, Social Media | Comments (3)

One Post Challenge: Something’s Happening Here

November 13, 2007 – 1:48 pm

In case you haven’t noticed, the One Post Challenge entry from “a fundraiser” has generated 60 comments as of this writing. I have intentionally not commented on the progress of the competition so far as I didn’t want to interfere in the process that was unfolding. But I’m going to break my silence.

What the $500 For Your Nonprofit post did was take control of the competition and create an incentive for commentators rather than retaining the incentive for the blog post author. This was an exceptional demonstration of the author’s understanding of online fundraising. His/her post generated attention and a link from a high traffic blog called BlogActive, which quickly became the top referring site to my blog (hello Pride at Work!). The fact that both the NY Times and the Chronicle of Philanthropy coincidently mentioned my blog yesterday also spurred traffic (although it is important to note that BlogActive sent more readers, and more engaged readers, than the NY Times or the Chronicle).

So now we see that when competing for attention online, having a great, well thought-out message doesn’t always win the game. You also need to understand the medium that you’re working with. Now the question becomes does the $500 For Your Nonprofit post simply highjack this competition and show that mobs are more powerful/important than intelligent thought provoking commentary? Or are their new and creative ways that participants can take back control of the competition and find a way to redirect this traffic surge to engage people to type more than three words?

To me, this is the central dilemma of online marketing. Is the internet great at getting millions of people to watch online videos of cats doing dumb things? Or can the power of social media be harnessed to provide a benefit to the public good?
I can think of no industry with a more vested interest in this question than philanthropy.

What’s your answer? Email me your entry to the One Post Challenge and demonstrate how social media for the social good is done.

(I’d like to thank Network for Good for co-sponsoring this competition and awarding their new Good Card to the One Post Challenge winner. Click here for One Post Challenge rules.)

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Media, New Philanthropy, One Post Challenge, Philanthropy, Social Media, nptech | Comments (21)

$500 For Your Nonprofit!

November 12, 2007 – 8:34 am

This entry to the One Post Challenge comes from the anonymous fundraiser who runs the blog Don’t Tell The Donor. If you’ve been forwarded this post, I vouch for the fact that the $500 is real and will be given to the winner. You can read about the details of this contest here. I would like to note that the winner is the post with the largest number of people posting a comment, not the most comments. So no need to post multiple comments from the same person.

By “a fundraiser”

I’m the anonymous fundraiser who runs the blog DontTellTheDonor.org and I am thrilled to be published on Tactical Philanthropy as part of Sean’s One-Post Challenge. I have also noticed the same tendency Sean cites that if we can encourage readers to leave just one comment - it can be a springboard for a rapid and engaging discussion.

My blog tries to inject a daily dose of humor into fundraising news stories… sometimes I get my hands on a juicy piece of gossip that makes its way from development office to development office… but my real love is for the profession of fundraising and the opportunity my day job gives me to connect people to the causes they believe in. I love providing opportunities for donors to give.

Therefore, I am going to use Sean’s “One Post Challenge” to demonstrate the power of fundraisers who understand the online world. Blogging is not about talking AT PEOPLE, it’s about making readers part of the story and giving them a reason to be engaged. I am going to attempt to win this first annual one post challenge by turning this contest on it’s very head.

I need your help… and I promise to try and make it worth your time.

The blogger who gets the most comments to their post will win a $500 “Good Card”, the new “gift card” from Network for Good that let’s the receiver make a grant to the nonprofit of their choice.

If I win, I will give the $500 to the charity named by the most people in the comments to this post. For example, if you are reading this post and you want me to give the $500 to your local Habitat for Humanity or your neighbor’s animal rescue - simply post a comment with the name of that charity. I hope to encourage people who love charities to visit this website and leave a comment.

Maybe I’m being conservative, but I think I would need 50 comments on this post in order to win the contest… and there will probably be a dozen different charities with varying level of votes… so, technically a plurality of 10 comments for one non-profit could win your favorite group a $500 donation. It’s that easy.
Forward this post to your friends and co-workers and encourage them to post a comment on my form and you could be a hero for your favorite charity

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Giving Blogs, One Post Challenge, Philanthropy, nptech | Comments (700)