The Gift of Giving to Non-profits

As a development professional, I am passionate about my belief in the gift of giving to non-profit organizations. At this time of year, mailboxes are brimming with appeals from a variety of organizations, many groups who rely on fundraising dollars to support their worthwhile missions.

Aviv Centers for Living recently sent out an appeal that quoted the Talmud as saying, “One person’s candle is a light for many.” We took a walk down memory lane recalling that when the original founders of Aviv gathered in 1945, the world was a very different place. Gasoline cost about 15 cents a gallon. Elvis Presley debuted at age 10. Harry Truman was sworn in as the 33rd President of the United States as George and Barbara Bush wed and the United Nations was formed. While the darkness of World War II clouded the universe, a group of citizens gathered in Lynn to create light for seniors and founded the Jewish Convalescent Home, fondly called “the Home.”

Well over 66 years ago, while the world was a different place, the desire for good people to galvanize for grand purposes was just as important as it is today. As you prepare for the holidays, take a moment to look in your heart and make a donation to a non-profit organization. It may be the best gift you give this holiday season.

Fundraising in a Turbulent Economy

So the stock market is a mess, and all signs point to a very weak recovery, if not a double-dip recession. What's a development officer to do?

First, DON'T PANIC! Well, actually a little panic probably won't hurt. I met with a friend today who just started a new development job. In her first two weeks on the job, two major donors to the organization have said they will be reducing their gifts next year by a total of $400,000! Interestingly, neither one of them cited the economy or the stock market as the reason. That said, finding a new $400,000 in the current economy probably won't be easy. So what do you do?

I would suggest sticking to fundamentals. Remember that development is about building relationships, and that people make gifts (especially major gifts) to the organizations they feel closest to. So now is the time to turn to your organization's current friends for renewed, increased, and new gifts. Don't make the case that you are in trouble because of the economy; rather, make the case that their help will help you keep your programs strong and ride out the storm.

Now is also the time to make new friends. Ask your board members and other volunteers to think about people they may know who could become interested and involved with your mission. Look for people with some connection to what you do. Then ask them to join you! Ask for their advice and involvement first; then ask for their gift. Remember, the more involved the person becomes, the more likely it is that you'll get a major gift for your organization.

These tactics may not increase your fundraising results immediately, but they will build your base for the long haul. And your current friends might surprise you by stepping up with the gifts you need! Don't fall into the trap of thinking you shouldn't ask people for gifts right now because of the economy. Remember, the number one predictor that someone won't make a gift to your organization is that they weren't asked. So ask, and ask often. It is our job to ask, and the donor's job to decide on the answer! Turbulent economic times require us to ask more than ever. The answer won't always be the one we hope for, but often it will be, and the more you ask, the more you'll get!

If you need some ideas for strategies for building stronger relationships with your organization's friends - old or new - or asking for support from them, let me know.

Volunteers: Friend or Friend?

One of my favorite volunteer board members - the chair of the development committee at a university I worked for - once said to the entire board, "Remember, WE volunteer board members are the fundraisers here. The staff is hear to help us do our jobs." This resonated for me because I started out in development as a volunteer for one of the large Jewish Federations. We (the volunteers) always understood that the task of asking for gifts was OUR responsibility, and that the campaign wouldn't be successful if we didn't do our jobs. Believe me, it was difficult, and took a lot of time; and we all had day jobs, too (mine was in the real estate business.)

By the time I was working at that university, development had changed - fundraising was much more in the hands of the professional staff, with limited support from the volunteers. That trend has continued, and the large size of the development staff at some institutions is evidence of it. But that volunteer chair still understood the power of the volunteer ask!

I still believe, as he does, that the best development work is done by volunteers. When a business person asks a peer to support an organization that he or she believes in, the ask is almost always successful. When a development staff person makes a similar ask, the result is not nearly as assured. Peers asking peers still works best! Perhaps it works even better today because it is not as common.

This is not to say that development staff isn't important. I still work in development, and believe that my work in cultivating and soliciting major prospective donors is crucial to the success of the organization I work for. But I also believe that when I can get the Board Chair, or another volunteer, in the room with the prospect, it is much more likely that we will get the gift we are seeking. Sometimes it takes a volunteer just to get the phone answered or the appointment set! Someone once said that when you get the right person doing the ask for the right project at the right time, magic happens. As a professional development officer, I aspire to succeeding at that task, and really try to find the "right person", knowing that it is sometimes me, but is much more often a volunteer!

It really pains me when I hear development staff members deriding volunteers as unskilled or "adding work" to "our already busy days." I am currently volunteering myself (yes, I sometimes take a "bus man's holiday") with an organization that has a half-time development officer who wouldn't be accomplishing nearly what she does if it weren't for a small group of volunteers dedicated to the success of the organization who are doing the hard work of developing strategies, cultivating, and soliciting major donors. I have never heard her complain about a volunteer!

Volunteers are our best friends in development. If you would like some help in figuring out the best ways to work with yours, give me a call.

Tax time?

Recently there has been some discussion in the media that one of the possible "fixes" to the Federal deficit crisis would be to reduce or eliminate the charitable tax deduction. Here's an article from the New York Times on this subject. The reaction from many in the nonprofit sector is nothing short of panic, and I wonder what's really driving that panic. It seems that many are afraid that their donors will stop giving if the charitable deduction goes away. I don't believe that will happen. Do you?

Nonprofit (501(c)3) organizations receive a number of benefits from the government: they pay no income tax on any income that is related to their charitable purpose; they pay no real estate taxes (in nearly all jurisdictions); in most jurisdictions, they pay no sales taxes (California is the biggest location where this isn't true - everyone pays sales taxes in California!); and contributions made to these organizations create a tax deduction for the donor. For the moment, only this last benefit seems to be in danger (and probably not much danger, at that). But why should we care?

The largest number of charitable gifts - the small ones - get no tax deduction because they are made by people who don't itemize their deductions, and therefore get no tax benefit from charitable gifts. And the bigger the gift, the more likely it is being made for other reasons than tax treatment. Charitable intent and a relationship with the organization, for example! I still believe that the main reason someone makes a gift to an organization is a belief in the mission of the organization (and that they were asked). It is possible that in some cases the size of the gift might be impacted by tax considerations - a tax savings could make a gift somewhat larger possible. But I would argue that this increase in size is marginal both for the donors and the organizations. If someone is making charitable gifts only for their tax-sheltering properties, I would also suggest that there are much more efficient ways to reduce one's taxes.

Note that I am not a financial planner; I am basing my statements on many years of working with philanthropists, and on anecdotal information. I haven't conducted a scientific study on this issue. However, indications from past changes in the deductibility of contributions (the amount of savings was reduced in 1986 and giving went up the following year) suggest that there will be minimal or no negative impact of a reduction or even elimination of the charitable tax deduction.

A word about estate planning and planned gifts: Estate planning often includes making provisions for charitable gifts. You probably know some of the terms: gift annuity, charitable remainder trust, charitable lead trust, etc. Much of the work of planned giving involves some amount of creating ways of making gifts and bequests that will reduce the amount of estate (and other) taxes that must be paid upon the death of the donor. These arrangements do, indeed, intertwine philanthropy with reducing taxes, but I believe that most of the time a planned gift gets made because the donor has a charitable intent and a relationship to the organization receiving the gift - not just because the gift reduces the tax bite. People with large estates work with advisers who help them minimize the taxes they must pay. Sometimes that minimization involves charity and sometimes it doesn't, but while the existence of the tax benefit might help increase the size of a charitable gift, it doesn't create it. The organization's mission and case for support, and the donor's charitable intent does.

If your organization is worried that your gifts will dry up because the charitable tax deduction goes away, I'm worried about your organization! If you don't have the faith that your mission is important and attractive to potential donors, we should talk. Perhaps I can help you better communicate what makes your mission compelling and reshape your case for support. There are hundreds of thousands of nonprofits in the U.S. My experience is the vast majority were created to fulfill a valid and compelling mission, and that mission is supportable by donors with or without a tax deduction!

Some things to think about...
What do you really know about the impact of the tax deduction on giving to your organization?
What is the ratio of donors in your data base who take the deduction to those who don't?
Can you run a report to find out?
What will you do proactively with what you learn?

Call me if I can help.

The Common Good

When did we stop caring about one another? We live in a neighborhood that has a neighborhood association and some land that is jointly owned by 97 homeowners. Some of the roads are town roads and some are private. Recently, a couple of the private roads were in serious need of repair. The town has historically done this work (even on the private roads), although when they are repaired, the condition is often worse than it was before the work was done. And much of the damage is caused by other town work like snowplowing and street sweeping.

So the issue was raised: "Should we ask the town to fully repave the private roads, or should the association pay for this work?" In addition, the neighborhood is split between those who abut the private roads and those who don't. Will the whole neighborhood pull together to pay for the repaving, or will the non-abutters refuse to pay their share? As you might guess, the consensus was to ask the town. But the town says they don't have the money to do this work. They did do a patch job, which brings us back to the beginning of the story.

Why doesn't the town have the money to pay for road repair? (private or public, the roads in our town are a mess!) Because in our state there is a law that restricts the ability of the cities and towns to raise property taxes above a certain level without a referendum. And this fall, every tax increase referendum in our town failed. Yes, I understand that we're in a recession, but the whole conversation about these roads has led me to the same conclusion: We don't care about one another anymore. No one thinks about the "common good".

This lack of concern for the common good is also part of the question in the neighborhood association. We accepted the town repair of the roads - bad as it is - so that we don't need to deal with who will pay for the full repaving project (since the town doesn't have the money). We don't want to have the discussion about whether this is an association responsibility or should only be paid for by the road abutters.

This is true for non-profits too. Much of the community work that we refuse to tax ourselves to pay for has become the responsibility of nonprofit organizations. But then we don't give them enough money to do the work either! We say we care about one another, but then we don't put any money behind our words. In particular, giving to federated campaigns (United Ways, Jewish Federations, Catholic Charities, etc.) has dropped in the past several years. And many federated campaigns now encourage "directed giving". This means the donor can specify where the money goes, instead of having it allocated by the community leaders who serve on the allocation committees. Why? Because we no longer seem to believe that there is a common good that can best be served by having a group of community leaders determine the priorities.

I firmly believe that there is a common good. That some projects must be paid for whether I benefit from them or not. That's part of why I have spent most of my career fundraising for nonprofit organizations. It's also why I am so frustrated by the current political climate. It's all about "I have mine, and I don't want anyone else to get theirs because it might cost me a piece of mine." It's why we continue to elect people who promise to lower our taxes, rather than people who promise to continue providing services, and we need to pay taxes to pay for them. If our society continues down this path, we won't continue for long.

If you agree, I'd love to hear from you! If you don't, I'd love to hear your reasoning, too. I'm willing to accept that I might not be right, but I want to know what keeps society functioning if there is no recognized common good and we don't care about one another?

Museum as Tourist Attraction

An article in the Boston Globe yesterday announced the imminent re-opening of the Boston Tea Party Ship and Museum which has been closed since a fire destroyed its main building in 2007. I was initially pleased to think that a well known and loved non-profit was about to be reopened. As I read further in the article, however, I became confused by the language about loans and investments. A little more digging, and I discovered that the Museum is a for-profit tourist attraction of "Historic Tours of America" whose website describes them as "...an entertainment company which provides historically oriented vacation experiences for our guests..." A for-profit museum. What is the difference between a non-profit museum and a for-profit museum? What does this say for non-profit organizations generally?

My take is that non-profit organizations provide a benefit to the community at large, beyond entertainment. (See my previous discussion of North Shore Music Theater.) So the Tea Party Museum is a tourist attraction that might bring money to the city, but isn't serving a larger social cause. Non-profit museums provide educational and cultural programming to the community. That's why they are granted tax exemptions and why donors may claim deductions. Non-profits must have a community mission. They are supported by donors with a philanthropic intent. For-profits try to make money from users. Non-profits try to provide services to their users, while trying to maintain fiscal responsibility. Sometimes they are also supported by their "gate", the way for-profit entertainment venues are, but they provide much more to the community that ticket revenue doesn't generally pay for - that's why their donors can take those deductions.

What this article taught me is that as philanthropists we must pay close attention to the mission and programming of the organizations we support. And make sure they continue to serve the community - not just the interests of the "owners".

Let's talk about philanthropy and mission. Drop me an e-mail or give me a call.

The Billionaires' Pledge

A lot has been written over the past couple of weeks about the request made by Warren Buffet and Bill and Melinda Gates to their peers that they each pledge to give away 50% of their fortunes before they die. Here's an article from the New York Times. Frankly, I'm not sure what this means.

Many of the people quoted as having made the pledge had already made arrangements to give away most of their money, and are just now announcing it. Even Mr. Buffet concedes, “It’s not like all or half of the money represented is added money, but some of it is added.” And I suspect that much of the money being given to charity will be given to charitable foundations. That's not necessarily a bad thing - it adds to the charitable assets available - but it doesn't immediately help nonprofit organizations, and it limits the amount available to those organizations in any given year.

Perhaps the most important factor in the pledge program is that it brings the idea of charitable giving to the front pages of newspapers for a couple of weeks. If this announcement encourages just a few people to give more philanthropy than they would have before, then it has done some good. And maybe that's all we can ask.

If you would like some ideas about how you can do some good, or if you are an organization looking for help in finding new donors, give me a call.

When non-profits become for-profits.

The North Shore Music Theater has reopened, and many people in this part of Greater Boston are delighted. There's nothing like live musical theater, and the "in the round" stage at North Shore is especially appealing. (See this article from the Boston Globe.)

There's just one thing different - North Shore Music Theater was a non-profit organization. You may remember that last winter they went bankrupt and shut down. The property was taken back by the bank that held the mortgage, and that was the end of that. Until a Rhode Island theater owner, Willam Hanney, decided to buy the property from the bank, and re-open North Shore as a profit making venture.

This is good news for the community, but what does it say about non-profit theater? Why couldn't North Shore survive as a non-profit? They were saddled with debt due to a fire a number of years ago, and weren't positioned financially to weather the downturn. They tried raising the money they needed to survive, but with the economic disaster, and a late entry into fundraising, their efforts were doomed.

If they couldn't survive as a non-profit, how will Mr. Hanney make a profit? One way is staff size. The article noted above mentions that North Shore laid off 50 people when they closed down. Mr. Hanney plans to operate with a full-time staff of six. And I would guess that the education programs that were a big part of the theater's mission will no longer be offered.

So theater comes back to the North Shore of Boston, but a half-century old non-profit organization has disappeared. This can't be good for philanthropy.

Let me know if your philanthropic organization needs help building support. Let's keep non-profits non-profit.

Does the board raise funds from business contacts?

There was a really odd short posting on the Boston Globe website last month. It says that the union representing health care workers asked the board of a hospital to consider whether a trustee "should have disclosed that he helped raise money for the hospital from at least one person with whom he had done business." This makes it sound like raising money for a non-profit medical center is somehow wrong or at least underhanded. At this particular hospital, being a trustee is an honorary position - the board of directors has fiduciary responsibility, and a hospital spokesman said that only directors must disclose conflicts of interest. Further, the spokesman said, "while trustees cultivate relationships with donors, they do not ask for money; that job is handled by hospital staff." This response is what I find so odd about this story. (Aside from the issue of why the union is making these kinds of requests at all.)

I've always understood that the entire role of trustees on non-fiduciary boards is fundraising. And if they aren't fundraising from people they've done business with, they aren't doing their jobs - it's not a conflict of interest - it is the job! Fiduciary board members have a major role in fundraising, too, but they also have some other responsibilities.

A number of years ago, I served as chief development officer for a university foundation. My board chair told the board, "it is our job as volunteer board members to raise funds for this organization. The staff is hear to support us in this vital role." I have always agreed with him. If the board won't, or for some reason is prevented from, raising funds for the organization, the staff will find it very difficult to succeed, no matter how hard they work.

Does your board help with fundraising, and do they cultivate and solicit business contacts? If not, would you like them to? If your board needs some help in understanding their responsibilities to your organization, let me know. I'm happy to help.

What does it mean to serve on a non-profit board?

There was a wonderful article in today's New York Times titled, "Trustees Find Board Seats Are Still Luxury Items." It carries a sub-title on the NYTimes.com website of "To Join the Met's Board, Have a Checkbook Handy." The sub-title is actually unfair. The article does talk about the importance of having board members who bring things other than money to the table.

However, the most important thing about the article, in my mind, is that it discusses openly the importance of having expectations understood when recruiting new board members for non-profit organizations. In particular, the article focuses on the importance of board members making financial commitments to the organizations on whose boards they serve. Two wonderful "cliches" are mentioned: "Give, Get, or Get Off," and "bring your Time, Talent, and Treasure," to the board. While both of these have been said over and over again, it doesn't hurt at all to remind our non-profit board members of their importance.

Board members who believe that "I give my time, so I don't have to give money," must be reminded that time alone is not enough. If for some reason they are not able to make a financial contribution, they must reach out to others for such commitments. If they are able to give and choose not to, they have no business serving on the board, and arrangements should be made for their removal!

The article also talks about the process of involving potential board members in the life of the organization before asking them to serve on the board. It is wonderful to have this reminder of the importance of building relationships - with our board members, as well as with our prospective donors - in the life of non-profit organizations. While the article is specifically written about the "premier" arts organizations in New York City, its themes are applicable to all non-profits.

Too many boards today forget these rules, and don't understand their most important roles in non-profit governance, setting policy and providing money (giving or getting!)

If you need help in reminding your board about it's role, or if you are a board member who wants to really help your organization, give me a call. Let's talk about ways to re-build the expectations of both your organization and your board.

How much should a non-profit executive be paid?

I've seen a number of articles and reports recently (this happens every time a new crop of 990s are filed) bemoaning the "huge" salaries paid to non-profit executives. Here in the Boston area, two of the recent "profligates" were the CEO of the Citi Center for Performing Arts and the President of Suffolk University. In both cases the reports in the 990s included deferred compensation of $1 million or more. In the case of the Citi Center, it was a large payment to the CEO's retirement account, paid as a bonus in recognition of many years of successful work. In the case of Suffolk, it was two years worth of extra contributions to the President's retirement account to, in the words of the board chair, make up for the fact that he "had been woefully underpaid' over his 52-year tenure at the school".

So what should we make of this? First, the media (and much of the populace) is fascinated by big salary numbers - the media wouldn't report on it if they didn't think it would sell newspapers or raise ratings for the TV news. Second, those big numbers at non-profits are seen by many as inappropriate. But are they?

It is not hard to argue that a university with a multi-million dollar budget should be run by someone with the skills it would take to run a multi-million dollar corporation. That doesn't require paying corporate-level salaries, but it does require coming close in order to attract high-quality talent. The same goes for non-profit hospitals and health systems, which tend to be even bigger and more complex than universities (and usually pay more, too.) On the other hand, should anyone working in a non-profit be paid more than the president of the United States? Since 2001, the "leader of the free world" has been paid $400,000 per year. Of course it could be argued that this is worth much more than anyone else's salary since it comes with a house, transportation (limos, helicopters, planes, etc.), expense accounts, and many other perks! That being said, a salary in the $400,000 to $600,000 per year for the CEO of a major non-profit is probably not unreasonable.

But what about the rest of the staff? One of the major complaints about development officers these days is that "they keep moving around." Unfortunately, often true. It's hard to really know an organization and all its parts in less than three years, and that happens to be the average tenure of a chief development officer. Why is that? Part of the reason is that salaries below the CEO level at most non-profits are very low. In addition, they rarely rise. In order to get more than a 2-3% raise in a non-profit organization, you generally need to leave for another position. Then the organization replaces you at a salary you would have stayed for - perhaps 10% more than you were being paid. This is unfortunate and short-sighted on the part of non-profit boards. It is also unlikely to change anytime soon. Too bad. Admittedly, there are other contributing reasons for the high turnover rate for development officers, but pay levels and little or no raises certainly play a part.

So, if you are interested in helping to stop turnover at your non-profit, give me a call. I'd be happy to help you analyze your situation and set up a system to help raise the funds needed to provide the raises to keep the staff!

Focus on mission

My son has just been accepted to a program that sends roughly 100 high school sophomores and juniors from our area to Israel each summer. The Youth to Israel (Y2I) program was created by the Robert I. Lappin Charitable Foundation, whose mission is very simple: "Helping to keep our children Jewish." The program has been in existence for over 40 years, and provides a fully subsidized trip to these students with no means test. The only requirements are that they live in the foundation's service area - one of 23 cities and towns on Boston's North Shore - and the teen must be Jewish and consider him/herself Jewish and be raised exclusively in the Jewish faith.

Until last year Y2I was funded entirely by the Lappin Foundation. Unfortunately, Lappin was one of the victims of the Madoff Ponzi scheme, and the Foundation was essentially wiped out. In other hands this could have led to the end of the program. However, Mr. Lappin is clearly not an average philanthropist. He committed himself to find the funding to keep the program in existence, and last summer 95 kids went to Israel, only six months after the Madoff scandal broke. This summer, Mr. Lappin was able to raise enough money to send to Israel all 99 teens who applied. Gifts have come from the Goldhirsh Family Foundation, the Jewish Federation of the North Shore, Oranim Educational initiatives (the partner organization that provides the tour program in Israel), and an anonymous donor, in addition to the Lappin Foundation's own $100,000 contribution. The total cost of the program is just over $500,000.

Why is this important? Because a local philanthropist refused to throw in the towel and kept focus on his mission. He knew he couldn't provide all the funding right now, and was willing to make the calls necessary to find the funding to maintain a program he is passionate about, and that he feels is crucial to the mission of his foundation. He has said his "long-term plan is to restore his assets to a point that will sufficiently endow the Foundation to a level that the annual income will totally or near totally fund Y2I." Here is the foundation's statement on the future of Y2I.

Mr. Lappin has recently been recognized by the Boston Globe as one of their "Bostonians of the Year." Their reasons have nothing to do with his foundation or the trip to Israel, and everything to do with his handling of his employees' 401K plan, which was also wiped out by Madoff. In short, Mr. Lappin made the employees whole from his remaining personal assets. It is very sad that this action is seen as something unusual in our society. Wouldn't it be wonderful if every business owner and every philanthropist were as true to their missions. At PhilanthropyGlobal we work with organizations and philanthropists. Let us know if you would like help in focusing your mission this clearly!

Telethon Telethon

So here I am, a philanthropy professional for over twenty years, and I hate getting telephone solicitations. I even ran the telephone program at Brandeis for several years. I know, "dialing for dollars" is the most efficient way to raise funds from a house list. It has a much better response rate than direct mail, and is second only to face-to-face solicitation - even for major and campaign gifts. Yet I hate being on the receiving end of the calls. I always answer, I'm always polite, and sometimes I even engage in a bit of conversation with the caller (especially if it's a cause I like,) but I won't make a pledge over the phone. Am I being hypocritical when I tell my clients to use phoning as a tool in their fundraising program? I don't think so, since it is still effective with many, many people (just not me!)

I really think the combination of e-mail and phone might just be the best set of fundraising tools these days. Unfortunately they both have problems - answering machines/voicemail for calling, and spam filters for e-mail. Viral e-mail is probably the best way to go at the moment. Get your friends to e-mail their friends, etc. Of course viral phoning is the VERY best - get your friends to CALL their friends. Then it's not a telemarketing call! It's a personal solicitation! It starts with a relationship and builds on the relationship for the benefit of the non-profit.

As always, it's all about building relationships. If you'd like some advice about building your philanthropic relationships, e-mail or call me. I promise I'll answer!

Eleemosynary

The "word of the day" the other day was eleemosynary. It has long been one of my favorite words. It means, "of, relating to, or supported by charity." Did you know that?

A few years ago in a foundation board meeting we were reviewing a by-laws change, and the attorney had put in a phrase about the eleemosynary purposes of our work. I was surprised that several of the board members had no idea what this meant, and they were delighted that I was able to explain that it means charitable or philanthropic, that is just what they were doing as members of the board. I guess the fact that the lawyer used it shouldn't have been a surprise. It is a direct derivative of the Latin "eleemosyna", meaning, as you might have guessed, charitable.

So, what have you done today that is eleemosynary? If you need help raising more money for your favorite eleemosynary organization, give me a call!

Nonprofit? hospitals redux

So, there's another article on a nonprofit hospital system in today's Boston Globe. This time it's Caritas Christi Health Care, owned and operated by the Catholic Archdiocese of Boston. If this isn't a nonprofit system, what is?

But again, there isn't a single mention of nonprofit status in the entire article. What we read about is that, "By aggressively cutting costs and boosting revenue from medical care, the Boston-based Catholic hospital chain is on track to post operating income of $31.1 million for the fiscal year ending Sept. 30, compared to a $20.4 million loss last year." ... "The chain consolidated operations at its six Eastern Massachusetts hospitals, cut jobs and froze salaries, negotiated higher reimbursement rates from insurers, and recruited more specialists to perform more complex - and profitable - procedures."

Where is the mission? Where is the care for patients? The whole article is about cutting costs and raising revenues. I don't dispute that hospitals need to operate in the black, but there was a time when they were fully understood to be nonprofit organizations, and when they were not in the black donors stepped in to make up the difference. Nonprofit hospitals were founded by like-minded communities - religious, ethnic, neighborhood, etc., to care for their own. Now it seems all they care about is their bottom line and whether they might be a good candidate for acquisition by a bigger organization.

Is there any way to get back to the basics of nonprofit healthcare? I'm afraid that the issue is colored by our difficulty figuring out how to provide basic healthcare to everyone at a reasonable cost (dare I suggest "single payer"). As long as this situation continues, and hospitals keep talking like for-profit companies, it will continue to be very difficult to make the case for support for nonprofit hospitals. If you need help making the case for your nonprofit hospital give me a call.

Nonprofit hospitals - are they?

I just read an article in today's Boston Globe about Partners Healthcare's financial results for the quarter. Apparently Partners is reporting a large deficit for the first nine months of the year, but didn't do as badly in the third quarter as it had in the prior two. If the trend continues, the article says, it will be the first annual loss in the "company's" history.

What's missing from this article? There is not a single mention of the fact that Partners Healthcare is a nonprofit organization, and the parent of two of the best hospitals in the country (along with a number of other smaller units.) How does Partners (and Brigham and Women's Hospital and Massachusetts General Hospital, it's two big members) raise money from the philanthropic community with this kind of news? It's part of the problem that hospitals all over the country have in making the case for philanthropic support: they are treated in the media (and sometimes behave) like for-profit companies, and the general community gets confused.

In the whole current debate about healthcare reform, I have heard only one comment - on the radio the other day - that mentioned that most hospitals in the U.S. are non-profit. And hospitals are mentioned, for the most part, in the same breath as the other "villians" in the healthcare meltdown, big pharma and the insurance companies.

This is a real shame. I have always felt that medical care is a right, and the provision of it is a mission best served by nonprofit hospitals, and that those hospitals deserve the support of the philanthropic community. But how do we best make the case for that support? If you're interested in further thoughts on this issue, e-mail me, and I'll send you a copy of an article I wrote on this subject.

Which comes first?

I just read an excerpt from an interview with Charles Bronfman, a noted Jewish philanthropist. He makes the point that while the Jewish community in the U.S. has created a wonderful program to build new leadership (Birthright Israel) by sending young people on an educational mission to Israel, when they return they tend to stay away from the Jewish Federations that are trying to create the new leadership.

Why are they staying away from the Federations? He says its because, "when Birthright participants seek to become active with the federations, “they are usually given a list of names and told to solicit, because that’s what the federations focus on - getting money.”"

I've always believed (and when I was involved with the Federation it's what they preached) that involvement comes before giving which comes before asking. If the first thing you ask someone to do when they return from an exciting mission is to solicit gifts, my guess is they'll run for the hills. But, if you provide them with a level of involvement in the activities of the federation first - serve on a committee or task force, or attend several lectures of interest - they'll be much more likely to make their own gift commitment. Once they've invested their own funds, they'll be much more interested in asking others to join them.

Someone once told me, "If you ask someone for money, you'll get advice. But if you ask them for advice, the money will follow." I have always found this to be true. If you need help figuring out how to get someone involved - to develop prospect strategies - give me a call.

How big a board?

I had a conversation yesterday with a colleague who asked me how big I thought the board of a non-profit organization should be, and how I would suggest managing diversity on the board. These are two important questions that all non-profits deal with from time to time.

First, how big should the board be? Well, I'm reminded of the old joke that asks, "How long should a person's legs be?" The answer is, "Long enough to reach the ground!" The related answer to, "How big should the board be?" is, "Big enough to get the job done." Then you might ask, "What job?" It seems to me the answer to that is that the board must make sure the organization is working to fulfill its mission. That means managing the executive director (or president in some cases), being sure the professional leadership is focused on the mission, and assuring that the organization has the resources (money, staff, supplies, etc.) it needs to fulfill that mission. When we talk about the board's "fiduciary duties" we're usually talking about resources.

I met with the development committee chair of a client organization last year to discuss the development plan we had been working on. In the course of our planning process we had discovered that the organization's budget for the coming year was going to be out of balance by over $100,000. One of the tasks in the development plan was the hiring of a development director, a new position. The board chair asked whether we thought the new development director would be able to raise that amount of new money in the first year. I said, "no, you'd be setting the person up for failure if you start them out that way." My suggestion was that the board should commit to close the budget gap for the next two years (either by giving it themselves or raising it) in order to give the new development director a chance at success. The development committee chair agreed with me, and said it was her understanding that that's what boards do; they give the money to fill a temporary budget gap! I think she was right on target. If the board won't fill the budget gap, how can anyone else be expected to give?

So, one of the answers to the "how big a board" question must be, "Big enough to close an emergency budget gap." This leads to at least part of the answer to the question about managing diversity on a non-profit board.

There is no question that diversity of a non-profit board is crucial, especially if the organization's mission involves working with or supporting diverse communities. The board should look like its community. But diversity can (and should) also mean diverse skills and backgrounds. And in every case, fundraising ability (both giving and getting) must be a primary consideration for board membership. If the board doesn't have the ability to get the organization through a financial crisis, then the organization has a very high risk of not surviving. If the board believes in the mission, they should be both willing and able to support it! If they don't believe in the mission enough to support it financially, maybe they shouldn't be on the board.

This isn't to say that there should never be anyone on a non-profit board who can't make a major gift. However, if you aren't paying attention to fundraising as you populate your board, you run the risk of the organization failing. The most wonderfully diverse board in the world - however you define that diversity - will fail the organization and the mission if it can't give or raise the money to fund the mission.

So, how do you manage diversity on a non-profit board? Use a matrix to figure out what skills, education, ethnic groups, geography, and other diversities you need, and always remember the importance of fundraising to the success of the organization.

How big should the board be? How diverse should the board be? Big enough and diverse enough to succeed.

If you'd like to talk about ways to build and/or diversify your board, give me a call.

Death of a Theater

I was saddened to read this week about the closing of the North Shore Music Theater in Beverly, Massachusetts. This non-profit theater had been around for 54 years, but couldn't survive a combination of a fire, borrowing to rebuild (beyond what the insurance paid,) an apparently rocky transition of leadership, and the precipitous downturn of the economy. I don't know all the details, but what I have learned about NSMT over the past several months seems to provide some lessons for non-profit arts organizations, and other non-profits.

Full disclosure: I learned about NSMT this past fall, as I was in the midst of negotiating with them for either a consulting contract or employment as their full-time VP for Development (it wasn't clear at the time which way they wanted to go, then became clear that neither would be possible due to their financial disaster.)

One of the stories I heard from several sources was that while NSMT has always been a non-profit theater, it didn't like to admit it! That is, under the previous administration, the theater attempted to operate on its ticket revenues (and education, etc.) alone. It really didn't want to behave like a non-profit by making a substantial effort at development. Only in the past year or so had the theater begun putting a donation envelope in all of its programs and mentioning that it depended on contributions to help fund its programs in its evening-opening announcements.

After the fire in 2005, there was apparently some fundraising done, but the loss from the fire, the shortened season, and the reconstruction was apparently more than $4 million, and this debt was never paid down by fundraising or any other means. Understand that I am not suggesting that a campaign to pay down debt would have been easy - it's never easy to fundraise to pay down debt. However, the rebuilding campaign that was held apparently did not raise nearly enough. Perhaps this is a case (I've seen this kind of behavior in other institutions) of wanting to build a certain kind of facility, and deciding to do so whether or not the money has been raised. "We can borrow the money to finish the building, and then raise the money later to pay off the debt." Too many non-profits say this, and then end up in trouble. The truth is that the board has the responsibility to either find the money to pay for the building at the time, or find the money to pay off the debt. Too many non-profit boards don't live up to their fiduciary responsibilities to oversee the staff when it comes to making realistic financial decisions, or to raise the money to fund those decisions. This is the hard work non-profit boards must do, and too often do not. North Shore Music Theater is not the only non-profit in the Greater Boston area that has had financial difficulties in the past few years because of overspending on construction projects not fully funded by donations or income.

We hear often about how important it is for non-profits to behave more like businesses. This is true especially when it comes to living within your means, but this is also one of the most difficult things for non-profits to do when it comes to fulfilling their missions. It is very hard to say "no" to mission-critical expenditures. So where does the money come from? It is the responsibility of the board to provide the funds needed to fulfill the mission of the organization. That doesn't mean board members need to give it all themselves, but if they aren't willing and able to participate fully in the process of raising the funds needed for the organization to fulfill its mission, they probably shouldn't be on the board. What this really means is working to develop relationships with potential funders (mostly individuals and families, but also including corporations and foundations) that will lead them to make gifts to the non-profit. The hardest thing for most organizations to figure out is that you can't just turn on the spigot of charitable contributions. If you haven't built relationships before you need the money, you almost certainly won't be able to raise the money when you need it! This is the sad cause of the failure of the North Shore Music Theater. The new administration had recently begun building relationships with potential funders, and there were some promising starts; but unfortunately there weren't enough potential donors ready to step in when the crisis really hit.

So we must sadly say "good-by" to the North Shore Music Theater. There are apparently still some options for rebuilding. If a buyer can be found to take over the property and lease it back. Or if an "angel" comes forward. Unfortunately, there were not enough relationships built with those who might be able to help for any of these possibilities to be very likely. Too bad.

So what's the takeaway? It's never too early to start a development program, but unfortunately it can get to be too late. People make gifts to organizations they feel connected to - especially large gifts. So they won't respond to emergency appeals if they haven't already been connected. Want to talk about ways to better connect your donors? Give me a call.

Why are board members afraid of development?

I have had several conversations in the last couple of weeks that are variations on the same theme: Why is it so difficult to get board members of non-profit organizations to help with development work?

It seems to me there are two main reasons. First, we often don't ask. Someone once told me that the number one predictor of someone not giving to a charity is that he wasn't asked. The same holds true for action by board members. If we don't ask them to get involved in development work, they won't. Of course, you don't need to ask them directly. Try asking them to call people to thank them for their gifts. Or try asking them to host a parlor meeting at their home to cultivate some prospective donors. Once they've participated in activities like these you can tell them they've been helping with development!

This brings us to the second reason: board members are afraid of development work. Even the most sophisticated (about development) board members harbor the fear that when they are asked to help in this area it means they are going to be handed fifteen or twenty names of people they have never met and asked to solicit each of them for thousands of dollars (or more!) That's why it is so important to ask board members to participate in the kinds of activities mentioned above. And its important to be sure they understand that development really is about the cultivation process - building relationships with people so they feel more connected to the organization. People make gifts to the organizations they feel connected to, and they make large gifts to the organizations they feel most connected to. If board members are hesitant about "doing development work", just ask them to help people feel connected to your organization. When the time comes for the solicitation, they won't panic because it will seem like a natural part of the relationship building.

How can you help your board members become more comfortable with their development role? If you need some additional suggestions, please give me a call! I'd be happy to help out.