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Judging Yourself As You Judge Others

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Something I don’t really often see people write about are the benefits of sitting on a grant panel, especially for an organization that funds you. First of all, the organization will love you for helping them out, especially during the heaviest period in their granting cycle.

Perhaps the biggest benefit for you will be identifying those areas people like yourself do well or fall short in making the case for their programs.  You can get advice about how to write an effective proposal on a monthly basis, but until you apply a critical eye to a proposal from outside disciplines, geography and demographic attributes with which you are familiar, you aren’t likely to appreciate all the potential pitfalls.

I recently participated in a panel for my state arts council for a program my organization wasn’t eligible to participate in.

There were a number of times people referenced discipline specific shorthand or neighborhoods/towns they were doing outreach in. I suspected that this information would be more compelling if I better understood the relevance.

Recognizing that I was probably making the same mistake of assuming reviewers would be excited by similar discussions of accomplishments for which they had no frame of reference, I started to pull out old grant proposals and found a number of places that could probably use additional information about why it was important that certain groups were involved or being represented in our programs.

During the panel review process I made additional notes as panelists would comment about things they wished they had seen more detail about. In other cases, it was observed too much time was spent talking about other organizational activities rather than focusing on the proposed project.

Now I will grant you, often space limitations imposed by the application form makes it difficult to provide the detail that will really allow your project to shine. It is important to make a case with the granting organization that 3-4 more lines of text would make all the difference.  Volunteering to serve on a grant panel can provide you with the opportunity to make that case in person.

I also want to acknowledge that when you are faced with a tall pile of proposals to review, the last thing you want to do is engage in prolonged introspection of the strengths and weaknesses of your own submissions. But it can be worthwhile to at least take the time to make duplicates of notes that represent potential areas of concern in your work for later review.

Then, of course, there is benefit in seeing what other people are doing. What novel ideas and approaches are out there? How are others executing their programs? How are they defining and measuring success? What strategies are they employing to deal with challenges?

One really, really general piece of advice I will give based on what I have seen is to make sure your website has links to your social media accounts. This is website and social media 101, but I was surprised at how many people mention they promote their events on social media, but don’t have links on their websites. Web searches will turn the social media accounts up, but there was often no easy way for someone who discovered an organization through their website to stay connected through social media.  (Actually, it might be more accurate to say that a web search turned some of them up, I have no idea if I found the full range of online presence.)

 

Lemonade Stand? Cool Kids Sell Art In Their Frontyards

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A year ago on Quartz a list appeared by former Stanford dean, Julie Lythcott-Haims, outlining what every 18 year old should know.

I briefly toyed with the idea of doing a post about how the arts, especially performing arts, provided experience in most of these areas. Among them were that an 18 year old should know how to: talk to strangers; manage his assignments, workload, and deadlines; handle interpersonal problems; cope with ups and downs, and must be able to take risks.

While, “contribute to the running of a house hold,” another on her list, may not appear to exactly fit into the performing arts, in her reasoning she says this teaches “respect the needs of others, or do their fair share for the good of the whole.” Those are skills you pick up when working as an ensemble.

As I was reading the article, I was envisioning kids in school, after school and summer arts camps/programs acquiring these skills since that is where arts experiences would likely teach these skills prior to someone turning 18.

So when I hit the eighth thing an 18 year old should know, “be able earn and manage money,” I realized that wasn’t something most arts programs would teach kids.

But if we are going to talk about the need for artists to manage and monitor their own careers,including finances, maybe elementary budgeting and accounting skills should be introduced to teen and even tween students.

Oh, but that is such a yucky, boring topic right? The kids want to have have fun making art, that will just scare them away.

I am not suggesting that you pull out your college accounting text. You can introduce cost and pricing in a fun way at an age appropriate level.

With younger kids, you start out saying – You made this painting or ceramic piece and now it is time to sell it. How much will you sell it for? How many do you think you can make in a week? How much could you make if you sell every thing at the end of the week?

This type of instruction hits on the cross-discipline approach schools are looking for these days. You can also get kids excited by the idea of how much money they might make.

Any kid can have a lemonade stand. Cool kids sell paintings, pottery and tickets to sidewalk performances!

Later you introduce the concept of material costs and time invested into the mix and take a more sophisticated approach to pricing. In certain situations maybe you have high school students participate in budgeting production costs for costuming and set building for performances. If they are involved in making the decisions required of a budget cap, all the better.

By connecting the idea that art has monetary value, you create a greater appreciation for art in students when they are young. It isn’t just something you do for fun and shouldn’t expect to be paid for.

While this runs counter to the idea that art should be created for its own sake, not with the goal of remuneration, the absence of this instruction hasn’t prevented people from claiming the arts should be self supporting.

Still, executed poorly the focus can be all about maximizing commercial viability over illustrating a connection between basic economic skills and art. Kids shouldn’t be given a message their work is bad simply because no one has bought it. And let’s not drag 14 year olds into the debate about doing something for exposure vs. being paid.

Given that not every person in an after school program or summer camp is going to enter an arts career, involving some basic economic considerations in art instruction when kids are young can shape attitudes and perception about the validity of arts and cultural endeavors over the long term.

You Know The Type, They Only Want One Thing–Your Fund Raising Ability

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If you ever doubted that executive director positions were all about the fundraising and light on requiring artistic vision, the recent news about the firing of Ft. Worth Opera general director will disabuse you of that notion. It was with some dismay that I read about his firing due to lack of creativity when it came to fund raising.

Now I don’t intend to understate the importance of strong fund raising. I probably would have just scanned the Dallas Morning News piece and moved on with my day. While unfortunate, organization leaders get fired or resign fairly frequently.

Except that as I read on it struck me that Woods wasn’t an idler as general director. Every sentence brought accolades for different accomplishments. He brought the opera to greater prominence, navigated challenges with performance facilities, engaged in some innovative programming that appears to have interested a larger segment of the community, and yes, did a respectable job with fund raising against a shortfall.

Just to be sure the Dallas Morning News writer wasn’t personally biased, I sought other reporting on the firing and they seemed to agree on these basic facts. All in all, he didn’t sound like someone you would want to blithely part ways with.

Certainly, there may be some underlying problems that no one is talking about publicly. The comments by the board in all the articles I came across focus so strongly on their desire to find someone who can handle fund raising and business development as Woods’ replacement that it appears that is about all that matters. Artistic and community relationship building skills seem to be such far seconds that I fear all the accomplishments Woods has been praised for will stagnate and perhaps decline.

The opera seeks to hire a leader to “focus more on business and management … to be creative with the fundraising and development aspect,” he said, adding that, “we just didn’t feel Darren could provide us with that leadership from that aspect.”

[…]

Martinez said Woods has brought the opera “to a point where we felt good artistically.” Now, he said, it’s time to move forward with a new general director who can help shape the company’s future, which includes being a good steward of donors’ money.

That last line made me wonder if the board really did approve of Woods’ artistic choices or if there is something going on that isn’t being spoken of.

Over the history of this blog, (holy crap, is it really going to be 13 years on Friday?), I have often cited studies about how fewer people are interested in taking on executive roles in non-profits. Of those energetic people I know who want to assume leadership positions, few to none have a vision that involves fund raising as their primary role. They get excited by the prospect of making an impact and aren’t afraid of getting their hands dirty, but job descriptions like this, (and lets be fair, Ft. Worth Opera is far from the only one emphasizing this skillset), don’t really fire their imaginations.

Donor Baggage Revisited

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I am going to be away for about a week for the holidays. As always, I have prepared some posts to fill in for my absence.

Since we are coming to the end of the year and non-profits are making last minute pushes for donations, I thought a piece I wrote in June 2008 about the baggage donors bring to giving requests might be particularly appropriate.

Particularly the following:

In any case the advice generally focuses on a somewhat formulaic planned approach. Just as dating tips rarely acknowledge that other people have the baggage of past dating experiences which will impact the relationship you are trying to cultivate, I rarely hear/read a similar acknowledgment in connection with fund raising.

One of the anecdotes mentioned in the story was about a wealthy developer who never gave more than $1,000 at a time to Temple. When Fredricks asked why, she discovered that even though he could afford to give more, he harbored fears about running out of money that went back to his childhood.

She recognizes that the people who ask for money like presidents and trustees also have varying degrees of comfort with the subject. “They should be treated the same way donors are—as individuals with different emotions about money—and given simple requests, she said. Instead of giving a reticent board member a list of prospective donors, Fredricks suggested starting out with the names and biographical information of two current donors and then asking the trustee to call them to say thank you.”

Giving Without Getting In Return

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No, this isn’t a moral posting about how it is better to give than get during Christmas.

I have been writing a lot recently about the transactional view of arts and culture, namely value is based in economic exchange either directly or in terms of the economic activity it may generate.

Given that context, I was interested to read Joan Garry’s video/blog post expressing a similar view about fund raising and the belief people won’t give unless they get something in return. She uses the example of two hypothetical pitches to a friend. In the first, she asks someone to attend a $500/plate fund raising event, extolling the virtues of the organization it it will support. In the second, she simply asks for a $500 donation, again citing the value of the organization it will support.

Okay. There they are, both of them. One of them is going to cost… If he buys a ticket $500. It’s going to cost the organization at least thirty cents on every dollar. On the other hand, maybe I bought him a cup of coffee, maybe he even paid. One of those gifts will stick and one of them will not. If Joe’s not available next year he won’t go to that gala, right? If he gives the gift of $500, what happens? Then about six or nine months from now I have a touch point with him where I tell him something remarkable, a great story about something that happened at the Ronald McDonald House and at the end of that email I will say, “Your fingerprints are all over that work.”

Hear the difference? Feel it? See it? For some reason it’s so much harder for board members. They think selling a ticket to an event that it’s a I can’t ask somebody to spend $500 unless I’m giving them something in return. What they’re missing is that by making that $500 gift out right Joe is getting something in return. Right? The donors get as much as they give. Maybe more, because they get an opportunity to be invited into a community of people who care about an issue that is meaningful in Joe’s community. That should be easier than selling them a ticket to an event, where there might be a b-list celebrity.

I am sure she is not unaware that some times people attend big gala fundraiser in order to leverage being seen there by others into some sort of advantage. A large number of non-profit organizations would probably be happier to remain focused on their central goals and employ a direct ask with a higher ROI rather than diverting staffing time, energy and money toward executing an event.

If we want to argue about cost effectiveness and overhead ratio as a basis of giving, this might be one area in which these conversations have some validity. But it is probably also the area in which that economics based argument would fail in the face of a board or staff’s emotion based conviction that people won’t give otherwise.

Despite it being widely known that one person will give without expecting anything in return…

Frank Discussion About Outreach, New Audiences Efforts In The Community

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A couple of good articles on the influence non-profits in the community came out this week. CityLab noted that in some communities, non-profits were exhibiting greater influence and leadership than politicians that represented those districts.

Based on his observations, he argues in the journal American Sociological Review, the role of nonprofits in disadvantaged city neighborhood has been changing. They’re no longer just extensions of the state or representatives of a few interest groups. They’re “legitimate representatives of poor urban neighborhoods,” and in many cases, “supersede” elected officials.

[…]

What’s happening now is that these organizations are directly negotiating for resources from public and private sector entities that hold the proverbial purse strings. Community organizations are now authoritative voices at the table, and often regarded by both private companies and bureaucrats as more invested and deeply knowledgable representatives of the neighborhoods. In Boston, “district-based elected officials, by contrast, attended ribbon cuttings and groundbreakings but were largely absent from substantive discussions of redevelopment planning,” Levine writes.

When I read this earlier this week, I thought it was interesting but didn’t think most arts organizations were deeply involved enough in their communities to wield this type of influence.

As luck would have it, I didn’t have to think too long about how I might express this in a blog post because Ronia Holmes does it so well in a post that came out today on TRG Arts’ blog.

Her post, “Your organization sucks at “community” and let me tell you why” is a must read if your arts organization conducts outreach activities or talks about attracting new audiences. I plan to distribute it to my board and partners in other arts organizations.

She makes some very frank statements which may be uncomfortable to read, but they are reasonable and empathize with the position in which arts organizations find themselves.

Almost too much to quote but I will try to keep it brief:

Disinvested communities are not devoid of arts and culture. In America particularly, communities who historically have been excluded from the table have responded by building their own tables, using whatever resources could be scraped together. Marginalized communities have established organizations that don’t treat them or their cultural output as deviations from the norm to be celebrated for diversity, but as fundamental components of society. The organizations they created, and continue to create, are replete with artists, leaders, decision-makers, and workers who look like and are part of the community they serve, who share similar lived experiences, and have a deep understanding of what programming will truly resonate.

Referring to arts organizations which are not native to these disinvested communities:

Rather than grapple with these deeply ingrained failings, most organizations have opted to substitute narrative for action. They have amended their written missions and values in order to recast themselves as inclusive organizations meant for all. They turn to the community and say, “Now we’ve got a space here for you!”

And they fail to hear this critical question: “Why should we abandon our own table for a small chair at yours?”

The following about seeking new audiences really grabbed my attention:

There is a pervasive idea that a “new” audience must be a “diverse” one, and community-building is co-opted as a tactic for patron acquisition. The hard truth is that the disinvested communities targeted by so many outreach programs simply do not have the resources to—or, frankly, the interest in—sustaining these organizations. The model of operation on which most organizations operate need constant and high influxes of cash, and the lion’s share of affluence still rests with white patrons.

The reality is that most arts organizations don’t need a “diverse” audience—they need an audience with discretionary income. Yet the almost maniacal focus on community-building keeps organizations trapped in cycles of trying to sell to—not engage with, but sell to—audiences that don’t have that resource. In the meantime, organizations are unable to concentrate fully on patron retention and loyalty, and identifying and building audiences that are able and willing to fill the funding gaps.

[…]

Every year, organizations jump through hoops to secure restricted grants that necessitate yet another outreach program or diversity week or community partnership, hoping that if they impress the funders enough they will be given money that can be used for what the organization actually has a mission to do.

If real, authentic, genuine community building isn’t central to your mission, if it isn’t your raison d’être, then you shouldn’t be doing it. Because chances are that not only are you doing it badly, you’re doing it at the expense of your real mission. The mission of most arts organizations—the real mission—is simple: to present an art form. And that’s ok. We need organizations that prioritize preservation, development, and presentation of an art form, and I for one don’t think any organization should be penalized for it.

As much as I quoted here, there is a lot I left out. Even though I probably flirted with tl;dnr eight paragraphs ago, I hope this sample is enough to make you want to read more of what she said.

While it is not the final word on the subject, I think we probably recognize the truth in what she says about outreach efforts. The futility of grant chasing has been acknowledged for quite awhile. These are ideas that need continued discussion.

While we would like to be in a position where our organizations are viewed as leaders in the community like those in the CityLab article, most arts organizations really lack the resources and mission to fulfill that role.

Info You Can Use: Success May Result In Reduced Donations (Big MAY)

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I was surprised by a recent piece on Non-Profit Quarterly reporting the results of a recent study finding that the more successful an arts organization was in attracting an audience, the more donations will decline.  The theory the researchers had was that success made an arts organization look less needy.

I was skeptical of this based on what I have observed, so I did a little digging to find the full article which appeared behind a paywall in Public Performance and Management Review. The details of their finding are a little more nuanced.

Even though the researchers make the statement in their conclusion that,

“The evidence suggests that better performance outcomes in terms of increased awareness and attendance have a negative rather than a positive influence on charitable giving.”

The discussion of their findings seems to suggest this is only true in regard to foundations.

For a 10% geometric mean increase in an organization’s attendance, the amount of all contributions received in the following year decreases by 0.72%

If we separate private giving into its three components (individual, corporate, and foundation giving), this negative relationship is statistically significant for foundation grants only. The amount of all charitable giving decreases by 0.08%

They don’t really make any statements about how individuals and corporations handle their giving in response to increased attendance and awareness.

Other Items of Interest:

Some other interesting things they found was that:

“It is worth noting that the amount of donations appears to be unresponsive to both government funding and program revenue.”

Basically, donation amounts don’t seems to be impacted by the amount of government funding or program revenue an organization receives in a year.

•Giving away free tickets may slightly help donations

“The result for increased free access lends some support to the first hypothesis: a 10% increase in the number of free tickets provided by arts and cultural nonprofits results in a 0.34% increase in contributions. This positive relationship is, however, only marginally significant.”

•Younger organizations tend to receive greater support than older organizations.

Donors, however, appear to prefer relatively young organizations, at least in the case of arts and cultural nonprofits. When we divide private giving into its three components, organization age has a negative relationship with institutional giving but is not a significant factor for individual donors.

Big Surprise

Despite what we read about donors really scrutinizing administrative overhead, for arts and cultural non-profit organizations at least, high overhead is not penalized.

…donors to arts and cultural nonprofits do not care about fundraising efficiency, which is measured by the average cost to raise one dollar. As the cost to raise a dollar increases, donations increase rather than decrease. On average, a 10% decrease in fundraising efficiency (i.e., an increase in the fundraising cost to raise a dollar of donation) leads to a 0.72% increase in the total amount of contributions. In other words, an organization would solicit slightly more donations, as compared to other organizations of similar type and size that spend less per dollar raised.

[…]

This finding is counterintuitive and provides no support for the prevailing assumption that donors view high costs of raising funds negatively. The results show that donors to arts and cultural nonprofits, especially foundation funders, reward rather than punish nonprofits that spend more to raise a dollar of donation.

The idea that the appearance of success is what helps you raise money is what provided the impetus for my deeper investigation. I think we all have a feeling that a few big organizations seem to attract big donations. Because the researchers are only looking at data collected via the Cultural Data Project, the social cachet of being seen to donate to a popular organization isn’t factored into the results. The authors do acknowledge that popularity and visibility do seem to be factors.

They suggest that big organizations are attracting larger donations because they are pouring more money into their fundraising budgets and aren’t being penalized for incurring the overhead expense.

I was interested by their observation that organizational size didn’t seem to impact corporate giving. I would assume visibility in the community, and therefore the ability to make a business more visible, is a factor in corporate giving more than organizational size.

Caveats

The researchers admit that since very little research has been done on these specific questions before, more study is required to gain an accurate picture. They say the statistical significance of the relationship between increased success and reduction in donations is marginal.

They also note that they use attendance as their measure of success which may be a poor criteria since it has no bearing on the effectiveness or quality of the experience for an audience member.

Likewise they note that using website visits as a measure of awareness might not be valid for many organizations whose communities may depend on print media, mailings and word of mouth to raise their awareness.

Big Boards In Big D, But Probably Not For Thee

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There was a piece on the Dallas Morning News website about how the boards of various Dallas arts organizations were beginning to focus on greater diversity in their membership and accountability of their staffs.

The article opens by noting that Dallas Summer Musicals parted ways with their managing director months before his contract expired and the Dallas Museum of Art appeared to have a tense parting with their director.

“In the old Dallas,” says Veletta Forsythe Lill, a former City Council member and past executive director of the Dallas Arts District, “a board would have let a guy finish his term,” as in, why not let Jenkins stay eight more months, until his contract expired?

“But we’re living in a new Dallas,” Lill says, “and the new Dallas naturally carries with it a new breed of board member. The new boards want more control and more accountability.”

[…]

Today’s artistic boards veer younger and more corporate, and although older white men continue to dominate, their once-fierce hold — some would say stranglehold — is beginning to wane. Today’s artistic boards are increasingly more diverse, with women commanding a more powerful presence than ever before.

I was happy to see that boards are starting to take their governance responsibilities seriously and are attempting to make board and staff composition more diverse and reflective of the communities they are serving.

As I was reading through the article, I wondered if the boards would possess the will to evaluate how effective they are at executing their responsibilities.

When I see that Dallas Summer Musicals has 146 board members and 40 members on their executive committee, I can’t help but be skeptical about how effective such an unwieldy arrangement can be.

Reading the following, I suspected the membership numbers are largely courtesy appointments for the purpose of fundraising:

Board giving and participation guidelines: $1,000 down payment to be a general board member, coupled with raising at least $2,000 from outside donors. Must be a season-ticket holder. Executive committee members: Must make a $2,500 down payment, raise at least $5,000 from outside sources and be season-ticket holders.

Similarly large numbers appear on the boards of AT&T Performing Arts Center whose bylaws allow up to 70 members, but currently has 55; Dallas Museum of Art which has 73 board members; and Dallas Symphony Orchestra which has 68 members, 20 of which are on the executive committee.

In January I wrote about San Diego Opera which was revived after a stakeholder revolt fought the board’s decision to cease operations. The board membership went from 53 to 24. One of the key issues they identified as having contributed to their inability to adapt to the changing economic and social environment in San Diego was the “Get, Give or Get Off” board membership policy.

The San Diego Opera was one of those organizations where having a large number of people on the board was a function of fundraising. You pay x amount of money and you’re on the board, and no one wants to alienate any of those folk with contentious conversations that cause discomfort. But that is certainly not a good modus operandi for an organization facing the whitewater of the twenty-first-century cultural organization. And, it was not only the business model that had to change but the governance model, too.

Yes, yes, I know everything is bigger in Texas. With a funding model that includes 40 executive board members bringing in $7,500 each and the other 146 board members bringing in $3000 each, Dallas Summer Musicals may not experience issues that require them to be more nimble and responsive.

For everyone else, everywhere else, it is worth considering if a move toward a leaner, more nimble board might be the best course to meet the organizations long term challenges.

For  your listening pleasure, “Big D” from The Most Happy Fella.

Friends Don’t Let Friend’s Orgs Get Clickbaited

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Non-Profit Quarterly had a piece last week about an effort to “help” non-profits that is flawed on so many levels.

An advertising company has created a site, Clickbait For Good which is creating clickbait campaigns for charities, apparently without being asked. Setting aside the fact that clickbait has pretty much peaked and worn out its welcome, the images they are using with their campaigns are pretty inappropriate for the associated charities.

It is unclear if the charities consented to the clickbait headlines being created for them on the Clickbait For Good website. One hopes not.

  • For Love 146 (human trafficking): “She fell for Mr. Perfect. You won’t believe what happened next” (with an accompanying image of a seated young girl in a frilly red dress).
  • For Girls Not Brides (child marriage in places like Bangladesh): “OMG! She is just 16 and she has done things the Kardashians haven’t even thought about” (with an accompanying image of an elite wealthy woman wearing a white dress hiked as high as it will go before being pornographic, exiting the backseat of a luxury car carrying a bag containing her latest expensive purchase).
  • For #Milk4Syria: “The ONE thing you need to know about drinking milk.”
  • For American Foundation for Suicide Prevention: “Exclusive: See what happened only a week after Robin Williams’ suicide.”

I checked the webpage out and indeed the images are as cringe worthy as described-

child bride

Non-Profit Quarterly lays it out pretty clearly why these sort of campaigns do more harm than good when it comes to generating investment and trust.

The problem is that this ill-conceived initiative is likely to aggravate more than inspire. The website should offer charities the option to sign up to decline the offer.

Clickbait is sometimes clever, often misleading, always distracting, and by definition overpromises and under-delivers. Clickbait patronizes the donor and at best trivializes the charity’s mission. Nonprofits seek engagement and relationships, not mere clicks. View “counts” may pay the bills in the marketing world, but tricking people into clicking on charity content kills trust, which is the coin of the realm in the voluntary sector.

[…]

Charities cannot game trust. Lying kills donor retention. The headlines above are morally indefensible. Clickbait is like learning to smile from a manual. Philanthropy is not grown in a petri dish. Charity is the result of honest human interaction and concern. Charity needs to be honored, not disgraced.

There is definitely fun to be had with click-baity ads, especially if you are spoofing the format to get people to attend a fun event. But to draw attention and support to serious crises, if there are appropriate, effective uses of the format, I have to imagine they can be counted on one hand.

There may not be a high likelihood that your arts organization will be targeted by one of these ads and the potential impact may not be as bad as for some of these humanitarian organizations. If these campaigns are indeed being created unsolicited, a neighboring organization might be grateful if you alert them to an ad that casts them in a questionable context.

Telling The Story Of Your Overhead

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Our friends at the Non-Profit Happy Hour Facebook group shared the Furniture Bank’s Charity Overhead Manifesto. In the post, the Furniture Bank talks about how much damage resistance to covering overhead can do to their programs.

We have heard many of these arguments before, but Furniture Bank takes the next necessary step of humanizing and discussing the impact of the work “overhead employees” perform.

The reason this is important is because it takes an abstract concept of overhead and specifically shows how overhead costs are manifested in the organization’s operations. Absent this specificity, it is easy to envision overhead going to senior administrator salaries or unsexy equipment and supplies like filing cabinets and copy paper. While this is inevitably the case to some degree, it isn’t the whole story.

This reminds us how important a compelling story can be. Furniture Bank lists what their overhead helps them accomplish:

  • Maintain, insure and run a fleet of 11 trucks, and a team of movers, picking up furniture from donors and delivering them to clients every day;
  • Employ 25-30 individuals each year who would otherwise face barriers to employment;
  • Pay market rent on a 30,000 Sq Ft client showroom;
  • Sustain an organization with 40 hardworking and big hearted employees who:
    • take orders,
    • track inventory,
    • book client appointments,
    • schedule and complete pickups & deliveries,
    • answer donor inquiries,
    • process donations,
    • ensure we have the right technology to run our operations, and
    • undertake the numerous other tasks that must occur every day to ensure that the community’s unwanted furniture goes directly to a family transitioning out of homelessness or displacement.

That format can be a little boring though. They also participate in the Charity Defense Council’s “I’m Overhead” campaign that has created images with Furniture Bank employees discussing what they do which end with a line about the impact they make, (you can see examples of the full ads on the Furniture Bank site.)

“My name is Miro Janes-Richardson. I make sure families have a place they can finally call home, and I’m overhead.”

My name is Yuri Hernandez. I make sure clients have the dignity of choice and don’t have to sleep on the floor, and I’m overhead.”

Miro is a truck crew leader and Yuri is a client services coordinator.

It may be difficult for arts organizations that don’t have a strong human services aspect to their operations to tell as compelling a story as these, but there are still opportunities to illustrate that staff help the organization be good stewards of donations.

For example:

“Do you recognize this flat? It has been in some of your favorite performances over the last five years including Dangerous Liaisons, Amadeus, A Raisin in the Sun and Christmas Carol. Here at the theater, we are great recyclers, repainting and repairing set piece dozens of times, extending their useful lives for years. This reduces our need to purchase lumber, which is good for the environment. But to make it happen, we need to store flats like this one and be clever about changing its appearance so you don’t recognize it when it appears again.

I am Steve and I work magic to make fake trees look real so that real trees can live, and I am overhead.

That five minutes of typing may not have resulted in the most compelling argument for theater operations, but you get the idea.

It isn’t just enough to tell people that they shouldn’t use overhead ratio as a measure of effectiveness, it is also necessary to communicate specific examples that illustrate that what they may envision the raw numbers represent isn’t necessarily the reality.

I don’t doubt that there will still be people who want 95-100% of their donation to be devoted exclusively to program beneficiaries, but linking overhead activities with impact outcomes can help combat decision making strictly by the numbers.

Enquiring Stakeholders Want To Know

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Last week I made a post about “rebranding” overhead costs in other terms in order to get away from the associated stigma. Included in the post, I mentioned that a non-profit was being sued by donors for dipping into its restricted funds to invest in the organization’s exploding growth.

On the Non-Profit Quarterly website today was an interview with Cindy M. Lott about the changing non-profit regulatory and enforcement environment that suggested similar scrutiny of non-profits may only increase.

The interview with Lott discusses a lot about the history of non-profit regulation on the state and federal level. One of the things they note is that the IRS’s decision to digitize 990 filings is going to bring the opportunity for a lot more transparency for non-profit charities. Access to financial documents and other information will hopefully provide a greater capacity to detect misappropriation and embezzlement of funds.

What caused me a bit of concern wasn’t the prospect that governments might use this information to apply undue scrutiny to non-profits, but that donors and funders might.

According to Lott, state attorneys general have always had legal standing to bring a suit against a non-profit entity or board of directors. In recent years, she says, other groups have argued that they have standing to bring suit as well.

Occasionally, we see beneficiaries who say, “Wait a minute—I represent an interest that is not being brought by AGs for whatever reason.” And we see marginalized members of the board and donors who say this as well.

While this is contrary to laws regarding who has standing, the fact that there are shareholder actions and class actions in the private sector may be cited to pressure for the same rights in the non-profit sector. Lott notes that secretary of state offices which oversee non-profits in each state are heavily involved with enforcing consumer protection and might easily equate donor dollars with consumer dollars.

I am merely noting what may be a natural outcome of the current trajectory of an underresourced enforcement community intersecting with a wealth of publicly available data. We may very well find in the near future that donors and beneficiaries who have access to information about where these billions of dollars are going may, in fact, decide that they would like a say when they believe something goes off the rails.

The interview cites the action taken by a wide segment of stakeholders in the case of Sweet Briar College’s planned closing. The footnotes for the interview provide a number of other examples of stakeholder actions, including a class action by donors who discovered 100% of their donation didn’t go toward programs as they intended and a suit by two sons who want to review the cause of losses suffered by a foundation their father established.

At this point I don’t see anything to be immediately alarmed about. It will definitely be worthwhile to keep an eye out for how things develop in the areas of governmental oversight and legal standing of donors and other possible stakeholders.

Overhead By Any Other Name

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FastCoExist recently continued its discussion about how a poor view of non-profit overhead cost is limiting the good such organizations can do by offering some “rebranding” suggestions in order to help change perceptions.

As an illustration of how the concept that non-profits must restrict their overhead cost is a severe impediment toward doing good, they cite a lawsuit against Architecture for Humanity.  The group was experiencing huge program growth, but was limited by donors to only devoting 10% to overhead costs. Because they dipped into program money to fund their growth, they have been taken to court accused of looting the funds.

Many company donations, the suit alleges, were earmarked for project costs. As overhead rose and things got more desperate, those got tapped to cover broader expenses. The plaintiff is calling that looting. The suit shows pretty clearly how groups—even if their rapid growth is woefully mismanaged—can be trapped by antiquated views on things like “overhead” and “indirect costs.”

[Update: Issues like this are why it is good to have Directors and Officers Insurance]

FastCoExist spoke to two brand naming experts who mulled over various concepts for changing how overhead costs are viewed by changing the terminology. The article go through various ideas they discarded to come up with the following suggestions.

From Margaret Wolfson of River + Wolf:

1: Circle funds
2: Encompass funds
3: Vessel funds
4: Core funds

Anthony Shore of Operative Words suggested:

1: Operations costs
2: Operational costs
3: Direct operations costs
4: General operational costs

The author of a Bridgespan report on paying overhead costs noted that this latter set of terms may not be appropriate because “not all operational costs are indirect, and not all indirect costs are operational.”

The naming experts made some additional suggestions that sounded a bit like arts organization donor categories so maybe we are already heading in the right direction and just need to find more sexy language:

Wolfson’s other idea is to award branded titles for budget line items, so folks who cover electrical costs could consider themselves “Illuminators” while those picking up the hardware and software tab would be “Digital Drivers.”

The point is, words definitely do matter. The final expression might end up being a bit unsexy, but only metaphorically. As Shore puts it: “What could be more sexy than dramatically influencing how much money pours into the critical, staying-afloat initiatives within an organization?”

Same Idealism, Potential For Same Mistakes

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Some time back I read a piece on the Bridgespan Group’s website that made me realize that non-profits and funders/donors may adopt similarly flawed approaches to addressing social issues. When you think about it, it only makes sense that two groups that are passionate and idealistic about bringing change to communities might make the same errors in policy and execution.

Because donor/funder is perceived as having more power in the funder-non-profit relationship, it can be easy to assume their decisions are based on criteria that differs from the non-profits seeking their support.

In fact, funders can make inefficient and inconsistent decisions for the exact same reasons non-profits do.

In the article, What Are the Five Most Common Traps I Should Avoid in My Philanthropy?, trap number one is:

Trap #1: Fuzzy headedness

As a philanthropist, your passions, values, and beliefs will fundamentally drive your giving. But unfortunately, “fuzzy headedness” occurs when donors allow their emotions and wishful thinking to completely override logic and thoughtful analysis. One common symptom: When asked “what are you trying to accomplish?” do you respond with broad, hopeful statements (like “curing cancer,” “ending poverty,” or “stopping global warming”)? If so, you’ll need to get more specific because at that level, your goals are still too undefined (and therefore unattainable)…

I realized this is almost the exact same mistake some non-profits make. They embrace vague mission statements and goals and define everyone in a geographic radius as the people they intend to serve instead of having a clearly defined focus.

I wondered if there might be a feedback loop between funders and non-profits with one saying their goal is to completely fix X and the second getting excited and inspired by the goal (or the money now available for that goal). Each party seeing the other is excited and invested in the goal decides it is worthy to pursue and goes on to mutually reinforce this too broad goal upon each other and others around them.

The second trap, Flying Solo, also has a similar overlap. Both funders and non-profits can fall into the trap of believing they know the solution to a problem either through lack of research about previous efforts or ego. The result is they spend a lot of time and effort repeating the mistakes others have made. Or they fall short having overestimated their ability to marshal the required resources alone.

The remaining traps are more funder oriented and have a little less in common with non-profits. Number three deals with under-estimating what it will take to achieve a goal and therefore underfunding the project. The fourth deals with using overhead cost as a measure of effectiveness.

Non-profits could contribute to reinforcing these traps by keeping their numbers low in order to keep their overhead ratio low, resulting in underperformance due to lack of sufficient funding. Which may, in turn, result from less funding from a donor or foundation that expected better results.

Some of the ideas in the article are new to me, some I have heard before, particularly regarding suggested changes in philosophy by funding organizations. The piece could be worth further reading if you are trying to find an effective line of reasoning to convince a funder to adjust their expectations and criteria.

What Does Waning Trust In Non-Profits Mean For The Future?

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A decision by the OneOrlando fund to distribute money they collected directly to the families and victims impacted by the recent nightclub shooting rather than through charities bears watching. Even while groups are calling for the reducing the use of overhead ratio as a measure of a non-profit’s effectiveness, there is increasing pressure to have money only spent for the purpose for which it was given.

According to the NY Times:

With the move, Orlando is the latest to shift away from established charities and opt for direct donations, a move that has become increasingly common, in part because of questions about how some charities use donations.

[….]

“There have been so many scandals we’ve seen after these sorts of situations, so it is a big deal that they’ve bypassed nonprofits because it shows a distrust in how nonprofits are doing things,” said Stacy Palmer, editor of The Chronicle of Philanthropy. “This sends a big message, too, because other cities might decide to use this as a model in the future.”

Mai Fernandez, executive director of the National Center for Victims of Crime, said Friday that the group, as well as some family members, had told city officials that they feared donations from OneOrlando would not get to victims if a traditional nonprofit was placed in charge.

While the motivation for donating money following a tragedy like Orlando is different from supporting arts performance or education programs, it isn’t beyond reason to think people will expect the same type of accountability from arts organizations. In a sense, smaller non-profits suffer for the poor decisions and scandals of larger non-profits like the Red Cross and United Way.

An individual has a right to be concerned about how their money is being spent, but those individual concerns aggregated across hundreds of individuals can serve to paralyze a non-profit as illustrated in a post by Vu Le from two years ago.

Non-profit organizations need to provide greater transparency and communication to meet the donor expectations of greater accountability. I am not sure how to communicate that there is a lot more involved in providing 6-8 year old kids with the opportunity to paint than just handing them the paint.

Do you include pictures of staff members joyfully buying paints and materials a the local arts and crafts store in your newsletter and donor report? Pictures of staff meeting with teachers to develop a unified curriculum of enriching activities? Readers may automatically gravitate to the pictures of the cute kids painting and ignore those of staff members, but maybe the fact that every hour of painting is backed by five hours of prep will slowly sink in.

In the meantime, I wonder if the committee Orlando is putting together to decide how to distribute the $7 million they have collected won’t also eventually come to realize that there is a lot of work involved in effectively and transparently giving away that amount of money. If they don’t end up paying a dedicated staff to help administer the money, they may end up either subsiding the effort through long volunteer hours or enlisting office staff paid by their own businesses and organizations.

Overhead Funding May Not Be Expanding, But The Conversation Is

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Something I had meant to mention in my post yesterday was that Priceonomics’ admiration of Yerba Buena’s Dream House Raffle sounded very similar to fund raising philosophy espoused by Dan Pallotta.

Said Priceonomics,

There is something admirable about Yerba Buena’s Dream House Raffle.

Every nonprofit spends a lot of time conducting and worrying about fundraising, and that is time that could be spent on the nonprofit’s mission. The Yerba Buena Center for the Arts identified a new revenue stream and has done well at it. It now raises more money from its raffle than it receives from individual donations or from the city of San Francisco.

Dan Pallotta says something similar in his 2013 TED Talk:

Now, if you were a philanthropist really interested in breast cancer, what would make more sense: go out and find the most innovative researcher in the world and give her 350,000 dollars for research, or give her fundraising department the 350,000 dollars to multiply it into 194 million dollars for breast cancer research?

If you have been following my blog for any period of time, you know that there has been a lot of discussion and examination about overhead ratio as a valid measure of institutional effectiveness.

Of late, the topic has been spilling out of publications focused on non-profit audiences and into the mainstream. This week, FastCompany’s FastCoExist took up the topic in a piece titled, “Demanding That Nonprofits Not Pay For Overhead Is Preventing Them From Doing Good.”

Upon reading the transcript of Dan Pallotta’s talk, I see the FastCoExist article basically says everything he did three years earlier. Except there continues to be more research conducted that is supporting the validity of the claim. FastCo cites a new Bridgespan Group study that shows how uniformly applying a flat rate limit on overhead is undermining non-profit effectiveness.

According to a recent report by Oliver Wyman and Seachange Capital Partners only 30% of New York nonprofits can be considered “financially strong”—and “many trustees do not understand the financial condition of their organization or how it compares to its peers.”

[…]

Part of the problem is that many funders have become obsessed with measuring their impact on a per-dollar basis, which means they’re more eager to give to specific projects than the institutional upkeep that supports them. But the 15% overhead limit doesn’t even parallel what commercial companies shell out. According to Bridgespan’s research, the average S&P 500 firm spends about 34% of their budget on essential behind-the-scenes support. For IT companies it’s more like 78%, the report notes. Some 21st-century nonprofits probably require the same kind of tech firepower.

Similarly Pallotta noted,

So we tell the for-profit sector, “Spend, spend, spend on advertising, until the last dollar no longer produces a penny of value.” But we don’t like to see our donations spent on advertising in charity. Our attitude is, “Well, look, if you can get the advertising donated, you know, to air at four o’clock in the morning, I’m okay with that. But I don’t want my donation spent on advertising, I want it go to the needy.” As if the money invested in advertising could not bring in dramatically greater sums of money to serve the needy.

What Bridgespan did in their research was segment non-profits into four general areas (U.S.-based direct service, policy and advocacy organizations, international networks, and research organizations) and then broke down expenses into five different categories. It probably isn’t any surprise that different segments of the non-profit sector vary widely in their needs.

There is a graphic in the FastCo article that illustrates this, but for example research organizations spent huge percentages on physical assets compared to policy and advocacy organizations. Policy and advocacy organizations didn’t spend any money on field and network operations, whereas the international and research segments did, but in greatly differing amounts.

They use this research to support their assertion that requiring flat-rate reimbursements for overhead costs across the entire non-profit sector is inappropriate. Not to mention that the percentages they set are restrictively low.

Regardless of whether this research brings about change in the immediate future, at least the scope of those involved in the conversation continues to expand.

Is It Worth Gambling On A High Stakes Raffle Fundraiser?

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Via the Marginal Revolution blog, I recently read a piece on Priceonomics about how the Yerba Buena Center for the Arts was using a loophole in California state law to “raise $4 million by selling $10 million in raffle tickets.”

Since the authors note that other states have a similar loophole (or lack thereof), I thought this could be something of interest to arts organizations in general. While it can be something to explore, before rushing out to organize one, you should also be aware that there are some elements to their raffle that have raised more than a few eyebrows.

Essentially what they do is sell $150 raffle tickets for the opportunity to win a $5 million Dreamhome or a $4 million payout.

Yerba Buena does not buy a house every year, and it is unlikely that it has ever given away the dream home that it advertises on fliers and billboards. Instead, as SFGate has reported, the organization finds someone who is trying and failing to sell their expensive home. The homeowner signs a contract with Yerba Buena agreeing to potentially sell their house, which would allow the nonprofit to give it to the winner of the contest.

[…]

Since taking the dream house comes with a big tax bill, winners always choose the money. SFGate failed to find any winners who moved into the San Francisco dream homes, and this seems to be the case nationwide. “I believe that with most, if not all, [dream house raffles] around the U.S., the winner takes the cash,” says Brian Yacker, a lawyer who works in nonprofit law. “I don’t recall a winner taking the house.”

A San Francisco Chronicle piece on the raffle notes,

Often owners of these homes connect with the Dream House Raffle because the nonprofit will pay them to take their property off the market as it becomes a marketing tool.

“Usually, the nonprofit is not given the home,” Pender wrote. “It might lease it from the owner with an option to buy if the winner chooses the home. The owner gets paid for keeping the house off the market during the raffle, and even if it doesn’t end in a sale, the home gets plenty of free publicity.”

This actually sounds like a smart approach and win-win all around, especially if you know that people will generally choose the money.

What raises eyebrows is the fine print. You only get the dream house or the $4 million payout if a minimum number of tickets are sold, in this case, 65,000. According to that same San Francisco Chronicle article, the art center won’t reveal if they ever reached that minimum in the seven years they have held the raffle and have deflected inquiries by the Better Business Bureau saying it was proprietary information.

The SF Chronicle notes though that even if only 70% of the 65,000 tickets are sold by June 24, the winner still gets to claim 50% of the profit from ticket sales which would come to $3,412,500, not an insignificant amount. They also peg the chances to win some sort prize at 1 in 30.

In terms of the operational nuts and bolts of these types of raffles, Priceonomics reports that California law requires 90% of the raffle proceeds go to the non-profits’ programming. (Though they say thanks to legal maneuvers, Yerba Buena actually spends 60%-80% of the proceeds on the prizes and cost of running the raffle.) Other states have looser requirements,

In other states, no loophole is required. Tennessee law, for example, only requires that 25% of the raffle proceeds go toward charitable causes; in Minnesota, it’s 40%. Massachusetts law just states that a “reasonable” amount of the proceeds should fund the nonprofit’s work.

Now before you start pondering the potential to use a raffle of this scale to make money, you should note Priceonomics’ comments the perceptual issues involved.

For one, there is the ongoing discussion of overhead costs. If people feel like the money they have donated isn’t going toward programming that benefits a needy organization or people that they serve, it can undermine donor confidence. Priceonomics cites a number of instances where people felt burned upon learning that only a small portion of what they gave actually benefited the group they were being solicited to help.

They list a number of examples where organizations have abused people’s ability to gain tax credit for donating homes and vehicles. The SF Chronicle article cites a few sketchy situations with dream home raffles.

Though Priceonomics does note in Yerba Buena’s case,

Most participants in Yerba Buena’s raffle probably would not be shocked to learn that a good chunk of their $150 raffle ticket goes toward the cost of the $4 million cash prize. And since the cost of raffle tickets is not tax-deductible, taxpayers are not subsidizing these fundraisers.

Actually, one of the criticisms of the billboard and bus advertisements for the dreamhome raffle is the fact it is a fundraiser for the arts center is downplayed.

The other perceptual issue Priceonomics cites in relation to raffles of this scale it can be equated with gambling. While a $150 ticket is not going to be viewed as exploiting low income people the way state lotteries are, if people feel like too little is going toward programs, it may create a negative view of the organization.

“The original reason for the 90-10 raffle rule—and having those raffles just for nonprofits—is because it’s not gambling but a fun way to support nonprofits you want to support,” says Berlin. “Once you move away from most of the money going to charity, it looks more like gambling.”

If you think you might want to do a raffle of this sort, it is worth reading both the Priceonomics and SF Chronicle pieces.

The former does a good job analyzing the logistics of such a raffle and ends stating their general admiration of the arts center for freeing up their time to focus on programming rather than fundraising. The SF Chronicle article takes a more skeptical view of the whole arrangement, questioning and then physically verifying the house even exists. Between the two, you can get a good sense of all the questions you might need to answer if you choose to replicate this sort of raffle.

Contemplating The Claw Back

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I frequently write about the need to have a donation acceptance policy. In addition to not having the resources to handle non-cash donations, some donations come with conditions that do not correspond well to organizational missions. Recently many donors have required institutions and buildings be renamed as a condition of their giving.

Sometimes there are problematic issues surrounding the way in which donations are handled or evaluated as well as with the people making the donations.

An article on Non-Profit Quarterly today falls into this latter category and should serve as a cautionary tale for non-profits.

Long story short, two company executives made large donations to Oregon State University and University of Oregon. After an investigation, the Securities and Exchange Commission characterized their business model as a classic Ponzi scheme.

As a result,

…a receiver has been appointed by the federal court to rescue as much of investors’ funds as possible by closing dozens of Aequitas-created subsidiaries and investment funds. And when that happens, there is every possibility that the court will also try to “claw back” some of those donated dollars.

My first reaction upon reading about the claw back was, “they can do that?” Obviously, given a second to think, if you were one of those bilked investors you would certainly respond, “Hell yeah they can!”

Unfortunately in this case, in order for someone to be made whole, someone else has to lose. NPQ reports that University of Oregon has already spent the money. How things might proceed in trying to recover the funds, I am not sure.

There was also a little lesson in the NPQ article about crisis management communications. Author Ruth McCambridge had a little criticism for an Oregon State spokesperson who was trying to downplay the impact of one of the donor’s involvement on the many advisory committees his largess garnered an appointment to. (my emphasis)

He was on the college’s Entrepreneurial Education Advisory Board, the Austin Entrepreneurship Program Advisory Board, and the “Dean’s Circle of Excellence,” which is made up of large donors.

In short, the relationship is pretty intimate, but OSU spokesman Steve Clark says that is essentially no big loss. “A businessperson or business representative on a board like that is one of many voices,” Clark said. “They don’t actually establish a course, a direction or a philosophy for the college—in this case the College of Business—but they provide advice, guidance and support to the dean. Their involvement, or their lack of involvement in the future, would not affect the direction of the college.”

Way to go on making the surviving donors feel special, Steve.

Now if I am being honest, I probably would have said something even worse. Assuaging the concerns of one group of people without insulting another is a tough line to walk.

And lest you think financial malfeasance like this doesn’t occur often, this is the second time this particular bolt of lightning has struck the University of Oregon. Back in the 1990s they ended up returning $850,000 to the court appointed receiver and removed the name of the donor from their law school.

I have to think these people weren’t only donating to large universities. The only consolation a smaller organization might have is that the amount donated to them may not be worth trying to recover. On the other hand, in aggregate even relatively small donations can add up to a significant amount.

While it is probably close to impossible for most non-profit arts organizations to identify donations that may potentially boomerang, it can be useful to consider how you might respond in that situation. Even the question of the timing and effort you might put into returning or retaining the funds one year after vs 5 years after it has been spent can be important to contemplate.

It’s Easier To Destroy The Building Than Fix The Roof

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For over a decade now there has been a conversation about how detrimental it can be if an arts organization decides to add new programs in order to qualify for foundation grants and funding. Usually the negative issues revolve around conflicts with core mission and placing additional strain on staff and resources.

Until recently, I hadn’t heard about arts organizations feeling they have gotten caught in a vicious cycle of needing to build multi-million dollar expansions in order to attract more money.

According to a Non-Profit Quarterly piece referencing an article in The Art Newspaper, that is the very situation facing museums. Even in the deepest throes of the recent recession, museums were spending billion on expansions. (my emphasis)

The museums say they need to expand to attract new donors, and that requires enough space to display enough work to pique the special interests of individual prospects.

“If there isn’t room to show these works, you are hamstrung when you want to make the case to a private collector that a particular object would have a suitable home in the museum,” says Neal Benezra, the director of the San Francisco Museum of Modern Art. The Art Newspaper agrees, saying, “Patrons are also more likely to stump up for a splashy expansion than for a lower-profile renovation or acquisition.”

In fact, in the article, new galleries, buildings, and wings are described as grounds for friendly competition among the ultra-wealthy. But after the expansion comes expanded operating costs, of course, and…well, the monthly nut becomes bigger and more formidable.

[…]

But large institutions have ended up being in constant capital campaign mode, creating bigger sustainability issues in the long run unless the donor money continues to expand and those donors fall in love with funding operations—a doubtful prospect. Too few capital campaigns and major gifts are structured to include endowments or other funding to sustain the buildings over time.

Not only is there a sense in both articles that there is quite a bit of vanity involved, there was also a suggestion that museums would “become a dumping ground for speculative investments in the art market.”

With the existing concerns that museums are becoming too closely tied to commercial efforts, it may not be unreasonable to fear that people may seek to burnish the value of their collections by having it shown in prestigious museums. Having taken on greater operating costs, wouldn’t museums feel pressured by influential donors (and concerned board members) to accept?

You may be thinking, none of this applies to you because you don’t work for a large, prestigious museum. However, this situation illustrates the dangerous cycle and potential for conflicts of interest, writ large.

Not only that, the sentence I emphasized is related to the more encompassing issue of funders in general not providing support for overhead and operational expenses. There is an implicit suggestion that capital campaigns and major gift solicitations be structured to include support for operations and long term infrastructure maintenance.

It may not be as sexy, but it is necessary and needs to be seriously considered by arts non-profits of all sizes. It is probably easier to carve out a portion of a major capital gift for these purposes than to solicit for it directly.

Guest Post: Putting The Wrong Labels On Boxes That Don’t Actually Exist

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[box type=”note” style=”rounded” border=”full”] In my post last week about poorly written job descriptions, Stephen Brown asked if I would address his perception that the title “Development Director” was something of a misnomer. Thinking that he was well along in considering this topic, I invited him to submit a guest post on the subject.

Soon he recognized the trap I had laid for him as his thoughts on the matter took hold and flowed across the page! With his permission, I have broken his post up to appear across the next two days.

Enjoy!

-Joe Patti[/box]

Many of Joe Patti’s articles inspire a moment of contemplation during my hectic days. I am often motivated to contribute to the discussion, and occasionally hit “submit comment” before wishing I hadn’t; two sentences are hardly enough to express myself properly. This time, though, Joe sent a thank-you note and offered the opportunity to expand my thoughts in a guest post. Here goes:

Risky Labels

When making the acquaintance of someone new, “What do you do?” is usually one of the first questions asked. Personally, I prefer the question “How do you make people’s lives better?” because it stimulates the sharing of passions and dreams rather than a job title. How do you respond when a person asks what you do?

Most of the time we use a label we think the inquirer understands: Conductor, Composer, Coach, Musician, Administrator, Performer, Director, Writer, Educator, Marketer, Project Manager, Producer, Leader, Renaissance Man, Jack of All Trades, or Emilie Wapnick’s coinage, “Multipotentialite.”

However, trying to fit your life inside someone else’s box has never worked. As Frank Luntz says in Words that Work, “It’s not what you say, it’s what people hear.” By using other people’s labels we risk confusion, appear boring, or sound like an unfocused busybody who jumps from one job or box to another (when children do that, we label them as having ADHD and medicate them out of creativity).

Future Negative Impact

Maybe one reason why the Western world struggles to maintain a healthy relationship with live performing arts is because we use misleading language, labels and boxes. This is hardly a revelation, but I have yet to hear about a sensible discussion that explores the issue seriously and recommends prudent alternatives.

By adopting others’ labels and holding on to them, the performing arts industry is becoming dated while serving only its own entrenched addicts. According to Gary Vaynerchuk in Crush it!, we have neglected to “look ahead and see what could negatively impact our businesses.” We have absorbed mid-to-late twentieth century labels we think the “outside world” understands and at no time considered their future negative impact, which is now upon us. For example, let’s look at the USA non-profit world’s common term “Development Director.”

Have We Got It Backwards?

Ask anyone who has contact with non-profit leaders what a Development Director does, and they say “fund-raising.” Ask anyone with no experience in non-profit management, and they say “develops products or services.” In fact, taking the usual responses and listing them, the description sounds remarkably like an ideal Executive Director: Develops the people, programs, finances, operations and strategic planning of an organization. It seems backwards to me. Perhaps both positions have the wrong labels.

Even Board members, who are often unfamiliar with non-profit language even after training, can be confused about a Development Director’s role. Merriam Webster defines Development as an act or process that causes something to grow or become more advanced, and Oxford defines it as a “specified stage of growth or advancement.” Dictionary.com even includes Development definitions for music, construction, chess and mining, but none of them refer to fund-raising, asking for donations, or submitting grant applications.

Disparity of Definition

For the small business or corporate representative on your Board, every product, service and process in their company is being developed, was developed, or will soon be developed. R&D is not an abbreviation for Research and funD-raising. In fact, Development usually results in new and improved ways of achieving the same outcome, which is hardly what fund-raising does.

This disparity of definition is caused by a lack of communication, which Dave Ramsey suggests in EntreLeadership is due either to communication not being a priority, or sufficiently “arrogant or fearful” leaders who are under-communicating on purpose. To a lay non-profit Board member, a Development Director is simply a layer of bureaucracy lean organizations can do without.

What we can do without is putting the wrong label on the wrong box.

A New Condition

Joe’s original article highlights that some organizations believe the Executive Director’s role is primarily (75%) fund-raising, and that their Board members clearly have no appreciation for the ED’s actual function, how their organization functions, or what a Development Director does.

In fact, he thinks his case study “reflects a lot of poor practices that have permeated the non-profit arts,” and I agree. So much so that I, too, am angry enough to share my thoughts about it.

Now throw into the mix my suggestion that the term Development Director is whole-heartedly misapplied and must be dropped, and we can put a new label on the new condition we are in: a mess.

[box type=”note” border=”full”]Tomorrow – What Are The Alternatives?[/box]

Leading 1.25 Days A Week

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By and large I keep things general and relatively low on direct criticism in my blog posts. However, since the goal of  this blog is to engender better practices in arts organizations, I feel like I need to address a topic that is under discussed –writing effective, accurate job descriptions.

I see a lot of poorly written job descriptions but there was one that came across my Twitter feed last week that was particularly egregious. Even after a weekend, it still bothered me. I won’t name names, but I am going to pull some lines from the description rather than obliquely referencing it.

The job is for an executive director. The one line that left me incredulous was:

Responsible in developing and executing a management plan where within two years the role of Executive Director will spend 75% of time on fundraising.

To put that into context, 75% of your time is 3.75 days a week. Now you may say the executive director wouldn’t be doing this every week, some months would be more focused on fundraising than others but that is still 9 months out of the year. No matter how you slice it, 75% of a person’s time is still a significant amount of time. If the Executive Director takes 2 weeks vacation, that means leadership and other functions get the 2.5 months that are left.

The amazing thing is, this is listed as number 8 of 8 primary responsibilities. How can something that is expected to take up 75% of an executive director’s time be listed last in a list of primary responsibilities?

Now, I will admit if you read the whole description the fact the person will be expected to do a lot of fundraising finds its way into pretty much every line:

• The position works within a team environment and is responsible for ensuring strong working relationships across the arts and grantor community;
• Plays a central role in fundraising including individual donors, corporate sponsorships and writing and obtaining grants;
• Executing a strategic plan including: education and outreach goals; development of a donor engagement plan including annual giving, events, corporate and volunteer relations; establishment of a major gifts program; and execution of a technology initiative including both hardware and software;
• Financial oversight including drafting and meeting a detailed annual budget;
• Ability to create and nurture relationships with new and existing funders, as well as write and secure grants to underwrite new and ongoing initiatives and general operations;

It would be better if the 75% commitment to fundraising was listed first and then what followed illustrated how that would manifest itself.

But this is more than just a matter of poor formatting and organization of ideas. Overall, I felt like there was a misunderstanding of the role of an executive director and a large mismatch in expectations.

Among the qualifications listed of the applicants are:

• Bold and creative thinker to lead a talented staff;
• Demonstrate good governance, financial oversight, and best non-profit management practice;
• Comfortable with traditional and emerging media;
• Proven leadership skills identifying profitable opportunities and growth within the communities we serve;
• Preferred demonstrated passion for the mission of arts, arts education and outreach to all communities;
• Familiar with STEAM and the maker movement;
• Experience and enjoyment in managing multiple challenging initiatives concurrently;

There was one line in the expected qualifications about possessing fundraising skills, but the primary responsibilities are replete with references to fundraising and grant writing. The qualifications and responsibilities don’t seem to be in synch with each other at all.

The expectations outlined in the qualifications are in line with an executive director, the expectations expressed in the responsibilities are generally more appropriate for a development director.

Where is there time in the 1.25 days a week or 3 months not dedicated to fundraising to devote to leading the staff, focusing on good governance, identifying opportunities for increasing revenue and growing the organization, pursuing a mission of arts education and outreach?

One of the primary responsibilities listed does call for “examining and evaluating the role art plays in the communities we serve and subsequently installing new, progressive and sustainable arts initiatives,..”

I have a suspicion that they started with the qualifications list and then started brain storming about responsibilities. As that list came together, whomever was contributing came to the realization this person would have to work on fundraising a lot and may have arrived at the 75% number without thinking about how that really broke down time wise.

That said, if they really do need someone to devote 75% of their time to fundraising, it would be better to hire a separate development person who only focused on that. If there isn’t money to hire two people then either expectations need to change or priorities need to be evaluated. Does the organization have a greater need to raise money or for focused leadership?

If the answer is money, then hire the development person and the board needs to decide on some sort of ad hoc leadership structure shared between the other staff and board members.

An executive director definitely does participate and contribute to fundraising efforts, but theirs is a leadership position. That leadership can not be exercised 25% of the time and still meet the expectations that staff, funders, business people and community partners have for a person with that title.

A person spending 3.75 days a week/9 months of the year soliciting support is going to be making significant commitments on behalf of the organization. Who is going to be setting the standards, researching best practices, creating policies and leading the staff to meet those commitments? The executive director in the other 1.25 days/3 months?

Who is going to make sure those commitments are met, gather supporting data and materials and do the follow up reporting? That is part of the executive director’s 75% time attending to fundraising you say?

Okay, yeah, maybe, but in the process something is going to suffer. These tasks are time consuming and reporting requirements are increasingly out of scale with the funding received.

There are a lot of factors at play here. Many aren’t specific to this job description. The description just reflects a lot of poor practices that have permeated the non-profit arts. If there is an Everyman, much of this description is Everyjob.

The questions I raise are among those that really need to be considered when writing a job description. Every organization is different so it is close to impossible to borrow sections of other company’s job description and do a good job generating your own.

I am willing to give the organization the benefit of the doubt and believe (even hope) that this description (and other like it) doesn’t match the reality of the position and more attention needs to be paid in making it accurate.

If it does reflect reality, bless the person who takes the job.

Removing Overhead Ratio As A Measure Is Not Enough

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On Non-Profit Quarterly Claire Knowlton wrote a piece advocating for moving past a focus on overhead costs and direct program expenses in favor of full funding of non-profits by foundations. (Or at least recognition of full costs incurred by a non-profit.)

She seems to start from the premise that programs undertaken are essentially jobs non-profits do to further the interests of the funders. This sort of shifts the whole dynamic from a situation where non-profits cast about to find money in order to provide services to one where foundations seek skilled entities to solve problems for them.

Imagine if your personal paycheck were like a restricted grant. Instead of representing your value and level of responsibility in the company, your paycheck is based on a predetermined line-item budget that details exactly how you can spend your earnings. A portion of your paycheck can be used for rent, some for utilities, but most is earmarked for business attire, transportation to work, and coffee to keep you productive throughout the day. The thinking here is that by tying your paycheck to the expenses that contribute to your work, the company is making sure that you will show up on time, appropriately caffeinated, and properly dressed. It’s as if every penny of your paycheck is spent before you cash it.

To some extent, you had a say in your paycheck budget. In fact, you had to present a proposed paycheck budget when you applied for the job. Your friends on the inside said no one who spends more than 20 percent of his or her paycheck on rent has ever been hired. To get the job, you cut your rent line item. That means making do with an efficiency unit above an all-night bowling alley, but it’s better than not having a job at all. Some line items were nonnegotiable from the start: As a policy, your company won’t pay for haircuts; but that’s okay—you can let your hair grow long.

She goes on with this analogy noting that the “company” wants to make sure you are working effectively so they require you to generate reports–except that the cost of doing so will cause the ratio of time you devote on administrative tasks vs. the central tasks they are paying you to accomplish to skew higher. The employer won’t like that.

Because every penny of your paycheck is pre-spent, there is nothing left over for the future or to take care of retirement, emergencies and replacing your aging car (equipment).

In terms of a solution, she says:

“If we start to fully fund nonprofits for their day-to-day program and overhead expenses, and abandon overhead measurements as a proxy for mission fulfillment and efficiency, it’s the equivalent of giving nonprofits control over their paycheck.”

But she says the term “full costs” include:

Day-to-day operating expenses + working capital + reserves + fixed asset additions + debt principal repayment = full costs

In addition to laying out her argument, she makes suggestions to both non-profits and foundations about how they can change the conversation and practices.

Full funding of costs according to her definition would allow non-profits to be more focused on outcomes rather than compliance in order to survive.

This distinction is important. One of my initial thoughts when I read this was that what Knowlton was talking about would primarily be applicable to social service non-profits because fewer foundations would be interested in funding an arts non-profit primarily focused on creating performances.

The thing is, many performing arts organizations are just as focused on compliance and survival as any other non-profit. There are a lot of sincere ambitions that get abridged and curtailed because there isn’t possibility of revenue or funding.

I don’t know how many conversations I have had that started enthusiastically but were quickly ended by the phrase, “…unless we can get a grant to cover it.” Enthusiasm to do a week long residency with multiple interactions turns into a single lecture-demo for lack of funding. Opportunities for single lecture-demos get turned down for not being revenue generating. The outcome focused on is surviving another season.

After awhile, no one even entertains exciting ambitions and settle for minimal token gestures that will garner them a little bit of funding.

A situation where both the organizations and foundations embrace philosophies that make a complete assessment of what would be required to fully fund an arts non-profit could yield amazing outcomes from some.

In addition to funding capacity building for the organization so that everything from the board governance to hiring practices were strengthened, a rigorous study of what the local market would bear in terms of pricing, (including the optimal pricing spread for events), would provide a clear picture of what the capacity is for revenue.

This way there is a good basis for decision making by the organization as well as stronger justification of the funding that is needed to offset the difference between earned revenue, donations and program expense.

While I am skeptical full funding will happen, articles like this one and the conversation about eliminating overhead ratio as a measure of effectiveness are indications that there is potential for a shift toward more constructive policies.

What Is On Your Customer Relationship Management Wishlist?

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At my day job, we have been looking into the possibility of getting a new ticketing system. We have passed the RFP (request for proposal) deadline and are evaluating the submissions. One of the areas we are really focusing on is customer relationship management (CRM) features because keeping track of all the ways a person interacts with us is increasingly important…and increasingly difficult.

This whole process reminded me of an article that caught my eye last summer, Why Nonprofits Deserve CRM Innovation. Author Gabe Cooper’s central thesis is that there is nearly $340 billion in donations being directed toward non-profits annually, yet the available CRM tools are oriented toward business sales rather than building relationships that connect with a donor’s passions.

“Charities and social enterprises face growing pressure to cut through marketing clutter and connect personally with younger Millennial donors. Their software can no longer afford to see donors as “leads” or “transactions”; instead, they must focus on the personal passions of each giver.”

He identifies five areas in which improvements to CRM will benefit non-profits.

Generosity-specific predictive data analytics. Nonprofit CRMs must predict and customize each donor’s experience. Successful systems will combine tried-and-true fund-raising data analytics with social media signals and even current events to create a holistic, personalized relationship with each giver.

Giver-managed relationships. Nonprofit CRMs must enable two-way communication and create open conversations with givers about the success of individual projects. Nonprofits can no longer report on cold institutional metrics.

Completely removing the “sales” paradigm. Nonprofit CRMs shouldn’t be modeled on sales/transactions. Instead, they should focus on long-term relationships around generosity, social engagement, advocacy, etc.

Open APIs and integrations. The days of monolithic donor management systems are over. Nonprofits want to use best-in-breed tools for email marketing, donation processing, etc. The new CRMs should embrace these choices and provide easy integration.

Increase efficiency and decrease overhead. Nonprofit CRMs must help reduce the unnecessary costs common to charities. Back-office tasks like donation importing, gift receipting, and foundation giving management can suck up hours of staff time and create massive overhead. The new CRM needs to understand the very specific needs of nonprofits and provide efficiency tools that allow charities to go about the work of accomplishing their mission.

I am sure there would be a lot of people cheering if the activities listed in his last point became much easier. Given that donor acknowledgment letters need to go out this month, it would probably move to the top of everyone’s wish list.

I had also been thinking that it might be useful to be able to record notes from every interaction whether it be phone call, face to face interactions, emails and social media. These things may already be possible in a way that doesn’t treat them as sales calls.

I wondered if any existing tool allowed you to record indirect signs of investment in your organization like people mentioning or tagging you on social media. Can you take screenshots of positive comments and electronically file them away?

I was a little leery at the mention of combining “fund-raising data analytics with social media signals.” That phrase made me wonder if he envisioned a system that tracked the social media activity of anyone who engaged with you and sent you tips noting what a person was passionate about. I could see that getting really stalker creepy fast.

On the other hand, if you have entered keywords into someone’s file regarding what they were passionate about and the system alerted you when a related topic was trending on social media, that might be okay. Or if the system collected keywords from the social media profiles of people who engaged with you and then spit out a report letting you know 58% of those people are passionate about animal rescue, Indian food and bluegrass music, that could also be help inform strategy development without feeling overly intrusive.

Are there any features on your wishlist you would love to see as part of a CRM package?

I’ll Love You Foreve…About A Month

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About two years ago, Non Profit Quarterly (NPQ) had a piece discussing the external influences on non-profit organizations.

There are quite a number of external forces that exert pressure on non-profits, but thanks to the ease of communication and dissemination of information, among the latest to emerge are: push for transparency and accountability; the ability of different stakeholder groups to mobilize and influence each other and social media’s ability to make a escalate local issues to national visibility.

While these are all very interesting, the one element that caught my eye dealt with the transitory nature of relationships.

There is much less reliance on cradle-to-grave relationships between people and institutions (no longer the standard). And more free agency and greater reach of communications technology require stronger and more consistently engaging attractors. Maybe a core image here is that of the contracted and relatively unprotected worker—the worker with multiple short-term jobs, or the employee who commutes remotely. Socially concerned people are replicating these shorter term, more tenuous relationships—taking their energy to a Habitat for Humanity construction project one month, a race against hunger the next, and participating in a campaign against constrictive web legislation in between. If you want to compete for people’s attention and money and names, you had better be giving them something that they can get very interested in and over which they can feel a sense of accomplishment and partial ownership. They do not always need to do the work themselves, but they do need to feel engaged at a spirit level.

This struck a chord with me because it illustrates a new stage in the relationship between arts and communities. We have gone from the ability to assume a relatively long and stable relationship that was the hallmark of Danny Newman’s Subscribe Now, to the need to gradual cultivate a relationship through a successive series of steps laid out in the book Waiting in the Wings to this current news that you are lucky if you can get someone to support you for a month.

This probably doesn’t come as a surprise to anyone, but it is a little depressing to see it in print. As to what is to be done, I would say make a consistent effort to communicate what you are doing and why they should be excited and interested to keep yourself on people’s radar.

And be prepared for churn. We know it is more expensive to attract new audiences to performances than to retain existing ones. While it is definitely worth working to maintain the loyalty of existing audiences, churn is likely to be a growing issue and needs to be factored into budgets. From the NPQ piece, it needs to be part of unearned revenue projections as well as earned because that is likely to fluctuate as well.

A big rally of support like the ALS Ice Bucket Challenge of last summer can help you advance your cause and expand your service exponentially, but it may taper off just as quickly so be prepared. This month ALS researchers reported on how much progress the $100 million boost they received last summer benefited their efforts. There isn’t any mention about what percentage of those who gave last year continue to do so now.

(To be fair, the report and Ask Me Anything were delivered by the researchers, not the ALS charities)

Donor Achievement Unlocked- Screaming Fan

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I had made a suggestion to the community board we partner with on our presenting season that they think about changing the names of their giving categories. My rationale was that the current categories are strongly oriented toward classical music, but that genre only compromises 10%-20% of the programming in any season.

They asked me to provide some suggestions at the board meeting in August. Since I want to have names that give a broader, more diverse sense of the type of programming we partner on, I have been jotting ideas down in a pretty stream of consciousness manner.

At one point, I realized some of the terms were likely unfamiliar and might require explanation. I considered that could be a good thing. If positioned correctly, it might help donors to more closely identify with the work we do.

By this point, I was thinking that what I working on might make for a good blog post so when I say, “help donors to more closely identify with the work we do,” I mean all of us.

That is when it occurred to me that a revamp in donor categories to include a description might be another area that could contribute to the effort of shifting focus toward the donor/audience that Trevor O’Donnell advocates for with arts marketing.

To a degree, this idea partially resembles the “Achievement Unlocked” motif of video games and some of the categories and stretch goals on Kickstarter. I am also pretty sure I have seen some arts organizations who employ this basic concept.

In no particular order, here is some of what popped into my head for a handful of the terms on the list I have assembled. Some or none of these may get used as inspiration strikes me.

Green Room – This is where all the energy gathers before exploding on to stage
Screaming Fan – With you cheering us on, we never run out of energy.
Stage Manager – Though you are behind the scenes, nothing runs smoothly without you
Running Crew – You do the heavy lifting and make sure the spotlight focuses on everything great on stage.
Comedy Team – Like Abbot and Costello, Stiller and Meara, Key and Peele, we do our best work when we have a great partner supporting us.

It occurs to me that if fund raising efforts were approached with a sense of the next level of giving being an “achievement” to unlock, it might encourage giving from younger people and lead to increased giving over time.

What that would look like is a lot of categories at the lower end of the scale at very small intervals ($1-$25, $26-$50, $50-$100, $100-$200) so that people felt they were progressing quickly through (or skipping) levels early in their giving history. At the higher end of the scale, the intervals between levels of giving would be much greater ($2500-$5000, $5000-$10000) which pretty much reflects the process of advancement in games.

If anyone has ideas for category names, descriptions, etc, I would love to hear them.

Gala Going

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Seth Godin recently linked back to a post he wrote in 2011 about the economics of fund raising galas. To heavily summarize what many of us already know, he points out that it is difficult to get someone to give money to a cause, but if you wrap it in a social occasion, people are willing to spend a large amount of money with the knowledge that some of it will go to a good cause.

Of course the issue is, there is a lot of time and money being spent on organizing the event. When it is all over, there may be a significant amount left over to put toward the cause, but there would have been a lot more had there not been such a large amount of fundraising cost involved.

But that brings up the simple question about whether fundraising can be decoupled from the social element. The basic development office truism is that people give to people, not organizations. Donors need to feel a personal attachment and investment to the cause.

There is an event called an Un-Gala where you are supposed to stay at home and make a donation. But if you Google the term, you will find that a lot of people sort of missed the memo and are having big flashy events.

At the same time, donors are increasingly looking at the overhead costs of non-profit organizations. Organizations like GuideStar, Charity Navigator and BBB Wise Giving Alliance are pushing back against using overhead ratio as a measure of a charity’s effectiveness.

Then there are some like Dan Palotta who are really pushing back against the concept of overhead ratios and advocate for spending large amounts of money to fund raise enough to pursue big solutions.

He has no desire to decouple the social aspect from fundraising. The more galas, 5k runs and promotional efforts you can muster in order to raise awareness and forge a connection or investment with the cause, the better in his mind.

I find a lot I agree with in Palotta’s philosophy. His thoughts about people taking too conservative a view about fund raising bear considering. Maybe my next statement is reflective of that mental malaise.

I am not sure most non-profits operate at a scale on which his ideas would be viable. I think he is envisioning the steps large cause based charities focused on cancer, poverty, diabetes, environment, etc. An arts organization would probably have to adopt a vision on a statewide scale rather serving a city or town to be operating on the scale required to viably follow the approach he advocates.

I have generally viewed Kickstarter and similar crowdfunding services with a semi-skeptical eye. However, reading Godin’s post on gala economics, I have to admit crowdfunding is superior in some aspects. It does reduce the cost of the social element to some degree. There are costs associated with producing a video appeal and producing and fulfilling the donor benefits, just as with a gala event. However, the costs aren’t likely to be as great as for a fundraising gala.

I have heard some horror stories from people who severely underestimated the amount of labor and cost involved with meeting their crowdfunding promises, but I can attest to the fact people do the same with their gala events. Crowdfunding sites allow an opportunity to experiment and relatively quickly refine your approach over various iterations. Something that is not easily done when you are talking about organizing successive social events.

So it is possible in time people will become as adept at creating engaging crowdfunding presentations as they are with gala auctions.

While most crowdfunding sites are focused on projects rather than being optimized for annual seasonal fundraising events, I imagine that design might evolve over time. Just as likely, non-profit organizations may find the idea of anchoring fundraising around an event on a single day is inferior to a series of longer term appeals customized and delivered to specific groups.

A recent article on Nonprofit Hub notes that donor fatigue is not real. People are willing to entertain multiple requests for donations. The thing that wears on people is poorly designed request and follow processes. A targeted, online approach to both may be the solution and allow for more frequent solicitations.

The other little nagging consideration is if people are increasingly having their cultural experiences at home or on a handheld screen, what will be the future of gala events? Granted, everyone loves a good party and may show up for gala events when they never darken the door at any other time of the year.

I would be interested to know if anyone has studied whether people whose only connection with an organization is these semi-annual events donate as much as someone who involves themselves more frequently. It would be difficult to measure. The infrequent attendee could easily be swept away by the emotion of the night (and perhaps a sense of regret for not participating more often) and give quite a bit. Someone who participates often may not give as much because they are not wealthy, but attend the gala because they do feel a significant appreciation for the experience they have had.

The reality is, both approaches may ultimately be necessary. Currently crowdfunding sites tap as much into the participant’s wider social network as much as it does their direct connection and interest in the project. Live events appeal more directly to a person’s connection, but provide an opportunity mingle and have an enjoyable social experience that a video on a website can’t provide.

Investing In Social Outcomes

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Non-Profit Law blogger Gene Tagaki had a post on LinkedIn a couple weeks ago about Social Impact Bonds. These bonds are a fairly new approach to funding non-profit activities. While I think they could be a viable tool for funding the arts, I had some reservations about them as well.

The biggest difference between a social impact bond and the current practice of government entities providing grants to solve the same problem is that a private investor is involved in the process.

Here’s how that might work using social impact bonds:

  1. A government agency identifies a social problem and commits to making a payment, but only if the targeted social outcome goal is met.
  2. An investor interested in addressing the social problem makes an investment which will may result in repayment with an additional return on its investment, but only if the social outcome goal is met.
  3. A nonprofit organization is paid by the investor, delivers services to achieve the social outcome goal, and provides a report back to the other parties.

Typically, an intermediary develops the SIB, raises capital from the investor(s), selects the nonprofit service provider(s), and selects an independent assessor that will determine if the social outcome goal is met.

Among the benefits to this approach that Takagi lists are:

  • Government payments only for agreed upon social outcome results, generally shifting government funding from short-term relief to longer-term impact.
  • Greater development and use of metrics for impact assessment, which may contribute to a favorable change in the way government funding works in its selection of service providers, models of service, and evaluation criteria and protocols.
  • Investors screen nonprofit service providers for those most likely to deliver the targeted social outcome result.

The shift toward long term impact rather than short term goals would definitely be a boon for most arts organizations. But the potential for service providers to be chosen on the basis of independent analysis using different criteria can be very appealing.

Arts organizations which are well positioned in communities investors wish to impact and who specialize in providing the services desired have the potential for receiving all the funding they need to do the job rather than funding in proportion to their budget. If organizations are chosen based on effectiveness rather than prestige, smaller arts organizations may be more likely to benefit as well.

The potential downside of this approach is that because it is an investment, the desire for a return may dictate many elements of the program.

  • Diversion of more cost-efficient direct government and philanthropic funding of sure-bet programs to address social problems…
  • Investors may dictate strategies of service provision to maximize their opportunity for a high economic return on their investment instead of a high social return.
  • Funding will be restricted and likely prevent nonprofits from using such funds to build the necessary infrastructure to support new or expanded programs to achieve the social outcome result.
  • Funding for innovative and long-term strategies may be stifled by investors willing to fund only the strategies with the most proven track records of success and/or easily measured, short-term returns.

Even if your organization doesn’t participate in a Social Impact Bond program, I foresee some potential repercussions in government granting and funding taking their cues from investors. If a government entity sees that companies are investing in certain programs, they may either view it as a type of imprimatur of those programs without doing any research or developing any criteria of their own. Or the government entity may wish to curry favor or stimulate greater investment in the community by supporting investor agendas with grants and favorable rules.

Part of the process to be qualified to invest in a Broadway show is that your personal wealth be such that you can afford to lose money. That is essentially what Takagi suggests in the analysis at the end of his piece. Only true social investors who are prepared to lose money or only gain a small rate of return in order to effect a social good should be allowed to participate in the Social Impact Bond program.

I bring up the Broadway investment scheme because the same potential for damaging investor influence exists there but the agreements have been structured so that it is clear the majority of investors don’t have any say in the way the show is executed. A basic framework exists that could be applied to Social Impact Bond funding.

Draw Me A Picture of An Arts Attendee

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Even though the articles on Non-Profit Quarterly’s website are relatively short, I found an article last month about fundraising for the homeless gave me a lot to think about.

According to the article, homeless charities are essentially forced to pander to the image of the homeless as old men living on the street in order to raise money even though the truth is 36% of homeless are families and 65% don’t live on the streets.

Research published in the British journal Sociological Research Online noted (my emphasis)

“Given the homogeneity of the images produced in this research, and further studies which show complex, contextual information can lessen the impact of a fundraising campaign, we could argue that charities are acting rationally in continuing to fundraise in such a way, even though in rooflessness they are focusing on a relatively small element of the overall problem of homelessness: ‘the public must be given what they appear to want: images of charitable beneficiaries that fit comfortably with widely held stereotypes about ‘victims’ and which prompt the largest amount of donations.’”

The article talks about how some charities recognize the need to balance educating the public about the truth while also acknowledging that “you also have the way that people perceive that problem and what they perceive the solutions to be…”

Reading this, I saw some parallels with what arts organizations face. There has been a lot of conversations in recent years about the mismatch between what arts organizations need funding for (i.e. operations) and foundation funding priorities.

What really got me was the idea that non-profits are often slaves to the image the public has of the constituencies it serves. The British researchers had people draw what they envisioned when they thought of homeless people and many people drew the whiskered old guy sleeping on the street. (I should note the study sample size isn’t terribly large so the results may not be entirely conclusive.)

I wondered if arts organizations were to ask their patrons or people in the community to draw their concept of an arts event attendee, would the pictures be of people in suits/tuxedos and evening gowns even if the reality was jeans and khakis with barely a necktie in sight?

In light of this research, I started wondering if arts organizations might be better served by embracing the high society stereotype they are trying to escape, at least when it comes to fundraising efforts.

If regular event attendees end up rendering an image that diverges from reality of the experience, it may be that they associate their self image with the one on paper. In that case, you may not want to do anything to disabuse them of that notion.

Though this is a complicated situation. They may have drawn the pictures they did because all your marketing materials feature performers in tuxedos and evening gowns reinforcing that image even though your audiences largely don’t dress in that manner or identify with that image.

In this case, continuing an effort to have marketing and fundraising materials and events attempt to diverge from the high society stereotype and more closely align with the audience reality may ultimately garner better attendance and donations.

While there are a lot of nuances of audience psychology to factor in, the rather obvious element in all this has always been that wealthy people make large donations that help keep everything operational so the image arts organizations have tried to project is one that appeals to them.

Like those who serve the homeless, arts organizations may be trapped into perpetuating an image that attracts the most donations versus presenting an image the best reflects the reality or ambition of their activities.

All that being said, I am still intrigued by the idea of asking people either to draw or describe the type of person who attends an arts performance. I have this feeling that a survey requesting a picture might actually end up with a higher response rate than a typical survey.

And it may provide some insight into the image the organization should be projecting in order to appeal to the community. (I have to confess, I had an amusing vision of a crayon stick figure drawing of a man in a top hat and woman in an evening gown slamming the door of theater in the sad faces of two less finely dressed people.)

If anyone tries this, I would love to hear what the results are. This isn’t out of line with what people are asked to share on social media sites and there are arts organizations who are already engaging people in this manner. Nina Simon could ask of visitors at the Santa Cruz Museum of Art and History to do this and no one would think it particularly novel.

Info You Can Use: Holding A Mirror Up To Fundraising

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Simone Joyaux wrote a must-read, “physician heal thyself” post for development teams in a recent Non-Profit Quarterly post.

In her column, Fundraisers: the Good, the Bad and the Ugly, she enjoins development teams to look in the mirror before blaming others for failures. (If you have a hankering to listen to the theme music for The Good, the Bad and the Ugly movie while reading, there is an interesting guitar rendition here.)

Joyaux addresses many common complaints development departments have about board members not providing assistance with fundraising, board members not donating, issues with opinionated executive directors and weak economic conditions inhibiting efforts.

She provides some advice about dealing with each situation, mentioning a different approaches to use. In nearly every case though, she challenges fundraising staff to examine their assumptions and understanding of the situation to see if they are at least partially contributing to the difficulties.

Often she asks if the development team has sat down and spoken with someone to understand their limitations and concerns and whether the development staff has been providing sufficient support to a board member’s efforts on their behalf.

There are some things Joyaux writes about that I have rarely, if ever, heard mentioned in relation to fund raising efforts.

(By the way: How do you define fundraising? I hope you aren’t thinking about asking for money only. There’s so much more to fundraising than the asking point. Do you know all the steps and the neuroscience and the psychology and communications and all the rest? Can you help board members apply that, in partnership with each other and in partnership with you?)

When she mentions them, neuroscience and psychology make sense as factors to consider, but I can’t remember ever hearing them mentioned in connection with development before. (Actually, I have to admit I only have guesses on how neuroscience relates.)

As Joyaux notes, becoming effective at development is a process and there isn’t anyone who hasn’t committed some sort of poor practice.

In my early years, I know I must have behaved this way. I saw glimpses in the mirror. How about you?

Bad fundraising performance #1: The fundraiser didn’t handle well leads suggested by several board members.

Bad fundraising performance #2: The fundraising staff didn’t ask for specific support from a specific board member, and explain why, and provide support.

Bad fundraising performance #3: The fundraising staff doesn’t spend much time learning about the program. The fundraising staff doesn’t collect stories from program staff. The fundraisers rarely observe a program or talk with client beneficiaries. This produces weak solicitations, bad links with our heroes, the donors.

Oops, actually that last point reminds me I need to follow up with some participants of an education service we hosted last week.

Can Fundraising Be Inspirational To All Involved?

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Last Thursday I attended an art show opening at the shop of a wood furniture maker. The owner of the shop invited some college kids in to festoon his walls with their work which leans heavily toward graffiti.

A couple things struck me while I was there.

First, the owner of the shop sells his furniture starting at about $2500 and going up. Except for a handful of people, few attendees at the opening could likely afford to buy his work because they were mostly college students.

Likewise, the fact the artists worked in a graffiti style, the art work isn’t likely to attract the type of people who will spend $2500+ to his store while the art show is up.

Clearly, the store owner was motivated by a desire to support local artists and not by a desire to grow his customer base.

I was impressed by the work the students had put into the installation. There were a few hundred hours worth of effort invested.

What I valued more was the opportunity this offered the artists to talk about their work with people they had never met. This is an important skill for an artist to acquire and be comfortable with as they work to advance their career.

These guys were really well organized. They had prints, tshirts and stickers for sale. They also had a laptop with a slide show of their work so you could order tshirts.

On the whole, they were doing a really good job of promoting themselves with the help of this business owner.

You may take inspiration from this story or it may give you ideas for a program you can cultivate among businesses in your community.

Much about this story is exactly what occurs when a non-profit organization asks a person or business for support in some fashion.

People give, and even though the organization may offer different levels of recognition, unless the donor/sponsor is giving a major amount or your organization is a focus of social and business activity in the community, there may not really be any direct benefit to their company in the form of goodwill or increased business.

As I thought about it, I realized when it happened to someone else, it was inspiring and exciting. When you have to solicit support for yourself in order to secure fiscal stability, it is business and somewhat burdensome.

When I tell you, look at this case, the gesture this business owner made enabled these artists to hone their communication skills and promote their work, it sounds so exciting and inspirational.

Telling a donor or granting entity that their support will enable fledgling artists to improve their ability to discuss and promote their work, it doesn’t feel as exciting. Maybe because you know this is only a small part of what the money will be used for or perhaps because the solicitation doesn’t have an immediate and direct connection to the result.

I have been wonder since last Thursday if there were any way to instill more of a sense of excitement and inspiration into the solicitation process but I can’t really think of any.

The artists who showcased on Thursday got their opportunity because they met the business owner at a similar opening that occurred in December. The person who is rumored to be doing the next show met the owner in much the same way.

But by and large, no one will know you need support unless you tell them so you need to go through the solicitation process. There is a certain degree of scrutiny and follow up reporting that is involved with any significant transfer of monetary and material support.

As much time, inconvenience and effort the business owner has spent by allowing different artists to showcase in his store, the expense hasn’t been terribly large for him at this point.

The only time the process isn’t going to require bothersome and boring effort that I can see is if you happen upon a comedy movie ending where you inherit an enormous sum from an unknown admirer.

For all my doubts, I still wonder if it might be possible to make fund raising/solicitation an enjoyable experience for everyone involved. I would love it if the experience I had last Thursday was scalable so I am especially curious to learn if anyone out there has managed to design such an experience.

Info You Can Use: Do You Know The Value of A Volunteer’s Time?

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Did you know I am a contributor to ArtsHacker, a website dedicated to offering all sorts of solutions to arts organizations?

Did you know that a volunteer’s time is worth an average of $22.55/hour and may be worth more in your locale?

Did you know you can actually claim each volunteer’s time on grant reports and financial reporting that you submit?

Did you know I wrote all about these things in a post that appeared on ArtsHacker last Wednesday?

Did you know that a meme about volunteering featuring the World’s Most Interesting Man makes your post more interesting?

Well, hey, now you do.

All kidding aside, volunteer hours are very valuable to an arts organization both as a result of the effort they expend on its behalf and for the value you can claim on various financial documents. And with even just a few volunteers working for you, it can add up to quite a lot.

There are accounting rules, of course, that limit what and how much of a volunteer’s time you can claim. But even if you use this information for nothing more than helping your organization recognize the true value of a volunteer’s effort, calculating this number can be worth it.

Do you know the value of your volunteers’ time?

Donor Cultivation In The Digital Age

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Last year the Wyncote Foundation released a report about how cultural institutions were using digital technology, Link, Like Share: How Cultural Institutions Are Embracing Digital Technology. The report goes into some best practices for putting digital resources and personnel at the center of your organization’s focus. This includes having the digital department drive some of the decision making.

I was pretty interested to read their section on focusing on capabilities, not projects. They noted cultural organizations need to be looking at long term capabilities and only focus on “fast-fail” experimental projects to help them achieve the long term goal of developing capabilities. This section spoke of the need for grant making to shift to supporting capabilities rather than short term projects.

What really caught my eye was their discussion of the implications that a digital orientation had on development efforts.

“Meanwhile, the legacy cultural sector in the U.S. still relies on what one of our study organizations called “the tyranny of the purchase funnel.” By that he means that the dominant logic of the sector is based on the user’s progression from awareness to sampling, then on to occasional and eventual loyal user, committed contributor and finally to the legacy bequest. This patron development pipeline is in the mind of nearly everyone at a legacy institution because it has been a proven route to revenue.

But digital is the new frontier, the Wild West. Legacy enterprises area vulnerable to new entrants who are digitally nimble, lean and responsive. It’s an unruly and unpredictable environment where major players, new and old lose major money. So why invest? And why not invest cautiously? Why risk effort that could be put toward the known and use it for the unknown?

My feeling is that while we have been talking about how arts and cultural organizations need to be innovative and nimble in the way they interact and communicate with their communities, how fund raising may need to change hasn’t been part of that conversation.

Think about how much you may have been focusing on the former while operating under the assumption that development would still be a gradual process.

The need to revise the approach to the development process has been implicit in the conversation, but never explicitly stated beyond providing ways for people to donate online and possibly needing to use services like Kickstarter as a fund raising source.

There is a lot of earned revenue oriented discussion about what changes people expect from their attendance experience, but not as much about how there may be an evolution in the method of cultivating and persuading toward greater investment in the organization.

The long arc of relationship building may no longer be viable. As cynical as it may sound, getting someone to donate as much as you can in the moment via their phone may emerge as the most successful strategy.

On the optimistic side, we are told the millennial generation wants to be involved with something they feel makes a difference so the challenge may be in finding ways to involve and engage them even more than your organization has in the past.

The issue that may emerge might be that the definition of what is meaningful may be strongly influenced by a person’s social network and shift accordingly.

For example- How many people are doing the ice bucket challenge or making donations now? How many people have become involved with supporting ALS related organizations?

I actually don’t know the answers to either of these questions. But if support has fallen off, is it due to the failure of ALS organizations to engage people or because the cause has slipped out of vogue?

The vast majority of arts and cultural organizations will likely experience fewer extremes in community involvement during the evolving digital age. But at this point, it may be difficult to know whether the fluctuations in personal investment are something wholly in your control or if it will be subject to the vagaries of popular taste.

Info You Can Use: Figuring Out True Program Cost

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After reading my post yesterday about how the federal government is requiring that non-profits receive at least 10% of grant/contract funding to cover indirect costs, you may be wondering how to accurately determine direct and indirect costs for your programs.

Getting an accurate picture of program costs is not only important for making sure you get proper allocations from government funded programs, but also for working toward a larger goal of providing boards of directors, funders and the general public with an accurate picture of the true costs of programs.

Providing an accurate picture is key in the campaign to diminish the use of overhead ratio as a measure of non-profit effectiveness.

In a piece on Social Velocity, Nell Edgington, emphasizes the need to present an accurate picture of costs and “break out of the nonprofit starvation cycle”

She also notes that it can help decide what programs really needs to be cut.

But don’t stop there. Turn this new knowledge about the financial impact of each of your programs into a strategic tool. Once you figure out what each individual program fully costs, you can compare the financial and social impact (how well it contributes to your mission) of each program to each other, like this in order to understand how well your entire program portfolio contributes to the money and mission of your nonprofit. Through this analysis you can determine what programs you should expand, which you should continue, and which you may need to cut.

She provides links to a rather detailed guide to determining the true costs of programs published by Bridgespan.

It isn’t an easy process. The estimated timeline in the guide is at least a month. Smaller organizations with fewer programs will take less time.

The guide discusses each stage of the process in detail, suggesting what staff roles need to be involved. It also provides some clear definitions and examples for what needs to be considered.

For instance, indirect costs:

Indirect costs can include general administration and management expenses (e.g. management staff salaries and benefits), infrastructure costs (e.g. rent and utilities, transportation, equipment depreciation, technical licenses), and other costs that are incurred for the benefit of all the programs within the organization (e.g. marketing costs, advocacy expenses).

It addresses questions about determining whether some salaries like those of the executive director and human resource personnel should be allocated across different programs or not.

(Just a note – The guide is about six years old and some of the internal links to templates and examples no longer work, but don’t be discouraged, most of them may be found in the appendix.)

Since there seems to be a slowly developing trend toward removing the stigma of overhead costs (that may evolve into a demand for a high level of transparency), nonprofits may want to start to invest in practices that will allow them to evaluate the true costs of their activities.

Info You Can Use: Know Your Funding Rights

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An event of note to be aware of is that last month the federal Office of Management and Budget said “that when governments hire nonprofits to provide services, those nonprofits legitimately need to incur and be paid for their “indirect costs”—which is government-speak for overhead and administrative expenses.”

According to Chronicle of Philanthropy, non-profits should receive at least 10%, if not more, “of the direct costs of their grant or contract to pay indirect costs.”

Given that non-profits are frequently anxious about revealing their true overhead costs for fear of having it count against them with donors and foundations, this mandate is seen as a victory because it starts to institutionalize the practice of covering those costs.

However, according to the Chronicle of Philanthropy story, the enforcement of these rules may depend on the self-advocacy of non-profits.

While the new rules are now the law of the land, the indirect-cost regulations must be interpreted and applied consistently by tens of thousands of individuals in fragmented departments, agencies, and offices at “pass through” entities (usually state and local governments and large nonprofits) that use federal funds to hire nonprofits to provide services in their communities.

The regulations are already in effect, but the multiple levels and layers of government have not learned about or communicated the existence of the new rules, let alone provided consistent training programs, to employees scattered across these pass-through entities.

Making matters worse, there has been no transition time for the thousands of jurisdictions to purge and modernize their outdated statutes and regulations to enable them to comply with the new federal requirements.
[…]

Unless we all take concerted action, it’s quite possible that we will slide back to what had been the status quo: inconsistencies in our nation’s archaic, patchwork government-nonprofit grants and contract “system” that have left nonprofits at the mercy of often contradictory policies and practices of disconnected federal, state, and local government departments, agencies, offices, and employees. Arbitrary, unjustifiable caps on indirect costs could remain routine.

The author of the piece, Tim Delaney, chief executive of the National Council of Nonprofits, encourages foundations to lend a hand with this advocacy. He points out that often grant makers end up filling the indirect cost gap that government entities may refuse to cover. Correct practices could mean a savings for grant makers who would no longer need to provide this assistance.

As an arts organization, you may be thinking that you don’t have any government contracts so this doesn’t apply to you. However, notice that these rules apply to pass through agencies which, depending on the program, may include arts councils and other organizations receiving funding from places like the National Endowment for the Arts.

The Council of Non-Profits has put together a guide to help people know their rights and advocate for them. It presents different scenarios where you may be told these new rules don’t apply and how to respond to them.

Two points brought up in the guide that lead me to think these rules apply to state and regional arts councils: One- it doesn’t matter whether it is called a contract or grant or any other term, the rules are based on the substance of the transaction.

Two – Sub-recipient non-profits who are required to acknowledge part of the funding is received from the federal government are covered under these rules.

If you have been required to acknowledge part of the funding is received from the NEA, these new rules are applicable to that program unless specifically excluded by by legislation.

Low Cost and Low Expectations

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I once had a situation where I got a call from an artist agent who wanted to change the date of our performance. The alternative date he suggested was really inconvenient based both on which days of the week are best for audiences and where it fell in our calendar.

When I talked about these issues, the agent suggested that given the really great price we had been given for our original date, we didn’t have a lot of basis for complaining. And this is true, we had been given a really great price since the artist was looking for a fill date between shows (which subsequently shifted, of course).

This came to mind when I was reading a New Yorker article last month that suggested airlines are essentially employing “calculated misery” to get people to pay to be more comfortable.

But the fee model comes with systematic costs that are not immediately obvious. Here’s the thing: in order for fees to work, there needs be something worth paying to avoid. That necessitates, at some level, a strategy that can be described as “calculated misery.” Basic service, without fees, must be sufficiently degraded in order to make people want to pay to escape it. And that’s where the suffering begins.

Later the article reports that an unnamed airline is considering an “economy minus” class of even narrower seating than they currently provide.

I don’t mean to suggest that the agent changing the date was an intentional diminishment value because we had received a good price. I don’t doubt the price made it easier for them to ask for the change, but ultimately I think they were trying to find balanced solution that served all parties well.

The point I wanted to illustrate is that we will often compromise our standards when we feel we are paying below the going rate.

There are frequently conversations about how cutting budgets will adversely impact the end product. Orchestras cutting musicians will cause quality to suffer. Trying to do more with less will mean staff will be over worked and may burn out or quit.

What isn’t talked about as much is how we may not feel we can demand better because we know a person isn’t getting paid enough. How often do you decide a press release or design is “good enough” because an intern or dirt cheap freelancer created it? Is your customer service not up to the standard you would like because you don’t feel like you can demand more from front of house staff for the same reason?

Most often arts organizations experience this reticence with volunteers, including board members. You don’t feel like you can ask people to work harder or commit to making difficult decisions because they are providing assistance for free.

In my experience, the conversations about volunteers not meeting standards occurs more openly. Staff will talk about how they might nudge a cranky usher into being a little more civil or trying to motivate an unengaged board member. Maybe the required action doesn’t necessarily follow, but at least the consequences to the organization are publicly acknowledged.

When it comes to paid staff, while everyone will grouse and joke about not doing it for the money, the conversation about compromising expectations doesn’t happen as much. The decision not to ask for a revision can tend to be individually internalized rather than openly acknowledged among peers.

Think about it a little. How often have you said to another person in your organization, this isn’t quite what I wanted, but I didn’t feel like I could ask for better since we give him/her so many responsibilities and can’t provide professional development opportunities. How often have you just kept that thought to yourself?

This is an under recognized consequence of trying to do more with less. We know that this will result in what staff we have being asked to shoulder more work and the quality will suffer. But there isn’t really a recognition that we may gradually accept the slippage in quality in a way that institutionalizes it as the standard.

Perhaps this is another reason to be resolved to do less with less when funding drops rather than killing yourselves to maintain your level of service. Probably 95% of arts organization have something akin to “to provide the highest quality…” in a mission statement or similar document.

When budgets get tight and cuts need to be made, the decision to be less ambitious and cut quality in order to maintain the same number of services is often chosen instead of maintaining ambition and quality and providing fewer services. There are many good arguments for this, including maintaining visibility in the community and fully utilizing a facility.

All that is publicly acknowledged. However, because everyone is working harder and has less time to for introspection, there is rarely an open conversation about whether the organization has started to tacitly expect less of itself in 1000 unacknowledged ways and ask its community to do the same.

Arts organizations are not airlines. The demand for service is not the same. Airlines can (unfortunately) get away with institutionalizing increasingly low expectations for low prices.

Basic Intro To Finance Options

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When I was at the Ohio Arts Council conference yesterday, I attended a session on finance for arts and culture. This is unknown territory for me because I am familiar with grants and fundraising, but don’t really have any significant experience with finance.

One of the things I learned were the differences between Community Development Finance Institutions (CDFI) and Community Development Corporations (CDC). (Which is to say, I know slightly more than the textbook definition, but enough to start paying attention and learning more.)

There were representatives of each of these type of organizations as well as banks and venture capital firms talking about somewhat familiar financing options like bonds. There were also tools that I had no idea a non-profit organization might consider like the EB5 program which provides foreign investors with a fast track visa process.

While I had a sense that a non-profit might get funding from a revolving loan fund, I had no idea that a non-profit might actually run one. One option mentioned during the panel was possibly partnering with people to run your fund and coming in as a second layer on a loan that a bank was underwriting.

The panel made us aware of New Market Tax Credits which CDFIs sell to banks to encourage them to fund/invest in projects in low-income, high-poverty, high-unemployment communities at a lower rate. They encouraged us to Google the terms “New Market Tax Credit Arts Culture” to see what sort of projects popped up in order to get a sense of what was possible.

There were some main points the panel wanted those seeking financing to walk away from the session knowing about:

• Investors want to know how your project fits into the overall vision of: your city, foundations providing support, other funders, the community and your own organization.

• Even if they don’t explicitly say it, economic developers are looking for how the project provides cohesion in terms of issues like market change, safety and stability in the community. Economic developers don’t concern themselves about the health of an arts and cultural organization except as an attractor of new business and enhancer of quality of life. They noted one of the reasons businesses are starting to orient back toward downtowns is because the density of activity provides for connectivity and innovation.

• They emphasized that no one source will provide 100% of the funding. It is going to have to come from a mix of economic development entities, banks, public and private grants and donations.

• As a result, you need to have all parties at the table, even ones that you won’t necessarily need immediately. You don’t want to be in position where you realize you will need extra funding and go to someone at the last minute saying you need money, trying to explain your project to them and get them connected to your story.

• The panel explicitly said, if you start talking to these entities when you have a project in mind, it is already too late. You need to be telling your story and have people aware of it years in advance of soliciting support for a project.

Ultimately, it seems like you have to be telling your story every day, all the time to your immediate community in order to gain short term support for your projects and to anyone else who may ever remotely be of any use to you for a hypothetical project.

To heck with “Always Be Closing,” you need to be “Always Be Charming” (Yeah, that stinks. Anyone has a catchy phrase, let me know.)

An interesting suggestion about bolstering confidence in your organizational story was to devote part of your annual budget to enriching your endowment in order to show potential investors that you are investing in yourself.

It was notable that the first question asked after the presentation was about the shame directed at non-profits for overhead and the fact they might try to pay people a living wage. One of the panelists said people shouldn’t be ashamed and that foundations should know better.

However, I felt like he was sort of hedging when he said to break down administrative cost by task rather than by roles and titles. For example- assessment,  program administration, engineering, capacity building.

I didn’t feel that overhead cost was of particular concern to the people on the panel. Their criteria for good governance and success seemed more aligned with the for-profit sector. So the fact this came up immediately may be a sign that the subject of judging an non-profit organization by overhead costs will become a more prevalent topic in the next couple years.

Guest Post: The Overhead Solution

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Back in June 2013, I wrote about the release of a letter by GuideStar, Charity Navigator, and BBB Wise Giving Alliance urging funders to discontinue the use of overhead ratios to measure the viability of non-profit organizations. They felt the number was an inaccurate assessment of  an organization’s effectiveness.

Since then, the subject of overhead ratio has appeared a number of times in my posts.

Recently, the GuideStar, Charity Navigator and BBB Wise Giving Alliance have released a second letter. This one is aimed at non-profits asking them to assist in the effort by educating their funders about the true costs of the programs and by providing alternative narratives about program effectiveness.

I was approached by GuideStar with a request to host a guest post on the subject. As this has been an area of interest for me, I was pleased to do so.

 

A Message From GuideStar President/CEO Jacob Harold

In 2013, I joined with partners at the BBB Wise Giving Alliance and Charity Navigator in writing an open letter to the donors of America explaining that “overhead ratios” are a poor way to understand nonprofit performance. We named this campaign “The Overhead Myth.”

I’m glad to report that the response to the campaign, including the original Overhead Myth letter to the donors of America, far exceeded our expectations. More than one hundred articles have been written about the campaign. It comes up every time I hold a meeting or give a talk. For many in the field, it’s been a deep affirmation of something they’ve known a long time. And, indeed, many leading organizations– the Donors Forum, Bridgespan, the National Council on Nonprofits, and others — have been working on the issue for a long time.

But we also know we have a long road ahead of us. The myth of overhead as inherently “wasteful” spending is deeply ingrained in the culture and systems of the nonprofit sector, and it will take years of concerted effort for us to move past such a narrow view of nonprofit performance to something that fully reflects the complexity of the world around us. That effort is essential, however, if we want to ensure that we have a nonprofit sector capable of tackling the great challenges of our time.

That’s why last week the CEOs of Charity Navigator and the BBB Wise Giving Alliance and I released a second Overhead Myth letter—this one addressed to the nonprofits of America. In that letter, we suggest a set of steps nonprofits themselves can take to help dispel the Overhead Myth. We all share responsibility for allowing things to have reached this pass.  And it will take all of us to fix it.

We direct this letter to nonprofits not because we feel they are the originators of the Overhead Myth but because they are in the best position to communicate with their donors and funders. We want to recruit nonprofits to help us retrain donors and funders to pay attention to what really matters: results.  In the end, that means nonprofits have to throw away the pie charts showing overhead versus program—and step up to the much more important challenge of communicating how they track progress against their mission.

In simple terms, we must—collectively—offer donors an alternative. In the letter, and on the accompanying website, we call on nonprofits to do three things as their part of this evolution:

  1. Demonstrate ethical practice and share data about their performance.
  2. Manage toward results and understand their true costs.
  3. Help educate funders (individuals, foundations, corporations, and government) on the real cost of results.

We have provided a list of tools and resources related to each of these goals. These tools give nonprofits tangible steps they can take to engage their stakeholders around this critical issue. As the sector develops new resources and tactics, we will add them to the website.

We believe it will take a shared effort to focus donors’ attention on what really matters: nonprofits’ efforts to make the world a better place. It doesn’t matter whether you work at a nonprofit or donate a few dollars to a favorite charity every year, please join us as we seek to move from the Overhead Myth to the Overhead Solution.

For more information, or if you have a resource related to this issue that can help advance the cause, please email overhead@guidestar.org.

 

— Jacob Harold is the president and CEO of GuideStar, is a 501(c)(3) nonprofit that connects people and organizations with information on the programs, finances, and impact of more than 1.8 million IRS-recognized nonprofits. GuideStar serves a wide audience inside and outside the nonprofit sector, including individual donors, nonprofit leaders, grantmakers, government officials, academic researchers, and the media.

This letter original appeared on PhilanTopic blog and is shared with their permission.[divider]

May A Large Donation Destroy Your Rating!

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This story can’t be allowed to pass uncommented upon. Or at least, I feel the need to comment more extensively than did Thomas Cott when he tweeted this link.

In a case of damned if you have too much overhead and damned if you don’t have enough, ALS Association is in a panic about their rating as an effective charity due to the windfall they received thanks to the ice bucket challenges.

Since they didn’t expect such a surge in donations, they don’t have a plan formulated to use it. As a result, they are in danger of having their rating fall from a B+ to an F.

“You can get in trouble for having too much money in the bank,” said Daniel Borochoff, founder and president of Chicago-based CharityWatch, part of the American Institute of Philanthropy. “We want to see that there is a plan for spending down this money.”

[…]

Borochoff said having so much cash and no plan for what to do with that money could lead to an automatic F. Newhouse said those plans are in the works, which I ‘ve written about here in a separate post.

Concern over a potential downgrade lead ALS Association CEO Barbara Newhouse to take a peremptory step of writing to three rating agencies asking them not to penalize the association.

So let me get this straight. A commercial business makes five times their normal annual income and they are celebrated for it. Even if someone takes a close look at how this amazing feat was accomplished and sees something fishy, it is often difficult to get regulators, who wield legal authority, to take effective action. (Not to mention the business can sit on the cash as long as they want.)

However, a charity experiencing unprecedented largess starts to react with panic that the judgment of unofficial entities may result in bad will for them. This despite the fact that the process by which this funding is acquired is transparent, public and clearly unexpected.

The one glimmer of hope is that two of the three rating agencies she sent letters to, Guide Star and Charity Navigator, were signatories to the letter sent out last year urging donors not to use overhead ratio as a prime criteria for giving.

Hopefully there won’t be any problems for ALS Association as they consider their next move.

Otherwise, we may see spiteful people leveling the curse of prosperity in this post title.

Eclipsed By Your Cause

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Two weeks ago my neighbors were gathered around their pool talking excitedly about doing the ice bucket challenge. One of the kids asked five or six times what ALS was throughout the conversation before someone answered, “Lou Gehrig’s disease or something like that.”

This was a good illustration for me about the hazards of having a cause explode in popularity. Often the symbols associated with the cause become valued more than the cause itself.

The Non-Profit Quarterly has been covering some of the skepticism that has been expressed about the long term usefulness of the social media trend.

Writing for Time, Jacob Davidson, whose father died of ALS, found the ice bucket campaign initially attractive, but then had misgivings. “When I looked closer, I became uneasy,” Davidson wrote. “No wonder it took me weeks to learn the Ice Bucket Challenge was linked to ALS. Most of its participants, including Kennedy and Today’s Matt Lauer, didn’t mention the disease at all. The chance to jump on the latest trend was an end in itself.”

Davidson also mentioned the somewhat negative structure of the campaign, that if you choose not to donate, you dump a bucket of ice water on your head. “The challenge even seems to be suggesting that being cold, wet, and uncomfortable is preferable to fighting ALS,” he noted. If the strategy of dumping cold water was meant to increase awareness of the disease, the strategy has a built-in contradiction: “ALS needs all the awareness it can get, but somehow I doubt many learned a whole lot from contextless tweets of wet celebs smiling and laughing,” he added.

Despite Stephen Hawking and having seen Pride of the Yankees, ALS might not be strongly on my radar if my father hadn’t died from it about 20 years ago. Even if that hadn’t been the case, I still would be a little concerned about how centered the campaign is on the self rather than the disease.

Seth Godin noted that about 90% of those mentioning the challenge or posting video/images of themselves taking the challenge haven’t donated. That is certainly their right.

He goes on to point out the double edge to the situation. Specifically that a positive impact has been to spread the word about a little known disease. (I guess Stephen Hawking isn’t famous enough himself.) The other point Godin makes is that it is normalizing charitable giving.

This has been great for ALS related charities which have seen more giving in a few months than they see in many years. Even if 90% aren’t giving, the 10% who are are having a significant impact for these organizations.

On the other hand, Godin points out that there are some things to watch out for:

1. Good causes in need of support are going to focus on adding the sizzle and ego and zing that gets an idea to spread, instead of focusing on the work. One thing we know about online virality is that what worked yesterday rarely works tomorrow. A new arms race begins, and in this case, it’s not one that benefits many. We end up developing, “an unprecedented website with a video walkthrough and internationally recognized infographics…” (actual email pitch I got while writing this post).

2. We might, instead of normalizing the actual effective giving of grants and donations, normalize slacktivism. It could easily turn out that we start to emotionally associate a click or a like or a mention as an actual form of causing change, not merely a way of amplifying a message that might lead to that action happening.

Along the lines of Godin’s mention of a fundraising arms race, Non Profit Quarterly quoted Emmanuel College research fellow William MacAskill who expressed concerns that flash could easily obscure the need to do due diligence on the recipients of a donation.

His second point more directly addresses the issue of the seriousness of the charitable decision, that such “donor-focused philanthropy…regards all causes as equal…We should reward the charities that we believe do the most good, not those that have the best marketing strategy, otherwise the most successful charities will be those that are best at soliciting funds, not those that are best at making the world a better place.”

Of course, the truth is people give to people, not organizations. To be a successful charity, you have to be good at both soliciting funds and making the world a better place.

I don’t think anyone would really mind if there was a groundswell of support that rallied attention to their cause, even if the attention didn’t translate into material support. Attention is extremely valuable. I can say with a high level of confidence that there are people in my community right now that speak well of my organization that don’t attend our events. If they inspire others to become involved, that is great for us.

The thing to watch out for is when the cause escapes your control and is co-opted for other purposes. Probably the biggest example of this is pinkwashing where companies use the goodwill of breast cancer awareness to sell products and burnish their image with little or no benefit going to breast cancer research.

Stuff To Ponder: When Not To Tell Your Story

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Createquity may be in reruns right now while they reorganize, but they have great timing. Today they featured a post from 2011 which was something of a complement to the post about pricing and story I made yesterday.

Where my post yesterday addressed using a resonant story to get people invested in paying a little more to participate in an arts event, Createquity featured a guest post by Margy Waller suggesting that when it comes to public funding for the arts, the lack of a publicized story might be the best bet.

Members of the public typically have positive feelings toward the arts, some quite strong. But how they think about the arts is shaped by a number of common default patterns that ultimately obscure a sense of shared responsibility in this area.

For example, it is natural and common for people who are not insiders to think of the arts in terms of entertainment. In fact, it’s how we want people to think when we are selling tickets or memberships. But, in this view, entertainment is a “luxury,” and the “market” will determine which arts offerings survive, based on people’s tastes as consumers of entertainment. Consequently, public support for the arts makes little sense, particularly when public funds are scarce.

Perceptions like these lead to conclusions that government funding, for instance, is frivolous or inappropriate. Even charitable giving can be undermined by these default perceptions.

The second paragraph aligns squarely with Seth Godin’s thoughts on pricing that “Some goods are difficult to understand before purchase and use, and most consumers undervalue them and treat them like commodities.” And later “In situations like this, our instinct is to assume that the thing is generic, a commodity, not worth extra.”

Waller suggests that given the perception that public support of the arts is frivolous, by making the fight to restore/increase funding public, arts organizations are choosing a battlefield where they are at a disadvantage.

Politicians can leverage public opinion that the arts are a luxury. When the conflict is covered by the media, it is in the context of a political fight rather than say, a matter of societal value, education and cultural identity.

Because the big fight in the default way of viewing the arts is very losable. And in our efforts, we’re forced to expand a precious resource: the time and energy of staff and key supporters who have to work so hard to convince public officials that they won’t suffer consequences in the next election.

Moreover, every time the fight is public, we’re likely to be reinforcing the dominant ways of thinking about the arts that are getting in our way now. When attacked, we rebut with facts, and the media covers the issue as a political fight with two equal sides – both seen through a lens that sets up the arts as a low priority on the public agenda. And as we know, this can have the effect of making people defensive and hardening existing positions. Of course, it should be no surprise that even officials who are friendly to arts funding are reluctant to be in the middle of that kind of coverage.

Waller suggests a strong, but quiet lobbying campaign, citing the success of just such an effort in Ohio. When you think about it, she has a valid point because quiet lobbying is exactly how plenty of entities who would prefer to avoid public resistance to their plans get things accomplished.

I am sure we can all envision some program that slipped by under our radar and we would prefer not to be associated with those sort of tactics. But the reality is, not every act of governance is preceded by a rancorous public debate. I am sure many arts supporters would be happy not to gird for battle every budget cycle if their goals could be accomplished quietly and efficiently.

We Need To Stop Optimizing Our Synergies

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Yesterday, I was speaking with a friend who was learning English as a second language. I don’t remember which word it was exactly, but we got on the subject of corporate speak, the nigh-meaningless terminology that businesses use to recast their activities as something impressive sounding.

I ended up sending her a link to Weird Al Yankovic’s recent video, “Mission Statement” which makes fun of corporate speak.

I let her listen to Weird Al sing about synergies, operationalizing strategies, monetizing assets and other esoteric phrases set to “Suite Judy Blue Eyes,” preparing to be asked what the heck those words meant.

As I waited, it suddenly occurred to me that my hopes for simplified grant reports where non-profits honestly reported the results of the project rather than claiming everything went as well or better than planned, were probably impossible.

As long as for-profit companies are using this self-aggrandizing language to talk about themselves, non-profits are going to be expected to mimic them to some degree to provide the appearance of competence and effectiveness. Most granting entities are either the non-profit arm of companies employing this blather or are foundations with boards comprised of people who work for these companies. For them, use of the latest corporate speak buzzwords are indications of organizational health.

It also occurred to me that the difficulty in attracting audiences from all strata of society might be rooted, in part, in the need to employ an esoteric vocabulary. The need to sound impressive for funders probably influences marketing text. .

But it doesn’t mean much to the audiences you wish would show up.

Certainly there are plenty of other factors which might inhibit a decision to attend an event. Programmings choices that don’t resonate with the interests of local audiences being one.

However, I wouldn’t be surprised to learn that new employees who understand how to communicate in a way that interests desired community demographics find themselves pressured either overtly or subliminally over time to use more “polished” language.

I’m afraid that just as like death and taxes, the influence of corporate speak is going to persist until we can actualize a paradigm shift by distilling our core identities into a bleeding edge proactive client centric modality.

One Person’s Passion Is Another’s Indifference

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If things are quiet for you over the summer, it might be a good time to evaluate your interactions with donors and customers. A few years back, I brought attention to a number of interesting findings about customer interactions.

One was that

“perceived indifference by a company causes far more people to sever their relationship with a company than cost and quality issues.” and “It’s important to note here that indifference only be perceived. People cannot know other people’s motives; they can only deduce them from the actions they see. So you can care passionately and still be perceived as indifferent.”

I linked to another entry on Donor Power blog that asked the provocative question –“What are you doing to persuade your donors that you aren’t human?”

The third dealt with using industry standard language in materials for customer/donors that not only have no relevance to these groups, but can ultimately be alienating.

We Need CRM Software To Manage Our Relationship With Our Own Creativity

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Dallas Museum of Art Deputy Director, Robert Stein recently made an argument about the value of museums, and by extension, the arts, as a counter to philosopher Peter Singer’s suggestion that philanthropic giving to the arts means that many more people are fated to remain disabled.

I was actually surprised to learn that Singer is a philosopher because it seemed to me that he was making clearly erroneous assumptions that those giving to the arts aren’t also giving to health and social causes as well. Likewise, it is incorrect to assume that absent the opportunity to give to the arts, all those only giving to that cause would choose to support health and social causes instead.

Indeed, I admittedly always assumed that given the choice between healing the sick and feeding the poor and funding the arts, the sick and poor would tend to win out. The fact Singer was essentially implying arts and culture held a greater allure for philanthropists made me wonder if there were appealing elements of arts and culture I was overlooking and needed to exploit more.

Now just because I find Singer’s approach to be weak doesn’t mean that arts organizations don’t have work to do in communicating their value. Stein’s piece is involved and makes a number of compelling arguments about how arts institutions need to position themselves and their value to the community.

In fact, I have ultimately decided to break up my original post and address different portions of Stein’s piece over the course of two days.

I was most drawn to the following concept:

Consider what could happen for a moment if Museums were able to document — like universities do — our creative alumni? With the technology currently at our disposal, why are we only so focused on patron management systems (CRM by another name) that track the money people donate to us? What if we focused instead on keeping a catalog and evidence of the creative imprint our audiences are exposed to and the impact they make on the world. Such a catalogue could effectively illustrate the museum’s imprint on the formation of creative ideas and creative professionals and their resulting innovation across a multitude of fields. This alumni creativity database could be a proof-text for the role of museums in the formation of creativity and a boon for fundraising linked to this important outcome.

This idea that arts organizations really needed to be assembling a database of cultural experiences as sophisticated as that in a customer relationship management system shook me because really, those experiences are the true assets of our organizations and many arts organizations allow their connection with them to dwindle once they pass.

We cross reference giving and attendance history, know where people like to sit, how they like to be addressed and what their social and professional relationships are. Many arts organizations can pull that information up in moments and spit out a report or mail merged letter tailored to a person’s interest.

But our creative record is often contained in banker boxes and file cabinets that we have to sift through for hours in order to derive any value from it. How many people can pull up the program, images, video, interviews, notes by the creative team/curators and feedback from event attendees in a short period of time?

We make statements about putting the art and artist at the center of our work, but do we really cherish and reflect on what we have done the way a child cherishes a favorite teddy bear and the way an adult wistfully remembers that teddy bear? Or is the work filed away alongside expense reports and tax returns and only pulled out for grant reports and anniversary displays?

Near the end of his piece Stein says,

Only by measuring and counting the difference we make in people will we live up to our potential to change lives. Without it, we risk being relegated to the periphery of contemporary society as mere treasure houses for the wealthy in need of a tax-break.

If we give up on the idea that we can know for sure that our museum makes a difference, then Peter Singer is right, we’re not worth supporting.

He is referring to a commitment to investigating the impact work on outsiders that experience it. But it occurs to me that there might be an element of “if you want someone to love you, you must first love yourself,” in all this. Maybe only by making the totality of our creativity, past and present, central to our focus can we really convince the world of our organization’s value to them.

Grant Panels Talk About The Best Ideas

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A couple weeks ago the Ohio State Arts Council streamed the deliberations of one of their grant panels. We had submitted an application for a new project so I decided to listen in.

The review started around 8 am and our application didn’t get addressed until around 3 pm, but by 10 am I had a pretty good idea that our application was going to fall short of the mark.

Even though I had run the application past the institutional grants person, there was a lot of silly omissions I could see we had made. By which I mean, we had the data or had envisioned activities as part of our discussions about the project—but we didn’t include it in the grant application. It was one of those cases of being so close to a project you were filling in the blanks and making leaps with your mind.

The problem is, the grant panel didn’t have the benefit of that knowledge or being mind readers. When our turn came, I took notes and now we will do better in the future.

Part of the intent of this post is to encourage people to listen into these deliberations, if available, to help you avoid the mistakes I made and just help improve your grant applications in general.

My other motivation was to encourage people to listen to these deliberations just so you can find out what colleagues in other locales are doing. I heard some really great ideas from the comfort of my office chair.

To some extent this is even more valuable than reading arts related blogs because grant review proceedings bring the details of diverse arts projects to one forum. Then you have people critique the idea, raising questions about things applicants possibly failed to consider, including whether they have been realistic about anticipating the resources and time that will be required.

Of course, you hear comments about what makes an application and an idea exciting to the grant panelists as well.

The one project that really caught my attention was the Highland Square neighborhood of Akron, Ohio’s proposal for their 3rd annual Porch Rokr and Art in the Square Festival.

They have over 100 performers appearing on the porches and front lawns of people throughout the community. You can see pictures from last October’s Festival on their Facebook page.

It appears they have a central area where visual and craft artists can sell their work as well.

This is the sort of event that strengthens ties and cultivates pride in a community

Info You Can Use: Evidence vs. Emotion In Fundraising

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This week Marginal Revolution blog linked to a study addressing the claim of many donors that they are motivated to give by the effectiveness of the charity.

The researchers worked with the charity, Freedom from Hunger, to send out two nearly identical letters.

In the first experimental wave, the control group received an emotional appeal focused on a specific beneficiary, along with a narrative explaining how FFH ultimately helped the individual. The treatment group received a similar emotional appeal (trimmed by one paragraph), with an added paragraph about scientific research on FFH’s impact. The second wave was identical in design, except that the treatment group narrative included more specifics on the research, and briefly discussed randomized trials and their value as impact assessment tools.

They found that adding the scientific data didn’t have an impact on whether someone donated and how much they donated in the full sample. However, the full sample includes previous donors as well as those who had never donated before.

There was a significant difference when they looked at just those who had previously made a donation. (I have inserted a paragraph break to the original text to provide easier reading)

We find that presenting positive information about charitable effectiveness increases the likelihood of giving to a major U.S. charity for large prior donors, but turned off small prior donors. This heterogeneity is important, we believe, and is consistent with a model in which large donors (holding all else equal, including income and wealth) are more driven by altruism and small donors more driven by warm glow motives.

Altruistic donors, we posit, are more driven by the actual impact of their donation, and thus information to reinforce or enhance perceived impacts will drive higher donations. On the other hand, for warm glow donors, information on impacts may actually deter giving by distracting the letter recipient from the emotionally powerful messages that typically trigger warm glow and instead put forward a more deliberative, analytical appeal which simply does not work for such individuals.

Now whether the results for a large national human services charity will be consistent for a smaller, regional cultural charity, is uncertain. The fact that larger donors may be motivated by evidence of effectiveness and smaller donors by emotional appeal and turned off by effectiveness data is definitely something to think about.

Ride With The Valkyries

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Last week I was thinking about alternative category names for giving levels because our current names lean heavily toward classical music while that is only a small portion of our programming.

As I got to thinking about it, I wondered if anyone had thought about changing the names of their giving levels from season to season both as a way to do some A/B testing on what types of category names might inspire people to give more and to appeal to a younger generation of donors.

People who are used to giving through Kickstarter with all the exciting images and rewards at different support levels might not be motivated by a static list of giving levels like: Donor, Supporter and Benefactor.

Category titles that changed every year and aligned with the season might be more engaging. If you were going to give $450, would you increase it to $500 to be listed in a category employing Henry V’s “We Few, We Happy Few, We Band of Brothers” as a giving level? Or the aforementioned “Riding With the Valkyries”?

Unless you were being tongue in cheek, you would probably want to stay away from a The Merchant of Venice “Pound of Flesh” as a category. Though “As You Like It” might be a good category for a giving level that garners many perks.

If you are clever about it, you might actually have people opening their donor solicitation letter to see what names you came up with as eagerly as they flip through the season brochure to see what shows are being offered.

While there is no guarantee they will give, they will at least be a little more engaged with the process.

Info You Can Use: Save The Charity, Save Your Company

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I loved this story on Non Profit Quarterly about a Maine restaurant which actually revived its business when it started holding all you can eat fundraisers for charities.

…the eatery thought of the weekly all-you-can-eat nights with suggested donations flowing to charity as a way to attract new customers. “It worked almost immediately and it revitalized the business,” Benedict said. “We would have gone out of business if we didn’t change the way we did business. Giving back is the first thing we did, and it worked.” She says that a total of $635,000 has been raised since 2009 for local charity organizations and individuals.

It is great to hear that a business saved itself by helping charities in the community. It could be a model for other communities and businesses.

However, the restaurant hit a snag when the state attorney general started to investigate whether it was licensed as a charitable solicitor.

My first reaction was disappointment because the restaurant was doing such good work, but the truth is that there is a lot of fraud and deception perpetuated by companies acting as charitable solicitors. So unfortunately, despite an abundance of good intentions, companies need to be careful about providing assistance to charities in a similar manner.

The Council of Non-Profits has a link to the first chapter of a book about the licensing required for charitable solicitation by 40 states. The chapter provides a good introduction to the issues involved and resources for finding out more about the requirements in your state. I was able to go right to the pertinent sections of my state code and find who is exempt from filing with a couple mouse clicks. (Unfortunately, it doesn’t appear the restaurant would be exempt in my state.)

Sometimes They Just Want To Go Home

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I was perusing the tweets of those at the National Arts Marketing Project Conference (NAMPC) while thinking about a comment made by the director of the local arts museum wondering why people were leaving a fundraiser so early.

This was the exact opposite situation from one apparently expressed by Alan Brown at the NAMP Conference who wondered why arts organizations were so quick to chase people out after the event was over.

The live and silent auction were over and no one was going to be asked to donate more money. There was plenty of food and alcohol to consume, a cigar and brandy station had been set up in the newly renovated alley for those who wanted to parttake. There was plenty of art to look at, including an amazing new installation and the artist was on hand to chat with.

They had only expected about 75 people to attend and more than 130 showed up so there were plenty of people with whom to mix and mingle. (And one of the other attendees remarked to me that there were a lot of new faces at the event so it wasn’t as if the conversation topics dried up.)

And it was only 8:30 pm on the Saturday night of a three day weekend.

By 8:45 except for the staff and volunteers, the place had pretty much cleared out.

So when I saw Sara Leonard tweet quoting a speaker at the conference saying, “Create the value your audience craves,” I wondered what might have been lacking that might have kept everyone hanging around a little longer.

The auctioneer had to ask for quiet a couple times during the auction because people were too boisterous so they were clearly having a good time.

Perhaps what the audience valued was an organization that ran an efficient fundraiser that showed them a good time and got them out before 9:00.

Maybe as Alan Brown suggests, everyone was used to being chased out and left of their own accord. Or maybe, as one off the museum staff suggested, the community likes to get to bed early.

I feel that I must make a bemused observation that clearly one needs to appeal to a younger audience not only to sustain support for the arts long term, but to find some people willing to stick around and keep the party going for you in the short term. (which I mean both literally and figuratively.)

Whether it be fund raisers or performances, it isn’t enough just to have a fun after-event party in order to attract younger audiences, the content of the main event has to be of some interest because there are plenty of bars and dance clubs where they can go instead and circumvent the boring part.

But the truth is, sometimes it isn’t anything you did. Audiences just want to go home and that is an enjoyable evening.

The Philanthropic Second Date

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Simone Joyaux recently posted her The Donor-Centric Pledge on Non-Profit Quarterly. There are about 23 statements against which you can measure your organization’s practices.

A good many are likely to lead to extended conversations. There were a couple that caught my eye about first time giving that I wanted to address.

10. Many first-time gifts are no more than “impulse purchases” or “first dates.”
11. We’ll have to work harder for the second gift than we did for the first.
18. Asking a donor why she or he gave a first gift to us will likely lead to an amazingly revealing conversation.

Number 10 about first time gifts being an impulse purchase struck me as likely to comprise a much greater percentage of giving than in the past. If giving via cell phone and Kickstarter-like campaigns continues to grow, it is likely that donating will become more of an impulse rather than habitual practice.

Even people who have been reliable annual givers may find themselves possessed of a much greater awareness of interesting opportunities than in the past and start to shift their giving elsewhere.

So statement 11 about having to work harder to get the second gift may actually start to apply to the 12th gift in some cases.

Number 18 provides a portion of the roadmap to avoiding losing donors by focusing on what has motivated them to give. It is pretty much another version of the suggestion I made in my post yesterday about finding out what motivates people to participate in an arts activity.

Even though we probably don’t want to actively acknowledge it, perhaps what should be added to Joyaux’s list is the understanding that a donor’s interests and motivations shift over time. After a decade of giving, they have changed as people. If you have cultivated a close relationship over that long a period, it a separation can be painful.

But their shift in priorities may not be a reflection on the value of your organization, especially if you have been engaged in donor and audience -centric practices.

Stuff To Ponder: Quantifiable Data Is For Other People

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I recently got a little lesson in how easy it is to apply criteria to other people that you resist having applied to yourself.

This weekend I was listening to a recent episode of This American Life which was covering the efforts of an organization called Give Directly which gives money directly to the poorest people in a country, in this case, Kenya, on the belief that they know best how to spend it.

Despite all the problems you might assume might arise, things seem to be going very well with the program.

Still, the founders were all grad students at MIT and Harvard so they are all about hard data. They weren’t satisfied with the anecdotal evidence of outcomes they found in their research. The organization is doing exhaustive research conducting surveys that take an entire day to administer to measure the differences in outcomes between those who receive funds and those who don’t.

This American Life also talked to people from Heifer International who give cows and training raising and caring for them, to people in developing countries. Their program sound incredibly beneficial. The cows are so big and healthy, the reporters talked about how intimidated they were by them.

The reporters mentioned that the people at Give Directly would like charities like Heifer International to do studies to determine what program design was most effective. The reporter asks a Heifer representative (around 30 minute mark) if they would consider giving cows and training to one village and then give the money they would spend on cows and training, to another village to see what was more effective.

The woman representing Heifer said that sounded too much like an experiment and you can’t do that with the lives of real people.

The reporter says he imagines the Give Directly people would respond “that we have to do experiments because that is the only way to figure out the very best way to help people.”

The Heifer representative spoke about it not being that linear and that there are some elements that are not easily quantified by the limits of data.

I immediately found myself siding with the Give Directly people. You are never going to be able to serve everyone who needs help. So if you are providing cows to one village and money to another, at least you aren’t setting up a control group that doesn’t get anything beneficial which is the case with most experiments. (control group getting sugar pills, other group getting the medicine).

And actually, that is how Give Directly is conducting their study–with a control group that doesn’t receive any support at all.

However, it only took about 15 seconds to realize that I was hearing very familiar language being used. How often have people in the arts talked about the benefits of what they do not being easily measured and provided anecdotes about smiling faces and lives changed? I know one acting teacher who yelled at a curriculum committee for trying to apply concrete measures to his classes.

Just recently GuideStar, Charity Navigator and the Wise Giving Alliance got together to ask that overhead not be used as a metric for deciding what charities to support.

Yet with the increased focus on quantifiable results with things like K12 test scores and college four year graduation rates, Give Directly’s model may become a more prevalent one in the future.

The good news is that they give money without any application process or strings attached. The bad news is that it is according to their own criteria.

A grass roof on your house qualified you to receive support from Give Directly in Kenya. If you had a better roof, you didn’t receive any money. A very slim distinction the story admits, between the very poorest and the slightly less poor.

I think we can all admit there are inefficiencies in the way non-profit arts organizations are run that could benefit from good evidence based criteria. However, I don’t think it is a self-deceptive rationalization to believe that what is effective for an art organization in Chicago will be quite different from one in the rural southwest.

This is not to say groups like Give Directly will formulate a one-size-fits-all giving formula. However, I wouldn’t be surprised if hard number results become viewed as an increasingly more important measure of success.

As I wrote about two years ago, Warren Buffett’s grandson, Howard Warren Buffett, has been talking about non-profits merging to become more efficient and solution oriented instead of problem oriented.

Warren Buffett’s son, (Howard Warren Buffett’s uncle), recently derided what he called “The Charitable-Industrial Complex” which criticized transplanting solutions with “little regard for culture, geography or societal norms.” He too calls for a better way of doing things.

Both are more directly referring to work that is being done in the developing world, but criteria applied in one sector will inevitably migrate to another. Talking about the unmeasurable benefits of the arts is only going to so convincing. It would be wise to acknowledge problems, pay attention and participate in the conversation so that others are not proposing solutions for you in your absence.

We’ll Pay You Twice As Much As The Last CEO (*snicker*)

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Apropos to my post dealing with doing more with less earlier this week, last week Janet Brown, CEO & President of Grantmakers in the Arts wrote about the problems with non-profit CEOs forgoing pay.

She cites an example where the retiring CEO of a performing arts center had only accepted a nominal salary. The savings that represented meant the different between running a deficit. Now with the CEO retiring, they either needed to find someone else who was willing to do the job for free or find the money to pay someone for the job.

The performing arts center should have been booking the CEO’s non-salary as an in-kind contribution all these years, keeping the reality of the expense in the budget. This, of course, would have shown a loss for some years, which (I’m only guessing here) is probably not what the CEO or the Board wanted. So the cycle of under-capitalization continues.

Brown asserts that every organization should strive to be completely transparent financially, not only for the sake of those who inherit leadership positions, but also to retain the confidence of supporters.

Sound business practices are possible in nonprofits but, as I’ve stated before, this demands transparency and leadership that wants to do more than keep the doors open….Our investors in the nonprofit arts world are community members, governments, foundations and corporations who give money because they believe in our organizations, their missions and the good they are doing for our communities. These investors also deserve (and should demand) returns, which include the best artistic product possible and the strongest balance sheet good management can provide.

I guess the lesson here is not to pay your executive director as well as your interns, erm I mean, pay them both!

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