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Info You Can Use: We Are More Than Just Our Overhead Ratio

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Well, the timing could be a little better.

Part of the big news today is that GuideStar, Charity Navigator, and BBB Wise Giving Alliance joined together to sign an open letter to all donors asking them not to use overhead as a primary criteria for giving.

The letter does a pretty good job in a short space of discussing how inaccurate the ratio is and the consequences for non-profits when they feel they have to hobble themselves to maintain a low number.

The letter specific cites Stanford Social Innovation Review‘s article, The Non-Profit Starvation Cycle which does a good job explaining the problem in detail.

The reason why I said the timing could be better is because it comes on the heels of a weekend where CNN has been majorly featuring a story about charities that have been fleecing donors with the causes only getting 4% in some cases.

Now make no mistake, I am not defending a 96% overhead by any means. There are a lot of scams out there and it appears pretty clear that the organizations featured in the story set out to deceive right from the moment they generated names that sound very close to nationally recognized charities.

My concern is that to people unfamiliar with charities, the timing of the letter’s release makes it almost appear to be an apologist for the high overhead ratios these dishonest groups had. Especially since a picture of the website of the one of the groups CNN damns contains a claim that Charity Navigator gave them a 3 star rating.

The proximity of these two announcements aside, the public recognition that charities should not be judged on overhead alone is a real advance in the effort to get non-profits evaluated on less superficial criteria. It will likely still happen for some time to come, but it is an encouraging sign.

Amuse Bouche Fund Drives

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So even though I am in a fairly rural area of Ohio, I have discovered that I have an embarrassment of riches when it comes to being able to access public radio broadcast streams. There are two from Ohio universities, one from West Virginia and one from Northern Kentucky. Despite the mountains I can hear each of them fairly clearly since there are repeaters located within a few miles of my workplace.

I tell you this provide some context when I say I heard a fund raising approach I liked but can’t for the life of me figure out which station I heard it on. I have visited each station’s website and Facebook page and still don’t know whom to credit.

In any case, one of these intrepid stations announced that now that the summer had started, they would begin “One Shot Wednesday” fund drives. Instead of having a week long fund drive, they were just going to make appeals on Wednesdays throughout the summer.

I thought this was a great idea because many people will tune away for the week of a fund drive and come back when it is over. Having it once a week repeatedly introduces itself into a person’s habitual listening. Since the disruption is contained to a small period of time, people may tune away for a day, come back again and then be reminded the next Wednesday around.

The station can better retain their listeners and expose them more frequently to the message that the station needs their support before a person chooses to tune away. And who knows, people may stay with the station throughout the Wednesday since the appeal breaks are short relative to other fund drives.

I have been trying to think of what the performing arts organization version of this might look like. Attending performances is not part of most people’s daily routine so there is no week long fund drive people might seek to avoid.

Curtailing the curtain speech appeal might make many audience members happy, but what more palatable alternative do you replace it with?

I know the board of my organization enjoyed calling people up to ask them about how much they liked the past season. The effort was well received all around. It would be possible to insert an appeal at that time, but if done poorly it would probably be a negative experience for all involved.

You might try having board members or volunteers chat casually with people in the lobby before the show and introduce the idea of supporting the organization. There is more of an opportunity to monitor that the process is done well and give notes on improving in the future. The only problem might be if the lobby is too small or if most of the audience rushes in at the last moment leaving little opportunity to speak with them.

I think the real question at the base of all this is- what are we doing now that makes people uncomfortable and what can we do to make it less so. That is what the one radio station did. They took the week long fund drive that everyone groans about and parceled it up across the summer.

I have no idea how successful it is, but from the way they spoke, they have done this before. Once I find the station again, I will try to do some further investigation.

But what ideas do you have to break up the often awkward process of fundraising into something more digestible?

Ben Franklin, Father of Matching Grants

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April 17 is the anniversary of Benjamin Franklin’s death. I thought it appropriate then to link back to a post I did titled St. Benjamin, about a man who was in many respects ahead of his time, including in relation to non-profits.

Franklin had the idea for matching grants 200 years before the Ford Foundation did. Back in 1751, he convinced the Pennsylvania Assembly to give $2,000 toward a hospital if $2,000 could be raised privately.

At the time, the idea was consider controversial, even Franklin was a little uneasy about his idea. As I wrote:

Well for one, political opponents felt the move was too conniving. I suppose it was because they didn’t believe he could raise the money and had tricked the Assembly. Franklin noted that knowing that their money would essentially doubled, they gave more.

Franklin himself referred to his innovative idea as a political maneuver so he might have felt a little uneasy about it himself. The success of his plan eased any troubled thoughts he might have had. “…after thinking about it I more easily excused myself for having made use of cunning.”

Info You Can Use: Kickstarting Your Taxes

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Salon has an important article to read if you are an artist trying to use Kickstarter to fund a project. Apparently people don’t realize the money they receive via Kickstarter is considered taxable income by the IRS.

In short, money raised from Kickstarter and other crowdfunding platforms is considered to be taxable income. Amazon Payments, which handles the credit card transactions for Kickstarter, disburses the funds to the project creator and sends them a 1099-K, a tax form that reports “Merchant Card and Third Party Network Payments” to the IRS. In this particular case, a pledge made by a fan to a project would be considered a third-party network payment.

[..]

“Although musicians may not necessarily be selling something via Kickstarter, they are still entering into a transaction with their backers,” he noted. “If they reach their goal of ‘X’ amount of dollars, they have certain conditions they’ve agreed to make. They should consider the money as income because the IRS defines gross income from ‘whatever source derived,’ unless specially excluded.”

The article also notes that artists often underestimate the cost and logistics of making good on their promises. One woman promised her supporters tickets to a show so when she exceeded her allocation of comp tickets, she had to buy the rest herself. Another ended up spending $10,000 in postage mailing out the items she promised.

Kickstarter also brings an issue artists have faced with their patrons since time immemorial–their desire to be involved in all the decisions.

The issue for Dawn was intensified by her raising five times the amount of her set goal. Suddenly, fans were complaining that she didn’t really need the whole $104,000 to record the album. Dawn countered by noting that not only did she use all of her Kickstarter funds, but she also opened four separate credit cards and dipped into her life savings to cover the difference.

One of those interviewed for the article suggested that anyone thinking of launching a campaign consult with an accountant or business manager first to plan for the tax liabilities and expenses the campaign will entail.

Info You Can Use: NP Orgs Exist In Shadow Universe (Great Resource Guides Too)

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My Twitter feed delivered me two great resources for arts professionals on the same day this week.

The first came courtesy of Sydney Arts Management Advisory Group. I guess I should have known that when they talked about a guide developed for “WA Artists” they meant Western Australia and not Washington State. In my defense, they link to a lot of prominent U.S. arts sources (like me!).

The guide they shared, Amplifier: The Arts Business Guide for Creative People, from Propel Youth Arts, is really one of the best guides for creatives just starting out that I have come across. If you cut out the resource guide at the end of the booklet, 98% of it is applicable to a creative anywhere.

The guide is really accessible with fun illustrations and interviews that will probably make you want to move to Western Australia. It also walks you through all sorts of planning processes with questions and checklists: project management, business plans, identifying markets, goal setting, evaluation, finances & funding, legal, product, pricing, place and promotion.

It doesn’t just deal with performance, but also tackles film, visual art and publishing, delves into copyright law (which appears almost identical to U.S. law) and licenses.

The guide also spends a few pages on risk assessment and insurance for events which is something I have never really seen in similar guides even though it is very important.

The second resource comes from the Wallace Foundation. This one is more geared toward arts groups rather than individuals starting out and is focused on administrative issues like finances, board oversight and administration.

You may have seen some tweets about it but not followed the link. It is really worth stopping by to take a look.

Some of the guides and case studies are what you might expect “Building Stronger Nonprofits Through Better Financial Management” and How to Talk About Finances So Non-Financial Folks Will Listen.

But there are some with more intriguing titles like: “Efficiency” and “Not-for-Profit” Can Go Hand in Hand,  and The Looking-Glass World of Nonprofit Money: Managing in For-Profits’ Shadow Universe.  

The latter is described as” Especially useful overview for board members with little exposure to the unique nature of finance in a nonprofit context.” I  never really thought of NP orgs as operating in a shadow universe. Sounds so cool! Does that mean Rocco Landesman was the dark emperor or something while he headed the National Endowment for the Arts?

There are also proposals like “The Nonprofit Starvation Cycle” which advocate for changes in the way foundations support non-profits.

The part of this resource I have seldom seen in other places was a whole section of five articles, including a podcast, on figuring out the True Cost of programs. They specifically have a calculator for figuring out the cost of after school programs, but following the steps outlined in some of the other articles can help reveal truths like social media isn’t actually free.

I haven’t read through everything in the guide, but I am definitely going to bookmark it for future reference.

Info You Can Use: Development Directors Need Love Too

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You may be aware of the recent report commissioned by the Evelyn and Walter Haas Jr. Fund and conducted by CompassPoint about the careers of development directors. I already had a pretty good idea that development was a thankless task and there was a lot of turnover, but Under Developed: A National Study of Challenges Facing Nonprofit Fundraising, brings the reality to the fore.

I was astonished to learn that a quarter of development directors were novices or had no experience in the field at all. My guess would have been closer to 5%.

One in four executive directors (24%) say their development directors have no experience or are novice at “current and prospective donor research.” Among the smallest nonprofits, the number rises to 32%. When it comes to securing gifts, executives report that 26% of development directors overall—and 38% among the smallest nonprofits— have no experience or are novice.

Half of all development directors vs. 34% of executive directors contemplate leaving development in two years. 22% of development directors had either given notice or were actively looking at the time they were surveyed. 40% of those surveyed said they weren’t sure they would stay in development as a career.

A quarter of executive directors reported firing their previous development director for performance or incompatibility with organizational culture.

As might be expected, organizations with bigger budgets reported greater retention rates. Being able to offer better salaries enabled them to attract talented people from other organizations. Some of these organizations reported something of an arms race with the best development professionals being able to name their own price in the face of an ever shrinking talent pool driving costs up across the board.

I have given some attention to the difficulties with attracting and retaining executive directors over the years so I thought it important to turn some attention to the development arm.

In fact, the report makes many of the same recommendations you will find in respect to the executive director positions: recognizing and celebrating emerging leaders, having better training/mentoring and having transition plans.

One of the central things they suggest is nurturing a culture of philanthropy. If you have read this blog for any length of time, you know a common refrain I have is that marketing and development aren’t the sole province of those departments followed by an inevitable link here.

The report talks about the need not to silo responsibilities. They define culture of philanthropy as:

Most people in the organization (across positions) act as ambassadors and engage in relationship-building. Everyone promotes philanthropy and can articulate a case for giving. Fund development is viewed and valued as a mission-aligned program of the organization. Organizational systems are established to support donors. The executive director is committed and personally involved in fundraising.

While they specifically mention executive director in the definition, the board is mentioned frequently enough in their discussion of the concept they probably should appear as well. They acknowledge at length that asking for money is a difficult endeavor for all those involved. They felt the fund development process would be much easier if the goal permeated all areas of the organization because it would naturally bring more support and resources to bear and make the director feel more empowered.

“I think the fundraisers don’t always manage up because they think, ‘It’s all on my shoulders.’ They forget that you’ve got 20 some board members and another group of volunteers, an executive director, and other direct staff — that this is a partnership.
—Executive Director

This is the one area in which smaller organizations can be compete with larger ones. While they may not have the money to pay high salaries and support the newest development software, (and the software gap is getting increasingly smaller and affordable), the more close-knit working environment can have the staff more easily integrate with development than in larger organizations where the function is more departmentalized.

There are some depressing findings in the report, but I think it is worth reading because I suspect it will also reveal that the problems one faces in ones organization aren’t as uncommon as you might think. That realization will hopefully allow people to feel a little freer to discuss these issues rather than assuming they face them alone and everyone else is operating effectively.

Americans Need A Cultural Stipend?

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Via Marginal Revolution, we learn Brazil’s Congress has approved a monthly Cultural Stipend for poorer workers.

“Now we are creating food for the soul; Why would the poor not be able to access culture?” the minister said.

Suplicy said the new incentive, approved by Congress and endorsed by Rousseff late last month, is expected to be introduced some time this year. “The money will be put in the hands of the worker who will decide how to spend it, by going to the movies, to the theater, to an exhibition or the museum,” she explained.

Other possible uses include purchases of books, music or DVDs.
[…]

Employers will cover 90 percent of the cost of the stipend but can then deduct the amount from their income tax. Workers will pay the remaining 10 percent, but can opt out if they choose to do so.

The first time I read about it, I thought it was a government funded program and might be hard to implement on a national level in the U.S.

However, since it is largely employer funded, the plan could actually work quite well in the U.S. since it allows the businesses to write it off their taxes much like companies and individuals can write off charitable donations in the U.S. I am not sure the government would have to create any new laws to make it possible. Though their encouragement would certainly help. The arts community could just make a big push for companies to declare their participation.

I imagine it would be great publicity for companies since they could collect testimonials from employees about the enjoyment they derived from books, music, performances and museum attendance thanks to their employers’ involvement.

Since employees have to contribute a little bit toward putting money on their culture cards, it gets potential audiences in the habit of paying to participate but doesn’t place the entire burden on them.

Granted, audiences may not end up using the money to purchase experiences at non-profit arts organizations. This won’t absolve arts organizations from the responsibility of making their offerings relevant and interesting. But along the lines of my letter to the president post, it starts to institutionalize the idea that all citizens should participate in cultural experiences.

When I did think this was a government program and was trying to devise a way to adapt it to the U.S., I thought about the dividend Alaska pays to its citizens from the oil proceeds. With that in mind, I was going to propose NY State use some of the tax money it collects from its great native resources- Broadway and Wall Street- to offer these cards to all citizens of NY. The population of the state has been dwindling so I thought it would be a great way to reward those who stayed and hopefully stimulate arts organizations in other parts of the state.

I suspect much of it would find its way back to Broadway. Though parts of Rochester NY are one of America’s Top 44 ArtPlaces so I wouldn’t count other parts of the state out.

Info You Can Use: Fundraising Must Benefit The Group, Not The Individual

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The approach of the holidays provides me with a little more free time so I have been catching up on my “come back to and read” list. I got to reading a piece by Non-Profit Law blogger, Emily Chan addressing activities athletic booster clubs engage in that may endanger their non-profit status.

Since these clubs are organized under 501 (c) (3) just like arts organizations, I became a little concerned because I see similar things happening with some arts organizations.

The potential conflict Chan addresses is in making the amount of money a person raises directly correlate with the benefit to an individual like crediting against the payment of tuition/dues or travel expenses.

Furthermore, such a credit system still raises private benefit concerns regardless of whether a parent is considered an insider or even involved in the booster club. Lois Lerner, the Director of Exempt Organizations at the Internal Revenue Service, recently affirmed that crediting amounts raised by a participant against that participant’s costs (e.g., dues, travel expenses) is a private benefit violation that may jeopardize the organization’s exempt status.

What immediately came to mind is that a lot of dance schools have their students sell tickets, Entertainment coupon books, etc., keep track of what each person sells and rewards the kids. I don’t think there is any problem with one child only getting to choose glitter stickers because she sold less than the child who was able to claim a stuffed animal.

However, if those sales determined who got to perform or helped one person defray more of the cost of going to see a show in New York than another, there could be a problem. If it defrays the cost of everyone equally, or even a specific class within the group like sending the cast of a show to perform at a festival, then it isn’t problematic.

Really, it is mostly a matter of benefits specific to individuals. This also likely includes fund raising to benefit a specific individual, say the medical expenses of a musician who was in a car crash.

Individuals should not be soliciting contributions from donors with any suggestion or intention that the contribution will be directly used for that individual who solicited the gift. Additionally, the booster club should not accept any contributions that have been earmarked by the donor for a particular individual. Not only would such contributions not be tax-deductible for the donor, the booster club would likely be acting as a conduit in violation of the federal tax laws regulating private inurement and private benefit by allowing such money to pass through the organization to the individual without having exercised any control, oversight, or discretion over those funds

I wonder how this might apply to organizations that try to forge a deeper connection with donors by having them sponsor a student. Keeping in mind that I am not a lawyer, my guess is that if the organization is selecting the student being sponsored, there isn’t a problem. The money went into a general pot with no specific expectation of which student would benefit.

But what happens if the student drops out and the donor has taken a shine to another student and wants the sponsorship applied to her as a replacement? This is a tricky situation if you are hoping for the long term, continued support of the donor.

I also wonder if something changes with the student’s status that requires more funding than for any other student, say their place of residence changes so they must pay higher out of state tuition, can the donor be solicited or even direct additional money to benefit a specific student without endangering the non profit tax status?

What If They Don’t Want To Be An Executive Director?

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On the Harvard Business Review blog site, Anne Kreamer asks “What If You Don’t Want to Be a Manager?” (h/t Daniel Pink) where she talks a little about the alienation one might feel moving from being a producer of material to a manager. While she talks about an experience in a corporate environment, it was easy to see the same situation cropping up in the arts when someone moves from creating content to producing revenue reports and reviewing labor laws.

One of the options Kreamer suggests, other than leaving the company and striking out on your own, revolves around changing the existing work environment. It was her last two sentences that resonated with me (thus my emphasis).

This is something more companies need to address. To remain globally competitive, organizations need to devise innovative ways to encourage and reward creativity. The unorthodox titles embraced by start-ups — directors of fun, ministers of information — can seem ridiculous, but the emphasis on improvising new ways of doing business is important. Furthermore, research conducted by Office Team found that 76% of employees did not want their boss’s job. If employees are no longer responding to the old carrots, it’s time for companies to establish new means of rewarding talent.

This reminded me of the Daring to Lead and Ready to Lead reports I had written on in the past that reported young arts leaders were chomping at the bit to gain greater responsibility in their arts organization, but didn’t necessarily want to assume an executive role.

It got me to thinking that while there is a lot of discussion about exploring new business models for arts organizations like the B Corporation and L3C, maybe there needs to be a corresponding discussion about changing arts job descriptions so that people actually want to assume the roles.

Two issues that seem to rise to the top for executive directors is work-life balance and that the position seems 75% about fundraising and increasing. It may be time to institutionalize the idea that marketing and development aren’t the sole province of those departments by spreading the responsibility around in job descriptions.

I have read a lot of criticism of Michael Kaiser’s ideas, but I have never seen anyone say he is wrong when he advocates for paying attention to the interests of potential donors and connecting them with your corresponding needs rather than viewing them as the source of a lot of money to answer the need you have prioritized.

With the proper training and expectations declared at the outset, marketing, education and artistic staff could take a more proactive role in identifying, engaging and meeting with donors than they do at present. Hopefully freeing the executive director to balance their personal and professional lives, improve their job satisfaction, connect back with the parts of the organization that excite them, and perhaps encourage others to crave their position.

The same can obviously be done with marketing where development, education and artistic, etc. are more active in expressing and advancing the organizational message.

I think people are already cognizant of this interdependent need based on a Twitter exchange between Adam Thurman, Howard Sherman and others this past September.

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Info You Can Use: Too Many Calls To Action

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I had meant to post this link a few weeks ago, but you know how things get around the holidays. Back in May, Jeff Brooks at Future Fundraising Now listed 20 Mistakes that Drive Away Donations. He saw the applicability to fund raising of the same list by Greg Digneo on Copyblogger who listed 20 Mistakes That Undermine Calls to Action in commercial marketing.

Given that so many non-profits are making a fund raising push for the end of the calendar year, I thought the list might be valuable to look at. The good thing about the list is that it covers mistakes that the beginner, intermediate and advanced practitioner will make.

One thing that caught my eye from Digneo’s list,

6. Multiple Calls to Action

What’s the one thing you want readers to do on your blog?

Do you want them to sign up for your list? And click on ads? And buy your products? And go to your social media profiles?

When you have too many calls to action on your site, your readers become paralyzed by the choices and leave your site.

Pick one or two actions you want your readers to take, and build your design around that. Don’t leave readers confused about what they’re supposed to do next.

Since a performing arts organization’s website is generally used for provide information that will move people toward buying tickets, as well as donating and perhaps a number of other things, it can easily devolve into something that does none of those well. I think it is good advice to focus on having your website call to visitors to take a couple actions and let everything else take the backseat.

At this time of year, many performing arts organization present shows that sell themselves well: Nutcracker, Christmas Carol, Handel’s Messiah, etc., it might be worth temporarily diminishing the ticket sales focus of home page a little and shift the emphasis to donations.

Digneo lists other mistakes that are worth pondering that might be applicable to your operations: Wrong Offer, No Urgency, No Empathy, No Social Proof; as well as some reminders about smart graphic design and positioning.

If You Believe In What I Am Doing

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Some data on the most successful of President Obama’s fundraising letters is really destroying what I thought I knew about constructing emails. It turns out, the most informal subject lines garnered the biggest donations. His campaign would do extensive testing on dozens of variations in the formatting, amount requested, tone, etc before discovering a winner they would send to the millions.

According to the campaign, the less professional the email looked, the better. They were a little incredulous at how good a response the most ugly emails received (my emphasis)

It quickly became clear that a casual tone was usually most effective. “The subject lines that worked best were things you might see in your in-box from other people,” Fallsgraff says. “ ‘Hey’ was probably the best one we had over the duration.” Another blockbuster in June simply read, “I will be outspent.” According to testing data shared with Bloomberg Businessweek, that outperformed 17 other variants and raised more than $2.6 million.

Writers, analysts, and managers routinely bet on which lines would perform best and worst. “We were so bad at predicting what would win that it only reinforced the need to constantly keep testing,” says Showalter. “Every time something really ugly won, it would shock me: giant-size fonts for links, plain-text links vs. pretty ‘Donate’ buttons. Eventually we got to thinking, ‘How could we make things even less attractive?’ That’s how we arrived at the ugly yellow highlighting on the sections we wanted to draw people’s eye to.”

Another unexpected hit: profanity. Dropping in mild curse words such as “Hell yeah, I like Obamacare” got big clicks. But these triumphs were fleeting. There was no such thing as the perfect e-mail; every breakthrough had a shelf life.

In light of this, I am starting to wonder if perhaps I am working too hard on the monthly newsletters we send out with information about upcoming shows.

Actually, the real lesson here isn’t that the pared down approach works but rather than you will never really be able to predict what will connect with people and you need to be constantly testing.

With as many people sending out as many emails as the Obama campaign had, none of them seemed to be able to accurately predict what approach would work best and even then, the appeal quickly waned. Which I am sure can be partially attributed to the sheer number of emails that people were receiving each day. I suspect a performing arts groups could probably experience success with the same approach over the course of a few emails.

One question I had given that my email list does not measure in the tens of millions was how large a sample size do you need to accurately measure the effectiveness of an approach? Has anyone worked with A-B testing enough to know?

By the way, the title of this entry is stolen directly from Obama’s list of effective subject lines. I will be interested to see what the response rate is.

Fuel Your Growth Or Ignite Your Destruction?

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Thomas Cott’s recent round up of stories raising questions about whether arts organizations should accept funding from energy companies which are poisoning the environment through oil spills and hydraulic fracking reminded me of the semi-controversial sponsorship of dance by Altria.

I haven’t been able to find it online, but some years ago there was a feeling that the relationship of tobacco giant Altria, neé Philip Morris, to dance was a little unseemly bordering on co-dependence due to the fact that dancers often resorted to smoking to curb their appetites and maintain their desired weight and figure.

They supported a great number of arts organizations, including Lincoln Center, but had a particular affinity for dance. It might have emerged as an issue in the wake of the anti-corporate sentiment of the Occupy movement last year if Altria hadn’t withdrawn their support of the NYC dance scene a few years back when they moved their headquarters to Richmond, VA.

Altria still provides support for the arts, a theatre in Richmond will be named for them in 2013, but their profile of support isn’t as visible since they have left New York.

It does raise the question about what elements should factor into a decision to accept corporate sponsorship or not. Many times corporations provide the sponsorship to bolster their image in the community. At the same time, an arts organization will be concerned about how the image of the corporation reflects on them in the community.

A theatre in Virgina or North Carolina will probably worry less about how their community will react to them being sponsored by Altria than those in NYC since tobacco has a long history in those places. But then Altria may have less incentive to provide sponsorships in those communities in order to bolster their image.

There is also the funding source to consider. Is there less of a stigma associated when Altria’s employees are directing where the funding goes?

This isn’t about Altria. You can substitute the name of an oil company for Altria and oil rich states like Alaska and Texas for tobacco growing states and the situation will be about the same.

In fact, with the stories about how big banks are mishandling money and putting the screws to people over their mortgages, accepting money from banks in some places may not endear you to the community. And since your community is in poor financial straits, banks may be the only significant source of funding enabling you to provide free and low cost services to the self same community.

Given all these factors, it may be wise for arts boards to draft policies and procedures for assessing sponsorship and donation opportunities which may arise.

If you are thinking these issues don’t really matter or don’t feel you even know where to start in developing criteria to evaluate opportunities, you may want to take a look at the blog post by Chris Garrard that Cott links to. There, Garrard addresses what he sees as the weakness of statements like: “But the arts sector needs the money…”; “But historically, the arts have always taken money from big business or sponsors… Why should things be any different now?” and “If we engage more people in the arts to learn about life and philosophy, then that has to counteract issues with where the funding came from…”

I am not necessarily saying Garrard is completely correct. His responses are highly idealistic. But these are all issues that need to be considered.

Your Mouth Says Innovative, Your Pictures Say Status Quo

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Yesterday I alluded to one of my pet marketing peeves, the claim that a work of art reveals “what it means to be human.” The phrase has mercifully fallen out of frequent usage these days (or at least I am not being sent those press releases and brochures any more).

However, Lucy Bernholz at Philanthropy 2173 reminds us about the importance of such buzz phrases to the non-profit arts community. She cites the (tongue in cheek) grant proposal by Michael Alexander of Grand Performances. Here is a taste:

“The Innovative Art Jargon Creation Project – An Activity for the New Millennium”

Project Synopsis
Grand Performances respectfully requests a grant of $37,500 to manage a program to develop new Art Jargon which will be necessary for effective grant writing in the next century.
[…]

HISTORY OF NEED
Each passing decade since the establishment of the National Endowment for the Arts has seen a geometric growth in the number of “buzz words” used by arts grant writers in their applications. To date, there has been no formal development program to insure consistency of quality of these new phrases, nor a system for dissemination to insure that grant writers throughout the country had access to the new phrases at the same time, often giving grants writers in one geographic region or one discipline an unfair advantage over those writers not familiar with the new phrases. Certain regions and certain disciplines have been consistently underserved due to their grant writers’ inability to gain access to the new phrases in a timely manner.

…During the national economic recession of the early 1990’s grant writers hit “a brick wall” as funding decreased for the arts and the available supply of new “buzz words” diminished…A privately funded study involving independent arts grant writers, arts consultants and representatives from government funding agencies from throughout the country provided evidence that one of the major causes of the diminished funding was a scarcity of exciting and useful “buzz words” that could be used in arts grant applications.

I got some pretty good chuckles off this.

However, over on ARTSblog, Megan Pagado reflects on her experiences attending the National Arts Marketing Project Conference noting that the choices arts marketers make often perpetuate the status quo even as they express a desire to change it.

“Slowly, though, the conversation shifted from marketer-created messages to marketer-perpetuated messages. A picture of an all-white, male orchestra elicited the most memorable response: “They’re all dudes!”

Therein laid the dilemma for many of us in the room: What is our process of reviewing materials from artists? What if an artist doesn’t have a better, less stereotypical photo for a marketing team to use? And, as Amy Fox (@museumtweets) tweeted: Do artists always understand the stereotypes they perpetuate when they create?

Some marketers walked away with an action item: creating a diverse committee to review artist materials, for example.

But I think many, including myself, walked away with more questions than answers: How can I be inclusive while avoiding tokenism? When does utilizing inclusive language achieve its desired goal of making all feel welcome, and when does it simply brush issues under the rug and avoid conversations that need to be had?

I will admit I had never really thought about whether an image an artist supplied was perpetuating a stereotype. Most frequently my concern is whether the image communicates that the performance will be interesting. I just had this conversation today about an image in which a pianist appears to have dozed off at the keys.

Taken together, these two blog posts remind us to be cognizant of the impression conveyed by the words and images we employ to promote our organization and activities. Are we saying we are innovative because we are or because innovative is the trending term? Do the images we use back up that claim?

I think it can easily slip our notice that while we may be explicitly saying, “we want to include you,” the images we use may implicitly be saying “No we don’t.” Certainly the environment and attendance experience in a performance hall can communicate this as well. But I think people recognize that dress code and knowing when to clap are already sources of anxiety and have taken steps to address this. It is probably time to start paying attention to the pictures too.

We Have To Destroy Our Arts Organization To Save Our Arts Organization

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The news of Hostess Bakeries making good on their threat to liquidate in the face of a baker strike reminded me of You’ve Cott Mail’s “Is bankruptcy the answer for arts money woes” round up from this past August.

Back then Thomas Cott linked to a story about how the Barnes Foundation let everyone believe they were going bankrupt in order to make the case for moving the art collection to Philadelphia easier. Another story recalled how the Philadelphia Orchestra also declared bankruptcy in order to help with their contract negotiations and relieve their pension obligations, suggesting that the stigma of doing so may be dissipating and other orchestras may be following suit.

Cott included an article by Terry Teachout acclaiming the success of the Detroit Institute of Art (DIA) in getting the citizens of three counties to agree to an increase in their property taxes (called millage) in return for free admission to the museum.

There was some talk that millage might especially be the wave of the future for funding the arts.

Yeah, not so fast. According to Judith Dobrzynski, the DIA might want to give a thankful prayer for their blessings. Residents of Ann Arbor, MI voted down millage to support a comprehensive public art project.

With that in mind, I wouldn’t necessarily count millage out as an answer. I suspect the biggest difference between Ann Arbor and Detroit was that DIA is a specific, visible entity, the benefits of which are easy to experience by walking in the door. If they were forced to close, it was clear what would be lost. Ann Arbor was looking to support art yet to be created which can be more difficult to become mentally, emotionally and socially invested in.

What I would really like to see is an arts organization successfully sell a community on a wide-ranging public support option like millage in the absence of a scenario of imminent demise. I have seen so many appeals in the face of an apocalypse that I wonder if it is even possible to rally significant community support for a healthy, stable arts organization.

Have we trained people only to respond to dire predictions? Or perhaps they have trained us that they will only respond to appeals couched in those terms.

Bankruptcy and tales of woe really isn’t the most constructive way to develop a relationship and confidence from your community. It impacts credibility and people soon become inured to news of financial crises. In this Hostess liquidation, the only person who wins is Little Debbie. (Come to find out, Hostess owns Drake’s Cakes)

The best evidence that you will not mishandle donated funds is that you are never in the position of telling people about the void that will open in their lives if they don’t rally to support you. It is harder to suggest people should have confidence in your business plan and financial practices if you are in dire straits, but more people seem ready to increase their giving in these instances because it is easier to be passionate in short bursts.

Yes, I know Joni Mitchell told us we take the things we love for granted many years ago, but there is nothing to say we can’t rally to change that behavior.

[youtube http://www.youtube.com/watch?v=XJIuP7zEVeM&w=420&h=315]

Care And Feeding of Development Directors

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Hat tip to Rosetta Thurman for linking to a valuable article about the care and feeding of Development Directors on the Chronicle of Philanthropy. Carol Weisman wrote “5 Ways to Lose Your Development Director in 2 Years or Less,” decrying the poor treatment and lack of support development staff receives.

An excerpt of her list:

1. Pay a ridiculous salary. A friend recently pointed out an ad on Craigslist for a development director. The position requires an MBA and five years’ experience or a Certified Fund Raising Certificate. There is a list of 15 responsibilities, including manage all aspects of individual giving, manage Web site, lead $3-million capital campaign, design and write the newsletter, recruit and manage volunteers, represent the agency at community events, and the list goes on. Salary: $40,000. I mean, really.

2. Reward great performance with unrealistic expectations. A friend of mine works at a university. The department she works in raised $350,000 in 2011. She raised $1.2-million in fiscal 2012. The goal she was given for fiscal 2013, $2.5-million. The additional staff support, financial support for meetings and training: zero. After a highly successful year, she is reading the want ads.

3. Provide absolutely no board support.

4. Don’t provide funds or the time for developing additional streams of revenue.

5. Avoid recognizing the work of your development professional.

Weisman expounds upon points 3-5 in the article. I didn’t want to get into reproducing the whole thing here.

As you might imagine, this is a sore subject with fund raisers. There were many comments on the article. One of the first, by a person using the sobriquet “helpfor501c3s,” related the following:

“When I have interviewed for Director of Development positions, I do my homework and read the organizations’ 990s prior to the meetings, anticipating the question about salary expectations. I have found that seeing the previous years’ compensation paid to CEOs and VPs is a helpful guide to preparing for a realistic response. Quite often when a CEO asks me for salary requirements, I am met with a response “That’s almost what I make!”

CEOs and Executive Directors have to get over the notion that they are the only employees that should make a high salary. When the Director of Development is the one responsible to raise the support to pay the CEO, a bit more consideration should be given to amply compensating an experienced and skilled Director of Development.”

I quote “helpfor501c3s” first to advocate for using 990 filings as a pre-interview preparation tool or for pre-application research if you are uncertain if an organization can meet your salary needs. I also cite “helpfor501c3s” for making the point that the development office is frequently responsible for raising the funds that pay the CEO and should therefore be highly valued by those in the C suites.

More than just a pleas to be nicer to Development Directors, both the article and the commenters talk about the importance of including fundraising in board training and education. There was a sense of letting the development office help the board get better at helping them rather than a declaration of “give, get, or go.”

As I read the article there seemed to be this feeling that development offices were expected to go out and raise money without depending on anyone else in the organization. Almost as if the marketing and promotions people were expected to gather information about a play or musical piece and all the artists without asking the artistic staff.

If you don’t think that is an apt comparison of the conditions in development offices, read some of the examples given in the article and the comments. It will probably be difficult to avoid seeing at least some similarities to your organization.

Every department in an arts organization suffers some injustices that need to be corrected, that is no surprise. You may not think about what they might be in relation to your development people that often.

Expecting Donors To Inspect More

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So I recently read a rather thought-provoking guest post by Anna McKeon, on Daniela Papi’s Lessons I Learned blog. In the post, McKeon basically says non-profits are making it too easy to donate and volunteer.

Now she is mostly speaking in relation to programs that non-governmental organizations run internationally, but I read with interest thinking that what she said might be applicable across the board with non-profit organizations. McKeon talks about how easy it is to text or click a button on a website to donate without ensuring the money will be used responsibly.

She cites an interesting news report about the negative impacts of voluntourism where people are bussed in to small village where they help build an orphange, feel like they have bonded and made an impact with the local population only to be replaced by another bus load of people doing the same thing the next afternoon.

We shouldn’t make it easy. We’re doing a disservice to ourselves. We’re encouraging each other not to think, not to explore, not to discover. We’re not challenging ourselves, our commitment, our perceptions, or our opinions. We’re promoting a life of ease where a sense of goodwill can be bought and not earned.

So let’s leave some things to be difficult. Difficulty helps us learn. It helps us discover more about the very thing we are trying to achieve. It can also mean that it feels even sweeter when we do succeed in our aims. And you know what? Even though “difficult” might be a harder sell, I still know enough people out there who are up for the challenge.

She makes a semi-valid point that many organizations accept the help of volunteers whose skills are so poor they wouldn’t consider actually hiring them but involve them in the work because it is free labor. I am sure readers can think of a few volunteers they have encountered who fit that bill.

The stakes aren’t as high for ushers at a performance as they are when it comes to providing clean water to a village. But an arts organization could be utilizing volunteers to do far more advance their programs if there was a greater expectation of investment from the volunteer and a corresponding higher level of commitment to volunteer training by the organization.

The one big question that really popped into my mind was–is it really the place of a non-profit organization to demand that donors and volunteers do more due diligence before becoming involved with the non-profit? Being supported by a highly engaged and educated constituency is certainly something I would crave, but I am not sure it is realistic.

But do people care about engaging in research if they are emotionally moved by an experience? Is it our place and in our best interest to expect them to? I think it is pretty clear you can easily garner more money via $25-$100 donations if you make it easy for people to satisfy an impulse to give they feel after seeing a show.

Yes, it is superficial giving and you may never get another donation from them again–but if you hadn’t gotten that impulse donation, you may have absolutely no basis to explore their willingness to give again. If they bought a ticket at the door and left without donating because there was too much work involved, you have no donation and no contact information for them. It is a missed opportunity for further interactions of any kind.

I will concede that it is bad for all non-profits if a donor discovers they contributed to a corrupt organization and is disinclined ever to donate again. There has to be some proportionality to the effort, though. Larger donors certainly need to be cultivated and at certain levels and mutual due diligence is required, but is it worth it for either party to have high expectations associated with a small donation of time or money?

The blog owner, Daniela Papi, related an interesting anecdote in the comments section which actually made me worried about the possibility of what I will term the tyranny of expectations. She talks about an NGO which was concerned about documenting impact for the benefit of their donors to the detriment of their own programs.

“when I asked them why they were harming their programs by trapping themselves in their own donor promises their answer was “Well, Kiva does it. People know exactly who their money goes to on Kiva, and they make that easy. Kiva is our competition for funding, so we need to do it too.”

I am definitely for accountability, especially in the face of so many non-profit scandals where people abscond with funds. (Which can still happen accompanied by glorious impact reports.) But I suspect that the more prevalent impact documentation becomes, there is a danger donors will expect reporting out of proportion to their donation, seeking detailed information customized to their interests, the cost of assembling which exceeds their donation.

This may emerge alongside low administrative costs as another unrealistic expectation placed on non-profit organization. Low overhead ratio and documentation of impact are probably mutually exclusive. I would be highly skeptical of an organization which reports being highly successful at achieving both.

Please, Don’t Donate To Us

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I got a little reminder about the need to shepherd your resources and occasionally refocus yourself on your core business last week when I did my semi-annual stint as an on air guest for the public radio stations.

I am really proud of them because not only have they raised enough money to erect transmitters in all but one major population center in the state, they have done so while reducing the number of days of their appeal from 10 to 8. I think they were inspired to shorten the fund drive by the fact they have generally reached their goals a day or so early the last few years.

Every time I go on, I usually bring some tickets to a show to give away as a thank you gift. I had suggested some appropriate shows when we were making the initial arrangements and was told it wasn’t necessary to offer tickets because they were de-emphasizing gifts in return for donations this year.

I know the stations has been using the message that the premium was the programming rather than the thank you gift for a number of years now. Actually, most public radio stations I have listened to take that approach. The idea is that you are giving so that you can continue to enjoy programming throughout the year, not so you can get a nifty t-shirt.

Thinking they had adopted a purist approach to the programming is the premium philosophy, I was eager to see how successful they might be. Turns out, they aren’t abandoning thank you gifts altogether, just scaling back a great degree.

I was told that because they have such a small staff to help with the gift fulfillment operations, they decided to stop soliciting gifts to give away because it requires so much tracking of where items have come from, if the stations have received the item or if there is a certificate to be exchanged for the item.

If you have ever tried to run an auction fundraiser yourself, you know what can be involved in this sort of activity.

Instead, they have elected to focus more on station branded shirts and tote bags and CD/DVDs associated with local and national radio shows. This way they had a standard group of items that could be processed in the same manner. The gifts provided by the local community tended to be a limited number of higher ticket items like celebrity chef dinners and spa weekends that required $500+ donations.

This new approach for the fund drive is a little new to everyone I guess. The on-air host during one of my segments asked me what goodies I had brought causing one of the coordinators to gesticulate madly indicating that I didn’t have anything. I covered by talking about the season brochures I had brought to help remind me about dates and times.

We often talk about how chasing grant money for programs and services outside your mission and capabilities can be detrimental to your organization. Sometimes you are also in a position where it is better to say no and refuse the gifts of well meaning people if doing so will strain your resources.

It can be very difficult to say no to a heart-felt offering. Many charities which help the poor and dispossessed would rather receive donations of cash rather than food and clothing because the latter requires items to be inspected, evaluated, sanitized and often discarded, all of which diverts staff time and energy.

Groups can be afraid of the ill-will they might generate by appearing ungrateful and refusing the donations and feel obligated to accept. However, there are some alternatives according to a Chronicle of Philanthropy article recently reprinted on Guide Star. Some of the options include redirecting people to groups who will take the donation, a move that can help bolster the creditability of your organization.

Of course, that probably won’t satisfy the ardent long time supporter that wants their gesture to benefit your organization. The Chronicle of Philanthropy article mentions that many charities have disaster plans which outline how they will deal with the out pouring of generosity that may result from a disaster. These plans include responses to donations they are not willing or able to accept.

It may be worthwhile to develop a similar plan to respond to the undesired generosity of a strong supporter so you are prepared for that situation as well.

Tweet Me Your Gift Now

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Non-Profit Quarterly (NPQ) had a piece today encouraging people to pay attention to the fact that Chinese are using social media service Weibo to give directly to the needy. The NPQ piece is in reaction to a Washington Post article about how recent charity scandals had turned a lot of Chinese off from giving to the state approved charities. Now people are using services like Weibo (China’s Twitter/Facebook hybrid social media service) to give to people directly, even though it is illegal to do so.

The scandals have shaken public confidence so badly that the Chronicle of Philanthropy reported in June that giving in 2011 was down to $7.9 billion from $9.5 billion in 2010. The Chronicle’s numbers come from a story on the state run China Daily which attributed the drop to a number of factors in addition to the scandals, including the economic downturn and general giving practices in China.

“In China, people’s willingness to give is ‘disaster-driven’ while in the US, donating is a habit.”

He added that the Chinese philanthropic sector’s over dependency on corporations could be another possible explanation to understand the dramatic changes in donations.

“Our research shows that companies, especially private companies, are dominant contributors. Last year, many export companies suffered from the global economic downturn, so they didn’t have much money to donate,” said Deng.”

What interested most about these stories wasn’t so much that people are using social media to give. We already know that is becoming a bigger factor in giving in the U.S. and recent laws are making it easier to crowd fund projects.

What I was paying attention to was that people were giving via social media even though they acknowledged that it is no more transparent and just as ripe for exploitation as giving to an official charity. In fact, some Chinese observed that personality and good looks seemed to motivate giving more than need in a few cases.

There seemed to be a psychological factor inherent to giving to someone directly that gave people a higher degree of confidence in the act of donating.

The US doesn’t have scandals the size of those in China, but there is still a lot of conversation about administrative overhead and Non Profit CEO salaries. Even though these criteria are generally unfair, they can still motivate giving decisions.

There is an old adage that people don’t give to organizations, they give to people. Based on these stories about China and some general observations I have had about the way people generally behave in the US, non profit arts organizations may find they need to provide giving mechanisms that give people a much more immediate sense of connection and response than in the past.

In addition to the ability to give online, an arts organization may need to allow people to give via their smartphones so that patrons can donate during a performance and immediately gain the sense that they are supporting that actor/singer/dancer that just came onstage. If the person walks off stage before they can give, it may be too late.

Two years ago during a public radio fund drive I was so moved by the quality of the show I was listening to, I pulled over into a parking lot to make my pledge because the show was almost over and I felt like I needed to make my pledge before it ended. There wasn’t really any reason not to wait until I got home because the money was going to the station and not the show directly and I already knew I was going to give again that year—But I just had to show my support for that show!

As people become accustomed to giving to things like Kickstarter projects, non profit arts organizations may find themselves having to solicit donations specifically for each project they plan to do rather than based on a general promise to do quality work as has been typical.

Arts organizations may be faced with the dilemma of positioning their programs this way. Restricted donations have always been a problem for non-profits. Do you want to be faced with having every $25 donation restricted to a specific project because people are more motivated to give to something to which they feel a direct connection?

You might as well have a for-profit structure if you are going to have market demand dictate what is funded, eh?

Info You Can Use: If You Missed Your Chance To Steal It Before

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While Oscar Wilde may have said, “Good writers borrow, great writers steal,” and blogging by its nature does involve citing others quite a bit, I generally try to avoid having my blog entries involve someone else’s work entirely.

However, occasionally someone provides information that can prove so valuable, it pretty much bears repeating entirely. Last month Thomas Cott assembled a series of links in his daily email which he titled, Steal This Idea.

Many of those he linked to posted entries urging people to steal their ideas, including Trisha Mead on 2AMt , the Association of College Unions International’s Steal This Idea contest and the Please Steal This Idea blog.

After reading this series of articles, you could almost forget that companies are actually concerned about preserving their Intellectual Property rights.

There are a lot of great ideas for the arts in these links. I must confess however that one which resonated very closely with me was an article from the Library Journal (also titled Steal This Idea) which talked about how the Hartford Public Library solicited ideas from their patrons and created a series of library cards people could pick and choose from.

This is a great idea for cultivating a sense of ownership among arts patrons and subscribers. However, the reason it resonated so closely with me is because I actually have kept every library card I have owned since I was a kid. And since I have moved around a fair bit in my career, my collection is between 10-15. Had those libraries offered a choice of more personalized cards, I would have probably “lost” my card frequently so I could add to my collection.

One interesting idea that Cott hadn’t included was covered by Sarah Lutman of the Speaker blog. She discussed the Great River Shakespeare Festival’s (GRSF) decision to sell 10 year bonds to fund their organization. The board of directors authorized the sale of 100 bonds at $5000 each. As of a month ago, they had sold 39.

Though there is some hope that at the end of the 10 year period, people will roll over or donate the proceeds of the bond to the organization rather than calling it due, GRSF is prepared to pay 4% annually on the bond. And they may choose to repay the bond at the end of the term rather than having it roll over. Ownership of the bond can be transferred.

The legal and filing fees for Minnesota were under $2000. It may be more in your state. It is an interesting idea to get people literally invested in your organization. There is some precedent for this sort of thing. The Green Bay Packers football team is a non-profit corporation and has famously offered stock to support their operations.

Fans grab shares when they are made available mostly for the pride of claiming ownership because the team doesn’t pay dividends. How much better is it then to be able to proudly invest in your favorite arts organization and actually be promised a financial return on top of whatever benefit the organization has to the community.

Info You Can Use: Like This Post And You Could Win….

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..Well Actually I Can’t Promise You Will Win Anything.

That was one subject tackled in a slideshow/PDF Venable LLP posted from a talk they did in early August, How Nonprofits Can Raise Money and Awareness through Promotional Campaigns without Raising Legal Risk. The slideshow proper is followed by resource documents that delve a little deeper into many of the topics.

The collected information is a great basic resource on many of the legal questions you may have about different sorts of promotional and fundraising techniques like raffles, games of skill and chance. The laws of many states make it necessary to have the “No Purchase Necessary” option and the ease (or lack thereof) of taking advantage of that option is frequently a subject of legal action.

While every state has different laws, the slideshow helps to clarify the general distinguishing characteristics of these activities. For example, I wasn’t aware of some of the following:

Some less obvious examples that may satisfy the “chance” criterion include those in which: a prize is awarded to the “100th” store (or Web site) visitor on a particular day; the amount of the prize depends on the number of people who decide to participate; the prizes are of unequal value; or, a drawing is used to break a tie, or a single prize is divided between tied winners.

The document addresses some of the issues use of the Internet to solicit contributes raises in relation to social media and rules dealing with being registered as a charity in other states if a significant amount of contributions is originating from there.

One of the biggest legal situations they discuss is the commercial co-venture (CCV) where a business might promote that a portion of a purchase will go to benefit a charity. NY State launched an investigation regarding companies that did that in relation to breast cancer and turned up a great deal of fraud. Apparently half the states have laws regulating CCVs in terms of disclosure and the manner in which the relationship is promoted.

Use of social media for solicitations is apparently a gray area legally so the suggestion is to proceed with the same care you would if you were making the same appeals face to face or in print. There are also concerns that you respect privacy when collecting user data, especially from children, and protect the data from theft. Geolocating and behavioral advertising and tracking are identified as hot button issues.

However each social media service has a number of their own rules of which you need to be aware.

For example with Facebook:

-Promotion may not be administered directly on the site, must be administered through a third-party Facebook Platform application
– Cannot use Facebook functionality or feature as an entry mechanism; e.g., “Liking” a profile page or posting a comment on a wall. Also cannot condition entry into the promotion upon taking any other action on Facebook; e.g., liking a status update or uploading a photo.

• However, can condition entry on a user “liking” a Facebook page, checking in to a “Place”, or connecting to the Facebook platform based promotion application as part of the entry process. E.g, can require that users “like” a Facebook page and then submit a completed entry form to enter.

This was something of a surprise because it seems like I get requests to like things all the time and have seen it tied to a chance to win something. I have been trying to remember about how they have been structured.

Facebook is also pretty strict about requiring groups to provide notice that Facebook is not associated with the promotion really in any way.

Another area of concern is intellectual property rights. If you are encouraging people to submit some sort of creative project you can run into a number of issues,

“Incorporating user-generated content in a marketing campaign could expose the sponsor to liability for libel, copyright infringement, violation of one’s right of privacy/publicity, deceptive advertising, trademark infringement, or other violations.”

While social media sites and marketers are protected from liability for what people submit or post on their sites, if you turn around and use the submitted content to promote your organization or product thinking it is entirely original, you could be in quite a bit of trouble.

If you look at the slide show but have more questions, it is really worth looking at the additional resource documents at the end. There are some good short articles that deal with the Do’s and Don’ts of Social Media promotion and

Oh What A Tangled Web…

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Today at lunch a musician friend was picking our brains about a fund raiser he wants to do for a cause he really believes in. He outlined his vision and then asked for ideas of places he could hold it. There were a couple assumptions he made about his budget that were unrealistic which we helped him to re-evaluate.

The discussion made me think of an article someone I follow on Twitter recently linked to by Nell Edgington, “5 Lies to Stop Telling Donors.”

Edgington lists the lies as:

1. X percent of your donation goes to the program
The distinction between “program expenses” and “overhead” is, at best, meaningless and, at worst, destructive… It is magical thinking to say that you can separate money spent on programs from money spent on the support of programs…“overhead” is not a dirty word…

2. We can do the same program with less money
No you can’t. You know you can’t. You are already scraping by…Politely, but firmly, explain to the donor that an inferior investment will yield an inferior result…

3. We can start a new program that doesn’t fit with our mission or strategy
Yes, that big, fat check a donor is holding in front of you looks very appealing. But if it takes your organization in a different direction than your strategy or your core competencies require, accepting it is a huge mistake…Don’t let a donor take you down that road.

4. We can grow without additional staff or other resources
Nonprofit staffers truly excel at working endless hours with very few resources…But someday that road must end…

5. 100 percent of our board is committed to our organization
If that’s true, then you are a true minority in the nonprofit sector. Every nonprofit board I know has some dead wood…It’s a fact that funders want to see every board member contributing. But instead of perpetuating the myth that 100 percent is an achievable reality, be honest with funders…It is far better to demonstrate that you are tirelessly working toward 90 percent.

I have frequently linked back to a post Andrew Taylor made about 6 years ago where he suggests non-profit organizations aren’t doing themselves any favors by keeping funders expectations high when they report everything went as good, if not better, than planned every single time.

In recent years “overhead” has come to the fore as a problematic measure of effectiveness. I think the whole idea about low overhead being a measure of effectiveness is the root of the other evils Edgington mentions in her article, in the pursuit of portraying themselves as having low overhead non-profits will say they can do more with less money, do more with same/fewer staff and the organization has a super efficient board.

An April article in the LA Times talks about why overhead is such a poor measure of a charity. In that column, Jack Shakely, president emeritus of the California Community Foundation, cites the example of a group that was buying its medicine in Canada but was using the cost of the medicine in the U.S. as a basis to report the difference in price as an in-kind donation in order to make their administrative costs appear to be a smaller portion of their budget.

Writes Shakely (with my emphasis added),

Don’t get me wrong. Low administrative costs could indicate prudence and sound judgment at a charity, but they could just as easily indicate inadequate staffing, insufficient salaries or, shall we say, fudging. Moreover, administrative costs aren’t the primary measurement of for-profit excellence. Are McDonald’s admin costs lower than Wendy’s? Apple’s lower than Microsoft’s?

[…}

But our intuitive thinking system wants an answer now, and because we are intuitively inclined to believe that the nonprofit sector is filled with soft, amateurish executives, we latch on to the pseudo-science of administrative costs as a measure of excellence. It’s hogwash; there is absolutely no way of telling that an organization with 5% administrative costs is superior to one with 20% costs based on that criterion alone. In fact, the exact opposite may be true.

As Shakely notes, it will be hard to get donors and funders to shift to better criteria when the overhead ratio appears to be so clean and rational a measure. But as both he and Edgington comment, no funder is going to use any other measure of evaluation if they aren’t told the criteria is unfair and unrealistic.

Think about what you can do to change assumptions as you make your next pitch or write your next grant proposal.

Stuff To Ponder: Process and Pitfalls Of Cultural Facility Construction

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If you are planning new building construction or a significant renovation, you would do well to check out the Set in Stone research project performed by the University of Chicago. When I first heard about the site and the research which looks at the construction of cultural arts facilities from 1994-2008, I thought it might be a thinly veiled indictment of overly-ambitious construction of arts centers.

But in fact there is far less failure reported than I expected, (though plenty of struggle), and the site is designed to be a resource for both research on the topic as well as guidance about the whole process. Prominently placed on the page is a six minute video that provides some quick advice about under taking a construction campaign.

Basically, it says people underestimate the project costs and over-estimate their ability to generate the revenue to operate the building upon completion. The video also notes that there are a lot of factors and constituencies with expectations contributing pressure to the project and suggests four questions to continually ask at all stages to keep things on track–or help ultimately decide to terminate the effort.

Four case studies illustrate the impact of these pressures on new facility construction. My favorite is the case study for the Art Institute of Chicago. It really provides some detailed insights into how the ambitions of the board, fundraisers and architect interacted to shape the construction of their new Modern Wing.

There is a quick overview of the study available but you may eventually want to take the time to read the full report. The full paper discusses construction and funding trends around the country and explores the impact of population shift and GDP on some of these trends.

There were some surprising and interesting situations they uncovered like the Pittsfield, MA metropolitan statistical area has the highest per capita spending on construction projects in the country, trailed by San Francisco; Appleton, WI; Madison, WI and Lawrence, KS. Who knew?

Interestingly, the construction during the boom period they researched didn’t seem to be in response to demand from the cultural sector.

This suggests that, in the boom period, increases in the supply of cultural facilities may not have responded to demand increases in the cultural sector. In fact, the evidence suggests that the relationships were negative during the boom period; either there was overinvestment in the supply of facilities relative to cultural sector demand for facilities, or facilities investment may have been responding to something else altogether.

What I also found interesting was that population size didn’t impact how much a city invested in the cultural infrastructure but rather how fast the population was increasing or decreasing. If the population started increasing, so did the investment in infrastructure.

What I found most informative was a comparison of the construction processes of different types of cultural organizations. There were assets and liabilities generally common to each type of cultural organization: producing theatres, museums, non-resident performing arts centers and resident performing arts centers.

Producing theatres seemed to have the easiest time with the process going from conception to completion in a relatively short time (7 years). Producing theatres were motivated to advance their mission and were able to keep that front and center throughout the process. They had the biggest cost overruns at 92% higher than the initial budget, (my emphasis)

“However, the starting budget was usually an internal figure and these projects’ managers were clever about when to announce their budgets publicly so that the escalations did not appear outrageous to the community. Interestingly, the publicly perceived escalations were often much lower—an average of about 19 percent. More importantly, the escalations that did occur often had a clear connection to organizational needs and were seen as helping the organization pursue its artistic mission.”

Museums also had a relatively short conception to completion time (about 9 years). One of the biggest challenges the report says they face is strong boards who often meddle with the plans often blurring a clear sense of leadership and leading to a fairly high rate of turnover on project boards. Cost overruns were only about 46% but were due to non-mission critical additions. Also museums were not able to be as flexible about generating revenue and often had to cut staffing and programming to deal with budget shortfalls.

The construction of Non-resident performing art centers were often strongly motivated by service to the community. (my emphasis)

“However, more often than not, community need for the nonresident PAC was not accurately determined. For example, a large majority of these projects used economic impact arguments as rationales for building. Included in these arguments was the implicit assumption that by building a cultural facility in a blighted area, it would automatically attract and sustain a substantial audience who would not otherwise have ventured there. Nine times out of ten, these assumptions were not accurately tested, and when the facility project was completed, the desired swarm of activity never materialized…Since the motivation for the project was so strongly centered in the desire to culturally enrich the broader community in a necessarily general way, a specific organizational artistic mission (if there was one) was often swept aside or obscured by a general enthusiasm for the idea of building a new arts facility for local residents.”

This situation resulted partially because these projects were organized by groups operating from a shared leadership model which meant there is often no clear stated central vision. Cost overruns of 62% were attributed to delays and lack of organization in the decision making process. Non-resident performing arts centers were generally flexible in their ability to absorb the overruns thanks to their low operating costs. Unfortunately, because most of the costs came from presenting performances, the preferred option to reducing expenses is usually to reduce programming.

Resident Performing Arts Centers have the hardest time getting started, mostly due to the need to serve the disparate requirements of multiple resident companies which often represent different arts disciplines. Because the founding organizations are often well-established, each with their own board of directors, a single clear, consistent leader is often difficult to identify.

These projects averaged 12 years from conception to completion, which doesn’t include the feasibility study period preceding the project proposal. Influence of the various groups can wax and wane quite a bit in that time. The constituent groups may be unwilling to cede authority even to the performing arts center executive once the facility begins operations. Changes in plans and leadership often means opening dates are frequently rescheduled.

“First, resident PACs were the costliest among all the different categories of projects. On average, they cost approximately $109 million to build and went about 64 percent over their initial proposed budgets. On a per seat basis, the median dollar per seat for resident PACs was $37,527, compared to $12,155 for nonresident PACs.”

The need to serve many resident organizations means that the resident PAC has less flexibility to use its spaces to generate additional revenue for the facility. Also, all the organizations are in the same boat together. If one organization faces a distressing situation, it impacts the future of all.

There were some other interesting observations that resulted from the study that I will address in a later entry. As I said, the Set In Stone site provides some pretty good resources and information to help you recognize and perhaps avoid problems others have faced with their major construction projects.

Thus Rises The Individual Curator and Commissioner

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There was an intriguing piece on Wired last week (h/t Thomas Cott) about an alternative approach to funding events via Kickstarter. Andy Baio talks about funding record projects, conferences and festivals by essentially lining up the speakers/performers/resources and then seeing if anyone is interested in buying tickets to the proposed events/project. If there isn’t enough interest, it doesn’t happen.

What was most interesting to me is how this type of approach really empowers an individual to curate a project. You may not be an artist yourself, but you have an idea of what combination of artists and concepts might be compelling and then can set out to bring it together.

While this is sort of my job already, there is something of an expectation that there will be balance in those I invite. I have a certain responsibility to make sure my facility and events are being run in a fiscally responsible manner. An individual isn’t necessarily saddled by those expectations. They can do a project as a one off and no one is concerned about whether their activities are serving the needs of the community.

Makes me wonder if this might be a potential mode of operation for the future. One of many that might replace the non-profit arts organization.

If taken at its face, this approach seems shift some burden to the artists/speakers being invited. If the event doesn’t happen, will they get paid? While Baio doesn’t explicitly mention it, I am guessing you would have to provide some sort of guarantee of payment to the artist/speaker regardless of whether the performance happened or not. Baio alluded to this in a couple places, including his requirements for these projects.

Projects like these have three big requirements.

Strong, achievable concept. Commissioned works should be scoped down to something realistic, because you’re paying for their time, but high-concept enough to capture the excitement of other fans.

Organizer. The funding may come from the crowd, but there needs to be a single person managing the project and handling all the logistics and small details.

Due diligence. The organizer will need a firm agreement from the artist, committing to a timeline, payment, and any other demands. Also, if the project results in a tangible work, determine who owns the rights to it before you start raising money.

While most artists and speakers like being paid, they like to be seen and heard even more so there is also some incentive for them to help promote the cause. It may not occur too frequently at present, but it could certainly become commonplace if the practice of running a project up the flag pole becomes more wide spread.

The other thing, of course, is that it turns your audience into much more active advocates for the work because there is a possibility it won’t happen. We know that many audiences today, especially among the younger generation, tend to wait to see if something more interesting might come along before buying a ticket. Since the performance will occur regardless of their commitment, there is no incentive to commit. The threat that the event might not happen can garner an increased investment in its success even if it is only that people continually check the progress of the funding to see if the event will happen.

A commenter to the piece pointed out a service in Brazil which rewards the early adopters. It sells refundable tickets to a show until the minimum is met. Once the event has secured its funding, it starts selling non-refundable tickets and apparently starts reimbursing the purchasers of the refundable tickets up to the their full purchase price.

To Close Or Not To Close, How Much Debt Is Too Much?

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A little over a week ago I received the news that one of our partner theatres decided to close its doors. That sent the rest of us scrambling to contact artists to see if we could salvage the tours with which the organization was involved.

The board has said they want to revise their business plan and perhaps reopen in 2013. In the meantime, come this Friday, the entire staff is out of a job. I am wondering if they will be able to resolve all their grants and settle other business in that time.

A conversation I had about their closing has had me thinking over the last week. When I read the news about their closing, I was somewhat relieved to learn the organization was $200,000 in debt. Given the debt amounts you usually see associated with failing arts organizations, this is relatively small. Though it is also more significant for their $1 million annual budget than for those with $10 million budgets.

Referencing this debt, a colleague asked if they couldn’t have simply gotten a line of credit from a bank to enable them to stay open. This got me thinking about how you determine when it is time to cease operations.

Given that they intend to revise their business plan and hope to restart operations, would it have been better to attempt a reorganization through the next season rather than lose momentum with their community and funders by closing?

Or given that their debt is about 20% of their operating budget, did they do the responsible thing by deciding to close in the face of what I assume to be dwindling attendance and fundraising prospects? Why saddle your new business plan with the burden of another year’s accumulated debt?

In the last couple weeks I read an article/blog post that criticizes a non profit board of a YMCA for being oblivious to the state of their failing organization. The article suggested the board should have seen the warning signs had they been paying attention to the financials.

Our partners were clearly paying attention and decided to do what they felt was the responsible course of action. There isn’t really any clear cut formula which dictates that you should close your business when your debt reaches a certain ratio of your budget because there are so many situational variables each organization faces. What one company can recover from may mark the start of a downward spiral for another.

I am curious to know at what point people think organizations need to close. Does seeing other non-profits rack up huge debts before closing or declaring bankruptcy inure us and make organizations more apt to keep operating under the assumption they haven’t reached that point of no return yet?

Stuff To Ponder: Do Foundation Boards Value Non-Profit Values?

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There was an article on the Center for Effective Philanthropy’s (CEP) website in April that I felt started to give me some insight into why it seems that foundations and non profits often aren’t in synch with each other’s needs.

CEP President Phil Buchanan writes about research he and research analyst An-Li Herring did on the backgrounds of the CEOs of the top 100 Foundations. I was actually surprised to find that 60 of 100 came from outside foundations. Of those that came from foundations, only 21 were promoted internally from the foundation ranks. Seven had come from another foundation, four of them were already CEOs of those foundations, three of those four had come from outside philanthropy.

That seems like an exceptionally small number of people with philanthropy experience leading foundations.

The profile of the 60 CEOs from outside foundations broke down like this:

Twenty-seven had experience in the nonprofit sector broadly defined:

Those who ran operating nonprofits (not including institutions of higher education) number 14.

Those whose experience was in higher education, typically as a college president or dean, number 13.

Seventeen came directly from a role in business.

The remaining 16 CEOs who came from outside the world of organized philanthropy had positions in government, law, or other domains.

Since boards and CEOs set the tone and operational philosophy of the foundation, this can have a lot of influence on the manner in which they interact with non profits and the criteria they set for funding. After reading the article, I started to wonder if foundations have contributed to the pressure for non-profits to run themselves more like a business. I have never argued that operational discipline isn’t important for non profits, but they are quite different from for-profit entities.

Some observations Buchanan makes:

Second, foundation boards don’t much value experience at other foundations. Again, perhaps a focus on leadership development within philanthropy will change that, but moving from being a Vice President at Foundation A to CEO of Foundation B happens only very rarely (at least at the largest 100).

Third, experience as a grantee, if you exclude colleges and universities (which I’d argue are a different animal) isn’t much valued by most foundation boards when they’re searching for a CEO. It’s striking that there are more foundation CEOs who came to the position from a job in the corporate world than a job running a nonprofit (again, excluding colleges and universities).
[..]
All that said, I’d still argue that boards might want to prize operating nonprofit experience more highly than they apparently do. Leaders who have experienced the pressure to meet payroll with no endowment to fall back on, and have felt what it’s like to be on the other side of the table from foundations, bring something important. They come to the role with a hard-earned understanding of the challenges of doing the on-the-ground work foundations fund – and of what nonprofits really need from their funders.

After reading these findings, I wondered what it is exactly foundations value in CEOs if it isn’t experience, empathy and knowledge about the sector the foundation serves. Buchanan also makes an “if it ain’t broke” argument in support of foundation boards looking to promote internally rather than introducing a potentially disruptive element.

Having read the piece I am really curious to know if external hires are generally more effective than internal hires or not.

It would also be interesting to learn if non-profits would give the highest marks to their relationships with organizations lead by CEOs with a long career in philanthropy. Likewise, it would be interesting to know if foundations would give the highest marks/most support to non-profits whose practices/values are similar to those of the CEO’s past industry.

Still More On Crowdfunding Start Up Arts Orgs

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If you have been reading my blog regularly over the last few months, you know I have been keeping an eye on the possibility of the crowd funding elements of the recently passed JOBS Act replacing non profit status as a viable method of creating and sustaining an arts organization.

If you haven’t been reading that long, well harken back to my original musings on the subject as well as some more recent musings with links to information on the implications of the law as passed.

Hat tip to Charity Lawyer Blog’s Ellis Carter (whom I have previously incorrectly identified as male. Sorry about that Ellis) for her link to a piece on Startup Company Law Blog about the problems with the law.

Author Joe Wallin confirms many of the general suspicions I had about the costs of compliance probably being overly burdensome given the $1 million limit.

One thing that surprised me was that the law actually prohibits start ups from the “do it yourself” approach which I have always assumed to be a hallmark of start ups.

3) The Law Forces Companies To Use Intermediaries

The law forces startups to use intermediaries to raise the funds. This is fundamentally different from what typically happens with startups. Most startups raise funds without the help of intermediaries. In fact, this is the prevailing norm for startup companies. The typical advice to a startup is–don’t use an intermediary! Founders, do it yourself!

 But here the law forces companies into the arms of either registered broker-dealers or registered funding portals. These entities are subject to numerous requirements, and their compliance with those requirements will make the process much more difficult and costly for companies.

Maybe arts organizations with their bare bones mentality about providing a product might make it work within the restriction, but the whole point of pursuing an alternative to the non profit business model is to adopt an alternative approach and mindset about providing cultural experiences. (a.k.a. ramen isn’t a default food group for artists.) Though it will probably bring it own attendant problems, success might be measured by how diversely arts and cultural organizations manifest after phasing away from non-profit status.

At the end of his post, Wallin suggests Congress go back and make some changes to the law to allow start ups to proliferate more easily. I am sure there is still plenty of opportunity for successful crowd funded start ups within the law. If it isn’t changed before that, perhaps the successes will lend credence to the idea this can be a viable path for entrepreneurs, moreso with a few changes.

In Which I Have A Belated Realization

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The lovely people at my state arts foundation sent me some information about National Endowment programs today that I thought I would share. The first is that there will be a webinar for the Challenge America FastTrack program on April 18. If you are thinking of applying and have questions, sign up!

The second thing I got was a PDF of the Our Town application guidelines webinar. I was interested to see that the program encompassed more than I originally assumed. The focus is on Creative Placemaking which means they are looking to improve quality of life, encourage creativity, support artists and engender a sense of community.

I had assumed they would support arts in public places, creation of arts districts and cultural facilities. I know some projects have included artist housing. I was pleased to learn that they would also support creative entrepreneurship, the development of creative hubs, design of public places and wayfinding systems. I hadn’t realized they were interested in cultivating an entire infrastructure. I guess it shouldn’t surprise me given the NEA is a partner in ArtPlace. There seems to be a desire to re-purpose existing spaces rather than new construction.

As you might imagine, they won’t support anything that doesn’t have arts and culture–and their practitioners–as central elements. At the same time, they also require local government at the city or county level as a partner to the non-profit. A government entity can only submit one proposal, which they define as:

“Eligible local government partners include counties, parishes, cities, towns, villages, federally recognized tribal governments, local arts agencies, local education agencies (school districts), or local government-run community college.”

Soooo….. as I got to finishing this entry, I realized that the deadline for this grant was March 1. I suspect the folks at my state arts organization didn’t realize this either when they sent the information out with a “please share” request. The Our Town link from the NEA home page isn’t working so it wasn’t immediately apparent the deadline had passed. I did find the application information page through other means.

If nothing else, it is a good resource for planning for the next cycle. (Which they indicate there will be.) This year the application window was December 1 to March 1. Unless you already had something in the works with your local government, it would have been a real crunch to get an application together. Let’s face it, few people are really going to be working on a grant application during the Christmas holidays.

Foundation Data Wants To Be Set Free!

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Last week Lucy Bernholz posted a collection of links on Philanthropy 2173. One of these was a video of a talk she gave last June on how the information foundations collect is as important to non-profits as the money they give.

She notes that foundations end up being huge repositories of information about successful activities in our communities and across the nation. In the best scenario, these projects get funded once and then filed away in the archives. In the worst scenario, they just get filed away.

As a result of their granting activities, Bernholz notes, the foundations know a whole lot about whatever their areas of interest are. But because the data hasn’t been aggregated into a usable form, even the foundation may not be aware of just how much they know. She advocates for making that data readily available so that groups can collate the information and make everyone aware of just what exactly is going on, what is needed and what the costs of delivering services are.

Bernholz uses the example of looking at all the requests made to Donors Choose, combined with what foundations are funding and the Race To The Top programs to learn exactly what is happening and needed in classrooms.

According to Bernholz’s post last week, there has been some progress since she gave her talk in using non profit data to help organizations.

To my mind, such transparency would probably also promote much more accurate reporting by non profits. It has been noted that grant reports have a tendency to be idealized. All the goals are met or exceeded and there are no challenges or unforeseen problems causing a deviation from the proposal. A system which files such information away and forgets it perpetuates this practice.

However, if the information is out there and circulating and people are repeatedly contacting you to find out how you designed your programs to achieve such wonderful success, there is greater pressure to have your results more closely reflect reality.

Info You Can Use: Short Term Space Naming

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I apologize for not making an entry as usual last Wednesday. I was deeply involved with a fund raiser that evening. So far we have seen some positive results which I would attribute to a combination of our approach and the environment we created that evening. I thought I would relate some of what we did and maybe some of you might find elements you can use.

As I believe I have mentioned before, we are planning a renovation of our theatre facility. Our development officer was thinking about naming rights for some of the spaces and had an interesting idea.

It is often very difficult for someone to get enough money together to name a space in perpetuity. However, they might be interested in naming a space for five years at a fraction of the cost of a life time naming. Once they had committed to that, they might be more open to the idea of a permanent naming via an estate gift or other method. The arrangement is that the 5 year will go into our donation account for us to use in the short term and the permanent naming will go into an endowment.

After discussing this idea with our leadership, she had lunch with a long time supporter of the theatre to run the idea by him. He was very receptive of the idea.

Our next step was to invite people to a lunch brain storming session about the renovation and how we might support it. Our concept was to float this naming idea but also see if anyone had suggestions to refine it or even replace it with a better idea. Although only a fraction of those invited attended the meeting, those that responded with regrets expressed some excitement for the possible renovation and gratitude at being invited. Those who did attend expressed a fair amount of enthusiasm about our plan.

Next we sent out a letter to the same mailing list telling everyone we had held the meeting, came up with some new ideas and would be holding a campaign kick off event so watch for the invite. We sent off the invite a few weeks later.

We designed the kick off party to play to our strengths. We held the event on the stage which most of our audience and supporter had never been on. We had artist renderings of the renovation and a sample theatre seat for people to sit in. (The people at the brainstorming session actually got to provide feedback on a number of seat samples before the architect had to send them back.)

The musicians were located on the orchestra pit which had been raised to the stage level. To watch the musicians, the audience had to look out toward the empty seating area. In effect, the roles were reversed with the artists in the physical position the audience usually occupied and the audience was on stage which the artists usually occupied.

About a half hour in, at the end of a particular song, a flash mob which had slowly been infiltrating the party started to perform, stomping, singing, banging objects, etc. They moved downstage to perform a song and physically advanced on the audience so that they would move clear from an area of the stage where we intended to perform. (We also instructed the caterers not to circulate with food below that line so that people wouldn’t linger there.)

Some child performers were introduced and got the whole audience (supplemented by some of our flash mob) involved in a call and response. Then they launched into a wild performance singing a rap while fabric was dropped from the ceiling and three aerialists came running out, climbed up and performed. Near the end of the piece, confetti was dropped so it swirled around the aerialists and down on the audience. Staring up at the aerialists, the audience got to witness the use of some theatrical mechanics and techniques they had never seen before.

Then while the energy was up, we talked about the theatre, the renovation and the short term naming plan. We already had a person lined up to sponsor our Green Room for 5 years so we had him speak and presented him with the plaque that will be mounted outside the Green Room.

After that, we distributed information about the naming opportunities and I gave tours of the facility to those who hadn’t really ever seen it. Unfortunately, like a groom at his wedding, I didn’t get to eat any of the food I paid to have served.

However, our efforts have already seen some additional successes. One woman called back to our development officer that evening after she left the party to express interest in sponsoring our lighting booth. Another contacted the development officer this week about the women’s dressing room. I have to credit these events to the donor who sponsored our Green Room as much as anything we did. I don’t doubt that his generosity provided a catalyst for the others.

These short term naming opportunities aren’t really going to be enough to help us with the renovation efforts. Though they can cover buying lobby and green room furniture and various appliances we might need. Not to mention it adds a little to our operating funds. While there is a lot of good energy and interest surrounding the program, my guess is that we will probably need to see a renovation start within the next five years to sustain people’s enthusiasm.

Mini-Granting Is Awesome

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It may just be serendipity (or you know, Google controlling my every life experience) but I keep hearing about this group called the Awesome Foundation. First it was a story about the Seattle chapter and then a few days later, while listening to the radio I discovered a new chapter was opening right here in my city.

The Awesome Foundation concept is sort of a mix between micro-granting and investment clubs. Ten people get together and commit to donating $100 every month. Then they distribute $1000 monthly grants. There isn’t a lengthy application process and you don’t have to be an established charity. If you have an idea and $1000 will help you get to the next step, they want to hear about it.

They draw a distinction between themselves and most granting organizations.

“The Awesome Foundation does high-frequency, low-stakes grant-making. Most grant-making institutions do high-stakes, low-frequency grantmaking. They often think big about initiatives and form multiyear commitments with their grantees. They give quarterly, twice a year, or only once a year. There’s a lot of pressure on everyone involved, from the applicant to the grant winner to the institution’s program officer to the board of directors.

The foundation’s success has to do with the simple formula. It’s not like big charity where the experience of being a donor is that you give money and aren’t sure where it goes. Our trustees know where the money goes. They’re really invested in the success of these small projects.”

This resonated a little with a post Diane Ragsdale recently made about funding decisions on her Jumper blog.

It’s time to start asking ourselves the disruptive questions. Does it make sense to subsidize large resident theatres and not commercial theatres? Does it make sense to subsidize professional theatres and not amateur theatres performing in churches or high school gymnasiums? Does it make sense to subsidize those that are most able to garner patronage from wealthy, culturally elite audiences? […]

We’re rather protectionist in the U.S. nonprofit arts sector because we know, or at least suspect in our gut, that if we start measuring intrinsic impact—testing our assumptions about the impact of the art we make— we might find out that there is greater intrinsic impact from watching an episode of The Wire than going to any kind of live theatre. Or we may find that small-scale productions in churches or coffee shops are just as impactful (or more so) than large-scale professional productions in traditional theatre spaces. Are we prepared, if we find this sort of evidence, to change the way we behave in light of it?

It made me think that programs like Awesome Foundation might contribute to the prototype for a new funding model where funding is directed to more of these smaller scale efforts. This is the sort of thing existing funders probably know they ought to start to do but haven’t found the will and the way to do it. Once small scale funding models like Kickstarter, Kiva and Awesome Foundation reach a critical mass, then it becomes easier for everyone to say that clearly their practices should be shifted in this general direction.

You Don’t Tell Me What To Give, Don’t Tell Me What To Say

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An interesting question was posed to Kelly Kleiman, the Nonprofiteer, about the practice of suggesting donors increase their giving from the previous year. The writer was offended at being told what to give the next year. Kleiman attributes the origins of the practice to universities who, anticipating the increased fortunes of their graduates as the moved along in their careers, asked for slightly greater amounts as the years progressed.

This seems like a great thing and, in fact, is the reason individual giving is such an important source of funds to organizations: while foundations often won’t continue their support unless you do something new and different for every grant, most individuals will just keep on giving unless you affirmatively offend them.

But what you’re saying is that the request for elevated support is just such an affirmative offense.

The problem is that the cost of everything continues to go up, and unless the monetary inflow goes up at the same time the agencies you support will find themselves seriously behind the 8-ball. Perhaps the agencies requesting your increased support would do better if they reminded you of that—”We haven’t been able to give our actors a raise for five years while their rents and grocery bills just keep on rising”—rather than beginning with a flat-out demand that you do more.

I thought the question and answer gave some interesting insight into the whole practice of “upselling” donors from year to year as well providing some guidance about how make the request a little more graciously.

What made me cringe was the second part of the writer’s question/complaint.

“And this year, when, as a board member, I was given the fundraising “ask” letters that were going out under my name to my personal contacts, I felt especially irritated to see the request for a specific additional amount. I would certainly never have written my friends directly with this request.”

Kleiman responds that the writer is within their rights to feel upset that such a request was going out under their name. It put me in mind of a piece from the Non-Profit Quarterly I wrote on this summer. The author, Simone Joyaux, referred to the practice of having board members solicit donations from family and friends ,as trespassing. She claims it leverages personal relationships rather than an interest in a cause and ends up alienating both the board member and their friends.

Joyaux noted that giving based on trespassing is generally shallow and not likely to persist after the board member has transitioned away from the organization. Unless, of course, the person solicited is genuinely interested in the organization’s cause. In which case it is better to have conversations and identify that interest initially rather than blindly solicit everyone in a board member’s address book.

This post title inspired by Lesley Gore

[youtube http://www.youtube.com/watch?v=zaw1ibwVbPI&w=640&h=360]

Try Ask

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I try a fair number of the strategies/techniques that I cover here. Some work better than others. For example, for the last seven performances we have tried just asking two questions in our surveys, one fun question and one that we really want to know about from our audience. Even with the ability to answer on a hard copy or text your answer, we haven’t gotten a lot of participation.

Except the night this past weekend when we were participating in an Americans for the Arts survey. Strangely, participation in our 2 question survey went up a little when people were faced with filling out a multi-question survey.

We also didn’t get the response I expected for a recent tweet seats program even though it was circulated a fair bit via social media. Though since this was a trial program, the small number of participants suited me fine and the experience will allow us to refine our approach.

In any case, I am sometimes skeptical about how much input and participation we might get from our community with other endeavors. So I was a little surprised and very pleased by the response we received for space naming meeting were recently had. As part of a renovation we hope to undergo, we have been trying to find a new approach to facility and space naming campaigns so we hosted a brainstorming meeting.

Recalling Andrew McIntyre’s assertion that people who are emotionally invested in your organization might only be visiting you in 2-3 year intervals, we invited people who had either donated or purchased tickets to multiple shows over a 3-4 year period. That yielded about 450 names after purging duplicates. We followed up a letter with a reminder email.

While only about 15 people attended the informal lunch meeting, there were about five times as many people expressing pretty heartfelt regrets saying they were honored to be invited and wishing they could be there. We even received some donations though we didn’t ask for any money.

I was really rather surprised at how many people seemed interested in investing more time and effort to provide feedback than would be required for a paper survey. I am sure the fact the purpose of our communication was to give them something (lunch) in return for their participation rather than asking them to pay to participate (season brochure, email newsletter) probably had a positive impact. Perhaps knowing they could participate in a dialogue rather than in the unidirectional conversation of a survey was a factor in their willingness to come to the meeting.

In any case, it was a very constructive experience for us, especially since I had never spoken face to face with 90% of those who attended. We were hearing from a number of new voices. The meeting also ran about an hour longer than we had planned due to the length of the conversations.

I am significantly less skeptical about the prospect of people’s willingness to participate and become invested with us. None of these people may participate in our space naming campaign, but my encounter with them has left me energized and excited. My advice to others who may not believe there is a lot of interest and investment in their programs based on survey response rates is to give a brainstorming type meeting a try. Like us, your attendance to invitees ratio may be fairly low, but you may gain unsought benefits.

(The title of this entry is a Hawaiian pidgin/creole phrase)

It’s Not A Genius Grant. It Might Actually Be Much Better

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I just got around to reading up on some of the new granting program initiatives the Doris Duke Charitable Foundation has recently announced.

In the interests of correction right from the start- Contrary to what I retweeted last week, the Doris Duke Leading Artists program is not their version of the MacArthur genius grants. Program director Ben Cameron explicitly makes that point. Sorry about that.

There were a number of things Cameron wrote that I was pleased to see a major foundation acknowledging (my emphasis):

Does project support force an artist to follow through with the production of a work that may be, after exploration, of less interest or less feasible than originally envisioned? Do regrant programs by their very nature favor projects that can garner consenus from a panel (a sort of comfortable middle) and disadvantage less conventional, more extreme or riskier work that an artist might wish to do? How can programs encourage more artistic risk while still acknowledging and supporting “failure” or “dead ends” that can be celebrated for their lessons, without necessitating further investment of production resources? With so many grants offered at nominal levels, how can an artist piece together a life of economic dignity? And now, with so many artists approaching their latter years, financially unprepared for retirement, have we been derelict in not supporting longer-term artist life needs and more aggressively helping artists prepare for this phase of life?

In an earlier paragraph, he acknowledges that foundations often establish long term relationships with organizations, but infrequently with artists, even those who are well established. In a later section, he refers to the amount of gratitude artists exhibited upon receiving an additional $10,000 no strings attached grant as “frankly, depressing in the knowledge that an unrestricted grant of $10,000 could be both so extraordinary and so life-changing for so many.”

One of the problems that I and other blogs have frequently discussed is that grantees often feel like they have to report everything turned out as good, if not better than anticipated in the grant proposal. If only grants did have the magical power to contravene the effects of real life, they wouldn’t be needed as frequently and in as large sums as they are. I was pleased to see a funder say they realized what the reality was. Overall, I was happy to see that they had decided to make a commitment to bolstering support to artists into their retirement.

The only thing that gave me pause was that the foundation decided to select recipients of support in their Doris Duke Leading Artists program from the pool of past grantees. Given that they had started to wonder whether their past selection process might reward mediocrity over risk taking, it seemed a slightly flawed approach. But honestly, there isn’t much alternative to deciding to how to make the awards. Besides, Cameron never suggests that the artists being awarded grants might be lacking in talent, only that the granting process encouraged highly talented people to moderate their ambitions.

The Leading Artist program is the one that most excites me, even though I won’t be remotely eligible. Even though the grant is for less money and there are more requirements for how it is used than the MacArthur genius grant, my claim that it might be much better stems from the potential change it represents in the approach to supporting artists. If successful, this program might become a model for other funders much as the programs of other foundations have provided the inspiration for the three that Cameron introduces.

It may also engender the idea that a healthy artistic practice involves some investment in one’s work, some effort in audience development and some investment toward retirement. (my emphasis)

“Recipients will receive an unrestricted grant of $225,000 over a three to five year period—a schedule to be determined by the artist recipient. An additional $25,000 will be available to the artist specifically to support work around audience connections or development. And a final $25,000 (which must, however, be matched by the artist) will be available for retirement purposes, bringing DDCF’s potential investment to $275,000 per artist.

We’d like to make clear that there are things these grants are not: They are not life-time achievement awards. They are also not “genius” grants, nor are they project grants. They are investment grants, designed to offer support with minimal administrative burden to exemplary professional artists who are dedicated to work in the nonprofit sector and with maximum flexibility and empowerment for the grantees.”

The second program is Doris Duke Performing Arts Fellows “these awards acknowledge that there are artists who have yet to achieve the same level of recognition as their colleagues in the Leading Artist category, but who nonetheless might have significant impact on their fields.” These people will be chosen by anonymous nomination with 20 grants awarded annually for each of the next five years. The awards are scaled down in both time and amount, but are meant to be used for the same purposes – creation, audience connections and retirement.

The third program is somewhat intriguing to me as well. Doris Duke Artist Residencies is meant to address a perceived adversarial relationship between artists and arts organizations by providing funding to essentially find a better way to do things.

“…All of these organizations can create residencies for artists, not only from within their fields but for artists from outside their disciplines. While a theater can clearly request support for a playwright or actor, a dance company can request a dancer or choreographer, and a jazz organization can request a musician, a theatre could instead request a dancer, a dance company could request a playwright, or a jazz organization could request a videographer. This flexibility allows for the possibility of important, cross-disciplinary learning.

…Ours is instead about supporting a partnership between an artist who wishes to explore and reimagine institutional life and behavior, and an organization willing to open itself to that exploration. It is also about reimagining how an organization and an artist connect to their community and supporting a pilot effort to behave in new ways. And, they are about the creative engagement of audiences in ways which give the organization and artist an equal stake.

As such, we recognize that these residencies will not be of interest to everyone. Those looking for a traditional artist in residency program will inevitably be disappointed that this initiative does not support those efforts, even while we support them through other initiatives in our grant portfolio.”

What I appreciate about this program is that it appears to be trying to give artists and organizations some breathing room and security to experiment as partners some new ways to engage audiences. This program will be open to applications some time in Spring 2012.

Crowdfunding Become Crowdinvesting?

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In the “stuff you aren’t supposed to do” theme of yesterday’s post, is a piece from Slate about legal restrictions on crowd funding.

While thousands of people can donate to your cause via sites like Kickstarter, SEC rules prevent those same people from investing in your company. If you figure people will donate to people in return for tshirts or other small thank you gifts/services, there is probably a fair bit of potential in getting people to invest in the same project with the possibility of financial return. But the rules say no way.

“Under current law, that is often illegal. A longtime Securities and Exchange Commission rule, designed to protect unsophisticated investors, limits the number of stakeholders certain private companies can have. If you hit 500, you often have to go public. That means opening your books to additional scrutiny and your business to the whims of the market. And being public is just not a feasible option for a tiny business looking for start-up funding. Thus, an artist can receive thousands of $5 donations on a site like Kickstarter, but an incorporated farmer cannot accept investments from thousands of interested small-timers.”

These are some of the same rules that govern investing in Broadway shows and are meant to prevent people from losing large amounts of money because they were not entirely aware of the risks of investing. There is certainly some wisdom in having them.

There are some moves to change this situation. President Obama included such a revision in his American Jobs Act. Even though the act failed to pass, the basic idea has bi-partisan support and some law makers are asking the SEC to change the rules. One petition to the SEC asks for an exemption for investments made in $100 increments as a way to prevent people from losing their life savings. Given that the exemption would mean less oversight of the activities, there is good potential for unscrupulous operators to take the money and run.

Laura Horton at the Legality website has a post that discusses all the legal issues and the efforts to change the rules at length. She reports that the legislation being introduced in Congress, (as opposed to the petition for a rule change to the SEC), would allow a business to raise “$5 million in capital, with a limit on individual investments of the lesser of $10,000 or ten percent of an individual investor’s income.” Horton notes that these companies would be exempt from some of the usual reporting. Hopefully at $10,000 a person, they wouldn’t be exempt from as much as a company getting funded $100 at a time.

Crowd funding at these levels could open the doors for a lot of possibilities, including starting an arts related business. This model might provide a viable alternative to the non-profit structure. It could provide the tools to not only to get an organization started, but also to sustain it over time.

As for how fraud will be prevented, Horton says,

“those in favor of crowdfunding find that investor protection rests on a fundamental aspect of this financing, opening it to lots of people for investment. This “crowd” aspect creates transparency, which may temper the effects of deregulation. There is also a stronger sense of community support through this style of investing. Crowdfunding makes venture capital accessible to small-scale business owners.”

I have to confess some skepticism about this approach being viable in the long run. A crowd can provide good oversight in a small geographic community or when it is performed by investing clubs who meet to research and decide who to fund. My suspicion is that if this type of investment is going to reach any sort of scale, people are going to be doing it over the internet and will rely on Amazon.com type reviews to make their decisions. Presumably, the rating mechanism will be a little more rigorous and have better protections against those who might try to game the system than most online rating websites. It is still likely the system will still be vulnerable to some degree of subversion.

But who knows, it may create a burgeoning industry of companies who meet those soliciting funding and perform objective evaluations and audits. They could post all their findings online accompanied by video interviews, photos of operations, etc for investors to use in their deliberations.

Are We Being Nudged Toward Partnerships

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I have started to wonder if there is going to be an increased emphasis on partnerships and perhaps even mergers in the non-profit arts. I often read about mergers by non-profits outside of the arts. Although the presenters consortium upon whose board I sit is in the middle of conducting a merger with a sister organization, I don’t hear about arts organizations doing it that often.

However, the Mid-Atlantic Arts Foundation has recently announced a new granting program, Southern Exposure, which will support the presentation of artists from Central and South America. (By the way, you don’t have to be located in the Mid-Atlantic States to apply.)

Most of the program isn’t outside of what you might expect of such a program except that it will “support projects that are developed collaboratively by presenter consortia based in the United States and its territories and ensure that engagements take place in at least three different cities or towns.”

The Western State Arts Federation (WESTAF) used to have a similar program termed “hub grants” as part of its TourWest grant program up until a few years ago. From what I have heard (which may not be accurate) they discontinued it because of lack of wide spread participation. (We actually participated in a couple years.) But now that times are financially a little tighter, will arts organizations on a national level be more amenable to partnering?

But really, back to my original question of whether a trend might be developing in which organizations are encouraged to partner. One cause of my speculation is that this summer I saw a grant program sponsored by the National Endowment for the Humanities for community colleges that required recipients to involve up to 12 other campuses.

Looking at the Mid-Atlantic Arts Foundation website, there are signs that they might be going in the direction of encouraging arts organizations to partner more often.

“Over the last five years, MAAF has built a core of program initiatives designed to address specific issues of regional arts support. The work of the Foundation has been focused on:
[…]
-Developing an infrastructure for touring and presenting
-Making connections beyond the region
-Developing partnerships
-Strengthening existing networks
[…]
-Exploring sub-regional initiatives and collaborations with subsets of MAAF state members
[…]
“

Now granted, the Southern Exposure initiative might have just fit their pre-existing efforts. Given that it does fit into their plans, if Southern Exposure proves successful, they may start to encourage similar collaborations more often.

Hawaii has an active presenting consortia (as do our brethren in the 49th, Alaska) so we are thrilled because this program plays to our strength. Plus, there is a project involving a group from South America we have been kicking around for a couple years. I will be the first to admit, this sort of cooperation isn’t easy to arrange and manage. It helps to have a little incentive. It would be great to see other groups adopt this practice. (Especially if you want to bring me out to consult with you! 😉 )

Possible To Cultivate New Funders Motivated By New Mandates?

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You may have read about the report the National Committee for Responsive Philanthropy released at the Grantmakers in the Arts conference noting the disparity in foundation support for arts organizations.

According to the report,

“the largest arts organizations with budgets exceeding $5 million represent only 2 percent of the nonprofit arts and culture sector. Yet those groups received 55 percent of foundation funding for the arts in 2009. Only 10 percent of arts funding was explicitly meant to benefit underserved populations.”

Most of this money is going to large organizations patronized by a shrinking wealthy white audience during a time when people are orienting toward community based arts groups.

As I read this, I recalled Scott Walters’ discussion of the difficulty his small arts organization had meeting the deadlines for the Our Town grant process and the questions he raised about the appropriateness of the criteria being employed. I suspect there is something of a feedback loop inherent to foundation grant programs in that they are structured to the needs of the organizations they serve and those they serve tend to be organizations with the resources to meet the criteria of the grant programs.

Foundations may have to expand the number and types of organizations they serve, as the report suggests. But I strongly suspect they will have to also institute changes in their process to better accommodate those with fewer resources than those with whom they currently deal. Otherwise, they probably won’t have very strong participation from a larger, more diverse group.

Of course, most foundations, whether they have an arts focus or not, were set up to serve the interests of their founders. It appears that this has been rather successful. The greatest success in securing support for under served populations may end up being best realized by cultivating/encouraging individuals and groups from those communities to develop their own funding structures whether it is foundations or cultural hui.

The article mentions that current funding practices originated in an 19th century need to prove America was on par with Europe culturally. That need has passed and a new set of practices based on different motivations are required. Existing foundations may end up doing a lot of good after shifting their priorities, but in attempting to overlay new priorities on their founding purpose they may never be as effective as organizations that structure their approach around a mandate to support the arts and culture of under serve communities from day one.

Cultivating a sustained culture of support in areas where it is not currently practiced won’t happen overnight, but aided by technology it may not require 100 years to take root either.

Will Buffet Family Foundation Influence Other Funders?

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Non-Profit Quarterly linked to an interview in Fast Company in which Warren Buffet’s grandson talks about his approach to philanthropy as he takes up the reins of the family foundation.

As I read the interview, I vacillated between mild dread where I hoped no one else decided to adopt the approach and feeling that his approach was sensible and might provide leadership that would strengthen the general non-profit infrastructure in the United States.

What made me most uneasy was his focus on quantity over quality.

“The first question, for instance, is “Assuming we are successful, how many people would we reach directly with the funding of this gift?” Proposals gets 3 points for affecting +1 million people, 2 for greater than 100,000, and 1 for less than 100,000. Those proposals with a less ambitious scope can secure a coveted spot on the portfolio team by being particularly unique or cost-efficient.”

While he does allow for funding of smaller efficient and effective organizations, I just wonder if that will get lost in the desire to report numbers served and therefore reinforce the idea that you have fudge numbers and always report success or lose funding.

Where this is coming from for him is wanting to get away from non-profits making emotional appeals and move toward discussing the complex factors which contribute to the problems the non-profit is trying to address.

“In the philanthropic world, the problem is the product, in the business world, the product is the solution.” says Buffett, who argues that NGOs are forced to “sell suffering.” The needless focus on sappy narratives often overlooks sophisticated solutions that can’t be easily marketed with a T-shirt-clad celebrity holding a small child.”

This is where I feel he is most sensible because he is determined to fund every step in the chain to addressing a problem, including the unsexy areas. But to do that, he wants the redundant organizations to either get out of the business, partner with other groups or refocus themselves.

“…rather than dolling out cash to independent, uncoordinated actors with the most heart-string-tugging story, they could take on an entire social problems (like food security or breast cancer) by systematically lining up nonprofits to tackle each part of the causal chain, from federal policy to victim resources.

“If you are an NGO, doing the exact same thing as another NGO, and that other NGO is doing better than you’re doing it, then you are in business for the wrong reason,” Buffett says in an exasperated rant against the individualist nature of charities. Overlapping operations, he says, not only waste money through redundant overhead, but keep brilliant minds occupied with logistical distractions that sap their potential impact.

“We will give you money to execute your mission,” Buffett says, “if you work together and identify the most cost-effective and successful ways to achieve that.”

Meanwhile, looking at the entire causal chain of a crisis is key to revealing missing links in the solution, such as political or logistical hurdles that are essential to success, but not appealing enough to raise dollars.”

Granted, the focus of the foundation he is leading is on agriculture, water and feeding school children rather than arts and culture. However, the practices of a Buffet family foundation is bound to have widespread influence with funders in other areas. It is possible that other foundations may use the same criteria.

Given that the question about whether there are too many arts organizations in existence has been a hot topic of late, it is conceivable that funders are already thinking along these lines.

So let me ask-

-how many arts organizations would seriously discuss merging or refocusing if a major funder told them they were redunant and less effective than another organization?

-how many might consider abandoning major activities that were redundant if the funder offered major support to expand in their areas of strength?

-would the arts in your community be more vibrant if there were groups that focused specifically on different niches within the chain? Such as:

-organization that handed advocacy for the arts with local government
-organization that focused on advocacy for the arts in education in conjunction with other advocacy groups
-organizations that purely perform
-organization that coordinates outreaches to schools by designing programs that emphasize the strengths of the performance and presenting groups

There are more functions that different groups might handle, of course, but this serves as a good example. You might look at this and think about how difficult it would be with all these tasks so decentralized, but think about how more schools would benefit if there was an organization that was making an effort to provide uniform coverage of your entire city/county. How much easier would it be for artists to make a living in the community if there was an organization that was hiring them to do outreaches in schools or connecting artists with students seeking instruction.

All this in an environment made conducive for these activities by groups who solely focused on influencing law and policy in government and school boards. Their advocacy is made credible by the existence of organizations who attract and employ strong performers and other organizations who develop exemplary education/outreach programs and train the artists to execute them effectively.

This approach may decentralize efforts and require a lot of cooperation between different groups, but does improve on the current situation where everyone does a little of everything with different degrees of success provided they have the funding and personnel.  As Howard Buffet acknowledges, there is a lot of unsexy infrastructure that no one really wants to fund that is crucial to the success of non-profit efforts. What a boon it would be if someone would fund all those places at a level smart people would be willing to engage in the work.

Info You Can Use: Tools To Chart Your Organizational Impact

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A partnership of GuideStar USA, Independent Sector and BBB Wise Giving Alliance has created a free online tool, Charting Impact, which non-profits and foundations can use to assess themselves and help in “telling the story of your progress in an accessible, concise way. People want to help you make a difference – through donations, volunteering, and more – but often struggle to find a succinct, consistent resource that clarifies what nonprofits want to achieve and what they have already accomplished.”

The process has participants answer five questions about their organization to help gauge where they stand. Completing the report is meant to complement rather than replace program reviews and strategic planning. The final assessments appear on the site which is intended to be a central resource for those wishing to support a non-profit to obtain more information and assure themselves that the organization has a self-evaluative process in place.

One thing I found very interesting upon viewing some of the sample reports is that the process involves a CEO review, a Board review and a Stakeholder review and informs the reader if those groups have read and signed off on the report. Though the organization can manipulate the results by providing the contact information for stakeholders they know will never be critical of them, the anonymity afforded the reviewers provides an opportunity for the organization to receive some valuable feedback about themselves.

Charting Impact is still pretty new so there aren’t a lot of people who have completed the process. It will be interesting to see how prevalent its use as a resource will be. It already integrates some of the information on organizations GuideStar collects and fulfills a part of BBB Wise Giving Alliance’s charity certification process. If the process is viewed as credible, there is a potential that foundations and funders may require organizations to engage in it to receive a certain level of funding.

It would be unfortunate if Charting Impact became too much a gold standard that individuals wouldn’t make even small donations to organizations that hadn’t engaged in this introspection. I don’t necessarily see that happening any time soon. It would be nice amid all the stories we read about excessive salaries for non-profit executives and mismanagement and corruption to have a measure that provided the general public with confidence about organizational effectiveness.

Late To The Confession

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I have only just gotten around to following up on my bookmark of John Killacky’s Regrets of A Former Arts Funder. If you hadn’t read it when it came out in late June, Killacky reflects on some of the practices he engaged in when he was a program officer at the San Francisco Foundation.

Most of his regrets focus on how he and other funders provided support to culturally specific organizations. Among the problems he identifies was the creation of a two tiered funding model that had different criteria and funding levels. It ultimately was not constructive for those organizations relegated to the second tier and tended to perpetuate and reward mediocrity on the first tier (or at least provide no incentive for taking chances). In fact, he also acknowledged, much as Scott Walters recently noted, that grant panels frequently employ evaluative criteria that punishes projects where success is not clearly assured.

I was intrigued by his suggestion that foundations adopt an approach more akin to that of venture capitalists (though not surprising given he worked near Silicon Valley, the VC capital of the nation)

“Maybe philanthropy should have taken a page from venture capitalists’ playbooks, investing more deeply at a significant level over a five- to eight-year time frame, as well as offering a range of non-cash, value-added assistance by sitting on boards, mentoring, and coaching of senior managers, in addition to artistic support. This is not hands-off, outsourced grantmaking. Focus on the triple bottom line and then get out!”

and later

When setting up these programs, I reminded the trustees that not all projects would come to fruition. For many venture capitalists, there is a rule of thumb regarding start-up investing. It suggests that on 1/3 of your investments you will lose all of your investment. On another 1/3 you may make or lose a little. The other 1/3 is where you make your money, and one or two is probably where the bulk of the return is. Unfortunately, this kind of risk-taking would seem foolhardy to funders.

I thought the second paragraph apropos to my posts of the last two days about admitting the arts experience can be disappointing.

One of the commenters to Killacky’s piece expressed concerns about the first paragraph I cited. The idea that foundation officers might come in to an organization that did not serve a traditional arts audience and tell them how they should be doing things seemed to strike the commenter as being even more detrimental than poorly funding the group.

This isn’t an unfounded concern. Venture capitalists often impose their own hand picked management teams on businesses in which they choose to invest and make demands about the way the company should be run. Depending on how it is handled, it either be a constructive or traumatic experience for the start-up that wooed VC support.

Foundations would presumably be entering a relationship with a fledgling arts organizations without the same sort of profit-driven motivation, but could still end up stifling the creative spark with too heavy handed an approach. The feeling that any attention is better than no attention being the stuff on which abusive relationships are made, arts organizations may bow to the demands of foundation officers, grateful that at least they can depend on their support over a number of years.

But obviously it can be a constructive situation for both entities if approached in a careful and deliberate manner. Being that intimately involved with an organization can give a foundation a much clearer picture about the needs and challenges faced by the sector they support than the sugar coated final reports they are getting and allow them to respond accordingly.

If foundations provide technical support and mentors over many years in the form of other working professionals rather than out of their own staff, the foundation can help arts organizations form support networks which will persist after their direct involvement ceases. As they share the fruits of their experience and own best practices, the mentors in turn can gain a deeper view of how different arts organizations operate than interactions at conferences and meetings can afford them.

Funding The In Between Places

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Scott Walters over at Theatre Ideas has been looking at how the National Endowment for the Arts distributed funds for its “Our Town” grant program. In the last three posts on the topic, he has been critical of the way the granting process is structured and executed, perceiving a surprising bias against rural communities given that it takes its name from Thornton Wilder’s play set in a rural location.

Scott’s initial criticism sort of deflated my sails when, by his criteria, the award to the Wallkill River School, Inc. in Orange County, NY where I grew up was not being made to a rural arts organization given the population of the county. I was excited to see that their project whose purpose is “To support the development of economic strategies for long-term, sustainable partnerships between the arts and agriculture in Orange County,” was funded.

I have to concede that the population has increased quite a bit since I was growing up and its psychological distance from New York City has diminished since then. (Though it still qualifies as “way upstate” in minds of NYC residents.)

I was also happy to see that the Trey McIntyre Project (TMP), headquartered in Boise, ID had gotten a grant. (Full disclosure, we will be presenting the dance company in Spring 2012.) Though it isn’t rural per se, Boise qualifies as fly over country in many people’s minds. I have found Trey McIntyre’s decision to locate there rather than NY, Chicago or L.A. to be commendable—and so has the population of Boise who treat them like celebrities. The group has made great efforts to expand the concept of a dance company’s place in the community by appearing anywhere and everywhere from flash mob like performances to dancing at the local NBA farm team games to creating their own art installation in a hotel room (forward to 3:30 to hear McIntyre talk about the installation)

I was also very happy to see a local burgeoning effort in support of Hawaiian culture was funded as well. I can probably devote an entry explaining how valuable this award is going to be in planting seeds for greater things.

All this being said, I felt Walters did a credible job in his entry today arguing that many elements of the application and review process placed rural arts organizations at a disadvantage.

As Walters acknowledge in his analysis on Monday, the NEA did make an attempt to enlist the participation of arts centers in rural areas and didn’t receive a very strong response. However, in reviewing the comments on his failed grant application, Walter notes that the criteria being used to evaluate his application wasn’t appropriate for the project he was proposing.

“When I consulted the NEA as to why my own “Our Town” grant was not funded, the notes from the review committee focused on excellence: WHO is going to be providing the art, and what are their credentials? Notice that my proposal was for a participatory arts program, and so the artists would be members of the community, not imported “professionals” from outside the community. Participatory arts, as the NEA knows from having recently published it own studies on the subject, is about enhancing the creativity of the citizenry. Credentials and press coverage are irrelevant.”

He also notes that since rural arts organizations don’t have large staffs, the three weeks notice they were given between being invited to apply and the deadline was barely enough time to compose a proposal. When they made it past the first stage, they were given only a month to assemble a complete proposal, an immense task given the length of the application and the limited staff with which to do it. These small staffs may also lack the experience and advisers to guide them in infusing the grants with the polish that granters like the NEA have come to expect.

I actually faced a similar situation here. A grant program sponsored by the National Endowment for the Humanities specifically focused on community colleges was announced in June with a deadline in August. One of the things they are looking for is involving up to 12 other colleges in a partnership. So not only do you need to try to assemble a work group of professors and administrators on your own campus during the summer after everyone has scattered to the winds, you have to get buy in from the same nearly non-existent groups on other campuses as well!

Via the citation of a comment by Ian David Moss, Walters wonders if the NEA is suited and equipt to directly pursue its mandate of geographically diverse funding. He discards Moss’ idea of directing more funding to trusted partners in rural states and letting them make decisions in favor of asking the NEA to become more accountable by cultivating stronger relationships with organization that work closely with rural arts groups and making a better effort to recruit people with an understanding of rural arts operations to serve on grant review panels.

While I disagree with Walters’ criteria about what constitutes rural, I am generally with him about the need to make the grant process more accessible to arts organizations in small communities. A decade ago, heck, even 5 years ago, I would have said the NEA faced an immense task trying to identify and reach out to rural organizations. But with email and social media, it is fairly easy to create focused email lists and Twitter feeds with which to deliver information to these groups.

It is just a matter of enlisting the rural arts service organizations that provide support to these groups to assist them in making them aware of the channels the NEA will be using to communicate with them. As Walters suggests, a time table and structure that recognizes both the limitations and different array of opportunities specific to rural arts organizations. Given how few organizations applied, even an increase of participation by a handful of groups will allow the NEA to claim a many fold percent growth in rural program support.

Trespassing Won’t Make You Many Friends

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The Non Profit Quarterly had a piece by Simone Joyaux which I suspect reflects what will be the necessary practice in fund raising for the future.

She asks fund raisers to stop asking their board members to trespass on their family and friends.

Trespassing is when you ask your friends or colleagues to give gifts and buy tickets . . . just because they are your friends and colleagues. This is the personal and professional favor exchange. This is obligation to a person rather than a cause. It’s a lousy way to raise money. It’s offensive. It alienates the asker and the askee. And it’s not sustainable.

[…]

How often have you, as a fundraiser, asked your board members to name names? How often have you asked them to bring in a list? Did you ask your board members to write notes on the letters that you planned to send to their list?

I say again, trespassing is a bad idea. It alienates board members. It alienates the friends and colleagues of board members. It doesn’t produce loyal donors or sustainable gifts.

Joyaux advises asking board members to suggest those they believe might be interested in supporting one’s organization and then inviting them to learn more about the organization. In the process of interacting with these people, one can gauge whether they are interested in what the organization does and perhaps what specific manifestation of the mission they may be disposed to supporting. From there you can work on cultivating a relationship with them that may see them more involved with the organization.

This suggestion isn’t terribly earth shattering or new. I have heard Kennedy Center President Michael Kaiser say this is essentially what he does to garner support for the organizations he leads. When I first heard him speak about how he evaluates what people may be interested in and only really approaches them in relation to their interests, it seemed a less daunting and more considerate approach than soliciting everyone for every cause, even though it is much more time consuming.

As Joyaux notes, existing supporters like board members are probably going to be more comfortable implementing an organizational relationship building approach. After all, they invested the time to develop their personal relationships with friends and colleagues. While they may be willing to donate the fruits of that investment to their favorite non-profit, those relationships were built on entirely different circumstances which may not be entirely compatible with a request for support of a non-profit.

Now that social media allows people to be approached for their support every time they turn on a computer or pick up the phone, it is likely that only those organizations that take the time to cultivate a relationship with people will earn sustained support.

Not that social media won’t be a good tool for keeping people engaged with the organization’s work. It may just not be the strongest method for the organization and individual to gain a good mutual understanding and appreciation of each other’s priorities.

N.B. My apologies. Some how I ended up omitting the link to Joyaux’s piece when I first posted this entry.

Info You Can Use: Speak Passionately, Persuasively…and Briefly

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I love it when, in the course of a few minutes, I come across different web pages that seem to go together like chocolate and peanut butter in a Reese Peanut Butter cup.

In this instance one link was provided by Drew McManus who noted Harvard Business School’s “Elevator Pitch Generator.” Based on the old scenario that you might get lucky enough to gain access to a powerful decision maker in a place away from their gatekeeper staff like an elevator, enterprising people are encouraged to find a way to talk about their idea or business in a compelling way in under a minute. The pitch generator coaches you through the process of formulating that pitch.

After answering who you are, what you do to bring value, why you are unique in delivering value, what your immediate goals are and how the listener is involved in those goals, the generator analyzes the pitch. The generator tells you your word count, how long it might take to deliver it and notes how many times you repeated words. You have the opportunity to revise your pitch or email/print it off for use.

The second web page I came across (I apologize for not properly noting the source of the link) was on Katya’s Non-Profit Marketing Blog. Katya Andresen references Charles Green’s Trust-Based Selling where he talks about the six toughest questions customers ask sales people.

Katya uses this to create the 5 Toughest Questions Donors Will Ask:

1. Why should we choose to donate to your organization?
2. What makes your organization different?
3. What experience do you have?
4. We aren’t interested, why should we pay attention to you?
5. Why is your overhead so high?

She provides suggested answers to each and acknowledges there may be more toughest questions to add by asking readers what tough questions they have been asked.

The response I liked the best was to the last one, probably because it was expounded up at length in a separate blog post of its own.

“This is not about salaries. This isn’t about overhead. It’s about your heroic staff, creating amazing arts programs that transform the people you touch. The end results of your efforts is the story you tell in your fundraising pitch. That’s not self-serving! Your CEO talking about the lives you change is not self-promotion—it’s the beating heart of your mission. Say it loud and proud.

If I were at your arts organization, I’d tell an incredible story about one child touched by a single performance. And I’d say what made it possible was my small, dedicated team. With a donor’s support, more of that magic can happen.

You raise money by talking about the impact of your work—not about budget line items. If a donor demands to see the numbers and asks about pay, tell a great story about one of your staff to illustrate my point: that nothing wonderful happens without a creative, committed team. (I assume your staff isn’t being paid $1 million a piece—that’s something I can’t spin.)

The bottom line: Don’t be afraid of talking about your people. They aren’t overhead – they are change agents. If they do great work, put them front and center in your stories of transformation. To use a theater term, they deserve center stage.”

There is so much focus on minimization of overhead as a measure of a non-profits success, mostly brought on by a very small number of charities paying executives a great deal of money, that it is helpful to have a little guidance on the subject. Mostly, she is reminding us that it is the work that really matters and that is what should be talked about. Saying we need to pay a liveable wage to retain talented people may sound too similar to the arguments banks make that they need to pay big bonuses to retain the top talent for people to make a distinction. It is probably better to focus on the fact you are employing people who bring both talent and passion to effect change and follow Katya’s advice not to focus on the money.

It seems to me that you can use the elevator pitch generator to hone how you talk about your organization, especially to donors. Talking about how people have been affected may need to take longer than a minute to be properly persuasive. But while you don’t want to gloss over a compelling anecdote in order to tell the story of your organization in under a minute, what is said still needs to be lean and to the point.

Ford’s Fresh Angle On The Arts

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One of the activities the Ford Foundation is engaging in as part of their celebration of 75 years is a series of forums focused on issues of social justice. The first of these, held on May 4 had an arts focus. I have been watching the videos of the sessions on the site and still have a few more to go but I wanted to reflect on what I have seen. The event utilized Cover It Live to aggregate the observations of the social media people who were present so you can review their record of the proceedings as well.

In the lunch time discussion between NEA chair Rocco Landesman and former NY Times journalist, Frank Rich, called “Roccing Out: A Lunch Conversation” (sorry, no direct link you will have to scroll down the page), they went over a number of issues, including Landesman’s now famous comments about supply of arts exceeding demand. What I found most interesting was Landesman’s discussion of his efforts to create a private-public partnership between the NEA and private foundations to better serve the arts constituencies.

I found myself wondering if the association would constrict private foundations’ vision toward that of the U.S. government since they are obviously an influential player or if the NEA’s vision would broaden to more encompass the myriad aims of the private funders. I could see the NEA funding possibly expanding as its chair goes before Congress to mention that influential foundation X was bringing Y amount to their partnership. Or it could backfire and Congress could decide it only proved there was plenty of private money out there. Though if GE and oil companies can make billions, not pay taxes and still receive subsidies, there has to be a way to successfully frame the argument.

Landesmann also discussed how he is trying to work with other departments of the federal government to get them to emphasize and use the arts in their programs. He described his efforts as being the coo-coo bird who lays his eggs in other bird’s nests for them to raise since they have more resources than he does. Two examples he used were aligning the arts with transportation projects and housing and urban development.

The other session I watched was “Sharing the Stage: Globalization and Cultural Might.” The thing that grabbed me was the discussion of how construction of arts and cultural centers were seen by countries as a symbol of having made it. Having such buildings were seen as conferring credibility as an accomplished, modern culture and society upon the country. The problem is that some countries haven’t thought about actually inhabiting the buildings with art.

Michael Kaiser of the Kennedy Center talks about traveling to Riyadh, Saudi Arabia and walking around a magnificent art center located far from the population that has never really had any performances in its 15 years of existence. He mentioned another large facility being constructed in the same country where they have projected no operating costs because it will be run entirely by volunteers. Vishakha N. Desai, President of the Asia Society, mentioned that China has plans for building hundreds of museums, but when she asked the mayor of Shanghai what would be put in them, she was told they would figure that out.

The point they were making was that there was something of a misunderstanding in governments in whether the value in art resided in the buildings or the artists. There was some discussion, especially when they opened up the floor for questions and comments, about the importance of having places to exhibit and perform work as well as to train managers to properly empower and enable the work of artists.

My first reaction to this talk about the building bringing prestige was the thought that this is what comes of promoting the economic value of the arts. This came mostly as a result of thinking about all the money and resources that went into the construction. I soon realized though that what the governments really sought was not the tangible value, but to trumpet the intangible value of their country’s culture. They have world class facilities in which to feature world class artists, heavily represented by artists of their own country.

In the US we have been arguing that arts and culture are one of the things about our country that make it great and strengthen the national character. It is difficult to criticize a government who agrees with that and wants to invest huge amounts of money to draw world wide attention to that fact.

Except, of course, that the Field of Dream expectation that if you build it, the artists will come to inhabit the facility and bring life to it is somewhat erroneous. It takes some significant effort and planning to cultivate an artistic life for a facility. My strong suspicion is that the construction of these facilities didn’t involve a lot of input from artists who represented the type envisioned to perform/use the building and the facilities may not be suitable to their needs at all necessitating some immediate renovations.

Stuff To Ponder: Transparent Community Driven Grant Processes

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The Hawaii Community Foundation just recently completed the first round of granting for their Island Innovation Fund. I was really very impressed by the way they went about their very transparent granting process. Instead of having a grant disappear into the bowels of the foundation offices, they got the community involved in the process of providing feedback and guidance at every step.

The blog for the local technology radio show, Bytemarks Cafe, did a good job last October of summarizing the approach they took.

On my preview, the proposal review was a 4 step process. The first step in the process is the Concept, where you submit your idea and any associated material, be it photos, video, documents or presentations. There is an open period for submittals and a deadline to meet.

Next the process enters into the Collaboration phase where proposal material is made public (public as in registered users of the site). The public has about 30 days to comment or ask questions. Applicants are able to respond to comments and make improvements to their Concept.

During the third phase, HCF personnel will review the revised Concept. Projects that best demonstrate the principles and goals of the Island Innovation Fund will be ask to submit a Proposal.

Finally in phase 4 the Omidyar Network and Hawaii Community Foundation staff will review and evaluate Proposals. The most compelling proposals get invited to present a 15 minute presentation to an independent panel of judges for final selection. This judging is open to the public. Winning proposals will be announced one week after the final presentations.

I listen to the radio show pretty regularly, but I must have missed the show where they originally discussed this because I would have definitely participated in the feedback portion of the concept phase. I think that is the best part of the entire program. Not only does it allow applicants to understand what the community needs are and adjust their application accordingly, but it also provides the Hawaii Community Foundation (HCF) with a better understanding of what the community needs from them.

It is something of a win-win for everyone. Even if the applicants aren’t proposing something that fits into the HCF or fund goals, they get valuable feedback about their concept should they wish to pursue it with another granting organization. Those who are invited to proceed, but don’t get funded also receive important feedback and I believe some will be allowed to reapply for the next round. Being able to walk away knowing how to make your proposal better and speak about it effectively is valuable in itself because you often don’t get any feedback in that vein from granting organizations.

In understanding what the community needs, HCF can begin to think about their own approaches and priorities, including assumptions about community needs they may have made. Perhaps some of the proposals didn’t adequately address how the specific submitter would effectively approach a need in the community. The need still remains and now HCF may be able to bring resources to bear having read the feedback on the community forums suggesting what considerations need to be made in effecting a solution.

I should also note that even the final presentations to the independent panel was conducted very publicly and was streamed live over the internet. The video may still be viewed on the Island Innovation Fund website.

Now in a bit of serendipity, Diane Ragsdale addressed the pursuit and funding of innovation in the arts on her blog today. She mentions that receiving funding for innovative work can actually destabilize an organization as they try to meet the heightened expectations that such recognition brings.

But she also notes that often the most innovative work is passed over in favor of more tame versions because real innovation risks failure by necessity:

“Finally, it’s perplexing and annoying to others in the arts sector when funders give ‘innovation grants’ to projects and organziations that are not, actually, innovative–particularly when one knows the projects that did NOT get funding. I’m not sure how this happens but I suspect it is in large part because ideas that are truly surprising, that may even defy written rules and conventions, are unlikely to make it all the way through the grantmaking process at most risk-averse foundations (in no small part because they make lawyers nervous).”

I am not going to claim that those awarding money from the Island Innovation Fund, even given their intriguing granting process, are any less risk averse than any other foundation out there. However, I would think that efforts toward innovation in the arts would benefit from a granting process like the one they conducted. The one benefit I hadn’t mentioned yet about this program is that even if one isn’t an applicant for the grant, just participating in the question and commenting phase can help a person refine their own nascent ideas and understand how better to execute them.

Cheating For Literacy

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Hat tip to Philanthropy 2173 for calling attention to a wild fund raising event being sponsored by the San Francisco literacy organization, 826 Valencia, called A Spelling Bee for Cheaters. Essentially, you join or form a spelling bee team which raises money for an entrance fee and then uses additional money to do everything from getting hints, getting a do over, using a dictionary, skipping a round or skipping straight to the finals round. They are doing this in conjunction with the creators of the musical, The 25th Annual Putnam County Spelling Bee.

Though, alas, it doesn’t appear that they are performing the show, too. That would be a real event! Still, this sounds like a great idea for a fund raising event.
One can buy tickets to watch the fun. They are having some cool celebrities at their pre-event VIP reception it might be worth the price to attend.

One of the things I liked about the event set up is that they have a page which allows you to form your own team, join another team or sponsor a specific competitor after searching for them and viewing their personal fund raising page. (Actually, until I copied the link for the previous sentence, I didn’t realize I left their webpage and was on a page hosted by their donation processor, Gifttool.com.) Though not a lot of people availed themselves of the personal pages, yet.

Get Your Cheat On!

Stuff To Ponder: Alternatives To Forming A Non Profit Org

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If your new year’s resolution is to do good this year, go for it! But if you are thinking of starting up a non-profit, you should be aware of the challenges you face. Both the normal processes to follow when starting a new organization as well as emerging scrutiny by the federal government. The Non-Profit Law blog has been packing a lot of informational goodness in their posts over the end of last year and the transition in to this one. Among their tweets of the week for last week was news of extra scrutiny of non-profits by the IRS.

The Gene Takagi and Emily Chan who write Non-Profit Law Blog also linked to a piece they wrote for the American Bar Association outlining the considerations a lawyer and their clients should use to evaluate whether they should actually form a non-profit organization. Many of the suggestions made are just good sense for forming any business including evaluating the need, whether it duplicates the efforts of another group, if there is sufficient clientele and a support base present in the community. They make suggestions of alternatives to consider.

But another person they link to in their tweets of the week really does a great job of providing these alternatives. Allison Jones makes suggestions for 6 alternatives with links to more information about pursuing these options.
 I had never heard of an intrapenuership myself.

* Free agent: More and more people are affecting social change outside of an organization. Harnessing social media, you can mobilize your network to take action or support a cause without the hassle of incorporating….

* Informal group/club: If the issue you are addressing is small or very specific (cleaning up a local park or stacking shelves in a local food pantry) you may just be able to round up a group of friends and get to work….

* Giving circle: … In giving circles you pool money and resources together to support an organization you all select. The focus is usually on a local organization, often extends beyond giving financial support, and the circles can be formal or informal….

* Local chapter of a national organization: … You can build on existing resources, support, and guidance to make a difference. Organizations that focus on professions, such as Young Nonprofit Professionals Network, Grant Managers Network, or Emerging Leaders in the Arts, tend to have chapters across the country. However other organizations in different causes, like the Reeve Foundation are open to supporters launching local chapters as well….

* Intrapreneurship: Do you work or volunteer for an awesome organization? Maybe you noticed a need because of the work you do? This can be tricky as many organizations are pressed for resources and time. However, you can harness your organization’s infrastructure to make small steps in addressing the need you have identified. Organizations are more willing to support innovation if there is someone (i.e. YOU!) willing to take the lead. Start by collecting information on the need and presenting it to your organization….

* Fiscal sponsorship: In fiscal sponsorship a nonprofit will allow you to operate under their 501c3 status….You should find an organization whose mission and work align with what you want to do and reach out to them directly….

Holiday Power Down

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I am away from home for the holidays this year so my mind will be turning to thoughts other than arts management until after the new year. A couple of time sensitive links before I sign off until then, both from the Non-Profit Law Blog.

First is a piece in the Wall Street Journal about mistakes people make when donating to charity. Important things to think about if you haven’t given yet, but definitely intend to. One nuance that I wasn’t aware of-

“When you’re donating tangible physical property, you can only deduct its fair market value if the charity’s mission directly relates to the property. So, if you give your picture to a museum, whose mission is to display art to the public, you can donate the full appraised value. But if you give it to a school or other charity that doesn’t showcase art as its primary mission, the deduction is based on what you actually paid for the piece”

On the other side of the equation, a quick primer from Pro Bono Partnership on what sort of acknowledgment is required of a charitable organization when donations are made. They include some examples of ways to structure an acknowledgment letter. They also remind you about what portion of a donation is and is not deductible.

That is about it from me for the year. Best wishes to you, your families and your arts orgs for joyous holidays and a prosperous new year.

Political Philanthropy

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Via the ever interesting Non Profit Law Blog and apropos to the portion of Barry Hessenius’ interview with Fractured Atlas’ Adam Huttler I recently focused on, is a piece by Ezra Klein in the Washington Post about politicizing your giving to non-profits.

In a piece titled “Giving is personal. Make it political,” Klein paraphrases Shakespeare, “I come not to praise charity. I come to politicize it. Or at least make it more aware of the political world around it.” He essentially takes the “give a man to fish…teach a man to fish” approach by suggesting while giving to a organization focused on helping the community assists them in their immediate purpose, giving to a non-profit that does policy advocacy helps change the operating environment for all the non-profits pursuing that goal.

He ends the piece saying,

“The point of this isn’t to polarize philanthropy or to warn anyone away from traditional charities. There’s room – and need – for an array of approaches. But at the end of the day, the government is the central player in many of these spheres, with the scale and power to make changes that other actors simply can’t contemplate. Charities that work to make the government’s policies better have a unique ability to take small investments and turn them into tremendous outcomes. If you’re looking for bang for your philanthropic buck, they’re the place to start.”

I have to admit a fair bit of skepticism when I read this. Klein writes for a paper in a town where lobbying makes the world go round so his view about effective use of money is necessarily tainted by that.

On the other hand, he writes for a paper in a town where lobbying makes things happen so he has first hand expertise on the subject.

And as I noted as I began this post, there is a lot of discussion these days that the arts need to assert themselves in the political arena. It is a sentiment being repeated so often of late that I wonder if this has become the equivalent of the stereotyped artist who doesn’t want to be bothered with the dreary details of handling the business side of their career and gets cheated. Politics can be a dirty, intimidating business that most right minded folks don’t want to get involved with. You need only read a little further in Mark Antony’s speech where he keeps referring to Brutus and those who stabbed Caesar as honorable men to recognize this is a situation which has endured in politics for a very long time.

Many lobbyists tend to be a little unsavory too. It is enough to make you wonder if the lesser evil might be to give to a local charity who may have high overhead costs versus paying large amounts to a lobbyist and getting little in return. Is it better to be cheated locally? Granted, the arts have a number of national and regional groups who perform various advocacy functions and the arts world is small enough that we can interact with the leadership and gauge their trustworthiness.

But would you encourage your supporters to donate to them rather than to you? Would you try to convince them to support the national group so that things would be better for your organization five or ten years down the road? People give to people, not organizations so your local supporters would likely prefer to give to you. Do you then pass some of their support on to an advocacy group? Even if their gifts are not designated to a particular use, most donors likely give because they believe the donation will have a direct benefit in their community. Do you tell them your plan is to create a better environment for all the arts in your state/city/county through political activity of some sort when you solicit their donation?

Perhaps these are conversations people will start to have with those that provide support. Some may have a sophisticated understanding of the process already and can provide assistance. A minimal benefit of such effort may serve to raise the profile of many advocacy groups in the public’s mind in the process shifting them from a logo in the “We Thank Our Supporters” section to the guys fighting for policy decisions. Granted, it might be difficult to explain why the local arts organization wants to give funds to the regional organization which gives the local guys funds for the summer concert series. It can be tough to understand why the regional organization can’t use NEA grants dedicated to free public programming for advocacy efforts.

Must Read: For-Profit Arm No Panacea For Non-Profit Funding Woes

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If you have ever thought that starting a for-profit arm for your non-profit to help support the latter’s mission, you must read The Nonprofiteer’s post on the subject. I have been hearing it suggested that non-profits embrace these types of arrangements as grants and donations have become increasingly difficult to secure. A study linked to by The Nonprofiteer requires one to pause in such considerations.

Writes the Nonprofiteer of the study:

“nonprofit agencies which choose to support themselves with for-profit businesses end up serving their clients less and worse. Moreover, when the businesses thrive the profits go back into the business, while when the businesses falter the losses are taken out of the hide of the agencies. “

I took a look at the study, “Social Enterprise: Innovation or Mission Distraction,” in which author Rebecca Tekula analyzes the 990 filings of Human Service organizations in New York County from 2000 to 2005. The number of organizations this encompasses is not cited though Tekula writes that the data “represents 700 organizational years” which averages to 116.67 organizations for each of those six years.

What Tekula says she found is that enterprises that yield non-business related income undermine the value provided through the non-profit program-

“As hypothesized, the internal capital markets of nonprofit firms seem to follow that of for-profit firms in that diversification leads to value loss as proxied by programmatic expenditure. What can be inferred from my findings is that this particular type of external enterprising behavior is associated with less value in the programmatic output of human service nonprofits.”

And, no surprise, ineffective programs can be a drain on the resources that should be directed to the effective ones-

“My findings are in accordance with cross-subsidy theories of diversification in which internal budgeting allocates funds to divisions with few investment opportunities (ailing enterprises of nonprofits) while failing to channel funds to those with ample investment opportunities (effective, efficient programs). While this research is a first step toward identifying the factors associated with earned income behavior in nonprofit organizations, there is much work to be done in this area.”

Tekula is careful not to say this will be true for all sectors of the non-profit world and encourages similar study of the arts, healthcare and education. But does caution, (my emphasis)

“Clearly more thought and research must be invested in this area and caution must be given in popularizing and glorifying the unproven benefits of unrelated or external enterprising activities on the very organizations that have become important service providers for society’s neediest individuals.”

Where Your Duty As A Non-Profit Lies

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I had to wonder if people were intentionally misreading the post I made about the Arts Council of England requiring applications for funding. My declaration that “Once again, Europe proves their arts policy is superior to that of the U.S.!” was meant to be read a little tongue in cheek lampooning the constant refrain that the arts policy and audiences in Europe are better than in the U.S. And even if that tone didn’t come across, I would have thought that when I wrote sentence or two later that the reality was that the policy is exclusionary and then spend 500 or so words talking about how it will be improved, it would be clear that I wasn’t seriously supporting the old way of doing things.

But I wasn’t really put off by the comments on the entry or by Leonard Jacobs post criticizing this view on The Clyde Fitch Report. In my mind, I was guilty of the age old failing – If you have to explain the joke, you didn’t deliver it correctly. Besides, I figured my blog would get some traffic from the Clyde Fitch Report post.

But then I got to thinking about it. No arts organization ever forms for the purpose of filling out grant applications. Yes, you know when you form your non-profit, it is something of a necessity for doing business. It isn’t a surprise that filling them out does indeed divert energy from the core purpose of the organization. So yes, on second thought, I do think it is pretty much the duty of every non-profit organization to gain funding with the least effort possible so they can get on with their core purpose. It isn’t just me saying this. The biggest measure of non-profit effectiveness is the ratio of how much raised goes toward programs vs how much goes toward overhead and expenses. This is the measure Charity Navigator used to rate my local United Way dead last among local non-profits.

Charity Navigator admits their evaluation doesn’t look at the quality of programs non-profits offer, a fact those at the bottom of the list are quick to cite when they decry the legitimacy of the rankings. But this is a measure that is gaining more and more traction, especially among politicians who are questioning the salaries of those few non-profit executives who actually make enough worth noting.

No surprise politics plays a big part in who gets government funding and who doesn’t. In that context it is get tougher to say that the old policy for funding by the Arts Council of England is really worse than that of the NEA. There are categories of people who were once eligible for funding by the NEA who no longer are due to changes in laws and policies made in reaction to political pressure. We have had mayors of New York City who have unilaterally declared that arts organizations will not receive funding because of program content. Are situations where individuals have the power to rescind funding awarded by a small group of people based on an application any more egalitarian than a situation where a small group of people are empowered to decide who will receive funding based on their own judgments (as well informed as they may be by the vastly superior arts environment which exists in Europe)?

Actually, on the face of it, I would say yes since the criteria being used by the NEA to award grants are clear from the outset, regardless of the pressures exerted to shape those criteria. As I mentioned in my original post, the process and criteria by which the Arts Council decided which organizations to fund and how an organization might even enter the council’s consideration was murky at best. Politics are going to tinge any decision making process where judgments are present. Lets not pretend though that the lengthy application process, be it an electronic or paper submission process, is the best and only way for governments to disburse funds.

When my consortium met last week, one of the aspirations we had for our fledgling merger was right in line with the regional partner initiatives the Arts Council of England hopes to implement. We are looking to become organized enough to propose becoming a partner organization to the state arts foundation and receive annual funding for our activities outside of the normal granting process. To my mind 10-15 performing arts entities coming together to work in partnership is an approach worth funding in an alternative manner. I believe it would be counterproductive to require each of us to submit a separate applications because it would perpetuate the idea that we needed to compete as individuals for funding rather than to collaborate.

Let’s be honest, there is a lot of self-interest when non-profits are seeking funding. As Leonard Jacobs notes, many funders have restrictive criteria about what they will fund based on interests, geography and shifting priorities. Our interests in the criteria for government funding is based immediately on whether we and perhaps our close partners qualify. A desire for an egalitarian arts policy that benefits everyone else is more philosophically abstract, based generally on creating an environment in which our potential audience base comes to appreciate the arts. If our perceived rivals gain significantly more largesse, our attitudes can become less charitable.

I am all for any system that encourages a shift toward group interest and responsibility–especially if the group shares in the paperwork rather than just me. But more importantly if you haven’t guessed, I would welcome a shift away from the damn paperwork. Leonard Jacobs says to stop whining about the paperwork and do some work for it. Well, it is the art that is the work you are doing for the grant, not the paperwork. Nobody is interested in funding paperwork. Though reviewing written applications may be efficient in terms of cost, the paperwork is really about the least effective way to measure the worth of a project. It is just a measure of good writing ability, which granted is an art itself and deserving of support. But that is just the genteel way of saying that someone knows how to bullshit well and use all the correct phrases and keywords. Many of the online application forms don’t let you submit them if your costs exceed your income and therefore require that you lie to complete them even if the truth is that you spent $50 more than you made. The whole process is dishonest before anyone even looks at the application.

The arts by their very nature are meant to be seen and experienced. Yes, sending people out to visit grantees is expensive, but perhaps it would be done if there was better funding. Yes, the visiting team might make subjective judgments about the worthiness of your organization, but they are doing that already when they read your grant application.

Colleges and universities are accredited by regional bodies who send people to evaluate them on a regular basis to bring them into compliance with current standards. Now I will readily admit that compliance translates into paperwork. I will also concede that the schools probably pay quite a lot to be part of this process. And even though they aren’t part of the government, members of Congress have been criticizing the accrediting bodies. So I won’t even pretend this idea would satisfy the NEA’s biggest critics.

But if arts groups were organized under regional bodies, then the cost could be borne by many just as it is with the schools. The experience of those participating as visiting evaluators would be much more valuable than sitting on a grant review committee. Instead of learning what committees were looking for in a grant application, the committee member could actually learn about the best practices by groups in their region and share that information with their home organization. Not to mention they would be sharing information and developing deeper relationships with other arts professionals beyond what can be accomplished at conferences.

Granted so much of this is pie in the sky idealism currently, but that doesn’t mean we have to complacently accept the current way of doing things. Really, it may not be that the written application is a bad format, but rather the criteria it looks to evaluate is flawed. The visitation process I am suggesting would change the evaluation criteria out of necessity. But as an alternative, as our ability to record and share our accomplishments on media improves, it can be just as valid a tool in shifting what criteria is emphasized too.

Though I really think that that an extensive program of visits by well trained teams would go an incredibly long way in improving arts leadership and management. While I think the sites that hosts the visits might receive some excellent guidance, were I designing the program, my focus would be on cultivating the abilities of the visiting team over telling the host what they are doing wrong.

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Butts In The Seats by Joe Patti is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
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