10 tips for the times ahead.

Talking about the current federal budget negotiations is like talking about the weather. Cuts are happening, but unless you’re a member of Congress or a power broker, you can’t do much about it. What you can do is position your organization to survive–and to continue to serve your community.

Severe cutbacks in the nonprofit and public sectors have occurred more than once since The Grantsmanship Center first started training, in 1972. Recently several of our trainers and our editorial board met to discuss what more than two centuries of combined experience have taught us about surviving hard times.

Here are 10 key ideas that came out of our meeting. We hope these will help you through the days ahead. In future issues of {Centered}, we’ll discuss these suggestions in more detail.

1. Keep a close eye on your community’s needs, and focus your available resources on those that are the most pressing.
2. Continue to do what you do best. This is no time to experiment, unless some innovation promises greater community impact or economy.
3. Every proposal should have a solid evaluation plan. Now, more than ever, grantmakers want documentation of how their financial investments make a difference. And now, more than ever, your organization should want the same.
4. Make sure you understand what outcomes are. Include specific and realistic outcomes in your proposals, and speak in terms of indicators of change rather than methods or activities. Most organizations that come to our trainings have not been documenting outcomes. Documentation has always been important, but it is more crucial now than ever. Proof that your services have the desired impact on community needs is a strong argument for support.
5. Be realistic. The federal budget is being cut. Assess your vulnerabilities. Don’t get blindsided. Anticipate what’s ahead, and instead of panicking, take the time to carve out options and develop contingencies. Develop a back-up plan (or two) that will enable you to maintain core services, even if your organization is hit with massive cuts. Since projected federal budget cuts are already affecting how foundations give, monitor changes in the kinds of grants foundations are making and the kinds of organizations they’re giving to. If you haven’t already done so, now is also the time to look seriously at non-grant sources of support, such as individual donors and earned income opportunities. Social enterprise is the wave of the future for nonprofits. And major gifts are still out there, if donors are convinced of the community need and of your ability to meet it. Build relationships with potential donors now.
6. Look for opportunities to build new partnerships and collaborations.
7. Don’t accept a grant for less than it will take to do the job you propose to do unless you have additional funding sources or reserves. Doing a bad job on a shoestring can be worse than not doing it at all.
8. You may have to make hard, painful choices. If so, it’s your responsibility to do so thoughtfully and with foresight. Otherwise what your organization becomes will be shaped by abdication, rather than design. Manage the organization’s budget with great discipline. Then, if you have to eliminate programs and staff positions, you’ll be certain that these cuts could not have been avoided.
9. The current environment challenges nonprofits to clearly articulate who they are, what they do, and why their work is critical to the community’s well-being. If there is a human need–or any other kind of need–that relates to your mission but that can’t be met in the current environment, document the damage you see.  It’s important for the arguments you’ll need to make in the future. Think about the role of public information in influencing future funding. As you collect documentation of unmet community needs, share it with elected officials. In this era of cost-shifting, governments and organizations will try to shield themselves from public anger, so you can expect to see a lot of buck-passing and finger-pointing. Don’t get caught in the crossfire. Since there is a lot of ignorance about the nonprofit sector, position yourself to communicate about how costs are being shifted, how these shifts impact the critical needs of your community as a whole, and how they impact individual residents. When a cut comes down the line, make it clear–to the community, in the newspaper, to the voters–what it means, who’s getting cut off, who’s going to go hungry or cold. This may prompt donors to contribute needed funds, and it may encourage politicians to reconsider what they decide to cut.
10. The organizations that will fare best are those that do the best job of planning, focusing on community needs, and documenting the benefits of what they are doing. These are the organizations that make a real difference in the long run. Beyond that, the people who make a real difference are the ones who persevere. The short-term forecast may look gloomy, but you’re not facing it alone. As you continue to carry out the missions of your organizations, lend support to each other, sharing ideas and resources.

This article summarizes a March 2011 roundtable discussion with {Centered}’s Contributing Editor Jim Abernathy and Grantsmanship Center trainers Mary Ruth Clowdsley, Barbara Floersch, Judy Gooch, and Chuck Putney.

Jim Abernathy, “10 tips for the times ahead”, {Centered}, Volume 4, Issue 4, April 2011

How to survive big cuts in government funding.

If we can be certain of one thing in these changing times, it’s this: For at least the next two years, we’ll see cuts–sometimes radical ones–in government budgets. Federal grant programs are shrinking, and state and local programs that have been supported by federal funds will shrink or disappear. In “Preparing for Federal Cutbacks in Spending” (Local/State Funding Report, March 14, 2011), Glenda O’Neal suggests steps organizations that depend on grants can take to survive this scenario:

• Prioritize and focus on the things you do best.
• Show proven outcomes from your programs.
• Demonstrate that your programs are cost-effective and, where possible, that they will save the government money in the long run.
• Clearly document the need for your services and programs.
• Strengthen or establish collaborations and partnerships with other groups.
• Learn how to accurately forecast likely revenue from grant sources.

Jim Abernathy, “How to survive big cuts in government funding”, {Centered},
Volume 4, Issue 4, April 2011

Get ready for increased foundation giving.

The Chronicle of Philanthropy recently surveyed 89 private foundations that account for about a third of the total assets of U.S. foundations. A key finding: their overall grants will go up modestly in 2011. In “Foundations Rethink Priorities in 2011 as Assets Slowly Recover” (The Chronicle of Philanthropy, March 10, 2011), Marisa Lopez-Rivera and Caroline Preston report that 37% of the surveyed foundations plan to give more this year, 33% say their giving will remain the same, and 11% anticipate a decline. Most expect to increase their giving in 2012, as their assets continue to recover from the drops that began in 2008.

The Chronicle asked foundation staff and others for advice on how best to approach foundations this year. In “A Focus on Signature Programs Can Help Charities Gain Grant Makers’ Support” (also from the March 10 issue), Caroline Preston offers these tips:

1. Emphasize how your group is collaborating or partnering with other organizations.
2. Demonstrate the urgency of your project or activities.
3. Show how your organization has limited your suite of programs to those that have demonstrated success.
4. Show exactly what results funds granted to your group will produce.
5. Report your financial condition honestly and completely.
6. Be sure your goals are compatible with those of the foundation.
7. If organizations like yours have received grants from the foundation, ask those grantees for advice.

Jim Abernathy, “Get ready for increased foundation giving”, {Centered}, Volume 4, Issue 4, April 2011

Your six fundraising numbers.

1. Net annual growth in active donors.

Every year you add donors through acquisition and lose donors through attrition. The difference between these two numbers is your net growth. It’s either positive or negative (or unchanged–unlikely). Don’t measure just the number of new donors you add annually. That number might look impressive, but it’s false. 80,232 donors acquired minus 81,439 donors lost isn’t growth.

2. Net cost per donor acquired.

Figure out how much you need to spend to acquire a new donor for every channel you use (direct mail, face-to-face, online, direct response TV, special events, and so on). You need to know this number to win board approval for a donor acquisition budget. Donor acquisition costs money. The other number you need to know is Lifetime Donor Value by Channel (below).

3. Attrition rate by channel.

Donors die, lose their jobs, move, retire, divorce and do other disagreeable things that make them stop supporting your cause. Although many of these things are beyond your control, you still need to know the number of donors you lose each year, expressed as a percentage of your active donors, and calculated for every channel you use to raise funds. When you know your attrition rate, you know how many new donors you must acquire each year just to stop your file from shrinking. Because it is shrinking.

4. Renewal rate by channel.

What percentage of your donors who give a gift one year also give a gift the next year? That’s your renewal rate. Your renewal rate indicates how passionate your supporters are about your cause. It also indicates how successful your donor stewardship program is.

5. Second gift conversion rate.

Most people who make one gift to a charity never make another. If you have a low Second Gift Conversion Rate, you either are attracting donors who are unlikely to make a second gift, you are not treating your first-time donors properly, or you are not asking for that vital second gift soon enough (or all three).

6. Lifetime donor value by channel.

How much does one of your average donors contribute to your charity in her lifetime? That’s the number you need to know to justify your investment in donor acquisition and stewardship. Include in this number every gift ever given, including annual gifts, major gifts, special event gifts and bequests. Know this number for every channel you acquire donors by.

Alan Sharpe, Know Your Six Fundraising Numbers or Die

A study about teens, charity, and social media.

Key Findings:

1. Teens are now more likely to spend their free time playing video or computer games than they were last year (72% 2011 vs. 63% 2010).
2. As in 2010, nearly 1 in 4 teens (23%) say they volunteer during their free time, and 1 in 10 (10%) have a part-time job.
3. About 9 in 10 teens agree – the same proportion as in 2010 – that:
   • It is more important than ever to help others who are less fortunate (90% 2011, 90% 2010);
   • It is important to support charitable causes symbolically even if you can’t do so financially (86% 2011, 88% 2010); and,
   • They wish they could do more to help those in need (88% 2011, 89% 2010).
4. Nearly 3 in 4 teens (73%) say their family has been negatively affected by the current economic climate, and about 4 in 5 (79%) have become more aware of the needs of others as a result.
5. Though they are equally as likely to agree (88% 2011, 89% 2010), teens in 2011 are less likely than they were a year ago to strongly agree that they wish they could do more to help those in need (43% 2011 vs. 50% 2010).
6. The majority of teens (71% 2011, 74% 2010) continue to support charitable causes or organizations, primarily by volunteering their time or participating in an event (43% 2011, 38% 2010).
7. Nearly 2 in 5 teens (37% 2011, 33% 2010) show their support symbolically, and about 1 in 3 (32%) vocally support their causes by spreading word of mouth and recruiting others.
8. About 1 in 4 teens (26%) donate money.
9. Though 2 in 3 teens (66%) agree that the benefits of social media outweigh the risks, and more than 2 in 5 (44%) say they have become more aware of the needs of others thanks to their social media usage, the plurality of youth ages 13-17 (29%) would be most willing to sacrifice their access to social media if they had to forgo some of life’s luxuries or necessities for 24 hours.
10. Only 2% would be willing to go without food (2%) or water (2%).
11. Most teens (80%) use social media, primarily to keep in touch with friends (76%).
12. Additionally, more than 1 in 2 teens (57%) share photos, videos, or links with others, and nearly 2 in 5 (37%) use social media to share their opinion about various issues.
13. Teens are more likely to “friend,” “like,” or “follow” companies or brands they like (41%) than charitable causes they support (34%).

World Vision, “A Study About Teens, Charity, and Social Media,” February 2011.

Bill Gates pushes students toward philanthropy.

33 principles for good governance and ethical practice.

Legal Compliance and Public Disclosure

1. A charitable organization must comply with all applicable federal laws and regulations, as well as applicable laws and regulations of the states and the local jurisdictions in which it is based or operates. If the organization conducts programs outside the United States, it must also abide by applicable international laws, regulations and conventions that are legally biding on the United States.

2. A charitable organization should have a formally adopted, written code of ethics with which all of its directors or trustees, staff and volunteers are familiar and to which they adhere.

3. A charitable organization should adopt and implement policies and procedures to ensure that all conflicts of interest, or the appearance thereof, within the organization and the board are appropriately managed through disclosure, recusal, or other means.

4. A charitable organization should establish and implement policies and procedures that enable individuals to come forward with information on illegal practices or violations of organizational policies. This “whistleblower” policy should specify that the organization will not retaliate against, and will protect the confidentiality of, individuals who make good-faith reports.

5. A charitable organization should establish and implement policies and procedures to protect and preserve the organization’s important documents and business records.

6. A charitable organization’s board should ensure that the organization has adequate plans to protect its assets—its property, financial and human resources, programmatic content and material, and its integrity and reputation—against damage or loss. The board should review regularly the organization’s need for general liability and directors’ and officers’ liability insurance, as well as take other actions necessary to mitigate risks.

7. A charitable organization should make information about its operations, including its governance, finances, programs and activities, widely available to the public. Charitable organizations also should consider making information available on the methods they use to evaluate the outcomes of their work and sharing the results of those evaluations.

Effective Governance

8. A charitable organization must have a governing body that is responsible for reviewing and approving the organization’s mission and strategic direction, annual budget and key financial transactions, compensation practices and policies, and fiscal and governance policies.

9. The board of a charitable organization should meet regularly enough to conduct its business and fulfill its duties.

10. The board of a charitable organization should establish its own size and structure and review these periodically. The board should have enough members to allow for full deliberation and diversity of thinking on governance and other organizational matters. Except for very small organizations, this generally means that the board should have at least five members.

11. The board of a charitable organization should include members with the diverse background (including, but not limited to, ethnic, racial and gender perspectives), experience, and organizational and financial skills necessary to advance the organization’s mission.

12. A substantial majority of the board of a public charity, usually meaning at least two-thirds of the members, should be independent. Independent members should not: (1) be compensated by the organization as employees or independent contractors; (2) have their compensation determined by individuals who are compensated by the organization; (3) receive, directly or indirectly, material financial benefits from the organization except as a member of the charitable class served by the organization; or (4) be related to anyone described above (as a spouse, sibling, parent or child), or reside with any person so described.

13. The board should hire, oversee, and annually evaluate the performance of the chief executive officer of the organization, and should conduct such an evaluation prior to any change in that officer’s compensation, unless there is a multi-year contract in force or the change consists solely of routine adjustments for inflation or cost of living.

14. The board of a charitable organization that has paid staff should ensure that the positions of chief staff officer, board chair, and board treasurer are held by separate individuals. Organizations without paid staff should ensure that the positions of board chair and treasurer are held by separate individuals.

15. The board should establish an effective, systematic process for educating and communicating with board members to ensure that they are aware of their legal and ethical responsibilities, are knowledgeable about the programs and activities of the organization, and can carry out their oversight functions effectively.

16. Board members should evaluate their performance as a group and as individuals no less frequently than every three years, and should have clear procedures for removing board members who are unable to fulfill their responsibilities.

17. The board should establish clear policies and procedures setting the length of terms and the number of consecutive terms a board member may serve.

18. The board should review organizational and governing instruments no less frequently than every five years.

19. The board should establish and review regularly the organization’s mission and goals and should evaluate, no less frequently than every five years, the organization’s programs, goals and activities to be sure they advance its mission and make prudent use of its resources.

20. Board members are generally expected to serve without compensation, other than
reimbursement for expenses incurred to fulfill their board duties. A charitable organization that provides compensation to its board members should use appropriate comparability data to determine the amount to be paid, document the decision and provide full disclosure to anyone, upon request, of the amount and rationale for the compensation.

Strong Financial Oversight

21. A charitable organization must keep complete, current, and accurate financial records. Its board should receive and review timely reports of the organization’s financial activities and should have a qualified, independent financial expert audit or review these statements annually in a manner appropriate to the organization’s size and scale of operations.

22. The board of a charitable organization must institute policies and procedures to ensure that the organization (and, if applicable, its subsidiaries) manages and invests its funds responsibly, in accordance with all legal requirements. The full board should review and approve the organization’s annual budget and should monitor actual performance against the budget.

23. A charitable organization should not provide loans (or the equivalent, such as loan guarantees, purchasing or transferring ownership of a residence or office, or relieving a debt or lease obligation) to directors, officers, or trustees.

24. A charitable organization should spend a significant percentage of its annual budget on programs that pursue its mission. The budget should also provide sufficient resources for effective administration of the organization, and, if it solicits contributions, for appropriate fundraising activities.

25. A charitable organization should establish clear, written policies for paying or reimbursing expenses incurred by anyone conducting business or traveling on behalf of the organization, including the types of expenses that can be paid for or reimbursed and the documentation required. Such policies should require that travel on behalf of the organization is to be undertaken in a cost-effective manner.

26. A charitable organization should neither pay for nor reimburse travel expenditures for spouses, dependents or others who are accompanying someone conducting business for the organization unless they, too, are conducting such business.

Responsible Fundraising

27. Solicitation materials and other communications addressed to donors and the public must clearly identify the organization and be accurate and truthful.

28. Contributions must be used for purposes consistent with the donor’s intent, whether as described in the relevant solicitation materials or as specifically directed by the donor.

29. A charitable organization must provide donors with specific acknowledgments of charitable contributions, in accordance with IRS requirements, as well as information to facilitate the donors’ compliance with tax law requirements.

30. A charitable organization should adopt clear policies, based on its specific exempt purpose, to determine whether accepting a gift would compromise its ethics, financial circumstances, program focus or other interests.

31. A charitable organization should provide appropriate training and supervision of the people soliciting funds on its behalf to ensure that they understand their responsibilities and applicable federal, state and local laws, and do not employ techniques that are coercive, intimidating, or intended to harass potential donors.

32. A charitable organization should not compensate internal or external fundraisers based on a commission or a percentage of the amount raised.

33. A charitable organization should respect the privacy of individual donors and, except where disclosure is required by law, should not sell or otherwise make available the names and contact information of its donors without providing them an opportunity at least once a year to opt out of the use of their names.

Panel on the Nonprofit Sector Convened by Independent Sector, “Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations,” October 2007

Philanthropy is …

Effectively cultivating prospects at little or no cost.

“There has never been a better time for nonprofit organizations to seek planned gifts. The challenging economic situation makes planned giving more attractive to prospective donors, the population is continuing to grow older and the largest inter-generational wealth transfer in human history is in its early stages. Nevertheless, despite the enormous opportunity for nonprofits, the sector is not doing enough to capitalize on current circumstances. Consider the evidence:

• Only 37 percent of those over age 30 say they are familiar with the term “planned giving” (2009 Stelter Donor Insight Report).

• Only 22 percent of those over age 30 report that they have been approached to consider a planned gift (2009 Stelter Donor Insight Report).

• Only 5.3 percent of older Americans have made a charitable bequest commitment, while 33 percent are willing to consider such a gift (Dr. Russell James III and The Center on Philanthropy at Indiana University).

• Only 1 percent of Americans have a charitable remainder trust, while 5 percent are willing to consider one (Planned Giving in the United States 2000: A Survey of Donors).

“Clearly the nonprofit sector can and should be doing more to bridge the gap between what has been achieved and what is possible with planned giving. However, before you can secure planned gifts, your prospective donors need to understand that such giving options exist and what a planned gift can mean to them and the organization.

“Fortunately, there are a number of relatively easy options at no or little cost that organizations can use to create greater awareness of a new or existing planned-giving program.

“Widespread messaging. Development professionals need to understand who planned-giving prospects are. While everyone is actually a planned-giving prospect, those most loyal to the organization will be the best and should get extra attention. Prospective planned-giving donors can be found at all giving levels, among all demographic groups and throughout an organization’s database. For some organizations, viable prospects might reside within the community, but not in the database. Therefore, planned-giving messages should be pervasive.

“Eight simple words. To help create broader awareness of planned-giving, you can include eight simple words in your e-mail signature, on your business cards, on your letterhead and elsewhere: “Please remember [organization's name] in your will and trusts.” This simple reminder will help create awareness and get some people to even consider such a giving opportunity.

“In the news. Most organizations publish a newsletter, e-newsletter, magazine or some combination of these. When writing an article about how the organization is fulfilling its mission, include a sentence or two about how a certain program was made possible by a planned gift. For example, in an article about scholarship recipients, you could say, “This year’s scholarships were made possible thanks to a generous bequest from Jane Doe.” A simple line like that, when repeated in other stories, will go a long way toward educating readers about planned gifts and the impact they can have on those the organization serves.

“Donor profiles. Another way to promote planned-giving in an organization’s publications is to print stories about planned-gift donors. However, you must be sure to present stories about diverse donors over time. Most people think that planned gifts (i.e., bequests or trusts) are something that only rich people do. By the way, no matter how wealthy someone is, a donor is more likely to consider himself or herself “comfortable” than “rich.” So show people that anyone can be a planned-gift donor by not focusing exclusively on the largest gifts from your wealthiest supporters. When telling the story, spend little time discussing the gift vehicle and more time discussing what inspired the donor and how the gift will help those served by the organization.

“The big picture and benefits. If you do articles specifically about planned giving in your publications, do not focus on how a gift mechanism works. For example, rather than doing an article that goes into great detail about how a charitable gift annuity is structured and works, mention that this type of gift will allow the donor to support the organization’s mission while providing him or her with an income for life. Save the details for a later discussion with the prospect, and focus in the article on what such a gift can do for the donor and the impact the gift can have. Keep articles brief and donor-centered. Each article about planned giving should benefit the reader.

“Online options. Another low-cost way to build general awareness of planned giving is through your organization’s website. Have a page, or several pages, dedicated to gift planning. As with articles, keep the material simple and of high value to the reader. Instead of having a button that says, “Charitable Gift Annuity,” have one that says, “Income for Life.” Keep the message simple and focused on the prospect. Also, be sure to include plenty of inspiring, real stories about diverse donors. This will move prospects, as well as further engage those you are writing about.

“Easy to contact. Whether in e-mail, print or online, make sure that prospects and donors can reach you easily. This means you should include your name and all of your contact information. People are more likely to make an inquiry of you than they are to some faceless institution’s general telephone number. Keep it personal and simple. No one is going to go hunting for your e-mail address or telephone number.

“Easy to read. Regardless of the electronic or print medium used to communicate with prospects, the material should be readable. While this sounds obvious, it is sadly not common practice. Remember, planned-giving prospects are almost always over age 40. Use a font size of no less than 10 points. Use a serif font, i.e., Times New Roman, rather than a sans serif font, such as Arial. While perhaps not as clean and attractive as sans serif fonts, studies show that serif fonts are actually easier to read. Do not use reverse type (white lettering on a dark background) because it is more difficult to read and not easily photocopied, printed or faxed.

“Events. There are a number of way events can be used to promote gift planning. For example, at a donor recognition event, be sure to specifically recognize those who have made a planned-gift commitment. You will solidify the support of your planned-giving donors while inspiring others to consider a planned-gift. Look for creative ideas for engaging and recognizing planned-gift donors in ways that cost little or nothing. You also can offer estate-planning seminars. However, the seminars should focus on the prospective donor rather than the organization. In other words, seminars should not be about the variety of ways one can donate to the organization, but rather about how estate planning can benefit prospective donors and their families. When inviting prospective planned-gift donors to events, remember that many will be elderly and will not drive after sunset if they still drive at all. Schedule events earlier in the day for seniors and consider helping to arrange transportation.

“By spreading the word about planned giving and how it can benefit donors, organizations will be better positioned to go out and ask for planned gifts.”

Michael J. Rosen, “Effectively Cultivating Prospects at Little or No Cost,”
Advancing Philanthropy, January/February 2011

10 non-negotiable elements of Moves Management®.

1. Unwavering support / buy-in of leadership
2. Qualified, action-oriented fundraisers
3. Assigned, rated portfolios
4. Appropriate CRM / donor database
5. Standardized coding
6. Clear ROI of making call reports
7. Specific, relevant goals and benchmarks
8. Goals and benchmarks tied to fundraiser evaluation and review
9. Statistical reports based only on database-entered actions
10. Regular team and individual fundraiser meetings

Peter Hoskow, The Big Bucks Start Here: 10 Non-Negotiables In Effective Moves Management®, 2011 Northwest Development Officers Association Winter Conference