Donors: leaders or followers?

Ken Burnett has furnished fundraisers with the theory of relationship fundraising. For many, this noble concept has been degraded into a sort of formulaic and politically correct form of donor relations. Speak to your donors in their language. Take the advice of donors and adhere to it religiously. Treat your donors as your charity’s key audience.

The problem is that donors are NOT ALWAYS right.

(I can feel the awkward silence, and the glares of heresy. )

Donors are not the only group in a charity’s constellation of relationships: the actual beneficiaries (lest we forget), volunteers, staff, management/board, competitors, and suppliers must all be part of the equation when developing policy and programs.

On top of addressing the many stakeholder needs, some donors are seriously off the wall. I’ve managed donor expectations for large charitable organizations, and some of the recommendations (often stated as if requirements) are bizarre, some unethical, and many downright rude. Other recommendations are well intentioned, but underinformed. And some were real gems in the rough.

In my experience, ALL donors who offer their perspective are basing their comments on THEIR own experience—this is a human trait, admittedly—and we know that not all donors are the same.

For example, if someone says that they will only give online, that does not mean that all donors give online. (Editorial aside: In fact, studies and proper statistical analysis indicate that for most successful fundraising non-profits, receiving even 10% of annual revenue from online donations is considered real success)

In an increasingly competitive fundraising environment, any marketing professional is tempted to be swayed by the voices of individual constituents. Especially if they are the ones "caught" by the donor on the phone. Donors can be quite persuasive.

The problem is that individual comments, recommendations, and advice are not normally based upon universal truths, solid testing, or large enough sample sizes. As a colleague is fond of saying: advice is free, but good advice will cost you.

Having said this, donors are a valuable source of insight. Statistics on donor behavior drawn from various donor segments can be incredibly useful in defining fundraising strategy. If many donors offer the same advice, then chances are that advice is worth considering. Furthermore, SOME ideas proposed by donors may also be marvelous and worth testing. From my own experience, I offer a few words of suggestion on how to manage the advice given by the self proclaimed “donor leaders.”

First, don’t argue with the wingnuts. It will suck time out of your day, patience out of your demeanor, and your soul from your work. In spite of the intrinsic need to be nice to each and every donor, it is rare to actually get to the root of these donors’ concerns in a way that will appease them, let alone sufficiently motivate them to actually give.

Second, accept rational suggestions as credible, and employ them as a starting point to engage that donor. Discuss the relative merits of the new idea or suggestion and offer your perspective based on other donor comments, policy directions, and available funding. More often than not, the conversation you have, even if you collectively decide that the idea may not work out, will build a relationship with that donor that will lead to greater support in the future. This is my understanding (interpretation) of Ken Burnett’s relationship fundraising.

Third, don’t acquiesce to ultimatums. If a donor requires you (or your organization) to change to get their support, then they have the wrong organization. Tell them so, nicely, get off the phone, then call a major donor to say thank you for whatever they did recently. I believe that limited time is better spent with those who are partners, not adversaries.

Finally, be sure to test those ideas that “fit” the budget, policy and ability of the organization, before assuming that they are true. Seasoned fundraisers don’t actually KNOW what their donors (or prospective donors) will do until they ask their donors.

So, are donors the leaders of an organization? No, they must be followers of the organization’s mandate, policy and programs.

The “customer,” it would appear, is not always right.

Nonetheless, good fundraisers must keep their ears and eyes open to the possibility that donors may offer some useful insight and ideas, and all non-profit staff must have faith that donors, in general, want to see the charity succeed and most of the time their ideas are a plea to help in a constructive way.

Business for good, or only for good money?

A business that runs solely to generate a needed product or service for clients while compensating employees fairly and investing in modest growth? C'mon.

Why not?

It is about initial investment capital, really. To start a business needs seed money, and the model today is to “borrow” money from investors and then promise to give them a financial rate of return on that long term loan as the business grows.

But there are new philanthropic investors out there like Jeff Skoll, and new giving mechanisms like community foundations and donor advised funds. It is no longer impossible to "sell" a business model to an investor that doesn’t give them a financial return on investment, but rather gives them the social change that they want to see.

True, in order to get an investor for a social business, the business model must be sound, the entrepreneur has to be trustworthy and capable, and it isn’t simply a matter of asking for money from the world’s rich to invest in a good cause…it takes perseverance and a good deal of strategic thinking.

That sounds like the necessary preconditions for ANY business.

In Dan Pallotta’s excellent new blog, he indicates that early in their careers, young people face a choice: work for good, or work for good money. He notes that this paradigm is changing and Nell Edginton’s related blog commentary also notes the possibility that “despite lower salaries Generation Y is entering the nonprofit sector in higher numbers than previous generations.”

So, to summarize, we no longer have the best and the brightest of the new employment pool avoiding working in the social sector. We no longer have rigid barriers to accessing venture capital for social businesses. We no longer have the choice to ignore the desperate needs in our society—our global society—from poverty, to environmental degradation, to health care disasters (HIV, flu epidemics) to basics like access to clean water or protection of fundamental human rights.

Businesses have germinated with a lot less reason.

Oh, right, the only reason to start a business is to make money. Indeed, some bright commercial mind will design, market and produce garlic peelers, nose hair clippers, or cabbage patch dolls if money can be made.

The key point here is that historically business success is measured in LOTS of money, both for the senior staff and the initial investors.

However, it is possible to generate a business model that creates enough revenue to pay staff, overhead and suppliers that generates a social benefit rather than 100,000 new widgets and a $0.31 per quarter stock dividend.

This might sound like a charitable model, but notably, charities do not get the same sort of latitude enjoyed by commercial businesses. Charities do not typically have robust advertising and marketing budgets, nor salaries commensurate with market value, nor the ability to investment in multi-year projects without disbursement quotas, and they suffer from extreme risk aversion.

Charities, then, are not the best foundation for social business. They have too many constraints placed on them by law or by convention. But a not-for-profit company doesn’t necessary have to be a charity. It is a business. It operates in the business world. Investments, not donations.

The good news is that the day of the social business has arrived. It appears that there is a new hunger amongst qualified staff and investors; they want to see their efforts and money lead to LOTS of improvements in society rather than accumulation of wealth.

Why, then, are not-for-profit businesses so rare?

In a decade, I believe they won’t be.