Powerful Fundraising Appeals: Advice from Two Advertising Masters

writing-that-worksThe elements of a compelling fundraising letter are timeless — but that doesn’t mean they’re easy to explain to writers. That’s why I like the advice offered by Kenneth Roman and Joel Raphaelson in their long-out-of-print guide to good business writing, Writing That Works.

The authors of this slim, strikingly designed book worked for Ogilvy & Mather, the renowned advertising firm famous for such legendary ad campaigns as The Guinness Guide to Oysters, Rolls-Royce, and the Man in the Hathaway Shirt — to name just a few.

In other words, Roman and Raphaelson know how to persuade people to part with their money.

“To raise money for charitable, educational, or political causes, you must appeal to the emotions,” they write. “People can have strong feelings about a community fund or a church or a candidate. They can want to give.”

Whether writing a sales letter for a business or a fundraising letter for a nonprofit, there are certain elements that are universal in getting people to give you their money willingly — and happily. Here are Roman’s and Raphaelson’s tips for successful sales letters, which apply to fundraising appeals too:

  1. Have a strategy. “Successful advertising starts with clear thinking on what to say — and to whom.”
  2. Project a personality. “Sometimes the tone of your letter can be as important as what you say.”
  3. Make sure the offer is right. “The offer is what gets the action.”
  4. Get people to open the envelope. “If the sales letter is an advertisement, the envelope is the headline, serving to attract the reader to read on.”
  5. Start fast.Involve your reader in your first sentence, or your second sentence may never be read.”
  6. Favor long letters over short ones. “Remember that your reader is looking for information, not for reading pleasure. Every sentence must work for its living.”
  7. Give something away. “A simple pamphlet, perhaps one you’ve already printed for another purpose, can be an effective free offer — and a cheap one.”
  8. Make it inviting to read. “People won’t read long letters that look formidable, with solid blocks of text.”
  9. Make it look like the real thing. “Letters should look like letters, not like advertisements.”
  10. Give your reader something to do. “Don’t let your reader nod in agreement, but do nothing. Your enemy is inertia.”
  11. Don’t let your reader off the hook. “People procrastinate. You must create a reason for your prospect to act now.”

Here are a few more tips that apply explicitly to fundraising appeals:

  • Tell the prospect how much money you want. “The reader does not know how much you expect. Suggesting the amount is up to you.”
  • Make it emotional. “People don’t give to institutions; they give to other people.”
  • Make your donors members, not just givers. “An effective fundraising letter gets people to identify with your cause. It makes them feel part of it.”

Writing That Works is full of valuable, succinctly expressed advice about many other kinds of business writing that are relevant to fundraisers too, such as reports, speeches, and newsletters. Although a second edition came out in 1995 and a third in 2000 in order to address the advent of personal computers and the early internet, the advice in the first edition is as sound today as it was 35-plus years ago — plus, I think the design and layout are more aesthetically pleasing than those of its successors.

If you write for nonprofits, it’s worth tracking down a copy of any edition for your reference shelf. Properly applied, it can truly help your communications stand out from the crowd.

Prospect Research Can Boost University Fundraising Success

two-men-laptopIn an increasingly competitive giving climate, it is not enough for skilled researchers to provide information about just the wealthiest prospects. “The things we know about the people who will take a meeting with us are probably not true for the majority of our constituents,” says Shelby Radcliffe, Vice President for Advancement at Willamette University in Salem, Oregon. “They are less than 1 percent of our constituents. Prospect research analytics can help us develop an understanding of the other 99 percent.”

This is especially important for institutions of higher education that are experiencing far more competition for the philanthropic dollar than ever before. “I think where institutions can add that competitive edge is on the prospect research side,” Radcliffe says. “Do we know where the next $100 million is coming from? That’s not a question you can answer one prospect at a time.”

In a previous position, Radcliffe administered the private phase of a capital campaign by having five full-time researchers meet with fundraisers at least monthly to review data and, often, after each prospect visit. Radcliffe’s researchers were encouraged to accompany fundraisers on visits as part of their training, and they were required to spend at least one evening soliciting gifts with the student calling program. While it took time for Radcliffe to bring enough researchers on board and for the fundraisers to develop confidence in the data, the results were worth it, she says.

In its 2012 survey of educational institutions, Best Practices for Prospect Research in Higher Education Fundraising, Second Edition, prospect research firm WealthEngine found that high performing organizations invest more in research resources than their lower performing peers. The most successful institutions have up-to-date strategies for screening, collecting, implementing and safeguarding prospect research data and integrating it into the fundraising workflow.

The challenge, Radcliffe points out, is that prospect research technology has not kept pace with the communications revolution. Ponderous relational databases often lack the flexibility to allow fundraisers to update them right after a prospect meeting while key information is still fresh. “As an industry, higher education institutions and nonprofits in the United States are raising a lot of money, but we could be raising more,” she says.

When Radcliffe speaks at conferences, she often meets people who manage hundreds of staff and millions — even billions — of dollars in gifts, but have only the most basic knowledge of sound prospect research practices. “People are meeting their goals, but I think they’re setting their goals too low,” she says. “We need to be more effective in using information management tools to maximize our effective- ness, but it’s hard because we’re an industry that’s built on handshakes and relationships. We’re in a time of transition, and we have a long way to go.”

This post was adapted from “More Than Data: How Prospect Research can Help You Fine-Tune Your Ask, Allowing You to Raise More Money More Cost-Effectively,” by Paul Lagasse, Advancing Philanthropy, January-February 2011 (reprinted with permission). You can read the whole article here.

What’s in Your Donor File?

spreadsheetAs people conduct more and more of their lives online, they are putting a great deal of personal information about themselves in places where others — including prospect researchers — can find it easily. This can lead to misunderstandings about what prospect researchers can find and use. For example, the article “Is Your Favorite Charity Spying on You? (The Wall Street Journal, May 16, 2010) claims charities are “using increasingly sophisticated technology [to] survey your salary history, scan your LinkedIn connections or use satellite images to eyeball the size of your swimming pool.”

As unsettling as it is to imagine a cadre of satellite-snooping prospect researchers monitoring everyone’s promotions and portfolios, the reality is fortunately much more mundane, says Justin Tolan, chief fundraising adviser at AMPERAGE in Cedar Falls, Iowa. “The primary reason you should be seeking information is to determine the interest before determining the wealth,” he explains. “Interest is paramount.” However, researchers routinely overlook much of what’s publicly available simply because it does not tell fundraisers about a prospect’s philanthropic interests.

At the same time, there are also legal boundaries as to what researchers can obtain and use. Anything spelled out in legislative privacy provisions, such as Equal Employment Opportunity Commission (EEOC) privacy laws, the Health Insurance Portability and Accountability Act (HIPAA) or the Family Educational Rights and Privacy Act (FERPA), is strictly off limits. Furthermore, the information that is collected must be kept strictly confidential with controlled access. The APRA Code of Ethics identifies four fundamental principles that members must abide by:

  • integrity and honesty in the conduct of research
  • accountability to applicable laws, standards and levels of discretion
  • accuracy, appropriateness and confidentiality of the work
  • avoidance of conflicts of interest

The line for charities, especially for quasi-public institutions such as state universities and public libraries that have access to vital statistics, is quite clear: information such as student grades, medical histories, fines and/or legal violations has no bearing on gauging interest. As for information about bank accounts, loans and credit card debt, that is strictly unavailable. Researchers may learn about many of a prospect’s assets, but not his or her liabilities.

Finally, there are professional and ethical boundaries governing what should be collected. Tolan says that researchers traditionally follow a “golden rule” principle. “You should not seek details on a person’s private life if you would not want him or her seeking the same about you,” he advises. (The AFP Code of Ethical Principles and Standards and A Donor Bill of Rights also apply; both are available on the AFP website.)

Joshua M. Birkholz, a principal at Bentz Whaley Flessner in Minneapolis/St. Paul and author of Fundraising Analytics: Using Data to Guide Strategy, sees a trend in both the quantity and quality of information being collected. Rather than compiling extensive biographies of prospects, nonprofits are collecting less, but more relevant, information. “It’s actually more costly and inefficient to do detailed research up front,” he says. Initial research should describe a prospect as likely to have a compatible interest with the organization, which a fundraiser can then build on during the initial contact. “Once you meet the donor,” he adds, “all the information you got before the meeting may go out the window.”

For their part, experienced donors understand and even expect that researchers are collecting information about them. However, having too much information up front can get the relationship off on the wrong foot. “It’s awkward to have a conversation in which I know more about them than they think I should know,” Birkholz explains. “Fundraisers should take the high road in the relationship.”

This post was adapted from “More Than Data: How Prospect Research can Help You Fine-Tune Your Ask, Allowing You to Raise More Money More Cost-Effectively,” by Paul Lagasse, Advancing Philanthropy, January-February 2011 (reprinted with permission). You can read the whole article here.

Donor Relationships and Marketing

rolodexIn my previous posts, I have discussed some of the most important implications of Regulating Fundraising for the Future: Trust in Charities, Confidence in Fundraising Regulation (aka the Etherington Report) on the future of fundraising. The catalyst for the Etherington Report was what the report described as “public concern over intrusive or aggressive fundraising methods” resulting from “high-profile cases of malpractice” particularly the death of 92-year-old Olive Cooke, who, it was widely reported, had been hounded by nonstop fundraising calls and letters for years.

The report noted that Britain’s Fundraising Standards Board (FRSB) had received 48,000 complaints against charities in 2013, mostly regarding excessive mail solicitations. While the report pointed out that this was out of an estimated 20 billion donor contacts that year alone, Ken Burnett, managing trustee for the Showcase of Fundraising Innovation and Inspiration (SOFII) and author of Relationship Fundraising: A Donor Based Approach to the Business of Raising Money, believes that it’s still 48,000 too many — and he’s not alone.

“We need to focus less on repeated requests that are designed to wear down our donors and learn more about being inspiring,” Burnett says.

Burnett has long championed an emphasis on marketing approaches that are based on “shared emotions, truth, and commitment” — in other words, using marketing techniques not to secure gifts but to secure relationships that lead to gifts. It is a subtle distinction that Burnett says many fundraisers often overlook. It also requires nonprofits to reframe fundraising expenditures in terms of the lifetime value of a donor, rather than the average cost per gift. And in a post-recession economy in which fundraising costs are on the rise and nonprofits are increasingly looking to individual giving to offset declines in grant funding, that can be a very tough case to make.

Twenty-five years ago, Burnet hoped to counter the then prevailing “churn and burn” paradigm that focused on the money rather than the people sending it. “But my fundraising vision was still not based on what the donor wants,” Burnett has written. “I ran a direct marketing agency. Though I tried to switch its focus toward communication, I still described our enterprise as marketing and communications specialists, putting marketing first. Why was marketing a mistake> Because our very success at it had enable us to downplay the donor experience, which is what we should have focused on to build the long-term, 40-year-plus relationships we need. As a result, we’re hemorrhaging our lifeblood while paying a fortune in acquisition just to stand still.

“The escalating cost of acquisition has now, in places, reached proportions impossible to justify unless we succeed in keeping donors a lot longer,” Burnett adds. “Yet, despite persistent protestations of being donor-let and a few inspirational examples of relationship fundraising, our sector seems locked into the ‘you give, we get’ mindset, with the fundraising equivalent of persistent hard selling the norm and brilliant customer experiences the hard-to-find exception.”

Fully aware that many people will see his change of heart as biting the hand that has fed fundraising so well for so long, Burnett points out that the biggest argument against marketing is a simple one: donors don’t like being marketed to. The difference is, donors now have the means to express their displeasure in ways that directly — and immediately — affect a nonprofit’s bottom line.

The ubiquity of “Unsubscribe” buttons has made it easier than ever for donors to terminate their relationships with charities on impulse — even when they continue to care about the cause. And with many nonprofits struggling with donor retention, every loss of a committed and passionate donor is a blow to the bottom line.

Despite what its name might suggest, relationship fundraising is very much a traditional data-driven approach. Marketing is, and always has been, about treating people as individuals, not as numbers. That is because the best marketers know that if you focus on the gift, that’s all you’ll get. If you focus on the donor, you’ll get all the gifts that the donor has yet to give. And the data prove it.

According to the 2015 Fundraising Effectiveness Survey Report, the median donor retention rate was 43 percent in 2014. That is, only 43 percent of 2013 donors made repeat gifts to participating nonprofits in 2014. When looking at new donor retention, for donors giving less than $100, the retention rate was only 18 percent compared with 47 percent for those giving more than $250. The same trend was seen in repeat donor retention: Donors giving less than $100 had an average retention rate of 53.5 percent over the last seven years compared with donors giving more than $250, which demonstrated an average of 76 percent retention. Does this say something about the way the different donors are stewarded or their relationships with organizations?

In his article “Relationship Fundraising and Marketing: Friends or Foes?” major-gifts fundraiser Roewen Wishart, CFRE, addressed what he called the “false dichotomy” that many fundraisers believe separates donor-focused fundraising from marketing. Relationship-based campaigns rely just as much on strategies, goals, quantitative data, and outcomes as transaction-based ones; where they differ is that a relationship-focused campaign necessarily requires a longer-term view of the return on investment.

“Relationship fundraising does not mean abandoning or neglecting how we ask for money,” Wishart writes. “It does mean that the transaction is the result, not the goal — and being careful with steps that reduce donor choice or favor quick returns over higher long-term returns, even where there is short-term cost.”

This post was adapted from “Inspiring Better: How Relationship Fundraising Can Win Back Skeptical Donors and Change the Way Fundraisers Think about Approaching Them” by Paul Lagasse, Advancing Philanthropy, Spring 2016 (reprinted with permission) You can read the whole article here.

Are Your Gifts the Result of Relationships, or Merely the Reason for Them?

gearsIn my previous post, I discussed the publication of Regulating Fundraising for the Future: Trust in Charities, Confidence in Fundraising Regulation (aka the Etherington Report) in response to public concerns about fundraising tactics employed by some UK charities that many people felt were overly aggressive.

Even though the Etherington Report doesn’t have the force of law outside the UK, fundraisers in other countries have been hearing similar calls for increased government oversight of charitable activities. Concerns over how donor advised funds are managed in the United States, for example, have led many observers to urge that laws be changed to require greater transparency and even mandatory time limits. In Canada, the threat of federal legislation that would impose salary caps on nonprofit executives recently galvanized over 500 charities to convene a summit to hammer out a common strategic roadmap and implement a nationwide educational outreach campaign that succeeded in forestalling the proposed law.

Ken Burnett, managing trustee for the Showcase of Fundraising Innovation and Inspiration (SOFII) and author of Relationship Fundraising: A Donor Based Approach to the Business of Raising Money, believes that, along with the concerns about oversolicitation that prompted the Etherington Report, these and other calls for increased regulation are an inevitable result of the widespread perception — accurate or not — that fundraisers cultivate supporters just to gain access to their wallets. It’s the antithesis of the philosophy that Burnett spelled out in 1992, in the first edition of Relationship Fundraising.

In the book and when speaking to fundraisers and stakeholders alike, Burnett defines relationship fundraising as “a donor-based approach to the business of raising money.” The relationship, he elaborates, can be “remote, slender, and distant, or it can be intense, close, warm, and even intimate.” The choice, he says, ultimately belongs to the donor. Whatever type of relationship the donor chooses, ideally it should be mutually beneficial, “where both [the donor and the organization] can see direct, tangible benefits that will encourage their relationship to continue by mutual consent and even grow.”

This mutual commitment is what sets fundraising apart from other types of marketing activities that also seek to motivate people to show their support through financial means.

The difference between the two methods is really just a matter of perspective. In Burnett’s view, a financial gift from a donor is the result of a relationship, not the reason for it. Put another way, an emphasis on the financial tramadol cod saturday need of an organization or a cause is analogous to “pulling” a donor toward your desired goal. In relationship fundraising, you strive instead to motivate people to want to give, in effect “nudging” them toward finding that goal for themselves.

As Burnett has written, “Instead of building the long-term relationships we need, fundraisers often opt for the low-hanging fruit of short-term money now, chasing the easiest bucks they can find to hit their quarterly or even monthly targets. At conference halls and seminars, there’s talk of buying donors in volume. We’ve commoditized fundraising and devolved the job of talking to donors and prospects to commercial third-party contractors who ration out among us the fruits from their sites. For this short-term saving, we’ve sown the seeds of our own downfall. Many are brilliantly talented and committed fundraisers, and we couldn’t and shouldn’t do without them. But the way we oblige them to work for us may not be what we need now.

“It seems to me and others, too, that what’s missing is the emphasis on the why and the pleasure of being a donor.”

Burnett believes that the most successful way to emphasize the why, to rekindle the pleasure of giving, and to nudge a donor to want to make a gift is through storytelling. In the quarter-century since the first edition of Relationship Fundraising, Burnett has become so convinced of the central importance of storytelling to fundraising — and of the need for fundraisers to embrace it passionately — that his latest book, which he calls his most important so far, is titled Storytelling Can Change the World. While the idea of storytelling is not new to fundraising, Burnett argues provocatively that fundraisers often don’t know how to identify the best stories to tell, or how to tell those stories effectively.

Burnett seeks to establish — or restore, depending on your perspective — the creative process to donor outreach.

As Charlie Hulme, managing director of Donor Voice and a former creative director for a major marketing agency, wrote in his review of the book, “We’ll never change the world unless we change the way we tell our stories.”

This post was adapted from “Inspiring Better: How Relationship Fundraising Can Win Back Skeptical Donors and Change the Way Fundraisers Think about Approaching Them” by Paul Lagasse, Advancing Philanthropy, Spring 2016 (reprinted with permission) You can read the whole article here.

Rethinking the Ask, Part 3: Changing the Wrong Mindset

MicrophoneWhen is too much simply too much? For donors, it is too many asks from too many fundraisers for too many causes.

Relationship fundraising has become the foundation of successful fundraising, with many development professionals worldwide hard at work finding new and interesting ways to engage people with the causes they care about. However, a report released late last year in the UK is forcing fundraisers there to rethink how they define and build relationships, and the implications of those changes are likely to spread far beyond national borders.

Regulating Fundraising for the Future: Trust in Charities, Confidence in Fundraising Regulation, also called the Etherington Report after the chair of the panel that wrote it, was published in response to public concerns about fundraising tactics employed by some UK charities that many people felt were overly aggressive. The issue received extensive press coverage — some of it highly sensationalized — and sparked an often-heated public debate over whether nonprofits had crossed an ethical line.

Concluding that fundraisers and the public alike had lost confidence in the UK nonprofit sector’s ability to regulate itself, the Etherington Report made several sweeping recommendations that, if enacted, would have the force of law, including the establishment of a national registry for people who choose not to be solicited by charities. The major fundraising bodies in the UK, the Public Fundraising Regulatory Association and the National Council for Voluntary Organizations, have endorsed the report’s recommendations. Nevertheless, some commentators have predicted that such a registry would effectively starve nonprofits of new revenue.

Ken Burnett, managing trustee for the Showcase of Fundraising Innovation and Inspiration (SOFII) and author of Relationship Fundraising: A Donor Based Approach to the Business of Raising Money, disagrees. He argues instead that the “do not solicit” list is an inevitable outcome of a fundraising mindset that assumes that the best way to get more money is to simply ask more people more frequently.

“In taking regulation out of the hands of fundraisers in the UK, the review body, while chastising British fundraisers for being overly aggressive, has insisted that fundraisers must put donors, not financial targets, at the heart of fundraising practice,” says Burnett. “We’re going to have to review how we do asking.”

Nor is donor dissatisfaction with oversolicitation limited to the UK. The Burk Donor Survey 2014, for example, found that in 2013, 64 percent of U. S. respondents and 71 percent of Canadian respondents reported that they had reduced or even canceled their financial support of nonprofits that had oversolicited them.

The proper course of action in response to this donor backlash should be clear, Burnett believes. As he wrote in a recent blog post, “The upshot of the past horrible half year is that in future fundraisers are going to have to be a whole lot less persistent in asking. Which seems to suggest, logically, that we’re going to have to get a whole lot better at inspiring.”

This post was adapted from “Inspiring Better: How Relationship Fundraising Can Win Back Skeptical Donors and Change the Way Fundraisers Think about Approaching Them” by Paul Lagasse, Advancing Philanthropy, Spring 2016 (reprinted with permission) You can read the whole article here.

Fundraising: Much Ado about Salesmanship?

handshakeThe differences between the nonprofit sector and the for-profit world have become something of a mantra among fundraisers. Charities work for a greater good, you say, while businesses are only interested in their own profit. Fundraisers are motivated by a desire to change the world (or at least a corner of it), while salespeople are only interested in raising their company’s bottom line. However, nonprofits and businesses share some important things in common — most obviously, the need for money. Because fundraisers and salespeople seek to achieve vastly different ends, fundraisers argue, their means must differ as well. Otherwise, fundraisers fear, what are they except a salesperson by another name?

“We’re both trying to encourage someone to make a decision, but for very different reasons,” says Brian Saber, president and co-founder of Asking Matters ( “What we’re ‘selling’ in the nonprofit world is helping others and goodwill.”

A major difference between fundraisers and salespeople, Saber points out, is motivation. “In for-profit sales, you learn to love the product and you go sell it,” says Saber. “In the nonprofit world, you believe in the organization and you sell it, but your reasons for doing so are much more personal.”

As the person in charge of training for the silent phase of a major capital campaign, Matthew S. Cottle, CFRE, director of advancement planning and special projects at California Polytechnic (Cal Poly) State University (, had to confront the issue of fundraiser motivation head-on. Because of a dearth of available development officers with major-gift experience, Cal Poly has been recruiting people with commercial sales backgrounds and training them to understand the differences between the transactional approach used by salespeople and the relationship approach preferred by fundraisers.

Explicating the differences between fundraisers and salespeople, Cottle says, has helped him to understand more clearly the role of the fundraiser in the donor relationship equation, as well as the risk posed by the cultivation of a transactional mindset that values the fundraiser’s need to secure a gift above the donor’s desire to join a group that shares the same passion “A donation indicates a shared aspiration and a shared emotion,” says Cottle. “If we don’t understand our own emotional responses, we run the risk of allowing the relationship to veer off in unanticipated directions.”

Another crucial element is the fear of rejection. If a fundraiser’s fear of rejection were to prevent him or her from securing a major gift from a high-net-worth individual, the result for the organization’s bottom line could be disastrous. That crucial difference, Saber believes, can sometimes be a hindrance to fundraisers. “Because you care so much, it can feel like a personal rejection if a donor turns you down,” Saber says. “It becomes a reflection on you. and that gets in the way of asking.”

Not only can fundraisers learn from salespeople how not to take rejection personally, Saber suggests, but they should also seek to minimize the risk of rejection by taking a more strategic approach to the way they identify and cultivate prospects. And that means taking advantage of knowledge that’s already out there.

“Good fundraisers know that money is a byproduct of putting the right opportunity in front of the right person at the right time,” says donor communications expert Tom Ahern ( “And that’s straight out of sales and marketing.”

Ahern, whose background is in commercial sales and marketing, points out that his field is built on a century of empirical research into human behavior that allows people to predict the outcome of a marketing campaign with a high degree of accuracy. Furthermore he argues that, whether or not fundraisers realize or admit it, fundraising is a specialized kind of sales and marketing. The difference, of course, is the use to which fundraisers put that neutral data — the reasons that they seek to place a suitable philanthropic opportunity in front of a strong prospect at a moment that is opportune for both the donor and the organization.

Both salespeople and fundraisers are in the business of persuading people to part with their money, but for very different reasons. Whereas a salesperson can promise a tangible benefit for the person with the money to spend, a fundraiser instead can only offer an intangible benefit to the donor, in exchange for the promise of tangible results for other people. And if sales is about persuading people to do something they may be in some way resistant to doing, fundraising is about encouraging people to do something they passionately want to do.

“My motivations are to alleviate suffering and help people better their lives through education,” says William F. Bartolini, Ph.D., senior advisor for principal giving at George Washington University ( “Earlier in my career, when I sold shoes and kids’ clothes, the sales were transactional. I provided a service, people bought the product, and I got a commission. It was a job. But that’s changed now.”

In providing a donor with an opportunity to achieve self-actualization, a fundraiser achieves self-actualization as well. “I’m sharing my passion and my enthusiasm with donors,” Bartolini adds. “I’m helping change lives. How great is that?”

This post was adapted from “More Than the Sum of the Parts: What Makes a Fundraiser?” by Paul Lagasse, Advancing Philanthropy, Fall 2014 (reprinted with permission) You can read the whole article here.

Beat the “Overhead Myth” by Treating Overhead as an Asset

abacus“I’ll support program activities, but I won’t pay for your salary,” a new board member recently explained to Donald K. Rhoten, CFRE, President of the Meadville Medical Center Foundation ( in Meadville, Pennsylvania. Instead of avoiding further discussion of a potentially touchy topic, Rhoten seized the opportunity to have a deeper discussion about overhead. “I explained that I respected his choice, but I also asked him to consider this: for many local nonprofits, it’s the overhead that’s actually providing the service. In such cases, overhead is an asset.”

An asset?

Rhoten asked the board member to consider the example of a soup kitchen run by a paid staff of one. That person’s salary would technically be considered an overhead expense, but without her, the soup kitchen would not be able to operate. “If I were choosing to support that organization, I would give to pay for her salary,” he explains, “because she is the organization.”

Rhoten’s argument showed the board member the value of paying for overhead, and he believes that other nonprofits can use the same approach to make the case to donors that they should think of overhead not as a cost, but as a means to a greater end.

Rhoten says fundraisers and executives should welcome opportunities to make the case for overhead. “Those questions are not bad questions,” he says. “They show that people are engaged. The donors we have who are the most active and who stay with us for the long term are the ones who are asking those questions. They’re not just going to write a check and go away.”

The challenge, he says, is to get people to see that overhead can provide long-term stability and even grow an organization.

As it turns out, the board member needn’t have been concerned about paying for Rhoten’s salary. Meadville Medical Center, an independent community hospital that serves Crawford County and the surrounding area in northwest Pennsylvania, funds 100 percent of the foundation’s overhead expenses. While this frees Rhoten from having to make an explicit case for overhead support, it also allows him to point to the benefits that such support provides to the foundation. Thanks to the hospital’s support, in 2013, Rhoten and his small staff were able to focus their efforts on raising $500,000 in support of myriad activities, including purchasing a new vehicle to deliver patients to the hospital’s oncology institute, constructing a new hospice house and dental center, purchasing adaptive bikes for disabled children, and providing new training mannequins to hospital physicians and nurses.

“Our overhead truly adds value to our hospital, our community’s healthcare services and our community’s overall way of life,” says Rhoten. “Without it, we could do nothing” — much like the soup kitchen example.

IRS Filings are Not the Whole Story

Just like his skeptical board member, Rhoten used to feel differently about overhead. “Initially my perception of overhead was in line with the myth,” he says, referring to the traditional view of administrative expenses as an accurate measure of a nonprofit’s performance. Rhoten faced questions from donors seeking justification for overhead expenditures. “But I quickly realized that ‘overhead’ is just a catchphrase,” he says. Instead, now Rhoten argues that nonprofits need to think about fundraising as a continuum that includes both administrative and program expenses. “We have to think of fundraising not as asking donors for money, but as helping the organization provide the best service,” he says. In other words, overhead is just as vital to mission success as program funds.

That is why the focus on one or two specific numbers, such as the percentage of overhead, can be so misleading. While the Meadville Medical Center Foundation’s IRS Form 990 filings provide donors with a broad-brush view of the foundation’s revenue for a given year, the filings don’t reflect gifts that were made to the hospital itself or to related organizations. As a result, donors who rely on the foundation’s 990s for assessing the foundation’s performance might see very little revenue in some years, and even what appear to be losses in others.

“I think that the transparency that the 990 provides is very important, but it affords people the opportunity to create misconceptions,” Rhoten points out. “The 990 is looking at dollars. I wish there was an equivalent document for looking at mission yield.”

Until such a form is developed, Rhoten will continue relying on old-fashioned persuasion to sway skeptical donors to his conviction that overhead is truly an asset, not an expense, for his foundation. “The questions may demonstrate the donor’s interest,” he says, “but the answers make a relationship.”

This post was adapted from “Not a Money Pit! How Nonprofits Can Convince Donors and Funders that Outcomes Can be Achieved More Effectively When They Support Overhead along with Programs,” by Paul Lagasse, Advancing Philanthropy, Spring 2014 (reprinted with permission) You can read the whole article here.

Abiding by Donor Intent is Crucial for Good Relationships

gavelWhen the New Jersey Superior Court’s Appellate Division handed down its decision in Adler v. SAVE in August of 2013, the ruling was widely described as precedent-setting because of its conclusion that nonprofits can be required to return gifts should living donors prove in court that the organizations have not honored the donors’ original intent. The Adler decision has catalyzed nonprofits to think about how to prevent costly misunderstandings over donor intent lest they risk losing gifts outright, as well as the goodwill of donors. (See “New Jersey Nonprofit Ordered to Return Gift After Not Honoring Donor’s Intent“)

By now, the basics of the case are well known. Princeton couple Bernard and Jeanne Adler donated $50,000 in cash and stock to SAVE, A Friend to Homeless Animals, a local animal shelter that was planning a new facility, for the purpose of constructing rooms dedicated to the care of older cats and large dogs. The Adlers’ informal gift agreement also secured naming rights to the rooms. However, following the merger of the shelter with another animal care organization, plans for the new facility changed to take advantage of an offer of a parcel of land in another township. The new facility, it was announced, would be much smaller than originally planned. Furthermore — and crucially — the new facility would apparently not include the two named rooms. Unable to reach an agreement with the nonprofit, the Adlers filed suit in county court for the return of their gift. Though the court ruled in the Adlers’ favor, the shelter appealed and the case went before the state’s Superior Court, which ruled decisively for the Adlers — nearly nine years after their initial gift.

Besides abiding by A Donor Bill of Rights, a key to preventing these kinds of problems is the gift agreement, says Kathryn W. Miree, the president and primary consultant at Kathryn W. Miree & Associates, Inc. ( ) in Birmingham, Alabama. “The gift agreement determines what happens to the gift and specifies the remedies that apply if something goes wrong. And that, in turn, determines whether you end up in court.”

Miree explains that, because gift agreements are all written differently, it’s important that all parties are aware of their responsibilities and roles. “Things go wrong when any of the parties around the table don’t know enough to represent themselves effectively,” says Miree. “If all three parties are experienced, the process works because you have a balance of responsibility.”

Miree recommends that gift agreements stipulate alternative uses for a gift should plans change, as they did in the Adlers’ case. Donors also may choose to set a time limit on their terms, or to define the intent broadly enough to allow the organization some leeway in how it chooses to use the funds. However, Miree admits, many donors are reluctant to consider alternative uses. “Don’t make the restrictions so narrow that you create a dysfunctional pool of money,” she often counsels donors.

A good gift agreement upholds the rights and responsibilities of all parties not just at the time of signing, but for the duration of the gift. “We can’t outguess change,” says Miree. “It’s important to give a board the discretion to use gifts where there is a greater impact.”

This post was adapted from “Semper Fidelis: How Strategically Stewarding Your Loyal Donors Will Help Your Organization Succeed With the Ongoing Shifts in Charitable Giving,” by Paul Lagasse, Advancing Philanthropy, Winter 2014 (reprinted with permission) You can read the whole article here.

Use Matrix Mapping to Assess Events

matrixIn their book Nonprofit Sustainability: Making Strategic Decisions for Financial Viability (Jossey-Bass, 2010), Jeanne Bell, Jan Masaoka, and Steve Zimmerman proposed visualizing a nonprofit’s business model using a method they called “matrix mapping.” In matrix mapping, the financial profitability and mission impact of each activity are assessed and then plotted on a Cartesian grid. The result is an easy-to-grasp graphic representation of the relative strengths and weaknesses of an organization’s activities. Depending on where an activity lands on the grid, the nonprofit can then take steps to improve underperforming activities as well as to sustain those activities that are performing well.

When a client recently contacted Dallas-based nonprofit consulting firm Rylander Associates ( seeking to revise its strategic plan, principal Carole Rylander, CFRE, realized that matrix mapping might be an effective way for the organization to assess how closely its 12 events aligned with its strategic objectives.

Rylander began by collecting the income, total direct expenses, and allocated indirect expenses for each event, and plotting them in a spreadsheet. This step required several iterations until all the numbers lined up and everyone understood what they were seeing. “They have the numbers,” Rylander says. “They just don’t tend to arrange them in the way needed for matrix mapping.”

She suggests documenting this process in order to avoid having to reconstruct it later.

Next, Rylander and her clients worked together to assess the impact of each of the 12 events. However, unlike profitability, which is based on hard numbers, impact is not in itself a quantitative measure. To compare profitability and impact, impact must be represented numerically. Rylander and her clients identified several impact criteria that applied to their events from the list of criteria in Nonprofit Sustainability, specifically:

  • alignment with core mission
  • excellence of implementation
  • scale or volume
  • depth of change and impact
  • effectiveness at filling a gap
  • community-building capability
  • leverage
  • addressing of root causes
  • contribution to academic-quality knowledge

Then, the evaluators weighted the relative importance of each of the selected criteria by assigning it a numerical value that, when added all together, equalled 100. Rylander points out that the more criteria you select, the less statistically significant each one becomes. The authors of Nonprofit Sustainability recommend selecting four or five at most.

Having established and weighted the impact criteria, the evaluators then added the fundraising events to the spreadsheet and, for each event, assigned a rating of one (lowest) to four (highest) for each of the impact criteria. Rylander also added total volunteer hours per event into her matrix, as a way of allowing the client to assess whether that precious resource was being allocated appropriately.

When the ranking results were transferred from a spreadsheet to the matrix grid, the results were eye-opening. The matrix showed that two of the organization’s longest-standing events, a fun run and a food booth at a fair, were much less profitable and had a much lower impact that the board had realized. “The placement of the run on the matrix map opened up a fantastic conversation about what other, more effective, strategies could be implemented to gain visibility,” says Rylander. “With the matrix map it’s actually possible to make the case for opportunity costs. As in, ‘What if you took that money, time, and energy and focused it elsewhere?'”

Ultimately, says Rylander, using matrix mapping to assess event performance is about giving nonprofit leaders the information they need to make effective decisions about going forward. “I think it’s the same as in psychology,” she says. “You can’t change what you’re not aware of. However, you can change what you are aware of.”

This post was adapted from “Brilliant Ideas: How to Create an Unforgettable and Successful Event with Multimedia, Community Engagement, and Spotlighting Your Programs,” by Paul Lagasse, Advancing Philanthropy, Summer 2014 (reprinted with permission). You can read the whole article here.

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