Tuning Up the Board’s Fundraising Engine: The Executive Director as Master Mechanic
by Laurence A. Pagnoni, Chairman

CEOs, says my colleague Alex Plinio of Rutgers Business School, get the board they deserve. True. But this only means that an executive director has to do more than report to the board. The CEO has to play an active role in developing the board.

Board management is often the most difficult aspect of the job for CEOs to get their head around. On the one hand, the executive director works for the board; on the other, he or she has a role in developing the best board possible. Some nonprofit CEOs may feel awkward about “bossing” the boss. Others, recognizing that the board is not firing on all cylinders, tune out. They sit back and glare angrily at board meetings and mark time until a new job offer is received, or perhaps count the days until retirement.

Steering a nonprofit through difficult economic times requires the opposite behavior. If the Board of Directors is not functioning effectively as a fundraising engine, the CEO has to diagnose the board’s problems and solve them. No one else will.

Here are three key recommendations:

First, look at what you have. Look at the board as individuals and consider the skills and interests of each member. What kinds of fundraising would they be good at? The affable, outgoing member—the one you would most like to have a cup of coffee with—would probably be terrific at asking people for money. This person could be chair of the Major Gifts Committee. The quiet, bookish member who would never dream of asking a donor for money probably has good written communication skills; here is someone who could write reports and appeal letters, or once or twice a year review the materials produced by the development office, offering a fresh point of view. The detail-oriented, mathematically-inclined member, the one who always seems to have a calculator in hand, is likely to be a whiz at organizing special events or reviewing budgets.

If you’re not sure what role certain board members might best play in fundraising, ask them. Review with them the various ways your organization raises money and ask them which they would prefer to be involved in. They may have strong preferences and will probably be glad that you brought the subject up.

The second key tip is to see what you don’t have. What kinds of people are missing from the board? Every board needs to have someone whose primary task is to look after the viability of the board itself. This person’s chief feature is the ability to facilitate teamwork. The individual filling this role is often installed as vice president and is the person who reminds the other board members of their duties and responsibilities. “How are your committee meetings?” the VP might ask. “Are you pleased with how things are going?” “How do you intend to make your annual gift this year, and can you make a stretch gift?” “We only had four meetings this year and you missed three of them. Can we talk about that?”

If there is no one on the board performing this function, it is up to the executive director to recruit and appoint someone with this talent. If the board consists, say, of lawyers and social workers, it is up to the executive director to recruit a fundraising and/or marketing professional, or someone possessing other skills sets that may be needed and missing.

The third thing to consider is the level of engagement. Board members do more and give more when their passions are engaged about the mission and the organizational vision at the highest level. It is the CEOs job to keep them excited about the organization’s mission and work, and to enable them to experience the agency in action. This can be done by sharing white papers with the board on the work in your field, or by having an expert in your field make a special presentation to the board. Invite the board to tour the program site or include them in on-going tours. Consider bringing clients to a board meeting and have them respond to questions and answers about the impact the program has had on their lives and its strengths and weaknesses. Some boards have membership slots for their client consumers yet rarely take advantage of the insight they may bring.

One measure of engagement, of course, is the board’s financial contributions to your agency. Record the board’s cumulative annual giving in your grant proposals and in a separate line in the revenue section of your operating budget. Public disclosure of how the board discharges its obligation to raise funds is important for your funders and constituents. And for the board’s self-awareness too.

CEOs can get the board they want. But you have to start with the board you have. The secret is not to tune out when the next meeting is called to order. Tune in, and fine tune.

The Creative Art of Stewardship
by Bob Serow, Senior Counsel

The joining of a donor with an institution is like an idyllic marriage where the relationship between parties endures beyond the initial “romance” of the gift. In the norm, unfortunately, few such Edens exist and, after short-term euphoria and a perfunctory thank you, the institution moves onward to other pastures.

Not staying engaged with a donor represents a lost opportunity for the institution to steward a relationship that is ripe for the offing. Make no mistake about it: to assume that a simple acknowledgement letter and/or phone call encompasses the essence of stewardship is an egregious error. On the contrary, exercising effective stewardship needs to be a process, one where the institution invests its intellectual and strategic capital on time and energy to bring a person who has displayed a commitment to mission, an alignment with vision, and a strong measure of generosity, into its proverbial family circle.

I would like to share a successful model developed by a small research institute for its $15 million campaign. You might think a research institute would have a difficult time engaging donors. But here’s what they do:

When donors make a commitment to support the institute, they are given the choice of 2-3 projects where their gift would be restricted. When this decision is made, donors immediately receive two acknowledgements, one from the CEO of the organization and one from the researcher who serves as program director. The letter from the CEO is of prime importance as it advises the donor that, for the funding year, the research program will be named in his or her honor.

Six months into the funding year, the program director forwards the donor two progress reports, one a highly technical document geared for persons in the scientific community, the other an easy to read summary, written in lay language.

The next step is a crucial one. It occurs nine months into the funding year, where the program director and the donor meet face to face. The meeting locale may range from a simple lunch in the program director’s office, to lunch/dinner at a fashionable midtown restaurant. Choice of venue is up to the donor.

The face-to-face meeting brings stewardship of the donor to a higher level as it (1) provides the donor and program director a chance to get to know one another on a personal basis; (2) affords the program director the opportunity to share with the donor first-hand the progress of the research project; (3) sets the stage for the next ask of the donor for continuing support and, (4) strengthens the relationship between the donor and the sponsoring organization.

Two weeks after the meeting, the program director sends the donor a letter of appreciation and brief summary of the items discussed. The development officer is kept informed along the way and looked to for guidance of the process. This sets the stage for the next ask. Shortly thereafter, the Development Office meets with the donor to solicit his or her support of the project for an additional year.

The choice of program to support, the letters, the naming opportunity, and the face-to-face meeting all engage the donor with both the program director and the organization throughout the year of the gift. With this level of ongoing stewardship, the probability of the donor’s continuing support of the project is likely. In fact, in all instances for the duration of the institute’s campaign, the model resulted in donors continuing to support the chosen research and most often at increased levels.

Clearly, the model affirms an important axiom of organizational relationship building, that with proper and effective stewardship, the donor’s first gift should be neither the last nor the largest investment in your institution.

Getting It: How to Profitably Refine Your Fundraising Pitch
by Sheldon Bart, Senior Associate

Yes, your cause is worthy, more clients are being referred than you can handle, and the metrics demonstrate an impact on your community. You’re a high performing provider of vital services, but your resource base remains low and relatively few people in your community (and hardly anyone outside of it) has heard of your organization or knows what it does.

There is a direct relationship in our consumer society between revenue and attention. People that have attracted a lot of attention (or have, as they say, “high name recognition”) tend to receive more offers, bookings, commercial endorsements, and campaign contributions. The same dynamic operates in the non-profit sector: the better-known an organization is the more grants and sponsors it is able to secure. You can’t build “name recognition” overnight, but it is possible to change the way other people think about your organization and to do it fairly quickly.

A tool for this purpose has been suggested by two professionals experienced in the art of attracting attention, or as it is more prosaically known, marketing. Al and Laura Ries published a book called The Fall of Advertising and the Rise of PR to help their fellow marketeers understand how to launch a brand. Their experience can also help nonprofit executives on how to pitch their organizations in a new and powerful way—how to, in other words, ensure that funders, donors, stakeholders, and the general public “get” the work that you do and grasp the contributions you are making to society.

Al and Laura realized that one of the keys to attracting attention to a brand is associating it with something new. Red Bull succeeded as the first energy drink. It became associated in the public’s mind as the number one brand in a new category of beverages. Dunkin’ Donuts, now a major international brand, was the first doughnut shop with a counter where customers could eat on the premises. Obviously, being number one in a new category is highly advantageous. Yet isn’t this a rare position to find oneself in?

Not necessarily. Al and Laura’s marketing insight—which is very applicable to nonprofit organizations—is that you can invent your own category. If you can figure out what you’re doing that no one else is doing, you can position yourself as number one in a new pioneering category.

Here’s an example. Wilderness Research Foundation (WRF) is an emerging nonprofit in New York City that mounts polar expeditions for university-based researchers. WRF also creates classroom curriculums based on the field work undertaken on its expeditions. No other organization does quite the same things. WRF therefore identifies itself as number one in a new category: bringing authentic science from the ends of the earth to K-12 classrooms.

You don’t have to pursue such an unusual mission to make use of the Ries technique. Greater Life, a Newark-based youth development organization in the south-ward of Newark, NJ, has turned part of its program site into a small business—a snack shop. The inner-city youth served by the organization gain business experience by running the shop. Greater Life can legitimately claim to be number one in turning street kids into entrepreneurs.

What is it that you’re doing that no one else is doing? If you can answer that question, if you can you identify a category you are number one in, you have an elevator pitch to prospective donors, a clincher for your cover letters, and a lead line for the project description section of your grant proposals.

Your “Ries line” should go into all of your press releases and appeal letters. Your board members should memorize it and repeat it whenever they proselytize on behalf of your organization. Your staff members should learn it and repeat it at seminars and conferences. It should be printed in boldface in your newsletters and in attractive graphics on your web site and Facebook page.

News & Views would love to know what you come up with and how it works for you. If it helps to get you press coverage or the attention of a new donor or foundation supporter, please let us know. We will tell your story in a follow-up article.

$1,000 for 1,000: A Simple Social Media Tactic
by Sean Jones, Grant Writer

If you type "social media fundraising" into Google, you'll be bombarded with stories of non-profits that raised tens or even hundreds of thousands of dollars using Facebook, Twitter, or e-mail blasts. You'll probably also notice that most—if not all—of these stories are about national nonprofits with big budgets and near-universal name recognition. If you work for a small, local nonprofit with a donor constituency of just a few hundred, you may be wondering: Can social media do anything for me?

One social media strategy we recommend is closely related to a Facebook fundraising tactic used by the big national nonprofits. You have probably run across this concept before: a nonprofit will announce that, for every person who "likes” its Facebook page, it will receive a one dollar donation. The money behind these donations is usually provided by a corporate partner who makes a "challenge" gift to the nonprofit to encourage it to build its Facebook presence. These fundraising strategies regularly make headlines for adding hundreds of thousands of constituents to an organization's fundraising page and an equal amount of dollars to its reserve fund.

If you have a budget of a few hundred thousand and a Facebook fan base of one or two hundred, such an ambitious "liking" project may seem unrealistic or not worth your time. Though a goal of 100,000 new fans and a partnership with a national corporate donor may be outside your scope, you can easily modify this concept to engage new followers and donors.

We suggest asking an established high-net-worth individual donor to make a special gift to your nonprofit with a more modest "Facebook Challenge." They might pledge one dollar for each new Facebook fan, Twitter follower, e-mail subscriber, or Facebook comment that your organization gets in a set period of time. You should associate this dollar gift with a specific goal or unit of service (i.e. buy a meal for your food pantry with each "like," send a kid to camp for every 100 likes). You should also agree to a "cap" on this challenge gift to reassure the giver that he or she won't go bankrupt and to make your final goal clear to your followers. This challenge gift may be for as little as $1,000 for 1,000 new followers. Just make sure the high-net-worth donor understands that the challenge gift is an additional gift on top of his or her regular annual contribution.

A modest "$1,000 for 1,000 Followers" campaign may not land you in the national media, but it would have a cumulative effect. You'll add plenty of new followers to your site, and you'll incentivize your current followers to tell family and friends about your organization. More importantly, you'll re-engage a high-net-worth individual who may have grown distant from your organization or whose giving may have stagnated. The $1,000 challenge gift may inspire your major giver to permanently increase her or her annual gift, or it may lead him or her to suggest and spearhead a new and more ambitious online fundraising campaign.

Social media is no magic bullet. But the core principle behind the "$1,000 for 1,000 Followers" campaign is applicable to any nonprofit with a Facebook page. It should be integrated with other aspects of your fundraising (individual donor giving, corporate sponsorships, events, etc.), it should have a set goal and time frame, and it should incentivize donors to meaningfully engage with your organization.

Mission Accomplished? For Funding Success, Don’t Overlook the Tale of the 990
by Thomas Mehnert, Healthcare Division Director

As we end one year and begin another, particularly in a time where we are all being asked to do more with less, one of the most fundamental questions we should be asking ourselves as not-for-profit managers and Board members is: “Did we fulfill our mission?”

All of our agencies have “Mission Statements” generally with lofty language about “service” and “helping those less fortunate.” Asking ourselves if we fulfilled that mission, while seemingly a simple question, is far more complex. But this is the area where one organization may distinguish itself from another in the eyes of its funders and stakeholders.

If our goal is to provide access to health care for individuals living in a community but our user data shows that we are serving only one racial/ethnic demographic while our community is racially mixed, did we really fulfill our mission even though our number of patients and visits increased over the prior year?

As organizations that are primarily funded by tax revenues and public contributions, an element of “mission” is safeguarding these funds and ensuring that they are used for client purposes. I recently was asked by some clients to assist them in drafting language for their 990 forms and went onto the Foundation Center website to look at some examples. What does your 990 tell prospective funders about your organization and the pursuit of its mission?

I saw a 990 indicating that the hundreds of thousands of dollars that were raised by various races, dinners, golf outings and other events did not equal the compensation of the organization’s top four executives. How would the people running in the races or their sponsors feel if they were told that their efforts were used for lavish salaries instead of going to the people served? On another 990, the executive director’s compensation was close to 4% of the agency’s total budget. She took 4% with the remaining 96% supporting the operation of two multi-story stand-alone buildings and a staff of several hundred, including physicians, nurses, and other professionals. While not-for-profits need to pay competitive salaries to attract and retain talented managers and providers, how comfortable would you be if you were asked to defend your organization’s managerial compensation?

Quality of services and the satisfaction of the individuals we serve is also a significant part of mission. While managers and Board members regularly get information from “Quality Improvement” offices, how meaningful is the data and is it really measuring if we are fulfilling our mission? When is the last time that you as a Board member or senior executive visited a program (preferably unannounced) and spoke with the clients and staff in a real and candid manner?

While looking at agency targets and objectives, new sites added, number of individuals served, number of services provided, new programs created, etc., is a significant and worthwhile endeavor, I suggest that you as a not-for-profit manager and/or Board member take that next step and ask yourself if you can truly say looking back on 2010, “Mission Accomplished.”

A significant grant may hang in the balance.

New Law Regarding IRA Charitable Rollover

The Tax Relief Act signed by President Obama last December includes the long-awaited IRA charitable rollover. It allows donors over seventy-and-a-half to make a gift directly to your charity from their traditional or Roth IRA. January gifts can be claimed this year.

Thanks to Tony Martignetti (see http://mpgadv.com) we have the following analysis:

Giving from IRAs: The Act permits charitable gifts that originate from an IRA, without your donors having to report their IRA distributions as income. (These really are “distributions,” not rollovers. I’m using the vernacular for its recognition, but it’s not technically correct.) Here are the requirements for a qualified charitable distribution under the just-signed Act:

• 1. Your donor is at least 70 1/2 years old on the date of gift
• 2. The IRA is a traditional or Roth
• 3. Maximum $100,000 per donor per tax year, aggregated across all qualified distributions
• 4. The IRA custodian makes a distribution directly to your charity
• 5. The full value of the gift would be eligible for an income tax charitable deduction if it were not a qualified charitable distribution
• 6. The dollars transferred would be includible in gross income if they were not within a qualified charitable distribution

Important Notes: The Act allows gifts in January 2011 to be reported by donors as if made on December 31, 2010. Your end-of-year giving from those 71 and over gets a one-month extension, if you have the consent of your gift processing office, CFO, auditors and gift crediting policy.

Your donors will find this significant. Amounts rolled over count against their annual required minimum distribution, and many elders are required to distribute to themselves (withdraw) more than they need. This isn’t as prevalent as it was in 2006 and 2007, because IRA balances used to calculate the minimum distributions are smaller than they were then, but overfunded IRAs still exist. After age 70 (OK, at 70 1/2) there’s a penalty for not withdrawing at least the required minimum, but your donors can work-off some of their required minimum distribution for 2010–in 2011– without increasing their 2010 gross income. Then they can do the same for 2011, in January, or anytime during the year. Only January qualified charitable distributions can count for 2010 or 2011, at your donors’ discretion.

January 2011 distributions that are claimed in 2010 also won’t impinge next year’s limit of $100,000. They’ll count toward this year’s maximum.

All charitable rollovers must be completed before January 1, 2012.

While traditional and Roth IRAs are eligible (and SIMPLE and SEP IRAs are not), the most likely gifts will come from traditional accounts. That’s because of number 6 above. Traditional IRAs are much more likely to be funded with dollars that would be included in gross income if not for the rollover, because those accounts are where contributions that are deducted from income (deductible) are made while working. Although Roth accounts cannot accept deductible contributions, there are true rollover scenarios where deductible dollars end up there. So, while it’s possible for Roth IRAs to hold dollars otherwise taxable on withdrawal, it’s not likely.

You may find it helpful to remember this generalization:

Traditional: Deductible from income on the way in, taxable on the way out. Roth: Not deductible from income on the way in, not taxable on the way out. The $100,000 annual maximum is per donor (IRA owner), not per retirement account. Distributions to supporting organizations and donor advised funds are not eligible.

Qualified distributions are not charitable deductions from income. Instead, the tax advantage to donors is exclusion from gross income. Yet the gift amount must be such that it would be 100% deductible if it were not a charitable rollover, ignoring the 50% and 30% deduction limitations, and any income limitation that may apply.

That means your donors can’t use the charitable rollover to buy a table at your gala; or tickets to your sporting events; or pay for auction items. None of these gifts is 100% deductible. The deduction for each is reduced by the value received in exchange for the gift.

This requirement also disallows charitable gift annuities, remainder trusts and lead trusts. Neither earns donors a full face value charitable income tax deduction. (Their deductions are based on the present value of what’s estimated to remain, estimated charitable remainder and anticipated stream of charitable lead payments, respectively.)

Washington Takes Notice

Noting that “One of every 10 Americans works for a nonprofit,” and that “government—at all levels—relies on the nonprofit sector to implement policy,” Representative Betty McCollum (D-Minnesota) has introduced legislation to establish a United States Council on the Nonprofit Sector.

The council would be charged with addressing the needs of the sector and function as a kind of “Small Business Administration” for nonprofits. The Nonprofit Sector and Community Solutions Act would also create an Inter-agency Working Group on the Nonprofit Sector to coordinate policy among federal agencies interacting with nonprofit organizations. Finally, the bill would direct the Department of Commerce to compile data on nonprofits and “develop metrics for performance, establish reporting requirements, and expand information so Congress can make well-informed policy decisions on nonprofit legislation.”

Congresswoman McCollum sees the proposed legislation as “the beginning of a positive conversation about the nonprofit sector in Washington, DC.” (For the full text of her remarks, please see:
http://www.mccollum.house.gov/index.php?option=com_content&view=article&id=944&Itemid=152#Background")

Commenting some years ago on a dubious piece of legislation, David Brinkley once observed that elected officials ought to be obliged to wear cowbells so the public would know where they are and what they’re doing. LAPA is grateful to Ms. McCollum for making some noise about the nonprofit sector, though we wonder if the sound we hear is a clarion call or a warning…

At the End of the Day

At the end of the day, client service is our ultimate product. We therefore cherish an e-mail we received from Manny Mones, who is about to retire as executive director of NACE Foundation.

NACE Foundation is the charitable arm of NACE (National Association of Corrosion Engineers) International, a technical society consisting of over 23,000 members worldwide. NACE International is the premier authority in the world on the protection of infrastructure through corrosion engineering. NACE Foundation is the only organization dedicated to preparing the next generation of corrosion engineers and professionals to save America’s infrastructure.

LAPA established and manages a grants program for NACE Foundation. We also prepared a 3-Year Development Plan for the Foundation, conducted a Year-end Appeal Drive, and designed a strategic corporate sponsorship campaign.

We were gratified beyond words when the following message appeared in our inbox:

Laurence and Sheldon,

Things are winding down fast for me here. I wanted to make sure, before I left, to thank you for the great work you have done on the foundation’s behalf and for the support you have given me. You have been a pleasure to work with and I bless the day I made the decision to hire LAPA. My best wishes to you both for a bright and successful future. Thanks again.

Best regards always,

Manny

Laurence Joins the International Speakers Network

As many have you have heard Laurence speak on issues related to nonprofit fundraising at seminars and workshops, and know how inspiring that can be, we are pleased to announce that Laurence has joined the International Speakers Network (ISN). ISN is a member-based organization that since 1990 provides unique career development services to professional speakers, trainers, coaches & consultants. See www.isnworks.com to learn more. You can still contact Laurence directly though to arrange for him to speak at your Board meeting, retreat or conference.