The Myth of the Fundraising Board
A tenant in the charitable sector is the board helps raise money. For 13 years, every Foraker training on the board’s role presented that norm. Still, in over 30 years of experience in the sector I only remember a small percentage of board members who were an asset in fundraising. Now, having observed many more nonprofits and having discussed the subject with colleagues, I am convinced that fundraising by the whole board seems the exception, not the rule. Many studies report that directors (board members) resent the expectation that they should ask for contributions. We know from experience in Alaska that many resent even being asked to give. Other studies find that that most nonprofit executives and development directors are dissatisfied with their board’s support in raising funds. This frustration seems to be rising.
So whose job is it? Who is best at raising money?
The answer is not simple. Our training mirrors what everyone else presents. We, and they, say the right people can include the board, (or a committee of the board), a “friends” committee, the nonprofit executive, the development director, and other staff as needed. While I have rarely seen the full board engaged, I have seen that when even one dedicated board member, or volunteer, asked for a contribution, it made the process more meaningful for the donor and as a result, more money was raised. I believe that the solicitation of a new donor requires a volunteer (or board member). But after a nonprofit engages in a process called “development,” nonprofit staff leaders can successfully ask an individual. In addition, a qualified staff member can ask a philanthropic institution.
In the past, when I worked in the United Way system, some members of my boards helped. But a “friends” committee did the heavy lifting. That group, called the Campaign Cabinet was comprised of business leaders and their lieutenants who were organized by industry to connect to the community’s leadership in support of United Way. At that time, 100% of United Way funding came from charitable support and 75% of that was from individuals, the rest from corporations. The Cabinet was charged with contacting business and civic leaders to ask for two things – employee solicitation and a corporate contribution. In its height of effectiveness, maybe 80% of those volunteers would follow through with the assignment. Then, after the initial call, most United Ways would secure loaned executives from their corporate friends (full-time volunteers who worked from September until Thanksgiving) to run the solicitation of employee groups. Those volunteers did most of the asking. (A bit of trivia, our current governor was one of those loaned executives.) The staff’s job was training the volunteers how to ask, supporting other volunteer efforts including going on critical calls, and then managing the data base so records of who gave what were credible. Everyone knew their job and most followed through. The result was that a lot of money was raised.
Having strong volunteer involvement is not just a United Way practice. The most successful public broadcasting solicitation occurs when the right, committed volunteer is on air, making the ask. Churches use congregates to ask. Telethons have celebrity or citizen volunteers. And when nonprofits initiate a capital campaign (fundraising for a building or equipment), a few board members and their business leader friends create a “cabinet” whose members ask for support.
Recently, Camp Fire conducted a capital campaign for their camp, as did Covenant House for their new facility. Volunteers were recruited, trained, and they followed through. Both campaigns were very successful. Both had great staff support, but their volunteers did the asks. The system still works!
One nuance that leads to confusion on who is best person to ask can be better understood when we break down the types of contributions we seek and the types of fundraising used by today’s nonprofits. Who asks depends on who is being asked.
Charitable giving has three sources: corporations, foundations, and individuals. About 22% of all charitable nonprofit income is from contributions. Corporations donate 5.5% of those dollars, foundations provide 14.5% and individuals, either through bequests, planned gifts, or annual contributions, give the rest.
Corporations and foundations are private institutional donors and they require a specific type of solicitation. While having the right volunteer making the ask can help, a well-presented proposal, following the guidelines of the institution, can be done by anyone. Most institutional funders want to know who’s on the board as well as the level of commitment from the community, but any representative of the nonprofit including staff can ask. Staff asking is acceptable – even the norm.
Another institution that provides funding for nonprofits is the government. Government funding is not counted as charitable support but the process is the same as with private institutional support. A staff member writes a proposal following the government’s guidelines. Therefore, the staff of a nonprofit that relies on any type institutional support can take the lead. But private and public institutional support represents less than 35% of all charitable nonprofit income. Many nonprofits need income from other sources. So where’s the money?
The majority of unrestricted nonprofit revenue comes from earned revenue or individual giving. Both can be sustainable when done the right way. Successful earned revenue requires a board with business acumen. The members must understand the business model, and like a for-profit board, make sure the earned revenue venture makes money – more income than expense. The profit from earned revenue is unrestricted cash.
And when a nonprofit raises money from individuals, the board must understand that it requires volunteers to ask. While staff can succeed in asking an institution for a contribution, if they ask for a donation from an individual donor, especially a new donor, they will have less success. The best case is when a volunteer who’s a friend approaches the prospect. The reason is simple. Regardless of a staff member’s sincerity, he or she is asking, in part, for their salary. Soliciting new donors requires someone who will be perceived as asking for the mission, not themselves. That kind of ask requires a supportive volunteer.
I have seen too few individuals in Alaska willing to ask. Maybe that’s one of the reasons why we have so few fundraising professionals staying in one organization for long, and an increasing number not staying in that career. Without volunteer support they fail. Nationally there is a shortage of skilled development professionals. An article that describes that situation was based on research by one of our sister organizations, CompassPoint, and can be found by clicking here. We have many open positions for professional fundraisers listed on our website. Many pay well, and some have remained open for months. We need good people in this field. Fundraising is a noble vocation.
Another nuance that may help clarify this issue is that there are actually three types of positions that are often called development director, but they are very different in activity and qualification, and they are not all technically development directors.
- The first type of (so called) development director is really a special events director, or logistics manager. These individuals must have the expertise to coordinate the effort of many volunteers and staff to successfully conduct an event designed to raise funds. It requires creativity and focus. These professionals must be good at record keeping. Events can be fun. They can generate goodwill. They can even raise a lot of money. But events rarely raise a lot of money over a long period of time. They are not sustainable. And if we were to add all the volunteer and staff hours into their actual cost, most would make little net profit.
- The next type of development director is one skilled at securing institutional grants. They are in fact, grant writers. These professionals need to be good technical writers and must be able to follow instructions. They also require the skill to keep good records. Institutions require that any potential grantee follow their guidelines. If a nonprofit were to ask for funding for a project not within the guidelines, or if it were not to follow the requests for specific information, a proposal is disregarded. And if the funder provides the cash, they require that the nonprofit follow all of their reporting requirements to a “T,” or risk future funding.
- The final kind of development director is one who is skilled at soliciting individuals. These are the fundraisers in highest demand. This position must be trusted to someone who is good at training, keeping records, and has the capacity to lead from behind. In the most sophisticated organizations, those truly practicing development, that person must possess a high level of social intelligence. Being culturally competent is a must. Eighty percent of all charitable dollars come from individuals. Most of those contributions provide unrestricted cash – the most important kind of income. When an organization engages over time in fund development, (described as the process of securing then nurturing a relationship with a donor so that the new donor becomes a committed donor), a qualified development director can take the lead and eventually ask for the continued and even increased support from the committed donor. Development is the gold standard for individual charitable support.
But development cannot be achieved until a volunteer, a board member, or someone with a passion for the mission – but not a paycheck from it – makes the first ask. Then, if the nonprofit works with that volunteer to provide stewardship for the donor’s gift over time, it can secure a committed annual donor. With follow through, some of those donors could become planned givers. All major fundraising success stories follow this path. There is no other sustainable way. The goal is to nurture all prospects into committed long-term donors who will then give every year. When people give because they are committed to the institution, not because of who asked or what event they attended, development has occurred. But first, they must be asked.
Unfortunately, in Alaska we ask development directors to do all three of these jobs. To add to the confusion, we expect that they can do ALL the asking. The fact is, they can’t.
In our book on sustainability, we encourage boards to determine if they are more dependent on charitable support or earned revenue. If the answer is earned revenue that means they should have a business strategy to generate more revenue than expense through offering services or products to a “customer.” That customer could include government, an individual, another nonprofit or a for-profit. Nonprofits that rely on government grants should understand that such funding is really earned income. They must understand if they are earning enough from the grant (income) to generate unrestricted income. Are they making a profit? If not, they are less sustainable. Nonprofits that rely on government grants may be at financial risk during these times of government cutbacks. Many Alaskan nonprofits depend heavily on that revenue. If they engage in other types of earned revenue activity with other products or services and customers other than the government, does that effort make a profit? Are their customers secure? Girl Scouts make a profit from cookie sales. Do you?
If the strategy is to raise money from institutions, like foundations and corporations, nonprofit leaders must understand that institutional funding only represents 4-5% of all charitable nonprofit income, and most of that funding is not sustainable. But done the right way for the right projects, it can provide significant long-term benefits, like using Rasmuson Tier One grants to implement a technology plan or larger Tier Two funding to build capacity or start a new venture.
And if a nonprofit wants to raise money from individuals, it must have board members willing to ask their friends for money and give time to help raise even more. If not, fundraising will not succeed. In other words, a nonprofit can hire the most experienced development director in the world and that person will fail without committed volunteers who stand by their side and help start the process.
The purpose of this month’s article is to clarify what is real or not when it comes to fundraising and why so many nonprofits can’t find the professionals to fill fundraising jobs. If a nonprofit has a viable strategy to earn a majority of its revenue from a product or service, the board doesn’t have to worry as much about its fundraising role. But if the nonprofit depends on charitable funds, it must have volunteer fundraising support. But volunteers alone are not sustainable. Those institutions also need the right committed fundraising staff, qualified for the job. An executive director and board must support them with patience, and they must be rewarded when they do their job well.
Alaska needs fundraising professionals. If you are creative and good at organizing, you could become an events director. If you are a good technical writer, you could be a grant writer. If you have high EQ, social intelligence, you’re good with numbers, can train and inspire others, can lead from behind, and you want a great career, become a development director. Jobs are available for all three types and all are considered fundraising professionals.
And for those of you who are doing all three of these jobs at once, we want you to know that we’re aware you’re out there, and we care about you. Please take care of yourself and prevent burnout. You are probably doing more than you should. Share this article with your executive and board. Maybe it will help clarify why they are frustrated with your efforts, and explain to them why you feel the same about their efforts.
If this article sparked interest from anyone considering a career shift, call our office or the Alaska Association of Fundraising Professionals. We will be glad to talk with you about your future career.
Finally, for nonprofit executives and board members brave enough to have read this far, please understand that fundraising is multi-dimensional. Different fundraising requires different skill sets. But if you want to raise money from individuals, where the highest percentage of dollars raised is unrestricted and your effort has the largest payoff, then you must find volunteers to work with staff. Not every board member must ask, but every board member should own his or her responsibility to do whatever possible to help. At a minimum, if an individual agrees to serve on a charitable nonprofit board that asks others for money, they must give.
Nothing else will work. I hope this article brings clarity to a complex problem our sector faces.