Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

November 14, 2011

A manifesto for smarter fundraising


By Todd Cohen

Nonprofits are consumed, often unproductively, with fundraising.

They frequently invest precious dollars to hire the wrong people to chase the wrong money from the wrong donors using the wrong sales strategies and pitches.

It is no wonder that over the past 40 years, charitable giving in the U.S. has barely budged from its 2 percent share of average household disposable income after taxes.

Now, based on ideas from several gatherings of nonprofit leaders, researchers, consultants and vendors, two philanthropy scholars at Indiana University have produced a report that calls for a much-needed overhaul of the fundraising business.

In the report, Growing Philanthropy in the United States, Adrian Sargeant and Jen Shang call for sweeping changes to build fundraising through creating more meaningful and productive donor relationships, focusing on audiences and fundraising strategies that can grow, improving fundraising training and development, and building public trust in nonprofits.

“Forty years of increasingly sophisticated fundraising practice, the development of planned giving vehicles, the appearance of the Internet, and the rise of new digital channels have done nothing to move the needle on giving,” they write.

The report, released by Blackbaud and the Hartsook Institutes for Fundraising, offers a slew of recommendations, all aiming to improve fundraising so it can grow giving.

Donor relationships

High on the list of the report’s criticism of fundraising are ways fundraisers operate and deal with donors.

Fundraisers treat donors as “piggy banks” and focus on performance measures such as response rates, immediate return on investment, and total amounts campaigns raise, an approach that is obsessed with metrics and is “crippling” the long-term performance of fundraising programs, the report says.

In their annual funds, for example, charities lose well over half their supporters between the first and second donation, and 30 percent a year from then on.

The sector “remains too focused on donor acquisition, content simply to refill an increasingly leaky bucket and ignoring opportunities to build meaningful relationships with supporters over time,” the report says.

Instead, it says, nonprofits should focus on increasing donor loyalty and retention by emphasizing the values of donors and the impact they can have, and giving them greater control over the relationship with the charity.

Charities also need to recognize the value of their fundraising programs.

To address turnover rates that typically can total 30 percent a year among staff, for example, nonprofit CEOs and boards need to show their fundraisers the respect they deserve.

Charities also must reorganize their fundraising operations; integrate separate programs for annual, major, campaign and planned giving; build collaboration among fundraising staff; promote shared back-office facilities; and support a longer-term approach rooted in stewardship and not driven by short-term and “siloed” metrics that “will only be counterproductive.”

Public trust

Growing philanthropy requires developing public confidence in charities, the report says.

No nonprofit that reports public donations, for example, should claim to have zero costs of fundraising, the report says, and leaders inside and outside the nonprofit sector that promote “inappropriately low ratios and pretend that this is somehow good business” should be challenged the report says.

“Fundraising should be regarded as an investment” that must be properly reported, it says.

It also calls for nonprofits in different fields and subsectors to create their own range of performance metrics, and for trade groups to map out and enforce best-practices codes for each form of fundraising and bar from membership any professionals who fail to meet those standards.

New giving

Charities need to encourage monthly giving, do a better job of engaging young people, promote best practices in social media, and encourage asset-based giving, the report says.

Cash, for example, represents only 7 percent of the average American’s wealth, according to estimates, so assets represent 93 percent of a person’s giving potential and are “largely untapped by fundraisers” who mainly continue to ask for cash.

Charities also need to do a better job asking for bequests, says the report, which also says the passing of the Baby Boomers will result in a “massive drop” in annual giving.

Over 80 percent of Americans will support nonprofits during their lifetimes, yet only about 8 percent will do so on their death, says the report, which calls for nonprofits to encourage every category of supporter to consider making a bequest or gift in their will.

“Responsibility for securing outright ‘gifts in wills’ must be wrested from planned-giving departments and promoted as a core form of giving in all categories of supporter,” the report says.

It also calls for encouraging wealthy people to “think through for themselves what might constitute an appropriate portion of their wealth to give away,” rather than “scolding” them.

Training and development

The quality of fundraising training and development also needs to improve, the report says.

Foundations, for example, should invest in research that aims to help grow giving and benefit the sector as a whole, says the report, which also calls for creating the field of “donor behavior,” growing giving by “enhancing the quality of the donor experience,” and establishing a research institute to focus on fundraising and serve as a research-and-development department for the sector.

Existing systems of professional development and certification for fundraisers need to make “knowledge of donor behavior” central to a career in fundraising, while undergraduate programs in fundraising should be developed, and all masters’ programs in nonprofit management should include a required module on fundraising.

The report also calls on colleges and other institutions that offer fundraising certificates to “label what amounts only to a certificate of attendance as exactly that.”

Teaching and learning resources also need to be developed and made available to help boards overcome their “endemic lack of understanding of how to fundraise,” a gap the report calls “the critical barrier to developing philanthropy in the U.S.”

What next?

Sargeant and Shang say they will set priorities among their recommendations and assemble working groups to develop action plans to put them into effect.

But nonprofits and foundations can begin immediately to better understand the fundamental role that fundraising plays in advancing their mission, the fundamental flaws in the way charities raise money, and the fundamental need among donors to have deeper, more meaningful and more engaged roles with causes they care about.

In short, nonprofits and foundations need to reinvent the way they work with donors, and invest greater attention and resources to growing philanthropy so they can more effectively serve people and places in need.

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