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Some comments from donors are telling:

“I lost a considerable amount of income this year, but I figure what I have will last me, and my situation is much better than that of many other people right now.”

“It’s one of the few funds where a New Yorker can feel they’re helping another New Yorker.”

“I can’t solve Wall Street, but maybe I can keep somebody off the street.”

WAKE-UP CALL: The lesson here is that people want to help, they just need to be shown the best way. The New York Times Neediest Cases Fund has been successful in creating a sense of community among New Yorkers. Here’s how:

1. Keep it close to home. People identify best with those in the areas they are familiar with – in this case New York. The “paper of record’ helped create a sense of community through the concept of a shared city (i.e., “helping your neighbor”).

2. Use case studies to personalize and dramatize the need. The editorial format provides the luxury for showcasing individual stories, as well as the journalistic context to provide credibility. Nonprofits can use their websites and newsletters to tell in depth stories, and can go a step further in using videos and other interactive media to evoke emotional responses.

3. Connect your donors with those in need by drawing parallels between the two groups. Donors to the Times’ cause are the working and middle-class who relate to the core needs of the poor. The Fund did a good job of showing how people share the same basic needs in housing, healthcare, education and the desire for the opportunity of advancement.

SOURCE: In a Time of Crisis, More Donors Decide to Give to the Needy

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This entry is in response to an op ed piece by Nicholas D. Kristof in the New York Times on December 24, 2008: The Sin in Doing Good Deeds.

Easing our insistence on low overhead ratios for charities, will help them to co-opt the profit motive. One reason that nonprofits are not as effective with their own in fundraising is not specifically the profit motive, but the fact that the public insists on nonprofits maintaining low overhead ratios (such as 85%). On the face of it, it makes sense that donors don’t want to see their money spent on administration or fundraising costs – they want it to go directly into programs.

However, this is not sustainable for the nonprofits. Charities, like businesses, need money to run their operations – to pay competitive salaries to attract good talent, to train their staff, invest in technology, and create effective marketing and fundraising programs. In industry jargon, this is called capacity building.

Insisting on low overhead ratios through charity rating sites (and nonprofits are caught up in this as well, citing their low administrative costs in their fundraising appeals) effectively limits nonprofits’ abilities to be successful over the long-term. Putting most of their contribution into programs leaves little to invest in generating the fundraising returns that they need today, or investing in the strategies that will make a difference for their operations tomorrow.

WAKE UP CALL: We need to get past short-term thinking and allow nonprofits more latitude with their spending. This will help to co-opt the profit motive. For example, if charities were allowed to spend 30% ratio on fundraising, they would not need to rely on people like Dan Pollata to deliver such huge returns.

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As more nonprofits turn toward individual and corporate donors, they face the issue of how to acknowledge these contributors often in contexts that do not easily accommodate long naming formats.

Red Rooster Group recently worked with a nonprofit organization that had multiple tiers of sponsorship naming — the entire building as well as specific wings of the building, its departments and individual programs, as well as a book series — all named after people.

Their series of brochures, are typically named for their respective programs. Given that these sponsors names, some of which were quite long, had to appear in the nameplates of the various publications, a plan was needed in order to handle them appropriately.

We identified the following three considerations for addressing sponsorship names:

1.  Political – how the name is treated based on the donor’s request balanced with the needs of the organization. The size of the donation, the clout and influence of the donor, and the need and fortitude of the organization will come into play.

2.  Relative – the size, nature and payout of the donation relative to other contributions for that organization. It is easiest to set up this hierarchy before soliciting contributions in order to set the standards for the appropriate recognition and treatment of sponsors’ names.

3. Logistical – the practical considerations that will determine how a sponsor’s name is treated. Each media will tend to have its own limitations. Building names, for example, may require a significant capital investment and have a fairly long lifespan, while links from an online recognition can provide quick means additional information.

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Most foundations are not making changes they and their grantees say are essential to supporting nonprofit success, but there is evidence of a gradual shift to more nonprofit friendly grantmaking practices, according to a new survey from Grantmakers for Effective Organizations.

The research, conducted by Harder+Company Community Research, was the second-ever comprehensive survey of the attitudes and practices of all staff ed grantmaking foundations in the United States. It builds on a similar study conducted in 2003 by the Urban Institute in partnership with GEO.

Principle Findings

There is a pronounced disconnect between the ways in which grantmakers are supporting nonprofits and what nonprofits say could contribute most to their success. Further, many grantmakers have not adopted practices that they themselves see as important for effective grantmaking.

In focus groups through GEO’s Change Agent Project and in surveys conducted by colleague organizations, nonprofit leaders have consistently pointed to two critical areas where changes in grantmaker practice can lead to better support for nonprofits:

1. Improving the type of financial support grantmakers provide, and
2. Building a more productive relationship among grantmakers and grantees. GEO’s survey found that while by and large progress is slow, there is evidence of a growing movement among some foundations to provide better support for nonprofits.

Red Rooster Group is a New York based graphic design firm that creates effective brands, websites, and marketing campaigns to increase your visibility, fundraising, and communications effectiveness. Contact us at info@redroostergroup.com.

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As the member of a grant allocations committee of a nonprofit, I was tasked with rating each grant application on a score card that posed the following questions:

1. How well does this project align with the funder’s mission?

2. What is the applicant’s relationship to the funder (do they send people to the funder’s program)?

3. Has the applicant demonstrated a need for the project?

4. How dependent is the applicant on the funder for the success of the project?

During this process, I found myself rating the organizations on all these areas and feeling that deserving groups were not scoring high. It struck me that the missing criteria was the impact that the groups would ultimately have. To create real change, funders need to go beyond alignment to mission or issue area to look for solutions that address root causes of problems, which can be leveraged for the greater good. I offer the following questions for a revised score card:

1. Is the organization addressing a real problem in our society that is not otherwise addressed?

2. Do they have a new way of addressing the problem?

3. What are the criteria for measuring success?

4. Do they have the means and ability to achieve success?

5. What ultimate impact will this have on society?

6. Is this a model that can be replicated by other organizations?

Inherent in this outlook is a disposition for innovation and cooperation, not typical characteristics of nonprofits. It’s time to start thinking larger and demanding more.

WAKE UP CALL: Is your nonprofit addressing fundamental problems in new ways? How can those models or processes be leveraged for greater impact?

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This laudable goal was supported by a coalition of community organizers and $25,000 in funding to pay for professional organizers, printing, and other support. While a decent amount of planning had gone into the project, as a marketing expert, I thought that they faced some huge challenges and a solid marketing plan was needed. As the nonprofit acknowledged, they needed strategic help in planning the campaign and in developing creative materials that could captivate potential participants. And yet, they allocated money for printing, but not the strategic thinking or creative design portion of this project.

With funds allocated toward certain aspects of the initiative, this organization’s lack of priorities was not unique, and I suspect fueled by the following factors:

1. A culture that values doing rather than thinking. Given limited budgets, the cultures of many nonprofits are organized around delivering services, not addressing core problems.

2. Not understanding the value that specialized consultants can bring to help achieve their mission (in this case, not seeing how the message and design of the marketing materials would be essential to the success of the initiative).

3. A lack of understanding about what goes into the creative process and a perception that certain things (such as printing) are a cost since they yield a tangible deliverable, but that consulting services, being someone’s time, can be donated for free.

4. Being accustomed to expecting certain services for free due to their nonprofit status.

WAKE UP CALL: What can you do to ensure that your organization values and funds high-value ideas that can make a difference to its mission? Here are some considerations for addressing these issues:

1. Planning for the long-term: Given constrained budgets and a natural penchant for serving, it is not surprising that nonprofit organizations face pressure to act and get things done expediently. Funding directives or organizational structures may not be conducive to allowing time to think through the challenges inherent in dealing with a specific issue. Knowing this, nonprofits would be wise to create the space to address the logistical and political issues they are likely to face in executing their plan.

2. Investing in intellectual capital: Successful companies know that they need to invest in marketing and promotion to break through the clutter, demonstrate their value, and engage their customers. Business are not afraid to invest in the tools and intelligence that allow them to achieve these objectives. Nonprofits can learn from this model. Granted, they face inherent inertia against such investments, but viewing the results of the forward-thinking nonprofits that leverage external intellectual capital to their cause can help demonstrate the efficacy of that strategy.

3. Learning about the benefits of intellectual capital: Small and mid-sized nonprofit agencies are not accustomed to working with consultants and may not understand the differences in quality brought by various experts. For example, in this case, the difference between a freelance designer who will create a poster that looks good and a marketing expert who will uncover the motivations of potential participants to drive those people to action. The latter draws upon years of experience, as well as the knowledge about how to conduct research, develop a message, and craft appropriate materials. This takes time, and a consultant’s time and expertise is the basis for their income. So when a consultant is asked to donate their services, they are not only donating that time, but they are also missing out on income they needed to make up that billable time (referred to as opportunity cost), which puts them in a worse situation to help the next worthy group. Additionally, whereas printing results in a deliverable product, it can be donated and declared as a tax deduction; services are not tax deductible.

4. Valuing intellectual capital: The mindset of getting something for nothing must change. As nonprofits handle more of the services that were once provided by government, it is not in anyone’s best interest to leave the nonprofit sector to the whims of market giving. To be around for the long-term, nonprofits must attract funding for  sustainable, capacity-building activities that will allow for proper planning and implementation of their services for years to come. Relying on donated services perpetuates the concept that nonprofits should pay for services essential to their mission. This applies to in-house expertise as well – nonprofits need to start treating their employees as their most valuable asset.

Conclusion

Nonprofits, like the one in this case, would be better served by using their scarce resources to purchase the high-value services that will make a critical difference in their work, rather than in the lowest-value, commodity-oriented services that can usually be donated. In the long-term, nonprofits need to demonstrate to funders that they require funds for operating their organizations with a long-term mentality so that they can continue to provide needed services for years to come.

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In light of current economic conditions, the nonprofit sector can’t afford to continue in a “business as usual” manner. This was the message that NYU Professor Paul Light delivered at the 6th annual conference of the Connecticut Association of Nonprofits. His keynote reflected the event theme of “Sustaining Nonprofits, Strengthening Communities.”

“We’re the first to go into a recession and the last to come out,” said Light, who is also Nonresident Senior Fellow at the Brookings Institution. To that end, he recommended the following paradigm shifts:

As the global community prepares to tighten its belt, everyone talks about the need to “do more with less.” Light argues that it’s time that nonprofits have the opportunity to “do more with enough.”

WAKE UP CALL: What steps can we take to increase state support and to attract the fresh talent we need?

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After the three-day Nonprofit Congress in May, the National Council of Nonprofit Associations (NCNA), which produced the Nonprofit Congress, organized a lobbying day to create awareness about the nonprofit sector. The New York delegation was one of many that went to Capitol Hill to lobby our Representatives and Senators about the National Capacity Building Initiative (put forth by NCNA). The bill provides $25 million for training and infrastructure for charities to help them become more effective and sustainable (half the funds from the federal government, half from private sources). That’s me (Howard Adam Levy, Principal of Red Rooster Group) in the yellow jacket, with Fred Fields, from the United Way of New York City, behind me, and Doug Sauer, Executive Director of Council of Community Services of New York State, bottom left.

The lobbying effort was important on three fronts:

1. To generate awareness about the need for funds specifically for non-program activities to allow nonprofits to pay for leadership training and operational costs.

2. To demonstrate to government the impact and importance of the nonprofit sector, which accounts for $1 trillion of the economy and 10% of the workforce.

3. To promote advocating for the nonprofit sector as an essential activity for nonprofits and to show that we can be effective when organized (with the NCNA the organizing body for the social services sector).

WAKE UP CALL: What are you doing to advocate for the nonprofit sector?

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