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Sunday, November 19, 2017

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Major gifts or more gifts: Which is better?
Tom Ahern

June, 2013

Asked why he robbed banks, Willie Sutton reputedly answered, "Because that's where the money is!"

 

Fundraisers could say the same. "Why do we stalk rich folk? Well, heck, that's where the money is!"

 

Venal? By definition.

 

Wisely so? I wonder.

  

Now, capital campaigns are different  

 

If you're in a capital campaign, then YES! Chase the rich! The richer, the better. 

 

In capital campaigns, the Pareto principle, the well-known 80/20 rule, is long obsolete. No longer do 20% of your donors give you 80% of your campaign goal.

 

These days, veterans say, 97% of your capital campaign goal will likely come from just 3% of your donors.

 

The logistical consequences of that 97/3 ratio can be staggering.

 

I just worked with a university. The school is preparing for a $4 billion campaign. To make that goal, applying reliable metrics from similar campaigns, the school's fundraisers will need to speak personally with about 68,000 well-qualified prospects, all of whom must be wealthy enough to make a $1 million gift without a second thought.

 

Daunting. 

 

But 97/3 can breed short-term thinking 

 

I recall with disgust this tale.

 

The director of development at an elite private school had prepared a solid, multi-year plan for her school's upcoming capital campaign.

 

The likelihood of making goal? About 150%. This school mindfully instills strong philanthropic values in its alumni and parents. 

  

But when she began to present her plan to the campaign subcommittee of the trustees ...

 

... a 40-something Wall Street grandee interrupted.

 

"That's nice," he barked. "But...."

 

He swiveled his eyes off her and rubbed his hands together. 

 

"...we don't need a plan like that. I'll just call a dozen parents I know who are like me." He meant other bloated Wall Street cash sacks. "They can afford it. We'll get this puppy done in a month."

 

Removing the stink of testosterone from the room required professional cleaning.

 

But, you know what? This jackass was almost right ... for a moment, for that one campaign.

 

He made goal fast.

 

What he did NOT help his school build was "donor depth." A.k.a., the donor pyramid. A.k.a., the "culture of philanthropy."

 

The missed opportunity? Campaigns build culture ... and your culture is your future 

 

You all know Aesop's fable, The Tortoise and the Hare. It's a race between unequal partners. 

 

Spoiler alert: the Tortoise wins. Because the Tortoise is focused, resolute, and follows a better strategic plan, written in part by a reputable consultant. 

 

Capital campaigns are peculiarly good at building the culture of philanthropy.

 

When the University of Toronto analyzed its $1 billion campaign (made goal: 2004), it discovered that roughly HALF the donors were first-timers.

 

They'd NEVER given to the university before. The school basically DOUBLED its donor base in the course of one campaign. 

 

Campaigns have the rare ability to draw new donors out of the woodwork, for a number of good marketing reasons. 

 

I think the shorthand truth is this: the rich get you to a capital campaign goal fastest.

 

Otherwise?

 

I think they might be something of a distraction. Unless maybe you're a very, very dear friend of Bill Gates or Warren Buffett.

 

Courting the wealthy ... in lieu of marketing intelligently to the rest of your donor pyramid ... is a self-inflicted wound that leads to financial impotence.

 

Eventually.

 

Predictably.

 

Whither community foundations?

 

I think many community foundations are proof of this.

 

They don't market well ... or at all.

 

They think they're rich ...

 

... when in fact they're FAR too poor to do much consequential good in the communities they supposedly "serve" ... 

 

Ironically, they are rich enough to blind themselves to their poverty, especially the oldest. They have nice digs, often with a commanding view. They pay market wages. And they have friends in high places: it's a civic honor to be invited onto the board.

 

But they never build any real culture of philanthropy amongst the middle class in their areas. Instead, they focus on the rich and their servants.

 

Yet -- good research shows -- most charitable bequests originate from the middle class. And charitable bequests are the bread-and-butter of community foundations. You have to wonder how well they know their business if they don't know their true customers. 

 

Is it a shame? We'll know soon.

 

The Cleveland Foundation (TCF), the original community foundation, stands on the threshold of its ... the whole idea's ... centennial (1914-2014).

TCF has amassed in a century almost $2 billion in appreciated assets. It derives its grant revenue from that nest egg. And it makes thousands of grants annually; last year, 3,097 separate grants, totaling $91 million. That averages out to $29,383 per grant.

When was $29,383 ever transformational? In 1936?

See?

That's why I say community foundations feel rich, but are in fact poor: they can't do much transformational grant making. What they can do is pay good salaries. What they can't do is change the face of their community. They don't have the resources. (Due credit to the Rhode Island Foundation, which I know works hard to be an exception.)

Under the questing leadership of Ronn Richard, TCF has commissioned a deep independent inquiry to ask: Has this community foundation done any real good over these last one hundred years?

Well a foundation might wonder.

In 1914, Cleveland was one of the most prosperous cities on earth! A beacon! Progressive! Enviable!

By 1952, when the city's Cuyahoga River caught fire for the first (and not last) time, it had become an environmental disaster poster child.

In 1978, it became a fiscal pioneer as well: the first US city since the Great Depression to default on its loans.

Today, Cleveland wears a crown of world-class institutions: the Cleveland Clinic, the Cleveland Orchestra, the Rock and Roll Hall of Fame.

But the city is hollowed out.

The public school system has been the usual US urban disgrace. "Reform" is on every tongue.

In downtown, the storefronts are vacant; you can't find a cab (I've tried).

And the middle-class has fled en masse to the suburbs, leaving the problems of poverty behind like stubborn rings in a draining tub.

Once there were almost a million people living in Cleveland. The city is now down to less than 400,000.

Sometimes you have to wonder ...

... if community foundations ceased to exist, would anyone long regret their loss? Can they hope to do lasting good as the "impecunious rich"? Or are their meager grants just enough so good organizations die slowly?

There is an easy and reliable remedy. It's called "selling" ... selling the lovely idea of endowed funds to the middle class. But that requires a change in direction. Selling is the exact opposite of public relations, the low-yield branch of marketing that community foundations have wasted their money on for, lo, these one hundred years.

Happy anniversary? Or will it be another hundred years?



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