Beyond Hand to Mouth

Fund-raising

Our tax laws confer a tremendous advantage to those organizations with tax-exempt status: the ability to fund-raise.  And yet the industry, in practice and application, is appallingly crude and rudimentary, self-absorbed and tone deaf, reducing intelligent stakeholders into groveling supplicants.

A fundraising infrastructure is important not only for fundraising, but as the foundation for board committees and endowment funds.  Fundraising should be developed like an investment proposition to a venture capitalist; instead it is often conducted like a spoiled child nagging his mother.

Ok, I’ve made my point.  But I have been in enough board meetings in which fundraising was the primary topic, the results were consistently disappointing, and yet there was insufficient critical thinking to advance the discussion and start doing what works.

This is the first in a series of posts on fundraising.  It is the popular topic, now that endowment balances have fallen and the debt markets have become inhospitable.  The primary objective, at least initially, is a change in perspective.  As such, I will reprint a few of my older posts, and approach the topic in different directions.  Perhaps one of the stories will ring true enough to act as a catalyst for change.

The Dream of the White Knight

I was a substantial contributor to my children’s private school. So much so that my name is displayed prominently on a wall in their main building, among a select group of other major donors. The headmaster was receptive to my invitation to lunch.
I asked about the direction of the school. The headmaster talked about the funding needs of future projects, and the desire to create an endowment fund. I talked about planned giving and the value of a charitable remainder trust for owners of appreciated real estate.

The headmaster nodded approvingly.

I volunteered to organize a planned giving marketing program. The school was located in an affluent area, and many of the parents and patrons had the kind of tax problems that planned giving vehicles could directly address.

The headmaster’s attention wandered.

This marketing program would demand a degree of commitment from the headmaster and the staff. I explained that the participation of the board of directors was crucial, and that I was happy to prepare a presentation. The headmaster said:

“Can’t you just write another check?”

No, I could not. I never wrote another check to that school again.

Many independent schools flourish because of sound planning and a cultivated depth and breadth of support. Many more fail to reach their potential because they lack very basic financial planning principles and procedures.

In my experience (as both advisor and board member), the greatest impediment to financial planning is The Dream of the White Knight: that wealthy donor who appears on our doorstep, enthralled with the sheer goodness of the mission, and solves our financial burdens, with few strings attached.

The Dream is a common “virus” among not-for-profit organizations. White knights are certainly an integral component of not-for-profit funding. Sometimes, thought, our White Knight wants collateral and a 14% investment return.

The danger of the The Dream is when it evolves into the predominant form of financial planning. It is intoxicating because it suggests that the otherwise messy aspects of finance, such as soliciting a diversified base of new donors or making debt service payments, can be tidily sidestepped.
And of course, The Dream is kept alive because every now and then a major donor does indeed appear.

Ultimately, the cost of The Dream is a complacent, financially fragile organization that does not develop the discipline and foraging skills necessary for long-term financial management.