The Status Trap

For decades the Salvation Army has ranked as one of the “most respected nonprofits.” It engenders the respect of the American public not only because it provides a valuable service to those in need but because it does so in such an unassuming way. The enduring face of the Salvation Army is the bell-ringer, clad in humble uniform, tending the kettle, often shivering, as Christmas shoppers scurry by.

The unpretentious example of the Salvation Army stands in contrast to other philanthropy-seeking organizations that have slipped, or charged headlong, into the status trap. This includes some nonprofits and some institutions of higher learning. Evidence of this in the recent history of higher education includes too many institutions making poorly-documented claims of “excellence;” assertions of being or becoming “world-class” unsupported by performance goals or specific service obligations; the unseemly jiggering of data to jostle for higher U.S. News rankings; or engaging in “arms races” for faculty stars, cognitively-gifted students, or “state-of-the art” technology and facilities.

The consequences of status-seeking in higher education can be seen in the disenchantment of alumni whose annual giving has declined for 17 years straight. The most prominent reasons for that decline, according to a survey done by Engagement Strategies Group, are alumni feeling as if they paid “enough already” in tuition, that they haven’t been giving a “good enough reason” to give, that donations go into “a black hole,” that their alma maters “don’t need the money” and that small gifts won’t make a difference.

Millions of Americans who toss small gifts into black kettles don’t share the same misgivings. They trust the Salvation Army because of past performance in service delivery and because all its unassuming identity offers proof positive that the money is going to the poor and needy, not to make the salaries of administrators more handsome, or its headquarters more gleaming, or to tangential initiatives intended to make the Salvation Army “a world-class” nonprofit. No, the Salvation Army has achieved status in the most honorable and sustainable way, through humble and effective service. And there is much that every philanthropy-seeking organization can learn from them, especially now.

Claimants for private support can greatly improve their competiveness by eschewing anything that smacks of status and self-promotion, and redirecting all available resources into activities that advance a succinct, streamlined mission. Presidents, CEOs and institutional leaders should embrace and embody an ethic of humility, minimizing the trappings but not the dignity of office, and foregoing travel that has more to do with hobnobbing in luxurious settings with one another or with celebrities than with true institutional advancement. In making a compelling case for private support, every philanthropy-seeking organization should be able to show donors how individual and collective commitments made in a given year will allow the institution to better serve its current constituents, or expand it services, or both.

Oh, and by the way, the Salvation Army now raises close to $2 billion each year. Institutional humility enhances moral authority, which, in turn, strengthens philanthropic appeal.

On Money and Mission

Let’s start with what seem to be unimpeachable assertions:

The purpose of institutional advancement is to advance an institution’s mission; and

The best way for advancement to do that is to secure larger amounts of private support.

Sounds right, right? Ah, but those assertions fall apart if the raising of money isn’t synchronized to the design and delivery of mission. Allow me to explain through analogy: Let’s compare an institution to an ambulance whose mission is to preserve life until patients can be delivered to the hospital. Will securing more and more private support for that ambulance automatically lead to the saving of more and more lives? Well, let’s see.

Let’s say your job is to raise more money for that ambulance. You’re told that your goal for the coming year is $100,000. “It should be a breeze,” your boss says, “We have the most important mission of all -- saving lives.” Yet, when you make your calls, loyal supporters raise concerns, including one who says:

“I’ve given generously for five straight years. I mean, I get nice thank you notes and a glossy annual reports but no one ever shows me how MY gift made a difference. I keep hearing is ‘Thank you for your last gift but now we need more’. No one tells why or what it’s for.”

You persist but keep running into donor concerns. Some question whether you need the money given how fancy the ambulance has become, not to mention how much the hospital has expanded after that last hugely successful campaign. Others say they fear the money is going into a “black hole.” Still others, as you get to know them better, reveal personal misgivings. One says, “I don’t think you’re even servicing my area any more.” Another says, ‘If I’m so important to the hospital, why is it that I only hear from fund raisers?’

Realizing that you can’t raise substantially more money without responding to these concerns, you go back to the office to bone up on how private funds have been used and why more are needed. You learn that donations been used to equip the ambulance with the latest technology. Yet, one of the drivers tells you that much of it is to diagnose and treat injuries they rarely, if ever, see. You ask, “Then why was it purchased?” The driver says, “Because other ambulances were getting it.” Further, the new equipment has added significant weight to the ambulance making it slower and significantly less fuel-efficient. You dig further and discover that the ambulance has been responding to slightly fewer emergency calls each year, and the survival rate of patients has declined modestly for five straight years despite the receipt of more private support each year. You realize the facts don’t work in the favor of fund raising.

Being of good conscience, you take your concerns to higher ups. “We could raise more money,” you say, “if we lightened the ambulance and conducted a logistical analysis to make sure we’re using the best routes to speed patients back to the hospital. And, we have to make sure we don’t withdraw service from areas where we’ve enjoyed the greatest philanthropic support.” Your higher ups, with varying degrees of acidity or amicability, say, “What does that have to do with advancement? Aren’t you supposed to raise money?”

“But I could raise much more,” you say, “if I could show prospects and donors how more money will allow us to increase response time, shorten return times, reach more people in need and drive up survivability.”

“We don’t want donors intruding in our affairs,” say the higher ups. “Our costs have gone up, therefore we need more support.”

“But, but, but…. “ you say, searching for the right words, “donors won’t give to offset our costs.”

“What???” say the higher ups, registering great incredulity.

“They give because of what we .. we…do. If we don’t do more – either serve more people or save more lives or both, how can we ask them to give more?”

“Because we’re in the business of saving lives,” say the higher ups. “And that’s very, very, very important.”

You ask if you can make your case to the CEO but are told he’s under a lot of pressure from the board to raise more money, especially for the ambulance because its costs keep going up. The board, it turns out, doesn’t give much, especially to ambulance and doesn’t think it’s important to look at response times or the survival rates of patients. They think it’s important to balance the budget and build an endowment. When they hear the cost of ambulance service has gone up, they pound the table and say, “We need to be more aggressive in fund raising.”

You find yourself in a conundrum. You’re expected to raise more money but you realize that can be done without changing the ambulance and rethinking its routes. And you don’t want to mislead donors. You didn’t get into the business to raise money for its own sake; you wanted to help save lives. So you start looking around for a job at another hospital, one that understands that the more mission relates to advancement, and vice versa, the more money you can raise which, in turn, will make it possible to further advance the mission and the credibility of the institution.

If you succeed in finding such an institution, you will discover that when mission and money are tightly aligned, donor, fund raiser and institution stand a far greater chance of living happily ever after.

I Believe

I believe that:

Fundraising and philanthropy are not interchangeable terms, that the former is dependent on the latter; if fundraising assumes that philanthropy exists to serve it, it gnaws at the generous hand that has fed it so well for so long;

Philanthropy is not “there for asking” nor can it be mobilized for things that have been, or are already being done; it awaits those with the vision and resolve to make a difference where a difference most needs to be made;

The best fundraisers see themselves as agents of philanthropy; they eschew fundraising strategies or tactics that tear at the hope, trust and goodwill that comprise the philanthropic spirit.

The best fundraisers strive to align the aims and interests of their organizations with the passions, principles and purposes of philanthropists; they know that enduring compacts are based on mutual moral obligations;

True philanthropic volunteer leaders do more than oversee the business of an organization; they live the mission through advocacy and action;

True philanthropists donate, in order, their time, talent and treasure; they are thoroughly of and for the causes they support;

True philanthropists subordinate their ego to a cause by working collaboratively and quietly through institutions; they target their investment to service improvements rather than creating new organizations in their own name that replicate existing services;

True philanthropy must be manifest in the mission of an organization, and in the daily dedication of those that lead and represent it; they must not ask donors just to give to their organization, but show them how they can give through it to create a better world; and

The assiduous application of these tenets ennoble and enliven philanthropy-seeking organizations, attract and retain the best staff, and inspire and sustain the support of the most remarkable philanthropists; that “true philanthropy,” when practiced by all, produces the most significant and lasting institutional and societal advances.

For Amber Waves of Grain

A very competent client asked me how to respond to a trustee who wanted to know how many fundraisers needed to be added to the development staff to secure an additional $20 million per annum. He assumed that the mere adding of a fundraiser guaranteed a significant return so it was only a matter of calculating how many it would take to produce the desired amount.

These are the kinds of questions that advancement leaders need to answer with great care. If one responds too literally by giving a projected ROI per development officer without additional context, one buys into, and helps perpetuate a reductive and presumptive worldview of philanthropy – and there’s too much of that out there already.

Here’s how I would answer that trustee’s (we’ll call him Joe) question: “Well, Joe, that’s like asking how much grain can be harvested by hand in any given day. We could calculate how much one strong, experienced laborer, armed with the sharpest scythe, could reap from sun up to sun down. Let’s say that came out to four acres. Then we could say that five similarly experienced laborers, similarly equipped, could reap 20 acres a day. But all that assumes there’s 20 harvestable acres. It wouldn’t make sense to hire harvesters if we hadn’t planted or cultivated enough grain to produce that kind of harvestable acreage, nor would it make sense to go to all the trouble to plant and cultivate the grain, only to send the harvesters into the field before it was mature. So we really have to look at what has been planted and has been under cultivation before we can answer that question. And we need to decide how much time and money we’re willing to invest in developing fields that will provide greater yields in the future.”

I could build on this metaphor, including relating the sharpness of the scythe to the keenness of vision, the richness of the soil to the ethos of one’s alma mater (which translates from Latin to “nourishing mother”), or the warmth of the sun to an institution’s commitment to long-term relationship building. But you get my point.

The simple truth is this: Reductive thinking about fund raising is the greatest reason why institutions fall well short of their philanthropic potential. We assume the grain will always be there or somehow grow on its own; all we have to do is figure out how to bring in the harvest. Conversely, the key to realizing their potential is rethinking and reimagining fundraising expectations in the light of what it takes to create a sustainable culture of philanthropy. As we sow, so shall we reap.

The effectiveness of metrically-driven fundraising is in direct proportion to the assiduousness of the cultural enrichment that preceded it by decades, and the sowing of goodwill and cultivation of relationship that preceded it by years.

The Ultimate Question

At the conclusion my conferences, some in attendance ask me for a “reading list.” They have been intrigued by the ideas and research I share, and want to learn more. When I respond, some are surprised by how few of my suggested readings do not come directly out of the professional literature about fund raising and philanthropy but from history, anthropology, political science, sociology, neuroscience, psychology and business. Indeed, much of philanthropic research and practice is, and should be, informed and shaped by knowledge created outside of it. A good example from my recent readings is, “The Ultimate Question: Driving Good Profits and True Growth,” by Fred Reichheld.

Reichheld’s research, conducted to assist market-driven companies and corporations, shows the key to sustained revenue growth is assiduous attention to building customer loyalty. He demonstrates, however, how customer loyalty is routinely undercut by many companies’ overly narrow focus on short-term profits. Placing one’s entire attention on financial measures, he says, “creates a one-eyed monster: an organization so focused on profit that it alienates the very people on whom profit depends, its customers.” Can the same thing be said of philanthropy-seeking organization’s focus on short-term fundraising results?

In fact, I see tremendous parallels to the philanthropic world in Reichheld’s findings, observations and conclusions. Below are selected quotes from his book (in italics) with my responses following (in bold).

Customers must believe that the company knows and understands them, values them, listens to them, and shares their principles. On the first dimension, a company is engaging the customer’s head. On the second, it is engaging the heart. Only when both sides of the equation are fulfilled will a customer enthusiastically recommend a company to a friend. Alumni attitudinal research conducted by Engagement Strategies Group on the graduates of the top 100 institutions in the U.S. shows that the majority feeling emotionally disconnected from their alma maters. Schools and universities need to focus on more engagement of the heart.

But of course building high-quality relationships does cost something – often a considerable amount. It requires investment… There is no way to deceive or exploit customers and build better relationships with them at the same time. How many of you feel as if your organization recognizes the validity of this observation and has made the necessary investment in genuine relationship-building? How many of you feel that your organization is exploiting customer loyalty by asking for what it wants rather than committing itself to higher levels of service in return for higher levels of giving?

Bain research teams consistently find that the links between satisfaction-survey scores and customer behaviors that drive profitability or growth are tenuous at best. Detailed analysis of individual customers, for example, typically finds that between 60 and 80 percent of customer defectors score themselves as “satisfied” or “very satisfied” on surveys preceding their defection. Conversely, companies that achieve satisfaction scores of 80 or even 90 percent often experience no economic advantage from the apparent customer loyalty. Satisfaction is simply too low a hurdle if the goal is superior relationships. How many philanthropy-seeking organizations defined donor satisfaction by the absence of complaints (and the occasional compliment) but never measure how many donor relationships fall into the category of “superior relationships”?

Companies get confused about the goal of a satisfaction survey. Are they assessing a customer’s satisfaction with a specific transaction? Or are they assessing the quality of their customer relationships? The former is relatively simple and is best done immediately following the transaction. But evaluating a customer’s relationship with a company goes beyond the sum of all an individual’s transactions. It includes every detail of the customer’s experience…. How many colleges and universities, for instance, have assessed the quality of their student and alumni experience over time?

We surveyed 362 companies and found that nearly all of their senior executives liked to pat themselves on the back for their organization’s treatment of customers. Ninety-six percent said they were “focused” on customers. Eighty percent believed they delivered “superior experience” to their customers. Alas, when we asked customers in another survey to rate the providers of goods and services that they bought from, they gave only 8 percent of companies a superior rating. We promptly dubbed the 80 percent the “believers” and the 8 percent the “achievers.” But whatever the nomenclature, this ten-to-one ratio suggests a startling gap between those who think they are doing right by their customer and those who truly are. What’s the ratio between your believers and achievers?

A young company starting more or less from scratch can build an entire business model around particular end-to-end value propositions aimed at delighting customers and turning them into promoters. Is it ever too late? Can’t any organization reinvent itself and start afresh by committing itself to “end-to-end value propositions”?

Of employees who worked 10 years or more at North American companies, Only 39 percent trust their leaders to communicate openly and honestly. Only 33 percent believe that customer loyalty at their company is appropriately valued and rewarded. Only 28 percent say that their company values people and relationships above short-term profits. … But here’s the real kicker: only 19 percent, fewer than one in five, can be considered promoters – people who can be counted on to provide enthusiastic referrals to the company that employs them. How would philanthropy-seeking organizations fare by the same measures of employee trust and enthusiasm? Reichheld points out that employee referrals are the best source of new applicants and warns that managers must recognize that it is impossible to earn customer loyalty without first earning the loyalty of frontline employees.

Too many companies do kid themselves about their commitment to the customer experience, let alone the Golden Rule. They tolerate great salespeople or great engineers who don’t embody the core values the company nominally espouses. That practice alone tells employees that the values are not their top priority. Values must be lived consistently not merely espoused on occasion.

As it turns out, one of the most powerful drivers of customer delight is simply listening and responding to complaints and suggestions. A company’s commitment to listen and respond proves that it values its customers and takes good care of them – basic requirements for any good relationship. This explains the power of exercises like Georgetown’s Student Discovery Initiative in which over 10,000 alumni have been interviewed in person by current students and the expressions of alumni delight that have followed.

Too many managers have come to believe that increasing shareholder value – their prime directive – requires exploiting customer relationships. So they raise prices whenever they can. They cut back on services or product quality to save costs and boost margins. Instead of focusing on innovation to improve value for customers, they channel their creativity into finding new ways of extracting value from customers. A recent analysis done by Moody’s shows tuition increases from 1990 to the present have outpaced all other price indices (healthcare, energy, housing, etc.).

The foundation for good business is the ability to organize relationships into voluntary associations that are mutually beneficial and accountable for contributing productivity to the surrounding community. This why philanthropy-seeking organizations must recast their cases of support so they don’t ask donors merely to give to them but through them to create a better world, and show how they have created alliances with community-based organizations or service providers to deliver on that promise.

Lacking a credible measure for relationship quality, managers forget its importance. They fall into the trap of thinking that their only goal is profits, because that’s how their performance is assessed. Is this equivalent to fundraising managers who focus only on metrical achievement?

When a company focuses in (customer loyalty measures), by contrast, its employees are happier. They’re proud to be part of a community based on Golden Rule principles. Their job content is richer, and they enjoy better relationships with colleagues; they have more opportunities for advancement because their companies are growing. I am thrilled beyond expression to hear this coming from a prominent business consultant. It’s a beautiful professional creed, one we should all live by. That creed is further elucidated in the following quotes that I will not comment on since they speak so beautifully for themselves.

When an organization earns the loyalty of its constituents, it increases the resources available to them, and it can have a greater impact on society.

When you put all of these simple ideas together, you come to the inescapable conclusion that the best way for an organization to grow profitably is to build strong relationships among customers and employees – relationships worthy of loyalty because they are governed by the basic set of ethical standards defined by the Golden Rule. It is truly radical to think that the more ethical a company becomes, the faster it can grow and prosper. Yet the data is hard to ignore. Companies that have earned the highest loyalty are winning the battle for market share in most industries.

Perhaps the most revolutionary idea in this book is the proposition that it is at least as important to measure the quality of relationships as it is to measure profitability.

The growth of any organization is simply the accumulated growth of the individual relationships that constitute it. Partners will invest to create better, more mutually valuable relationships when they are a part of a community in which members hold each other accountable for building relationships that meet Golden Rule standards. Relationships are the crucibles in which values creation takes place.

Worst Practices

For the past few weeks, an interesting LinkedIn online discussion among Professional Speakers on Philanthropy has revolved around “worst practices” in philanthropy. Here are some thoughts offered by experts with decades of experience:

The practice that traps so many nonprofits is looking for new donors rather than focusing on their current donors and stakeholders, and especially looking for rich people, when the people who are already connected to them could be turned into major donors if they were thanked well and engaged more deeply in the organization

Recruiting board members for reasons other than their utter passion for the organization's mission. "We need some big hitters on the board" = kiss of death.

Hiring a professional fundraiser and then expecting that person to raise three times as much as they ever have before and to do it without board or senior leadership involvement...guaranteed to fail...

Many small organizations warp their missions chasing money. It's easy to get diverted when it's possible to successfully pitch a grant for an ill-fitting program or a shotgun partnership encouraged by a funder…"Any dollar" is not necessarily a "good dollar" if it derails the organization or subjects it to the whim of a self-serving donor.

Another common mistake is using anecdotal "evidence" to guide decisions. I see many organizations that are too eager to grease the squeaky wheel when that squeak is coming from just one or two constituents. Often, these constituents have limited involvement with the organization and mission, but they exert outsized influence on the board and executives, because they make the most noise. If complaints raise concerns about organization practices, programs or policies, it's time to gather real evidence to guide decisions rather than to respond in a knee-jerk fashion to a constituent who may just be a jerk.

The lack of being very definitive of expectations when recruiting Board members. Plus, allowing members to serve for too many years - terms. On the flip side, someone who has served the Board well, including the fund raising process, should not be "dismissed" after reaching the maximum number of years of service. Give those productive individuals an "emeritus" title and invite them back for periodic updates on what is happening - - in essence don't lose that good advocate!

One of the worst practices is the lack of a definitive and complete "case for support" that has the vision to excite in both the short and long range and the proper financial expectations and resources to make the organization successful in the eyes of the donors and other stakeholders. This would apply to small and large organizations.

Neither being successful in one's professional career nor having a personal stake in the mission nor being "connected" are enough to make someone a good, skillful board member. But those are often the key criteria by which board members are identified to govern. For-profit professional experience is only vaguely related to nonprofit board governance, and yet many (not all) successful professionals feel as if they come to the table as turn-key board members. Their well-intentioned ignorance can manifest in many ways.

I see some organizations replicating and expanding practices that have not been show to actually produce good results, or at least not better results than other practices they could be doing instead.

Breaching donor intent after gifts are made or "changing our minds" about key funding opportunities having pitched case initially.

In monitoring this important discussion, I was intrigued to see how many comments focused on boards – especially board recruitment. Yet, I agree that if one is looking for either best or worst practice, the wellspring is the board of directors. For that reason, my nomination for “worst practice” would be that board that sees advancement as an out-of-body experience, something they look down on but have no influence over. In healthy environments, board members do far more than evaluate or, even worse, flog the CEO and/or advancement leader. They understand that leadership is not a matter of telling people what to do or demanding that things be done; it is a matter of holding themselves to the highest standards, demonstrating what needs to be done, then asking others how they can help them accomplish the same. Human achievement does not flower in us-them environments but it does when “we the people” commit our lives and fortunes to forming “more perfect” societies.