Viewing posts categorised under: Stewardship

The Curse of the Mega-Gift

Fundraising | 0 comments | by Sheri Hodde

We have all daydreamed of an angel-donor who appears out of nowhere and drops in our laps a massive amount of money for our mission. Think of the immediate financial problems it would solve: It would completely take away the stress associated with managing monthly cash flow. It could also make those grandiose dreams of expansion an immediate reality. But is there a downside? In short, yes – if not managed properly, a mega-gift can often create more harm than good, and can sometimes lead to the demise of a nonprofit organization.

I was channel surfing late one night when I came across a documentary following previous lottery winners. You can already see where this is going, because we have all heard enough stories about lives being ruined by financial windfalls. It is true – with very few exceptions – when millions of un-earned dollars drop in the laps of normal people, more bad things happen than good.

Most of the lottery-winner stories in the program began with the elation and celebration of winning, and circumstances went downhill quickly from there. Most of the stories included divorce, loss of friends, depression, lack of self-worth, and the loss of most of the money. A few even ended in the attempted murder of a spouse.

Now, to be fair, there were a few success stories as well. These were people who strategically prepared before they allowed any significant change to happen in their lives. They were smart about it! They maintained their values, integrity, and life strategy and did not let the money take over. In fact, in every success case they continued to work at their jobs, even though they had no financial need to do so.

Even after watching this documentary, I must confess that, like many of you, I would be willing to take on the challenges of winning the lottery. Think of the good we could do!

When a nonprofit mission becomes the beneficiary of a seven- or eight-figure gift amounting to multiples of its annual budget, it can have the same result as an individual winning the lottery. I have personally witnessed this in three organizations in the past few years – and watched them manage the gifts in three very different ways.


Nonprofit #1

An independent school received $10 million from a single donor to provide operational support to the school and remove the need for the school to do so many special events (golf tournament, auction, gala, etc.). Once the news of the gift broke, there was first celebration, followed by a downhill slide. The large gift came from one donor who was known to have a net-worth of more than a billion dollars.  That huge gift sent the message that this donor would take care of funding the school’s needs. The result was that the rest of the school’s donor base stopped giving because they believed they were not needed.

This school quickly realized that it had not managed the large gift properly, and set about trying to counter the negative impact. Although it has taken a few years of hard work, this school has mostly recovered and nearly brought giving back up to where it was before the receipt of the gift.


Nonprofit #2

A mid-sized social service agency received a $50 million gift in the midst of trying to raise only $25 million in a capital campaign to build a new facility. Twice the goal in one gift. Not bad, right? Wrong! The mega-gift donor gave the gift with multiple strings attached, one of which was a demand that they stop raising money from other donors. Other strings attached to the gift were related to changes in the floor plans and appearance of the proposed facility. This was an ego-driven gift of a size that would put all of us in the same dilemma: do we take it, or walk away from it?

This nonprofit decided to take the gift and then to put all of its energy into satisfying the donor. It is struggling to this day doing just that. Meanwhile, the broad and generous donor constituency has been left out in the cold and the nonprofit will likely not rebound quickly from this situation.


Nonprofit #3

A small college in the midst of a $25 million capital campaign received news that an out-of-state anonymous donor wished to give $25 million. While the notification of the gift provided some distraction for the board and staff, an emergency strategy meeting was immediately called to discuss the ramifications of such a gift. After much discussion, the college adopted a position to strategically channel the large gift into an area that was not currently being addressed by the capital campaign. Further, the college expanded the campaign to $50 million and utilized the gift as a challenge to motivate the broader donor base to act.

The result is that the college is making excellent progress toward its goal of $50 million, and there is more excitement than ever about giving to the campaign.

********************

Three stories with three different outcomes – the difference being how each nonprofit allowed itself to be changed by a windfall of money. The lesson is to stick to your values and never abandon the base of donors that you depend on to sustain your mission. Just like the lottery and unsuspecting winners, an eight-figure gift can ruin a nonprofit if not managed properly. Receiving such a gift should never be a reason to slow down or stop fundraising. Rather, it should make the participation of other donors more important than ever.

read more

Our Greatest Responsibility

Board | 0 comments | by Sheri Hodde

There are a lot of resources on the topic of stewardship and accountability in the development office, and most of them are helpful for development professionals as they strive to be responsible. However, the problem with most of the material on this topic is that it only applies to relationships with donors. As development professionals, you are also faced with other relationships that demand your stewardship and accountability – and those relationships are your greatest responsibility.

Let’s consider the obvious perspective first. Yes, it is absolutely critical that you are a good steward of your donors and that you account for the gifts they give to fund the mission of your organization. But sending out a thank-you note isn’t cutting it – not even a handwritten note, especially for your most important donors.

The question to ask is, “What can I do for my most important donors that will result in their belief that giving in support of the mission was the best decision they could possibly have made?” The answer is different for every donor, but it is always more than a thank-you note.

Even when your donors tell you not to do anything for them, do something – the right thing. You should do this for the same reason that your mother was right when she taught you to always say thank you. Say you were invited to your friends’ home for dinner and, at the end of a lovely evening, you thank them. It is common for the hosts to say, “It was nothing – our pleasure – no thanks necessary – we are happy to do it.” Regardless, you still say thank you – and you probably reciprocate by inviting them to your home for dinner in the future. That is how you truly behave as a good steward of that relationship. To not say thank you or not reciprocate in some way takes the relationship for granted and, over time, the relationship suffers.

Okay, that one was pretty easy to grasp. How about a new perspective on stewardship and accountability? You are also accountable to and the steward of a great resource – your board. The accountability side of this is easy to grasp, but perhaps not the stewardship side. Both are critical to understand.

Accountability to the board includes quality and appropriate planning, frequent and accurate reporting, and delivering results that resemble the planning. It is critical to gain and keep the trust and confidence of the board. Your ability to do this directly impacts the board’s ability to sustain and grow the mission.

Another key reason to account to the board is to tap into it as a resource to strengthen your development office. If the board is informed and believes the development operation is working as it should, you are in a much stronger position to engage the board as a strategic resource – replicating your arms and legs in various aspects of your development plan. While engaging the board may still be a challenge, it is far more likely to happen if the board feels in touch and informed.

Another perspective on this topic is stewardship and accountability to the mission of your organization. Whether your mission is to feed the poor or educate children, it is the reason why your job exists. The way you act to engage donors and thank them must be influenced by the mission.

Take the relatively simple task of giving a thank-you gift to an important major donor. I was approached recently by an organization that was contemplating the right way to do this. The question posed to me was: “Is it appropriate to buy our biggest donor an iPad as a way of saying “thank you”? We know he could easily buy one himself, but he won’t. We think he would enjoy this.”

Let’s examine this case carefully. The iPad is certainly within the acceptable cost range of the large gift given by the donor (the cost of the iPad is less than one percent of the size of the gift). He probably would truly enjoy the gift. But my answer is “NO!” While the gift may meet certain criteria of good stewardship and accountability to the donor, it raises too many questions. And it does not meet the criteria for good stewardship and accountability to the board or to the mission. If your mission is to feed starving children in Africa, it is pretty hard to justify buying iPads for your best donors.

So, in this case, the compromise was that the organization above invested its “thank you” budget in a video depicting orphan children (the focus of the mission) singing to and thanking the donor by name. The result was an experience that the donor will never forget and an emotional connection he could not have experienced with a traditional gift.

The long and short of this conversation is this: as a development professional, your greatest responsibility is to be good stewards of the resources entrusted to you and to be accountable to all parties engaged in the mission. As you create and implement your development plan this year, use a quick litmus test:

  1. Will it honor our donors?
  2. Will it honor our board?
  3. Will it honor our mission?

If the answer is yes to all three, then you have managed your greatest responsibility with excellence and integrity.

read more

Subscribe to our blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.