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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.
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.
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.
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.