My client stared at me in disbelief. "What do you mean don' accept the gift?," he asked, his face flushed red. A wealthy benefactor had just pledged a considerable amount of money for an intensely needed, but fairly simple renovation project. I had just recommended he not accept the gift as offered.
While motivated by good intentions, many times the worst thing a wealthy donor can do for an organization is give it a gift, especially a one-shot gift for a specific project or program. At first glance, most directors of non-profit agencies would think that statement could only come from a consultant.
In the short term, it is awfully tempting for the head of an organization to accept one or a few substantial gifts for a program that she knows will benefit needy clients. Raising money is hard work,and getting harder every year. Why raise $50,000 in thousands of small donations, when you can go to one or two likely sources, ask for the money, and get it with less effort and expense?
The answer is both obvious and subtle.
In the first place, it is never easy to just ask someone for a gift. Before asking for money, a potential donor must be carefully cultivated, a trusting relationship built, and financial capability carefully researched -- especially in today's volatile economic climate. This process takes time and often large amounts of staff energy.
More importantly, a single large gift can distract the organization from attending to a fundamental, increasingly critical task nowadays -- broadening its resource base. In fact, accepting several large gifts often sends the wrong message to a segment of giversthat organizations need desperately -- middle- and upper-middle-income households. The perception goes something like this. Why should I give to that organization, when it has some fat cats they can turn to whenever they have a need?
For the organization itself, these perceptions can be fatal. While life is undoubtedly made easier for the board and executive staff in the short term, all too frequently some issue arises which alienates the wealthy donor and the sources of funds dry up overnight.
Or, the donor dies and either leaves very little to the organization, or leaves the funds in a restricted trust, which reduces administrative flexibility. Every experienced consultant I know can tell you horror stories of such events happening every day.
In other cases, severe economic downturns, such as the one we are now in, cause major donors to reduce their infusions of cash to little more than a trickle.
Instead of having a healthy base of other financial resources available, the organization and its mission of helping others are dealt a disastrous blow. And, in fact, that is what has happened to many fine non-profit organizations recently.
What should a non-profit do to guard against this problem and to ensure a healthy bottom line?
First, financially strong non-profits work diligently to build up a broad resource base. No matter that it takes lots of effort and money to solicit those smaller donations. It is critical to get many smaller donors interested in the cause.
If the non-profit does its job right, it will stay in communication with those donors and help them to see how that small gift made a difference in the life of a person in need. Then, that small gift will assuredly grow over subsequent solicitations.
Next, savvy non-profits get people involved in other, non-cash ways. In the case of my non-profit client, we got together with the donor and helped him to understand how his gift could double or triple its value if we used some of it to simply purchase supplies. Then we developed an approach for community residents and constituents to volunteer labor to renovate the building and grounds.
The result was that donations as a direct outgrowth of the project more than tripled and the agency now has a committed group of volunteers bringing in funds and eager to work on new projects.
Smart non-profit agencies -- and wise donors -- ask for some donations to be earmarked as challenge gifts. The donor offers "x" amount of money to be paid only when the agency raises a specified amount from other sources. This is a powerful way to leverage dollars. Most people, when asked, would rather give money knowing that each dollar they give will be matched by funds from another source.
Of course, I'm not advocating that a non-profit agency refuse any and all substantial gifts.
But when all is said and done, broadening the resource base is an integral part of a solid marketing strategy for non-profit organizations. It just makes sense for more people to know about the fine work that a worthy non-profit organization does. That raises more short-term cash, and does much more in the long run. It sparks good will, volunteers, enabling legislation, stronger boards, and a more effective message aimed at those who are the recipients of the agency's good works.
Les Picker, a consultant in the field of philanthropy, works with charitable organizations and for-profit companies.