A revolutionary idea in fundraising, but could it work?

I read a fascinating post today by a recognised voice in the non-profit sector, the author has the reputation for being a pioneer within the industry at creating innovative fundraising ideas that can change the whole landscape fundraising methodology. The comments on his blog on the Harvard Business review are both interesting and more than a little confrontational to an industry that has a perceived way of doing things. Here is a link to the article which I encourage you to read  and would be equally eager to learn your own thoughts about his proposal.

The premise is that non-profits need to completely change the way they do operate and specifically how they reinvest funds to stimulating further fundraising. Over the last few decades non-profits just like ‘for profits’ have been far more public with their results, the internet age has led to more public access to profits and donations which in turn has resulted in better corporate responsibility and shareholder information. Donors to charities feel like shareholders of a sort, willing to invest in a cause and an idea be it seeking a medical cure or providing a warm meal to a family in crisis. Just like customers of any business donors seek to know more about how a non-profit is performing, how quickly is the non-profit growing, what has it achieved, how much of a dollar that is donated will end up in research or relief, how much goes to overhead/running costs and how much goes to further fundraising. I feel all of this information is critical and should be publicly accessible as it allows your donors to decide what non-profit best supports the ultimate need that they feel aligned with.

Much like corporations the non-profit industry has established a benchmark for how much donated money should in turn be put back into fundraising to further the growth of the organization. You can see some specific examples within his post but the target some of the largest non-profits seem to have arrived at is somewhere in the vicinity of 8-12%. Indeed non-profits are usually very proud of stating that only 10% (for example) of all donations are spent on fundraising. In a way its almost an act of collusion that has brought non-profits to arrive at that range of ‘reinvestment/marketing’ for lack of a better phrase. He also examines if its more than coincidence that the same range is targeted by many of the largest corporations – a happy medium has been reached perhaps? The problem however is that the largest corporations are looking at revenue streams 20, 30 or even hundred times higher than non-profits and thus their advertising pool is that much larger. More to the point should the fundraising budget for non-profits be aligned with the same model that fortune 500 companies employ?

His argument says that for non-profits to truly grow and achieve greater good they need to really invest in more fundraising, and not just a little more but vastly more. Its a brave new train of thought and one that I think really does merit examination. If for example a non-profit has annual revenues of $15 million and they aim for (and celebrate) just $1.5million going back into further fundraising ventures will they grow significantly the next year? If they grow at 2-3% the next year are they really moving closer to their overall goals or just merely treading water? With that 3% growth and a further 10% investment in future fundraising aren’t the results likely to remain fairly consistent and simply crest and fall along with the ever present waves of our economic system. He proposes a very radical approach where 50-60 or even 80 per cents of funding is re-engineered into new fundraising initiatives to really accelerate the growth of a non-profit. It would take a very bold organization to leap into that strategic mode but what an exciting theory if it proves to be correct!

Nevertheless I can see value in being less conservative than the 8-12% range that seems to have become established as the norm. If a non profit were to take the gloves off and increase that to 25-30% and see donations increase by a similar amount they would surely follow that path toward wonderful results for their chosen cause. The perception that donors will only accept a minimal reinvestment by a non-profit in future fundraising might also be misplaced. If your donorship were to witness 50% growth in a few years rather than a decade or more surely the sense of engagement and making a difference could only be magnified? Its a fascinating concept and I’d be very curious to see who is brave enough to adopt it. Changes like this reinvent things if they succeed.

My thanks to Dan Pallotta for such a challenging idea. Read more at the Harvard Business Review website.