Balancing the Mission Checkbook

The annual deluge of year end requests for contributions has begun in earnest. I received four letters at home yesterday, two at work, and three emails.

One of the letters and emails were from the same organization.

I think this year that I’ll make a stack of them and do an analysis after the holidays are over. I will certainly respond to some of them with a check, but others will not get more than an annoyed glance. Annoyed is the operative word. Like most people, my husband and I have a number of organizations that we support regularly because we are committed to their work, believe they are well-run and have a meaningful impact. There will be many other requests, though, from organizations either no connection to our lives, our issues, or our interests. But we’re still on their list – again and again and again. An article in the November 23, 2006 issue of the Chronicle of Philanthropy called “The Vanishing Donor” really struck a nerve with me. The article addresses the high donor dropout rate experienced by many organizations – donors will make one or two gifts and then disappear from the list.

But the biggest reason by far for the loss of donors is that many of them are just as angry as Ms. Medicus about the number of mailings they receive and other aggressive fund-raising tactics, experts say.Even so, most charities that rely heavily on direct-mail and telephone appeals have been slow to change how they interact with new donors, says Penelope Burk, a Chicago fund-raising consultant and author of Donor-Centered Fundraising: How to Hold On to Your Donors and Raise Much More Money.“It is difficult to transition out of the old system to a new one that is better for the times,” but the need for change is long overdue, says Ms. Burk, who has conducted in-depth research on 250 donors to determine what they want from charities and why they stop giving. Charities, she says, “are now in a state where the entire country is over-solicited and donors have hunkered down, looking for ways to get out from under these negative aspects of fund raising.”Donors tell Ms. Burk and other researchers that they are asked for money too often, provided with only token acknowledgments of their gifts, and offered little meaningful information about how their money was used. Donors also complain that they are not given sufficient choices about how a charity communicates with them. (November 23, 2006 Chronicle of Philanthropy).

Join a live discussion with researcher Penelope Burk on December 4th for more on this topic.

The research findings and recommendations were music to my ears:

• Ask donors what method of communication they prefer and how frequently they want to hear from you.
• Put effort into learning what your donors want from you. Do they want information about an issue, information about activities, or simply a thank you letter?
• Reduce the frequency of solicitations.
• Finally, thank your donors personally and sincerely.

I’m going to keep my stack and report back after the holiday. I’m also going to contact the organizations that we do support and invite them to have a different kind of relationship with us – a relationship that fits our preferences and needs. Next year I’ll take that into consideration when it’s time to write the checks.

Here’s some advice that you’ve heard before – the board of directors of nonprofit organizations must take responsibility for the organization’s financial health. More specifically, board members need to understand the organization’s financial information, evaluate and monitor progress compared to plans, participate actively in planning, and hold management accountable to the polices and goals that the board establishes. While this is nothing new, it seems that the lesson is missed over and over again as in the dismal situation at the Milwaukee Public Museum.

The current news relates to criminal charges filed against the museum’s CFO stemming for the financial troubles at the museum that surfaced in 2005. While the charges are against a former executive, the museum’s board was clearly not doing their job. When reading financial reports, one of the first questions a board member should ask is, “does this information make sense based on what I already know?” In the Milwaukee Museum’s case, several major expansion initiatives into retail stores, IMAX, and new exhibits were not meeting budget, but the museum’s financial reports were apparently indicating that cash flow and finances were fine. Does that make sense?

In every case, someone needs to ask the question - and that someone should be the board members.

The lesson that needs to be learned over and over is that each board member is responsible, not just the treasurer or the board members who appear to be “experts”. Sometimes it’s an unlikely member who can say that the emperor has no clothes. The only way that can happen, though, is for every member of the board to have a grounding in reading the financial reports and understanding the underlying financial structure of the organization. Even a sophisticated financial professional needs some training to understand how government reimbursement contracts and restricted grants work. Board members without a financial background certainly need to learn the basics such as how to identify red flags and ask questions.

This takes us back to the Milwaukee Museum – where the financial information doesn’t make common sense; an obvious red flag. When funding is going down and expenses are going up, cash has to come from somewhere. In the museum’s case it was from the endowment, other nonprofits rack up debt, delay payables, or fail to pay payroll taxes. In every case, someone needs to ask the question – and that someone should be the board members.

Good boards maintain a balance between supporting the organization’s management and governing the organization that is described well in the article Why Boards Don’t Govern by Jan Masaoka. Taking responsibility for finances is one of the cornerstones of governance.

I’ve had several conversations lately with directors and board members of nonprofits about offering benefits to employees. The question often starts as a budget question - can they afford it? After a while, though, we end up in a discussion about organizational culture and values. Nonprofits often have stated values - a set of guiding principles that have been crafted during strategic planning with the board, staff and other constituents. Our goal and intention is live out our values in every aspect of the organization. Here are some values that are frequently embraced by nonprofits: Respect, Integrity, Cooperation, Teamwork, Dignity. These values statements and employee benefit questions can collide when nonprofits make financial decisions and feel that they have to choose between budgets for employee benefits and wages or budgets for added programs. But what about those values? If respect, teamwork, and mutual support are core values, what about living wages jobs and employee benefits?

How can nonprofits justify spending 70% of the budget on payroll?

I’ve talked to three nonprofits in the last month that are working their way through this question – with difficulty. One of the difficulties is caused by the ambivalence that some staff and board members may have about compensation in general, particularly in young or small organizations. I was recently asked by a new employee of a nonprofit “how can nonprofits justify spending 70% of the budget on payroll?” I asked him how he thought they should spend their budget and he answered, of course, “the clients”. He needed a quick lesson in the financial basics of how nonprofit social service agencies provide their services. This same naiveté leads boards to convince themselves that employee pay and benefits are a less worthy budget choice than other priorities. Every nonprofit with paid staff has to face this question at some time.

Of the three nonprofits I’ve talked to about benefits recently, two of them have been operating for less than three years and are navigating a familiar organizational transition in staff and structure. The third nonprofit is a long-established organization, with social justice as a core value, that’s had employee benefits on the priority list for years. They’re having the hardest time with the benefits question because it has become a critical values clash that’s been avoided for years – and it’s getting worse as time goes by without facing their responsibility to “walk the talk”. So look at your values statements again and make sure that you haven’t been ducking your responsibilities.

To learn more about employee compensation structure and employee benefits in Minnesota, see the Minnesota Council of Nonprofits Salary Guide. The Guide reports overall benefit trends by filed of service, budget size and location, and specific information detailed by benefit categories and positions.

October was conference month for me. I attended four annual conferences of statewide or national organizations. I started with the joint conference of the Minnesota Council of Nonprofits and MN Council on Foundations followed by the MN Association of Community Health Centers, Independent Sector and ended with Opportunity Finance Network. One conference each week in a single month – why does everyone have to meet in October? I attended five plenary sessions, three keynotes, two awards dinners, and (I think) eleven topic sessions. I also presented three of the sessions at two different conferences.

I heard many smart and experienced people talk about important, urgent issues. I learned about technical and financial topics and policy and economics. After all of my conference experiences this month, I have one burning question: what’s the point of PowerPoint? Many of the conference sessions included a PowerPoint presentation, but in very few cases, did the visuals add anything of value. I hate to admit it, but the PowerPoint that I created for one of my sessions was a case study in dullsville. We all complain about it, but when are we going to stop mistreating our audiences and improve the practice?

The typical use of PowerPoint at the conferences was a number of slides with 4 to 8 bullet points containing 40 to 70 words. Most used no visuals except the logo of the presenter’s organization or a Microsoft design template. In many sessions the presenter also distributed printed copies of the slides as a handout. The best of the presentations used the slides as a focus point for the audience with key phrases and issues. Less effective presentations used slides with every word of the information, lots of data and detailed descriptions, and lists of the names of the panel members and topics for the session. The worst users included slides with complex charts that were unreadable both on the screen and on the printed page. Unfortunately, the audience can end up frustrated, confused, bored, or insulted.

Despite my complaints, I don’t hate PowerPoint. Research about learning styles shows that many people learn through visuals, and PowerPoint can be a great communications tool. Here are a few suggestions to improve your use of PowerPoint:

• Learn how to use PowerPoint. It’s not a difficult program but there are features that need practice and testing.
• Good presentations don’t just happen, they require planning and preparation. The problem with templates is they make it easy to take shortcuts and create a bad presentation.
• PowerPoint is a visual tool – make it visually interesting and engaging with pictures and graphics that build on your message. This includes both the pictures and the slide design.
• Get a copy of the book “Why Bad Presentations Happen to Good Causes” published by Cause Communications. This terrific book, less than 100 pages long, is full of practical information to improve presentation content, delivery, and use of PowerPoint. Most nonprofits can get a copy for free.
• Visit David Canfield’s 8 Mistakes of Microsoft PowerPoint Presentations for a list of common mistakes we have all made at one time or another.
  

I’m back from conference-land. Next week I’ll be back with thoughts about financial issues for nonprofits.