Contributing to charity is a unique transaction in our society: people give money and receive nothing tangible in return.
I think of this when individuals who have spent their careers in the for-profit world draw comparisons between the business and nonprofit realms. They tend to urge nonprofits to run themselves like a business. In applying lessons from their world to the nonprofit sector, these well-intentioned businesspeople often miss a few critical points.
This is particularly true about fundraising. The veteran businessperson will draw comparisons between fundraising and business sales. “You have to work the list,” he’ll say, with a knowing nod. He’ll go on to explain that you also have to be persistent, build relationships, and develop trust, all of which will lead to a gift/sale. I agree to a certain extent. Building relationships and trust is central to encouraging charitable gifts. Human connection is critical to salespeople and development officers alike. Persistence is good, so long as it doesn’t slip into being obnoxious.
But what some people overlook is that customers in the for-profit world need to buy something from somebody. If a hotel manager needs to replace 100 mattresses, she will be buying those mattresses from one supplier or another. An internet retailer needs to have its packages delivered by someone – whether it turns out to be UPS or FedEx or the US Postal Service. A paving company needs to buy raw materials and heavy equipment; an office park needs to hire landscapers and roofers; a charter fishing boat needs to buy bait and hooks and gasoline and motor oil.
What’s true for all these businesses, and every other, is that they need to buy equipment, supplies, and services in order to keep their doors open. It’s simply a question of whether to buy those items and services from Vendor A, B, or C.
But people and businesses don’t have to give to nonprofits. Charitable giving is purely optional.
Let’s repeat that: charitable giving is optional. In fact, the only charitable giving that’s required by law is the annual distribution from private foundations, and those grants make up only 15% of all giving nationally. Yes, there are tax advantages for individuals to give to charity, at least for the 30% of the population who itemize their deductions. And businesses and individuals can receive a social and sometimes practical benefit of being recognized for their generosity. But what the donors get in return never adds up to the cost of the gift.
Donors give for a variety of reasons: genuine altruism, responding to a disaster, honoring a friend, “paying back” a scholarship, and yes, sometimes trying to further their own reputation. Motivations are complicated. But even those gifts that result in some small part from the desire for self-promotion or from a sense of obligation are also driven by the desire to give. Charity is not a requirement. There is an element of joy involved, because it is, at heart, a voluntary action.
It’s not the nonprofit’s job to understand each donor’s motivation. For that matter, even the donors themselves don’t fully know why they give. Asking donors why they contribute to a particular organization is like asking them why they like their favorite dessert or park or song. They know that they like the organization. Supporting the cause answers an emotional need. Giving provides them with joy.
What the nonprofit very much can do is honor the donor by expressing gratitude. Nonprofits should acknowledge the gift immediately, and then, for new or large donors, a board or staff member (or both) should call or write a personal note of thanks. Charities need to honor the donor’s request for publicity or anonymity. They should let donors know a few months down the line how their gift is being used, or how the larger campaign is faring. If nonprofits have the chance to get to know the donors in person – and they should try! – they should be candid about their organizational challenges and ambitions. And then, when the time is right, nonprofits should give their donors the opportunity to make a gift once again.
And in all their interactions, nonprofits should never forget that this is a voluntary action on the part of the donors. People who contributed last year don’t have to give this year or next year. In fact, nonprofits have no right to expect that they will. It’s not a sale. It’s a gift. Keeping that mindset, and treating people with the resulting degree of appreciation and respect, is exactly what will, in fact, make someone a loyal donor, year after year.
Copyright Alan Cantor 2017. All rights reserved.
So true! Thank you Alan. Really appreciate your posts.
Thanks, Anita! You certainly know both worlds. I appreciate your comment!
so true. someone in this sphere said the “world of development moves slowly. One can’t sprinkle a cucumber with vinegar and expect it to become a pickle” or words to that effect. Cultivation takes time, integrity and respect. We never take our donors for granted.
Thank you, Marylee!
I enjoyed hearing you speak yesterday in Concord, NH. You are not only very knowledgeable and insightful, but you know how to get it all across to an audience. Your great sense of humor is just the whipped cream on top of the pie. I also agree with what you say about non-profits being run like businesses, but only with regard to how you relate to your donors. In my own experience over some 25 years serving on a variety of boards, the organization itself, and its administration, really do need to be run like businesses. They have all the same challenges. Money comes in and money goes out. There are issues of Human Resources and all that entails, property, supplies and budgets to manage it all. These organizations cannot run solely on altruism and good intentions. It is one of the reasons why I think that business people are a critical element of any board. I am not a business person myself, but I greatly rely on the advice of business people in my trying to function to my greatest effect on boards.
Thanks, Dan, and it was great to see you yesterday as well.
How about we compromise? I agree with you that core operations at nonprofits should be run in a businesslike way — dealing efficiently with vendors, purchasing, HR, accounting, all of that.
Where I caution people about the “run a nonprofit like a business” mantra is that there’s a fundamental difference in goals. In a way, they’re doing the same things, but for a different end purpose. The goal of a business is to make a profit for its owner and/or shareholders, and to build the value of the company. Now, to do that right, they need to treat customers, employees, and vendors well, and to be smart about expenses, reinvesting in the company, and all of that.
Nonprofits need to do all of those things: treating customers (well, clients) well, being fair to employees and vendors, managing the expenses, etc. All true enough. And nonprofits need to balance their budgets. But being in the black is not the end in itself as it would be for a business. For a nonprofit, balancing the budget is a way to reach it’s goal, which is to deliver mission, however that’s defined.
So, we’re largely in agreement, Dan. Good business practices are important in the for-profit and nonprofit worlds alike. But I will assert that there’s a fundamental difference in the goals, and sometimes people forget that.