How to Structure an Organization to be Effective at Fundraising

effectiveorgstructure 2013-Nov25

Often, the reason the major gifts function in an organization does not work is because the organization itself is not organized properly. Or the leaders in the organization don’t have a clear view of what the various functions in the organization are supposed to do.

Jeff and I encounter this all the time. We ask an MGO, “What is the purpose of your job?” They answer, “To raise money.” We reply, “That’s half right. The purpose of your job is to fulfill donor passions and interests and, as a result, raise money.” There’s a huge difference.

Or take the question to a level higher with the Development Director. “What is the purpose of your job?” Same answer. And we give the same reply.

These exchanges led me to begin considering organizational structure and its effect on fundraising.

In my opinion, the fundraising division of a non-profit has two major functions:

  1. To help people (donors and recipients). This is 80% of the effort. Yes, I think this is the majority of the effort. Sorry, if you are in all the other work that I have on the right side of the chart above. I’ll get to that in a moment. Here, the development function works with two major entities: individuals and organizations. The individual work, at the highest level, is accomplished through direct marketing, major gifts and planned giving. I know there is a ton of detail in all of this. But at the macro level, this is what I believe the whole thing is about. Notice that the focus of ALL the employees and volunteers in this unit is building relationships with donors and causing mutually satisfying transactions at an agreed upon and acceptable ROI. I put the word “Period” at the end of that sentence on the chart because I mean period. That’s it. That’s all there is – nothing more. So the major activities in this category of work are building relationships and causing transactions at an agreed upon and acceptable ROI (return on investment). It’s important to note that it’s relationships that we are building and, in that context, we are causing transactions. But not just any transaction – a mutually satisfying one. And not at any cost. Nope, at an acceptable ROI. But not just any acceptable ROI – an ROI that all the parties agree on. All of this is important.
  2. To help the organization itself by minding the brand. This is 20% of the effort. As I said earlier, this is the lesser part of the effort. Not any less important, since it is important, only that this category of work uses less of the organization’s resources of labor and budget. But the function is important in that the sole focus of these folks is creating positive and memorable impressions about the organization with various publics. They are building that brand. Notice that PR, events, marketing and branding are in this category. Some will say, “I thought an event was a fundraising thing.” Nope. Good events do raise money, but most, if not all events, are really brand raising, not fundraising. “But… but… the event raises money, so isn’t that fundraising?” Yes and no (see our White Paper on this subject). Net revenue (I hope) comes in, but all you have done is secure dollars, not donors. In fact, most events do that. They get dollars in the door, not donors. So really, by creating and managing the event, what the organization has done has been to pull off a self-liquidating or self-funding branding tactic, creating a positive, favorable and supportive impression of the organization. This helps fundraising and is a needed function, but I would not label it a primary or foundational fundraising activity. Never is and never has been.

So, why is all of this important and what does it have to do with major gift fundraising? Understanding the proper fundraising structure…

  1. Helps the MGO keep perspective on his role – The major gifts function is to take individuals who come up through the direct marketing pipeline and build relationships with them for the purpose of fulfilling their passions and interests and funding organizational programs. This is a critical, very critical, and needed function in the organization. A non-profit organization cannot operate cost-effectively, in my opinion, without a robust and well-run major gift program. Why? Because the economics and ratios will not work for the organization. If a non-profit only has a direct marketing program it will likely have an ROI of 1:3 or 1:4, which is OK, but not ideal. Adding a major gift program, with its higher ROI, positively affects the economics of an organization, increasing it by a point or two. So, that is good. But even more importantly, a major gift program adds flesh and personality – a real human element – to the fundraising program. It puts a face to what could easily be a very impersonal transaction. This is the real value add and one that also has economic benefit. An MGO needs to keep these values clearly in mind. When an MGO can see that she is the face of the organization to a donor, it helps the MGO understand the critical role she plays and how important it is to the success of the organization. It is not just about reaching goals and providing resources to fund program. It is so much more than that.
  2. Helps the MGO understand how the other functions fit – By knowing that the objective of events, PR, marketing, communications and branding is to increase awareness and cause positive impressions, the MGO can value those functions as a necessary part of the entire enterprise. Too many MGOs do not understand or value these supportive roles. And too many MGOs miss the fact that an event is not an end in and of itself. It is a stepping stone toward developing relationship. And if it does not accomplish that, it is not worth the effort, nor should it be part of the MGO’s strategy.

Looking ahead to the fall, we’re approaching a busy season for many non-profits, which have those months chock full of activity: events, PR tactics, PSAs, etc. – all of which are mostly good. But I find that many organizations lose their way during these times. They are super busy doing their fundraising, public relations, marketing and communication programs. And they forget the donor in the process.

And that’s what’s wrong.

That is why I am taking the time right now, before “the season,” to remind you why the organization exists, how it should be organized and function, and how that relates to donors.

Because if, in the middle of all this noise, you stop and think of the donor and what she fundamentally wants, the organization and all of its self-actualizing activity will diminish and you will get back to this basic trutha donor wants to do something meaningful with her time and money.

So understand where you fit and why, and keep the donor firmly in the center of your values and priorities this holiday season. And, I promise you, things will go better for them and for you.

Richard

A version of this post was originally published in November 2013.

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One Comment

  • Dick Walker says:

    This is an excellent piece and should be a part of every business school program focused on nonprofit management. The audience should be organization CEOs and Boards almost more than CDOs and MGOs.

    Well done.

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