I’m bracing myself for “hate mail” on this one. But I have to speak up. I do.
Here’s why: a promise to pay is not the same as paying.
In the last six months, Jeff and I have encountered a number of situations – in organizations large and small – where the credit policy for a major gift officer goes like this:
If you get a pledge from a donor we will credit (the MGO) the entire amount toward your goal for the year.
Then I ask the question: “OK, so you are saying that the $1 million goal a MGO has – it’s really not cash in the door, right?”
“Yes,” they reply.
“Well then, how are you going to pay the bills with a pledge IF it is not paid?” I say.
And we go round and round.
I got into this topic with a MGO recently. Let’s call him Bill. He was getting quite upset with me that I was saying a pledge should not count until it is paid. Quite upset.
So I framed it this way: “Bill, let’s say you are interviewing for a job to work in my company. We agree I will pay you $80,000. I tell you I will commit to $40,000 in cash and $40,000 in a pledge. You look at me funny and tell me that a pledge is fine if I pay it. But if I don’t pay it, you ask me how you are going to make your mortgage payment. I tell you not to worry about it. It will all work out. My pledge is good. I know it’s not cash. But it will be OK.”
Well, Bill got the point. It was good to have a pledge. Nothing wrong with that. But unless the pledge was converted into actual cash in the bank, it was no good.
I’ve seen one situation where a MGO was credited with a pledge for $2 million, and several things happened:
- He literally stopped working on the rest of his caseload. In his mind, he had reached his goal. The fact was that he was 80% behind on all the other donors. Not good. This is real money lost.
- Because the pledge was credited to him in its entirety, he had no incentive to keep the donor informed. In his mind, the money was in the door. No need to worry about it. The sad fact is that the pledge went bad and was not fulfilled after the first payment. I think it’s because the MGO stopped cultivating and stewarding the door.
- The organization missed a ton of operating revenue, and it hurt them financially. And this is revenue lost from the unfulfilled pledge AND the other donors who were not stewarded.
Pledges are good. Jeff and I don’t have one thing against them. It is really good to have a donor commit to future giving. Our only concern is about WHEN to credit the pledge. And we think that the crediting should happen when it is paid.