Managing Major Donors | How charities manage their relationships with major donors
A study conducted for The Institute for Philanthropy and the Ansbacher
Contents
Introduction Objectives Sample and methodology Summary of key findings and conclusions
MAIN FINDINGS
I. Segmentations used in classifying donors II. How well developed is major donor fundraising III. Barriers to major donor development work IV. Lack of strategic vision: what does this mean and how is it manifested? V. A staged programme VI. What do donors expect? VII. What do corporations expect? VIII. How the structure and culture of charities themselves inhibit best practice
Introduction
There is no doubt that the competition for charitable donations in the UK has grown steadily stronger in recent years. An increasing number of charities are chasing a total volume of giving, which is growing slowly if at all. The current decline in the stock market and the overall financial uncertainty is also likely to impact on the generous instincts of actual and potential major donors. It is therefore more than ever critical that the sector concentrates its marketing resources to the best possible effect.
Objectives
Following work we now know a considerable amount about the various motivations which may lead donors to contribute (or not contribute) to. It is also clear that there has been increasing use of database marketing techniques and customer relations strategies for mass donors.
Where there is much less information is in the area of how charities respond to major donors and what is currently done to foster such valuable relationships. It is believed that that there is now an opportunity to begin to promote learning and to establish a code of best practice in this area and the aim of the proposed research is to provide the information on which this can be based.
The going-in hypothesis is broadly that charities do not manage the relationships with the major donors as effectively as they could. In short, that charities are not optimising the potential of people who currently contribute large amounts or people who could in future be persuaded to continue and even increase their donations.
A study by the Institute for Public Policy Research into the attitudes of the affluent to philanthropy is germane to this research. (‘A Bit Rich?’ What the wealthy think about giving, IPPR, May 2002)
The following quote from the IPPR study defines the key role for charities with regard to major donors:
‘What is striking is that there is little evidence of much thought being put into how much the rich and affluent give. Most are happy to decide how much they will give based on how generous or ‘flush’ they feel. Like those on lower incomes the rich and affluent take as their guide the way in which they are asked. (non-italics, Author).
Our study adds to this work by focusing fairly tightly on the professional (or not) activities of charities and the interface with major donors. The study examines the philosophies, techniques, methodologies and importantly the structure and personnel of the charity that influence how successful fundraising efforts are with people in a position to contribute substantial sums – e.g. £5,000 and upwards.
Sample and Methodology
31 people were interviewed face to face or over the telephone in interviews lasting from 20 minutes to over 1 hour. The breakdown of the sample was as follows:
13 Charities were drawn from the following sectors:
Children International Age Environment Health Arts Education Housing
The charities were all well known names, prominent in their category and represented a range of sizes. The majority received money from several sources; we concentrated the interview on the money received from major donors.
Donors were all regular major donors to at least one charity and these donations ranged from £5,000 to £250,000. Several were currently or had been in senior positions in charities and several had experience of administering a charitable trust.
Summary of key findings and Conclusions
The enquiry by looking at what major donors expect from the charities to which they give, but in the course of this discovered that these expectations sometimes very poorly met are only the tip of the iceberg in examining how charities can increase donations from this source.
Key findings were:
Status of major donor fundraising: under-developed
The status of major donor fundraising in the UK ranges from the very amateur where little attention is paid to it as a separate activity, to the very sophisticated and professional. As a generalisation, we would conclude that the vast majority of charities would benefit from a more disciplined approach.
However, these interviews reflect a strong interest in adopting best practice and we would expect to see evidence of more professional approaches in the near future. Although charities will use different language and have different definitions and ways of conceptualising their donor activity, all define broadly three bands of donors:
Major: upwards of £5000 (a few placed the lower limit much higher) Mid-level: from approximately £1000 - £5000 Mass: under £1000, the vast majority of whom are well below this level
Most of the charities’ time and budget are taken up with the mass level, involving as it does, a wide range of direct marketing activities.
Barriers: too much reliance on traditional approaches
Barriers to a more sophisticated and professional approach to major donor funding work are believed to be endemic to the charity sector. These barriers are variously described as:
Too strong reliance on traditional one-off funding campaigns charity balls and other fundraising events
Short term, ad hoc thinking and activities that fail to appreciate what is required to develop a professional plan
Difficulty in sticking to a strategy even if one is in place
The perennial charity problem of shortage of resources
As a result, a specific commitment to major donor development work comes too low down the agenda and is likely to be under-resourced and/or funds mis-allocated.
The foregoing are the familiar symptoms of a lack of long-term strategic vision, which may affect any organisation. What characterises charities, however, is a certain amount of intellectual confusion, particularly with regard to major donors, taking the broadest definition of the category e.g. individuals, trusts and corporations.
The source of this confusion revolves around the answer to this simple question:
Who are the charity’s clients?
Charities are most likely to see the end recipients as their clients. However, if charities thought of their major donors as their ‘clients’ they would see that the ways in which these donors are treated are often inefficient and unproductive.
Transactions vs relationships
Traditional adherence to ad hoc fundraising methods results in major donor work as a series of ‘transactions’. In other words the interface with the charity is based on a series of discrete ad hoc donations.
The fact that many donors, often through their own efforts, motivations and needs develop a long-term relationship with the charity is a fortunate by-product. This is an inefficient system for the charity because it relies too much on donor goodwill and not enough on the pro-active efforts of the charity.
The short-comings of this are obvious when contrasted with a relationship-based philosophy. The relationship approach is predicated on active and systematic efforts to engage willing major donors more emotionally with the charity over a relatively long period of time. For many this approach is not particularly well understood and thus inadequately implemented.
Such a philosophy and ethos recognise that relationships grow and flourish when there is reciprocity – although the degree of donor involvement will vary enormously. Charities are unlikely to improve on their donations until this philosophy becomes central to the charity culture.
The full adoption of a more client-centred approach – analogous to a commercial company in the service sector – has many obvious and not so obvious implications for how the charity is structured, staffed and managed. (See below)
More rigorous disciplines required
Adherence to a disciplined and fully implemented programme is not as widespread as it should be. The following template programme represents the key stages, each of which has disciplines and procedures within it. A small number described this type of programme specifically; others referred to some but not all of the stages.
Seven Stages of Solicitation
Stage 1 Research and drawing up prospect list Stage 2 Evaluation and judging potential Stage 3 Getting to know the prospect, understanding what motivates them, and finding out what interests them Stage 4 Identifying the specific areas of the charity’s work that are of greatest interest Stage 5 Asking for the money Stage 6 Thanks and recognition Stage 7 Consolidation and stewardship
What do donors expect?
If the charity is committed to building relationships with its major donors, central to its activities must be an understanding of what donors actually want from the charity and indeed, what they deserve.
Seven key questions a charity needs to ask of its major donors
The following 7 questions are ones that the charity should ask itself for each and every one of its major donors. If these questions are asked, answered and acted on, the kinds of oversights, mistakes and unexamined opportunities that donors reported are unlikely to occur and the relationship much more satisfactory and productive as a result.
Acknowledgment
Donors’ expectations are relatively undemanding. It is because they are undemanding that the failure to acknowledge the donation or even thank the donor is particularly shaming when it happens. Sometimes these are purely administrative slips, but in other cases we discovered acknowledgement was simply not part of the charity’s normal behaviour. However, the point is not only one of basic etiquette. It strikes at the heart of what we have been describing as a process of relationship building. What is communicated to the donor, and by whom are part of the process of garnering goodwill and encouraging further commitment.
Involvement
Certainly not all donors wish to become involved with the individual charity’s activities, despite giving regular and/or large contributions. But for those who consciously seek involvement ( or who are open to persuasion) the key person to inspire and stimulate a donor’s enthusiasm is the programme director, not the fundraiser.
Access
People support causes, not charities. Consequently access to the energies and passions of those people closest to the cause is the strongest card the fundraiser can play. However, because programme directors don’t necessarily see support for fundraising as part of their job, the best efforts of the fundraisers are often frustrated.
The fundraiser, in contrast, functions as enabler, facilitator and administrator. S/he is the conduit to the heart of the cause – best represented by the programme director. Too few charities seem to recognise the importance of this distinction in engaging the interests and emotions of major donors.
1. What type of contact should we be making and how frequently should we make it? Letters, phone calls, emails, progress reports, invitations to events (both donor-specific and as part of the charity’s on-going programme) should all be considered and identified.
2. Are we treating this donor with the respect he or she deserves and expects? On receipt of a major donation, have we written immediately to thank the donor with a personal letter? Have we ensured that either the chairman or the chief executive (in addition to or rather than the fundraiser) has written the letter?
What do corporations expect?
Although the study focused on donors as individuals, several of them had been solicited for donations as heads of major companies. Here the requirements are more rigorous. Charities, after all, are competing with each other. Chief executives (or their deputies) expect evidence of research done on their company, resulting in a clear argument as to how links with the charity’s cause will benefit the company its brands or its reputation. It was said this seldom happens.
In addition, charities are criticised for amateurish presentations; for failure to anticipate questions and thus failure to answer objections; and for fielding the wrong individuals. Here again, the programme director with passion for the programme and its needs is more likely to succeed. Both structure and culture of charitable organisations inhibit the development of major donor fundraising programmes.
Central to this is the role and status of the fundraiser. As a generalisation, fundraisers are not as central to the organisation’s decision-making as they should be, and as a result, do not carry the status necessary to maximise their role. In particular, this refers to the important role as conduit between the major donor and the work of the charity.
The fundraiser is the key person to implement the core major donor disciplines described above: both the 7 stages of solicitation and the 7 questions to be asked regarding each donor. Consequently, they need to be central or at least closely integrated into management decision making. Currently, they appear too far outside to be as useful as they could be.
3. Are we timing our requests appropriately? Have we guarded against placing this donor’s name on a mailing list or other kind of mechanism that insults him/her by asking for another donation hard on the heels of receipt of a major cheque?
4. Do we know from first hand experience how committed the donor is to our particular charity and how actively involved with the work of the charity does he/she wish to become? If so, what personal plan have we developed that could help the donor get closer to the organisation and how has that been communicated?
5. Do we know if the donor is in a position to offer professional skills? What are they, can we use them and how have we responded to this?
6. How much public recognition do donors want and in what form? Have we offered anything public? Should we? What kinds of recognition would be appropriate for this person?
7. Who in the organisation and what aspects of the charity’s work would the donor like to meet/experience?
What are we arranging to meet this need?
There are specific lessons from best practice in the United States here:
Titles: Americans are often scorned in the UK for ‘title inflation’ but titles are important in conferring status and respect. ‘Director (or Deputy Director) of External Affairs’ is more prestigious than ‘fundraiser’.
Salaries: The Director of External Affairs can be, although not necessarily, the most highly paid person in the charity. Salaries reflect status and this is recognised.
More integrated management: The fundraiser will have more day-to-day involvement with the planning and execution of programmes: the choice of options and the funding issues involved. So rather than being some kind of necessary seen-but-not-heard back room activity, s/he is an essential part of the management team working more closely with programme directors to introduce major donors to the work of the charity.
Programme director: If the fundraiser is to be more involved with programme planning, programme directors need to be more involved with fundraising. Currently this rarely appears to happen or does not happen as often as it should.
Chief Executive: The same point applies to chief executives. In the broadest sense, full endorsement and active involvement in fundraising is everyone’s responsibility.
Trustees: The role of trustees is changing we are told. The traditional British reluctance to require trustees to be significant contributors (or fundraisers themselves) appears to be declining in charities that are not ‘protected’ by government or other statutory sources of funding.
However, there is still a strong reluctance to require trustees to be contributors. Many define the primary role of the trustee as governance, best delivered through a diverse collection of individuals contributing skills and time instead of (major sums of) money.
Charities who support this view believe the greater responsibilities placed on trustees as a result of recent regulatory changes underline the need for highly skilled trustees and that this is more important than the ability to contribute. This is not universal, however: some board chairmen don’t accept this, believing that such protestations are merely excuses for not giving.
The dilemma can be resolved by setting up separate committees (or boards) of major donors who work solely on major development fundraising. This practice does not appear to be particularly widespread but it is recommended as giving extra muscle to the fundraiser’s work without losing the skills and talents of less affluent trustees.
The whole area of how to build effective, efficient and productive boards needs to be studied more closely. Experience in the US, where a more developed infrastructure designed to help charities through research and publications exists, is highly relevant.
Conclusions
In conclusion, the study underlines the importance for charities of developing a more relationship-based model for managing their major donors. Charities need to look at major donors as individual clients from whom they could gain more commitment (in terms of money, or time, or skills). However, the essence of this approach is reciprocity and this requires giving more back to the donor: paying more attention to the longer term stewardship of each relationship rather than treating donations as discrete transactions. As the report has described, this has major implications for the charity's structure, culture and working methods.
MAIN FINDINGS
I. Segmentations charities use in classifying their donors
The language is important here. Although different charities use different terminology, have different cut-off points and all sorts of different ways of grouping donors at different levels of contribution (such as Supporters, Friends, Benefactors, Members etc), there seem to be very broadly three bands corresponding to low, medium and high.
The point, however, as one of the consultants explained, is not so much the monetary limits of the band but the specific nature and needs of the charity in its own marketplace and the nature of the different activities that each group of donors requires. ‘I would not categorise the bands. I think that it is a major mistake. Everybody tries to make this a monetary issue but I’m saying it all depends it depends on the state of development of the organisation, it depends on your cause, it depends on the marketplace you’re actually competing in.
Some people will define a major donor at £5,000 plus, for others it will be £10,000, and others it will be £15,000.’(Consultant). Another wouldn’t consider anything under £100,000 as a ‘major gift’. Nevertheless, the following groupings correspond broadly to how charities we spoke to group their donors:Major donor What most people mean when they use the term ‘major donor’ are people giving donations of £5,000 upwards. This could even be as low as £1000 to begin with, but would be targeted for greater involvement/contribution over time. Also, it is worth including donations from corporations and charitable trusts here because there is an important overlap with individuals when it comes to the kinds of presentations (formal and informal) charities make for large sums of money or support in non-monetary ways.
Mid-level donor
Below this is a band which doesn’t really seem to have a commonly agreed upon name – described generically as ‘mid-level’ giving donations of about £500 £1,000. So this group sits well above the mass donor but well below the top level. It is characterised by one consultant as essentially ‘personal direct marketing’: not what he thought of as deserving of really serious ‘major donor’ attention.
Nevertheless, people in this category need attention as they can theoretically be moved upwards if the process of ‘growing or stewarding donors’ is taken seriously. Activities in this area specifically are worthy of a separate study, as it is in many ways the most difficult area to understand and categorise.
The ‘mass’ donor
The vast majority of donors are obviously those who make contributions of say £2 - £10 per month or gift amounts up to several hundred pounds. Appeals to this level of donor are what constitute the most conspicuous ‘public’ face of fundraising, with all of the appeals that the direct marketing world can devise small gifts, direct mail shots and so forth. Street solicitations seem to be the latest trend here and a source of success with certain kinds of charities and amongst certain kinds of people. Young people seem to respond most favourably here, but the technique is widely criticised by others.
Conclusion
It is beyond the scope of this report to discuss marketing priorities in terms of allocation of money and resources. All charities use a wide variety of direct marketing techniques to solicit donations from both mass and mid level donors. But the success or otherwise in terms of return on investment of these approaches is impossible to generalise reliably on, given the data requirements from such a widely diverse population of organisations. A much larger sample and a more structured data collection technique are required.
Major donors obviously constitute a tiny minority of any charity’s donors but because their contribution is so disproportionate to their size they need to be looked at completely separately and so it is the attitudes, practices and disciplines in this sector that is the specific focus of the report.
II. How well developed is major donor fundraising?
The broad generalisation that emerges from these interviews is that major donor fundraising as a discrete category requiring special skills, techniques, and philosophies is relatively underdeveloped in the UK.
Obviously there is nothing new about soliciting large sums of money via capital campaigns and reliance on what could be thought of as very wealthy benefactors. Identification of this as a category of specialisation requiring disciplines, techniques, methodologies with a philosophical underpinning is relatively new for the majority of UK charities. The consultants, and those fundraisers and donors with US experience were particularly emphatic about this. ‘If you look at some organizations, they’re very much in the past and haven’t evolved to the new way of working. When we talk about major donors it is said that the techniques have only been in the spotlight for the last 5 years or so as mainstream fundraising activities.’(Consultant)'.
The state of development for many of the charities we spoke to was characterised by the following remarks interested, aware of the need to develop but still rather tentative in terms of what they are doing now: ‘We haven’t done a lot of major donor fundraising the way some charities do. We’re looking at it at the moment but have not done the big asks or relationship building with the richest people in the land.’ (Charity)‘ We’re looking at the contacts we have – our most well off donors and their networks to large wealthy people. But very much at the early stage. We’re looking at American models as they are further ahead with more planned giving.’ (Charity).
There are obviously many exceptions. We interviewed a number of highly professional charities and respondents named several other well-known charities as particularly good at major donor work. Indeed, it is from this minority of charities in our sample that we drew most of the recommendations the report makes on how practices could be improved. But even the most experienced charity fundraisers acknowledged they were not as good at major donor fundraising and relationship management as they wanted, and perhaps more importantly need to be.
III. Barriers to major donor development work
This section looks at the kinds of issues that appear to inhibit major donor work. As will be seen in the following discussion, problems are largely internal rather than external. In other words, problems stem from the way the charity itself is organised, structured, led, trained. In short, the whole culture of philanthropic organisations misses opportunities to maximise income.
This consultant with long experience of a wide range of charities speaks for many: ‘The place where charities struggle is the internal marketplace. When I do strategic planning with them, we do the research, we identify the constituency but I always say to them, the pieces we have to address now are the big internal stumbling blocks, otherwise this programme is never going to grow. The fundraiser cannot do everything that is necessary to develop a really good programme.’ (Consultant)
What, then are these internal stumbling blocks? What are the barriers that need to be overcome?
The thinking is too short term
‘Short-termism’ is hardly unique to the charity world. All commercial business suffers from it to some extent. But in the charity sector with its complex culture of often-contradictory motives and its mixture of professionals and volunteer workers, it may be more endemic.
From a consultant…‘They’re not really taking a long-term view. They generally tend not to have a disciplined strategic approach to major donor fundraising. It’s tactical, it’s sometimes under-resourced, the expectations are not there, the people aren’t there and it is thought that a lot the time people simply do not know how to ask.’ (Consultant)
This quote echoes not only the views of consultants working in this area but also some of the more experienced fundraisers and donors with many years experience of the charity world.
Too reliant on techniques from the past: ‘the Brigadier and the charity ball.’ The point made by the more experienced respondents was that the practice of major donor fundraising is still largely rooted in the past, is ‘amateurish’, ‘ad hoc’, and lacking a larger strategic perspective and design.
A consultant put it this way:
‘It’s seen as something that was done by a Brigadier or a Major General or titled person - those types of people with their lists of contacts, their network and their ability to organise big events tables at charity events of one kind or another.’ (Consultant)
In other words, major donor fundraising is confined to approaches leveraging traditional institutions of British life – the military, the titled, the well off local dignitaries with a mixture of administrative skills, status and a wide network of contacts.
Another pointed out that ‘modern’ techniques of sophisticated major donor fundraising were relatively recently developed so it’s not surprising that the old methods were still widely used. His view was not that these methods were ineffective far from it but that they should be seen as a part of a wider more professional over-all approach, which could increase the level considerably.
Too low down the agenda/ potential unrecognised
For some charities, the opportunities here are to some degree simply unrecognised and thus the organisation fails to see the importance of appropriate leadership, methodologies and resources. If the charity fails to see major donor work as requiring a long-term commitment and specialist skills this is inevitable. This comment reflected the experience we heard from many of the fundraisers describing their work.
‘It’s not been on the agenda. What’s been on the agenda has been small amounts of money from large numbers of people rather than large amounts from small number of people. So the focus has been building up the £2 a month donors.’(Charity) Under resourced and resources mis-allocated.
In a very real sense all charity work is under-resourced. Thus it is miraculous that spectacular results are often achieved under very difficult circumstances. The point at issue here is priorities. Even when the potential of major donor contributions was recognised, resources are a major issue: not enough people, not the right people, people too thinly spread over other activities, under supported by management. These consultants’ views were typical: ‘With some of the large charities you have huge fundraising departments and they can afford to have people solely devoted to major donor work. But that is not always true. You will find plenty of large charities in the UK, e.g. is raising £30 to £40 million with only one major donor person sitting in the corner with their contacts because obviously they haven’t thought it was that important. But with the small charities you find that essentially a couple of people are doing the direct marketing, the trusts and everything else so very little attention is paid to major donor work.’ (Consultant)
‘Chief executives can be very bad here. They are keen to see the money and will accept that this might be a new income stream but are not prepared to put the resources behind it to get the programme done properly, so its all pushed onto the fundraising department to wave its magic wand.’ (Consultant).
We look more closely at the roles of different functions in a later section. The foregoing problems and barriers are characteristic of any company lacking a long-term strategic vision. But there are clearly particular problems in the not-for-profit world compared to the commercial world.
sometimes very poorly met
