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Community capital – Tech-driven growth

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By Todd Cohen

Challenged by big financial firms and other nonprofit groups in the hunt for philanthropic assets, community foundations are remaking themselves in the image of entrepreneurs.

Foundations are using technology to revamp their operations, and forging marketing alliances in the aggressive pursuit of donors.

“Philanthropy has become a product and a market,” says Carla Dearing, president and CEO of Community Foundations of America in Louisville, Ky., a buyer group created by 26 community foundations to develop tech-based products and services.

The 600 U.S. community foundations control $30 billion in assets – and have targeted the estimated $6 trillion to $25 trillion in charitable assets that Boston College researchers expect to move between generations over the next 50 years.

That unprecedented prize also has triggered a rush by financial firms — led by Fidelity, Vanguard, Schwab and Merrill Lynch – to adapt to the philanthropic market the marketing and technology muscle they’ve developed for individual investors.

*Charitable gift funds created by the financial firms have grabbed a big share of wealthy investors’ charitable business. Charitable assets managed by Fidelity, for example, doubled to $4 billion in 1999 and 2000.

“The community foundation field was caught by surprise by the establishment of those gift funds,” says Suzanne Feurt, managing director for community foundation services at the Council on Foundations in Washington, D.C.

To catch up, community foundations and organizations that support them are working together to ramp up their investment in technology, marketing, professional development and policy work.

TEAMING UP IN MICHIGAN

Building on a long-term initiative to expand philanthropy throughout Michigan, community foundations there have joined forces to better understand donors, and develop products and communications tools to market themselves to donors, prospects and professional advisers.

With investment from Michigan community foundations, the W.K. Kellogg Foundation in Battle Creek and the Charles Stewart Mott Foundation in Flint, Michigan Community Foundation Ventures has produced a “local marketing portfolio” of materials that foundations can customize to market themselves to local advisers and help them explain community foundations to their clients.

Those products were integrated into a statewide marketing campaign starting last October targeting donors and professional advisers, including a six-month print-ad campaign.

Michigan Ventures, a supporting organization of the Council of Michigan Foundations, now is offering those products to community foundations nationally.

Supported by a grant from the Council on Foundations, the Michigan council is working with it and Community Foundations of America to launch a national research-and-development incubator to develop new marketing products and tools that community foundations can use to train their staffs and boards.

“There is a consensus that community foundations need to have a national marketing platform with common messages that still emphasize their individuality and localness,” says Rob Collier, the Michigan council’s president.

BUILDING A NETWORK

Spearheaded by the Council on Foundations, community foundations have fielded teams to function collectively as a communications hub, watchdog and change agent.

The teams tackle issues ranging from professional standards, professional development and legal and legislative policy to marketing, technology and community leadership.

The legal and legislative team, for example, played a key role earlier this year in talks with Fidelity, Schwab and Vanguard to head off a legislative and regulatory battle in Washington pitting commercial gift funds against community foundations.

“If there was an appearance of war before, there’s now a ceasefire and we’re moving toward détente,” says Feurt.

Still, with a handful of commercial gift funds up and running, and with tax-exemption applications pending for dozens more, she says, “they’re not going to go away.”

Rising to the challenge will require savvy marketing, strategic collaboration and innovative use of technology, she says.

Marketing initiatives range from development of a donor brochure that any community foundation can customize to hiring a public-relations firm to pitch stories about community foundation issues to national newspapers and magazines.

The council also has created an online locator for community foundations, and launched a series of email list-serves for community foundations

And the group has raised $3 million in a $5 million campaign to create a fund to support special projects ranging from research to marketing – including $250,000 for the national R&D incubator.

The council also is working closely with Community Foundations of America to build a “national marketing platform” that both groups and their members can use to drive their development of strategy, positioning, products and programs.

DEVELOPING PRODUCTS

CFA itself represents an enterprising, tech-driven approach to help community foundations boost their marketing, donor services and operations.

“Everybody is our partner and everybody is our competitor,” says Dearing, the group’s CEO, referring to the ways she believes community foundations will have to function to survive.

Initial products include a Web-based tech platform to handle back-office functions, a Web-site template that members can customize and a tool for conducting market research.

The back-office system features donor services, Internet reporting to donors and automated interfaces with banks and other custodians of donor assets.

CFA is piloting the system with the Greater Kansas City Community Foundation and the Luzerne Foundation in Pennsylvania, and plans to regularly make changes based on client feedback.

To help reach donors, CFA is creating a Web-based tool kit for lawyers, accountants and financial advisers that probably will include training on gift planning, materials to share with clients to introduce the concept of charitable giving, and other sales support.

Dearing, a former analyst for Morgan Stanley and co-founder of Investor Capital Services, a New York investment administration firm pulls no punches in promoting the Web-based tools that CFA is developing.

“Fear is great motivator,” she says. “No community foundation wants to be left behind.”

WORKING THE WEB

CFA is basing its Web-site template on the award-winning site of Greater Kansas
City Community Foundation, which is revamping the site to make it easier for donors and professional advisers to use.

The site, launched in 2000, was designed to give donors access to information about their accounts — including current balances, investments, transactions, and gift and grant history – as well as research and analysis on community programs and giving opportunities.

Now, the foundation aims to personalize information for donors based on their giving patterns and interests, much like Amazon.com customizes information for customers based on past purchases.

The new site, to be launched late this year, also will let donors make gifts and grant recommendations online, and will provide tools to help professional advisers create funds for clients.

CREATING CHOICES

While community foundations emphasize their local roots to differentiate themselves, some say they don’t compete with commercial gift funds.

“We recognize there are lots of ways people can give,” says Patti Glass, chief operating officer for the Greater Kansas City Foundation.

“We really believe that all charitable giving is good charitable giving,” she said. “Whatever we can do to ignite the passion of people to give is what we’re all about.”

Cynthia Egan, president of the Fidelity Charitable Gift Fund, agrees.

“There are different needs for different donors,” she says. “The challenge is to have the right kinds of programs that really make giving easy, that help stimulate and educate donors and that are generally working to connect donors with the causes that are important to them.”

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