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Donor focus seen as key in recession

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Todd Cohen

After raising $2.4 billion in a campaign that ended in December 2007, the University of North Carolina at Chapel Hill began preliminary planning for a new campaign to raise $3.5 billion to $4 billion.

But hit by the economic recession, the university has put those plans on hold.

In the meantime, after receiving $271 million in cash in 2009, an eight percent drop from a record-breaking year in 2008, the school is focusing on fundraising basics, says Matt Kupec, vice chancellor for university advancement.

“We’re still not in a campaign but we need to stay in a campaign mode,” he says.

The recession has had a chastening effect on nonprofits, which are working to strengthen the fundamentals of their annual-fund and capital-campaign fundraising programs, retool their fundraising strategies and stay connected with donors, experts say.

“The recession has stimulated fundraisers to have to be more creative, more personal, more deliberate,” says consultant Karla Williams of the Williams Group in Charlotte, N.C. “Just as the donor has become more discerning, the development officer has become more discerning.”

Lou Nanni, vice president for university relations at the University of Notre Dame, says the recession has provided an opportunity for fundraising programs to regroup and rethink their strategies.

A down market, he says, “is a time you can be rigorously introspective and working out a strategic process that will position you well for the future.”

Taking stock

Nanni says Notre Dame responded to signs a recession was coming by focusing on how to improve its fundraising.

“We said, ‘This is a time for us to be rigorously introspective and look to see what we can do to fine-tune our organization and make ourselves more efficient,'” he says.

The school, which has raised $1.67 billion with a year-and-half left in a seven-year effort to raise $1.5 billion, has hired consulting firm Grenzebach Glier & Associates, involved its entire advancement team and broad range of constituencies in the planning process, and visited other schools.

The effort has resulted in a new strategy the school will roll out this spring that affects its entire fundraising program and support systems, including annual fund, principal giving, major gifts and gift planning.

While details of the new strategy are not yet available, Nanni says “execution and implementing plans” lie at the heart of effective annual-fund programs.

“Across the board, beginning with annual giving, we need to do a better job in stewardship and engagement,” he says.

Notre Dame, for example, has done a good job recognizing levels of giving but not recognizing consecutive years of giving, regardless of how much a giver gave, Nanni says.

Donors who are recognized for giving in consecutive years “will continue giving, even during downturns,” he says. “That’s a form of stewardship that we have not formerly engaged in.”

Another key challenge for all nonprofits, he says, is how to find fulfilling roles for individuals who want to get involved.

“Whether you’re a homeless center or the advancement program of a major university, it takes a very carefully thought-out program to be able to respond to that question,” says Nanni, who ran a large homeless center in nearby South Bend before heading the university’s development program.

“The future of philanthropy is going to be directly related to how well we engage the time and talent of our constituencies,” he says.

For some organizations, he says, that may involve a “much more comprehensive online engagement,” beginning with annual giving.

Organizations also need to be more flexible in planning capital campaigns, he says.

Capital campaigns at colleges and universities, for example, typically last seven years, yet leaders of those institutions may leave before the campaigns end, and their successors may have different priorities, he says.

“How do we build in enough flexibility,” he says, “to change priorities as they evolve.”

Nanni says that while it performs well in many areas of fundraising, including an alumni giving rate of 74 percent for its last campaign that ended in 2000, Notre Dame has tried to focus on areas in which it could do better, such as large gifts.

From 1994 to 2000, the period of that campaign, for example, Notre Dame received only five gifts of $10 million or more.

To generate more of those big gifts, the school created a principal gift office to focus on the highest-end donors; asked its gift-planning office to get out in the field and work more closely with prospective donors; developed new products after obtaining a private-letter ruling from the IRS that permits Notre Dame to invest charitable-remainder trusts in its endowment; and expanded its office that works with foundations.

In the first five years of the current campaign, Notre Dame has received 28 gifts of $10 million or more.

Focusing on givers

Williams says “best practice” in development programs is “very donor-focused” and “holistic.”

Organizations that have fared well in their recession fundraising take an approach to philanthropy and giving that is “based on a transaction between the donor and recipient,” she says.

“Best practice is a holistic program that asks and invites the entire community to get behind an organization to do the work they were designed to do,” she says, and focuses “on the donor rather than on the money.”

The recession has prompted organizations to extend their deadlines for capital campaigns and to be more open about their campaign strategy with a broader range of constituents, Williams says.

“At times like this,” she says, “everything comes out on the table.”

The recession also has laid bare the fleeting value of feasibility studies, she says.

“You can do a feasibility study to determine what you think you can raise in the campaign, but the day you finish the study, it is obsolete because what somebody said yesterday is not necessarily going to hold in three months when you get into a campaign,” she says. “Feasibility studies are only as good as the day they are done. They do not, cannot, absolutely predict the future.”

Instead, nonprofits can “create feasibility as you go,” she says. “Rather than assessing feasibility, you create feasibility.”

The future of campaigns, she says, will consist of “continuing engagement,” replacing the “feasibility study and the regimented mathematical drill where we send volunteers out to do the ask.”

Williams says the recession also may help nonprofits wake up to the underappreciated value of annual giving.

“We still have in our industry this sort of lack of regard for how critically important it is for donor retention and donor acquisition,” she says. “Annual giving typically is the very first place a donor enters into an organization’s database and becomes connected.”

How an organization treats a first-time donor is key to engaging the donor for the long-term and represents a kind of test by the donor of the organization, signaling to the organization that the donor is interested in it and wants to know if it is interested in the donor, Williams says.

“The first-time gift in the annual fund is the most important gift a donor makes to an organization and the most important gift an organization receives,” she says.

The recession, she says, has led nonprofits to take a more personalized approach to “secure first-time gifts that have more meaning both to the donor and to the organization.”

Keeping it real

Paul Fulton, a member of the board of governors for the University of North Carolina System who also serves on local nonprofit boards in the Winston-Salem area, says many nonprofits are considering deferring capital campaigns “and trying to put more emphasis on annual” fundraising.

Fulton says he has become much less aggressive in approaching potential donors.

“You need to bide your time,” says Fulton, former president of Sara Lee Corp. and former dean of the Kenan-Flagler Business School at UNC-Chapel Hill.

“People are more reluctant to give and share their wealth because they’ve got less of it,” he says. “You’ve got to demonstrate some sensitivity to donors today that you understand things are different.”

Kupec  at UNC-Chapel Hill says the recession has prompted the school to focus on fundraising fundamentals and take advantage of new technologies such as email, Facebook and text-messaging.

“You’ve got to continue to invest in the development operation,” he says. “Don’t retrench.”

Fundraisers at UNC, for example, are focusing on their level of activity with donors.

“Let’s make sure we’re all out there, engaging in meaningful conversation,” Kupec says. “You don’t want to get gun-shy, even in these tough times.”

And talking to donors and prospects means talking straight about the economy, he says.

“We don’t hide from it; we acknowledge it,” he says.

The recession has prompted more donors who might have made endowment gifts to make “expendable” gifts instead, agreeing to make annual payments equivalent to the annual income an endowment gift would have generated, Kupec says.

“The idea is that when the world does get better, and we do a good job of stewarding, it’s our hope the donor will eventually endow that scholarship in perpetuity,” he says.

“You don’t want to be in the doom and gloom,” he says. “You look for opportunities where a donor can make a gift that would have some impact right now on the campus.”

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