Nonprofits tackle tough financial realities

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In Colorado Springs’ first Truth Salon, nonprofit professionals talked over fundraising struggles, started tough conversations  — and shared some “aha” moments.

The Truth Salon was a brand new roundtable-style breakout session at the Center for Nonprofit Excellence’s annual Nonprofit Day Conference, held at The Antlers hotel March 9.

“As professionals in this space know, there are lots of things we’re not always talking about when it comes to talent and fundraising and finance,” said Jessica Gemm, director of talent at fundraising consulting and campaign management firm The Suddes Group. “That’s how this session was born.”

Third Sector Group Principal Kimberley Sherwood and Katie Willemarck, associate director of accounting for the U.S. Olympic Committee, joined Gemm to lead the panel discussion.

“We want to get comfortable with telling the truth about talent and money in a perceived resource-scarce environment,” Sherwood said. “We want to explore some questions that we might be afraid to ask about development and financial management. Then we want to connect the collective expertise in this room … because I can’t even imagine the centuries of experience we have here, together, to learn from one another.”

For nonprofits, talent development, financial management and fundraising “connect like a Venn diagram,” Sherwood noted, and need to be discussed together.

Gemm focused on challenges in fundraising talent development, most notably the high churn rate. For many reasons — few of them positive — development directors don’t stay put for long.

At nonprofit organizations with budgets under $5 million, more than half of all development directors are planning to leave within the next two years, Gemm said.

“That’s obviously a huge impact, especially for smaller organizations where people are wearing multiple hats, and it’s a big hole when somebody leaves,” she said.

“And when somebody leaves your small organization … how long does it take you to find the right person to fill that role? If you’re an under-$1 million [budget] organization, the data says it’s going to take you almost two years to find that person,” she said. “This is one of the things that gives people nightmares and keeps them up at night.”

One reason behind the churn is that many nonprofits fail to clearly define roles and priorities for development directors.

“Especially in smaller organizations, we expect the development director to be the grant writer, to do 12 events, to go out and meet with donors — and guess what, if you’re pulled in all those directions you’re not going to do any of them very well,” Gemm said. “As organizations we have trouble making decisions about what’s most important, and that’s how people get burned out.”

The second problem: support, or lack of it.

“It’s either having the executive director and the board meddling and holding on to all of the relationships and not letting the development director do their job, or it’s saying, ‘You’ve got it, run with it!’ and not supporting them at all…” she said.

The third problem: Development officers aren’t given “enough runway” to get results.

“If you haven’t raised money in six months you’re out of there … and that’s not enough time for anyone to build reasonable relationships,” Gemm said. “This is not a transactional business, in fundraising — this is a relationship business, and if we keep getting into this cycle of people moving on so quickly, you don’t have any time to build those relationships.”

So development directors need clarity, support and time to do their jobs effectively — and nonprofits suffer if they don’t get it right.

“Having people leave every couple of years, having a position unfilled for two years — you lose money, you lose momentum with any relationships you had been building, and you impact the morale of the organization,” Gemm said, “because then everyone starts freaking out about making payroll.

“All these problems are based in this mindset of scarcity: that we don’t have enough time; we don’t have enough clarity; we don’t have enough people; there’s nobody we can recruit who’s in this community,” she added. “And that’s just not true.”

Sherwood addressed the myth of “too many capital campaigns,” pointing out that the number of campaigns has remained static over the past 17 years — and that they actually work.

“You know there’s nothing faster than asking individuals for money. … Capital campaigns are really powerful ways, if they’re done well, to ratchet up your fundraising performance,” she said. “That kind of directed, focused strategic fundraising really does work. And it works in Colorado Springs and El Paso County. We are actually more generous in El Paso County than any other similarly sized county and our giving per capita outpaces Denver.”

People are ready to give, she said, but nonprofits are failing to ask.

“We have a tendency to over-ask a small set of donors — you probably know who that short list is,” she said. “But in the steady work we’ve done, we’ve found there are many, many, many — like thousands — of people who can give $500, $1,000 … and we’re just not asking enough.”

Willemarck took a deep dive into the financial management side of nonprofits, emphasizing the importance of facing the true, “fully loaded” costs of fundraising events, as well as the need for planned surpluses and building up cash reserves.

She also encouraged nonprofits not to fixate on the idea that “73 cents of every dollar needs to go to the mission,” but to communicate better with donors about why costs are going down or overheads are increasing.

“It’s a shift to say ‘Yes, we spent more money on fundraising because we need to grow,’” Willemarck said. “Especially people who come from the business sector [know] it costs money to make money — so why in the nonprofit sector have we been hiding from that?”

Another tough conversation that nonprofits are avoiding is about the uncertainties surrounding changes to tax law, Gemm said.

“I don’t know how many of you are speaking to your boards and educating them about the tax law but people told us they were absolutely avoiding it [because] that’s a political issue,” she said. “…Our perspective at CNE … is if we’re not engaging in these difficult conversations with donors, with our board members, there’s no way we can have a thriving sector.

“That is concerning to me, to not be talking to board members about what the implications are, for fear that someone will feel that it’s a [partisan] conversation — that self-censorship is really problematic,” she added. “It’s important that we actually are engaging people in deep conversations about the things that they’re committed to, in partnership with us.”

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