Fiscal Policies in the Age of Coronavirus: How Do You Like Me Now?

Welcome to Week 13 of Annual Giving in One Hour a Week. I chose this image it because we are technically in spring, which makes us expect warm sunshine, blooming flowers, and maybe baby bunnies, but with world events right now, our collective mood is more like this bleak, gothic scene of fog and bare trees. The rainy day we’re all supposed to save for is here, and I encourage you to use your One Hour this week to review …

… drum roll, please …

Fiscal Policies! Ba-dum-shh!

I have a bunch or war stories on how NOT to handle fiscal policy creation and enforcement, and I hope one day we can get drinks and talk about it in person. Until then, while this isn’t technically Annual Giving, your policies do affect your current fundraising, especially during this somber and uncertain time. At the very least, solid fiscal policy will protect you from having to do emergency fundraising when things aren’t as bad as they are now. People want to give for your mission work, not because you’re going to close your doors at month-end if you don’t get a bunch of cash. Hear me out.

Why do I want you to dig into something so boooooring when everything is terrible and chaotic?

Now is the perfect time. If your organization’s policies haven’t been built to protect your mission, or they have but they aren’t enforced, you are in serious risk. On Saturday I read a sad story in the news: MacMurray College, a 174-year-old higher education institution in downstate Illinois, is closing for good in May. Already teetering on the financial brink, it was pushed over the cliff by the impact of COVID-19 on the economy. It’s small – about 500 students – but about 60 faculty just lost their jobs, plus all the administrative and operational staff needed to maintain a working campus. Consider the economic impact that has in a county seat with fewer than 20,000 residents.

Maybe it was the invisible hand of the free market and inevitable, but I want you to consider that maybe everyone in leadership there was just so nice, and filled with hope, and conflict-averse, that they avoided the hard choice to pump the brakes a while ago, and instead threw every scrap of furniture they had into the furnace to keep the fire burning, and now it’s gone and the fire’s out.

We will see others follow, and it will be heartbreaking. Act now to check and enforce those dull and boring financial policies that will protect your nonprofit! Stand up to Board bullies who personally have plenty of money and so the reality of you laying off staff isn’t real to them. They seem well-meaning. They aren’t — they’re looking for short-term gratification. You may hear this pushback from Board members or major donors: “I’m not contributing (or soliciting) money to have it sit in the bank. I want it to HELP people!”

Of course donors want to see impact – that’s where they get their emotional payoff for giving. People who truly want you to succeed will want to know that you’ll be able to keep doing the good you do, well into the future. Close your doors because a cure is found … close your doors because there’s a systemic solution to the safety-net gap you‘re filling … don’t close your doors because you let someone talk you out of having insurance, which is what cash on hand gives you.

So, policy #1 to make sure that you have, and are enforcing: Reserve Fund Requirements. If you have three months of cash on hand, boost the policy to six months and build a savings plan into your operating budget so you get there. If you have six months on hand, congratulations, that’s pretty great, but still, build it to nine; keep increasing until you have enough on hand to pay your people and your vendors for a year. Secure sound professional advice, because you may even be able to put some of that money to work for you, making money with limited risk. Good donors who care about the cause you serve will want you to safeguard your ability to continue.

Where does this money sit on your books? Consult an accountant for advice; my suggestion is a Temporarily Restricted Fund, not an endowment that locks up principal. Treat that TRF as if it were an endowment, but have it accessible when you have a cash flow gap.

If you give grants, the other policy to check now is your Spending Policy. Foundations typically follow a giving guideline like a fixed percentage of assets with the amount commemorated on a certain day of the year, or if there are enough assets that they are invested, the spending policy may be a portion of the average ROI for a number of completed quarters. Those formulas work well when there is not a lot of market fluctuation, but this year could be different, especially for organizations ending their fiscal years soon. Work out what makes sense for your organization; this market puts us in a real-life worst-case scenario, so make sure that you aren’t risking your future. for example, a grantmaking foundation that commemorated $1MM of assets on 12/31/2019 may now be committed to granting 5% of that amount, but to do so they are liquidating assets that have lost half their value, forcing them to cut into principal. Limit your exposure.

Lastly, cash on hand also serves as collateral during good times, which may allow you to use a Line of Credit to seize growth opportunities without spending down your savings.

As we close out the first quarter of 2020 and make our best guesses day by day about what to do, now is the time to make the case to your leadership that solid fiscal policies aren’t boring — they are mission insurance.

Is Your Donor Management System Working for You?

Welcome to Week 12 during this strange and surreal time. I couldn’t identify an inspiring image to go along with Donor Management Systems so here is a cool lowrider I admired at a community event in San Diego two years ago. As I post this, my weather is cold and rainy so it’s nice to think about sunshine and sparkle to start the week.

So, although everything is super weird right now, we have to keep our organizations going forward anyway. Whether your life is not too different day to day or it is completely turned upside down and inside out, try to see your way clear to setting aside an hour to stop and think about how you are storing and using your contact and gift history information.

Where do you keep your list? In my first Development job (1982) everything was still on paper! A shoebox with index cards is still good if you don’t have too many records, but you probably have some kind of digital system so that’s our subject for this week. For the first 10 years of my career I had primary departmental responsibility for the fundraising database so this is a subject close to my heart; I’ve led three database conversions at different nonprofits, and as I write this, I’m starting on my fourth.

Basic Database Types: Linear and Relational

Are you using a relational database now? If so, jump ahead to Coding Review. If you don’t, or aren’t sure about that term, dig in here.

When we start a database, it’s often linear, either donor-based or transaction-based, not relational. That means there is a single cluster or line of data for each donor, or a chronological list of gift entries. You could be working with a printed name and address list with gift history and notes jotted on it, an accounting program like QuickBooks, or a spreadsheet with each entity’s contact and gift information a single line.

Once there’s more than one transaction per year for a donor, calendar-based entries and spreadsheets get unwieldy. Some organizations start fresh each year, losing continuity, and risking inaccurate entries, not to mention duplicating a lot of work. In this model, giving history is stored in annual silos, with no efficient way to see from year to year who your most loyal donors are, what’s causing your increases or decreases, or catching lapsed donors before they’re gone too long to renew.

Relational databases are structured as interconnected hubs of information around each donor/prospect. They assign a unique ID to each constituent, divide record types between Individual and Organization templates, and allow you to:

• Track multiple contact records (e.g. work and home addresses, phones, emails)
• Enter all gifts and pledges on a donor’s record (see complete history at a glance, plus current pledged/paid status)
• Link constituents to other records in the database (employee to employer, individual to family members, donor to the people who are managing the relationship)
• Tag records with a Constituency Code representing the strongest connection to your organization; often you can designate a Primary Constituency such as Board Member and have several others that are also relevant, such as Alumni, Former Staff, Parent, etc.

Once you can see individual and group trends over time, you can create informed fundraising strategies based on your donors’ behavior.

If you’re working with a linear database, I guarantee you that you are missing opportunties that come from a deeper understanding of your donors’ behavior. Missing those opportunities limits your organization’s ability to grow and be its best. There are plenty of accessible, cloud-based systems available now with affordable monthly rates. This is a suitable project for one or two knowledgeable volunteers; talking to peers and searching fundraiser listserv threads are good ways to find real-life reviews and recommendations. When selecting a system, look for responsive support, clear pricing, and ease of use.

Coding Review: Dealing with Workarounds

With any database, it is wise to periodically review how you’re coding constituent and gift records, especially if your organization is growing or evolving. If your database is up and running, use your One Hour this week to pause and think about whether anyone has to use multi-step workarounds to extract desired data. It’s easy to make a habit of downloading database contents into a spreadsheet and manipulating it to get what we want. I am certainly guilty of doing that! When the database is cumbersome and you’re under time pressure, it always seems like a timesaver in the moment to refine and reorder extracted data instead of fixing the system contents, but over time the inefficiency adds up. You deserve a database that’s clean and responsive to your requests. Make notes of any workarounds you or your team might be using, and put that on your next administrative agenda. Pull together the users of your system, and if that’s just you, either get targeted consulting help from your software vendor or find someone in your circle (Board, parent, vendor) who works with a donor or CRM (Client Relationship Management) system at their own organizations. Use the perspective of at least one more person to work with you to identify and implement a solution to improve coding.

Using your One Hour for data this week will set you on a path to growth. If you have found a great database that you’d recommend to others, or a wonderful professional who could help others, please share that in the comments as a kindness to your colleagues on the same journey!

Fundraising Events in the Season of

COVID-19 Containment: Four Options

As a resident of the first county in Pennsylvania to experience widespread closures, I have been thinking a lot about my colleagues who have critical fundraising events this spring. We are experiencing an extraordinary, rapidly developing, and frankly a frightening situation; theory is all well and good until we have to make timely, real-world decisions using knowledge that may change dramatically in a matter of days or even hours.

So, for Week 11, I want to address professional and volunteer leaders who are facing tough decisions about your spring events, and present some options for you and your fellow stakeholders to consider. If you’re in this predicament, the first thing I’d encourage you to do is to pull out all contracts you have with your host venue and other vendors, and read the cancellation terms. Put a dollar figure on the sunk costs of cancelling today, and find the next date when the price goes up again. This gives you a time frame for cost-conscious decisionmaking.

What’s the #1 consideration above all others? People’s well-being. Here’s my personal experience. For many years I’ve been involved with a two-day, outdoor sporting event with thousands of competitors and tens of thousands of spectators. Certain weather conditions prohibit competition, and the organizing committee has faced some challenging decisions. My takeaway is that you can’t go wrong putting people’s safety first. It’s a bitter pill to swallow for coaches and teams to lose their chance at advancing toward or clinching a championship, but it’s better for the organizers to hear complaints about being overly conservative than for anyone to be harmed by a negligent decision. There are a lot of heartbroken coaches in my circle but not one is questioning whether spring sports should continue.

It is clear that social distancing is the best route to limiting COVID-19 transmission; therefore, if you have any event which brings people into close proximity, you are on solid ground to say that you will not hold the event while movement restrictions are in place.

What can you do instead?

I expect that the brilliant minds in the nonprofit and public relations/event planning world will create some inventive solutions that are new to us now, and will open up options we hadn’t considered before. In the meantime, your options include four basic approaches:

1. Cancel the event outright, and immediately look ahead to next year. Write as promptly and personally as you can to your supporters (significant sponsors and donors should receive telephone calls and follow-up emails from the CEO or Board President), say that the mission is as important as ever, you are deeply grateful for their support, and you hope that they will join you next year. This is no time for a mass email! Enlist volunteers and staff to make this a warm connection.

If you can connect with your venue and secure a date –with a “rights of first refusal” agreement before you put a contract in place – use your one-on-one outreach to include a Save the Date message. If you have a well-loved event, it’s helpful to keep it at the same time each year as part of its identity.

Discuss with your stakeholders whether to offer refunds or credit toward the next year’s event. It may be worth returning gifts just to maintain good will. And the donors who are close to you will not all ask for refunds. If many people ask for their money back, that’s a lesson in itself: in my opinion, you are running such a fantastic event that people attend for the experience, and they are not connected with your charitable mission. That may be tough to accept but it is an important lesson about how you have been messaging around your mission.

2. Postpone your event a few months. This likely means moving to a less desirable day of the week, because the fall gala season will likely mean the most sought-after venues are tightly booked already, and your donors will have more demands on their time as rescheduled events land on the calendar next to longstanding events in the same season. This could change the feel of your event and give you some food for thought.

Be sure to consider fall holidays before signing an agreement, and keep in mind that if  you’re counting on closing sponsorship and gift agreements for a late summer or early September date, you will be mightily challenged by decisionmakers’ vacation absences from the start of college semesters through Labor Day week.

The other factor to consider is that if you continue fundraising for an additional six months or so, you may be challenged to renew the new donors you pick up when you return to your usual spring date. You could end up with your event happening annually at the new time of year.

3. Turn your event virtual. Can you come close to replicating the event? Is there a significant educational component and/or an inspiring speaker that you could put online with a realtime event, including audience interactions? Would you shift your auction to an online platform? If you are absorbing significant sunk costs due to canceling a live event, the cost of going virtual may not be a possibility.

4. Cancel the event, emphasize personal outreach, and in a few weeks when the world isn’t changing so rapidly each day, evaluate the true costs of the event before committing to it for next year. By true costs, I mean three things: the hard costs (food and beverage, rentals); soft costs (how much time does staff use to execute the event? Calculate what your organization is spending on both salary and benefits); and opportunity costs. If you are deploying volunteers to write notes, solicit auction items, or staff the event, and if you are receiving goods or services pro bono, that’s significant. What else could you do with the time and influence those people are using for the event? What else could you do with those goods and services? The disruption we are all experiencing puts things like this in perspective for many, which may open a door for you to make a change that, when life was going smoothly, could have caused you a lot of headaches and ill will.

For everyone facing these hard choices, I am wishing you wisdom and strength in reaching stakeholder consensus around your path forward. Stay safe and healthy, wash your hands, and if you still have a primary in your state, consider registering to vote by mail. I just did.

My Favorite Database Cleanup Hacks

Welcome to March and Week 9! For your hour this week, I invite you to meditate and daydream. This exercise is written as a solitary activity, but you could absolutely bring one or two people into the circle and do it as a group. Once you have completed the prospect identification exercise from Week 7, you will see which groups of people are connected and interacting with your organization. Grab your results and whatever tools you like to use for recording non-linear thoughts, and change your surroundings in order to refresh your perspective – literally, being in a different space than behind your desk can support your imagination.