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Endowments are Not Sacred and Donors Are Not Always Right – Insights from the MANP Executive Leadership Forum

by Molly O'Connell

DSC_0706MANP’s recent Executive Leadership Forum (ELF) featured provocative keynote speaker Alan Cantor, who is sparking conversation nationally with his critiques of the ways in which charitable giving is being “warehoused” rather than spent on current needs.

His “enlightening, thought-provoking, relevant, and funny” presentation prompted vigorous conversation about the best ways to create long-term impact, and the power dynamics that plague nonprofit-donor/grantor relationships.

Four themes emerged that serve as a call to action to the nonprofit and philanthropic communities.

1. Take a Step Back and Discuss Your Endowment Philosophy

Endowments are an important tool, and serve a critical purpose for many organizations as a safety net that ensures that mission can still be addressed during challenging times. However, Alan Cantor’s assertion that we have “endowment addiction” resonated deeply with ELF participants. Board members can feel their job is to “protect the endowment,” sometimes reducing the annual distribution rate or cutting staff during times of crisis rather than jeopardize the endowment’s balance. Nonprofits often point to the size of their endowment as an indicator of success or organizational health, rather than telling the story of their impact (see #4 below).

It is essential for boards to educate themselves about endowments, and have conversations about when it makes sense to start an endowment, appropriate uses for an endowment, and how to balance fundraising for an endowment with fundraising for current programming and services.

2. Prepare to Offer Creative Alternatives

If a donor walked into your office and offered you $100,000 to start an endowment (which would then pay out approximately $4,000 a year), what would you say? Would this provide transformational impact? Likely no, but many organizations treat major donors as customers who are always right.

Organizations are both legally and morally bound to comply with donor intent. However, a donor usually intends to make maximum impact; organizations must be prepared to articulate how major gifts can be put to effective use, rather than treating the donor-centric model as a mandate to defer to donors, when it is really a call to foster true partnerships. Wealth does not always equal wisdom or experience with the work of your mission. You bring that to the table. As nonprofit leaders, we honor the generosity of our donors by using their gifts to make the most difference to the communities we’re working to feed, educate, strengthen and inspire. Contribution to or creation of an endowment may be an appropriate choice, but it should not be a default.

Nonprofits need to be actively involved in promoting choices for major gifts that support an alternative narrative for the best way to make transformative impact.

  • Cantor presented the concept of Shapiro Tuesdays as a model to keep a museum open an extra day each week, and name that day in honor of the donor.
  • Participants shared models such as the Campership 100 program, which provides sponsorship to campers who learn about and recognize their sponsor, and examples of major gifts being used as seed money to pilot a program named after the donor.
  • Many in the group were energized by the idea of running “impact campaigns” to raise money for ambitious time-limited outcome goals without the legal restrictions that accompany endowments.

And, if a donor is intent on giving in a way that does not serve your mission, be prepared for that, too. If your organization does not have a gift acceptance policy, get one on the books.

3. Advocate for Investing in Staff as an Impact Strategy

Many donors and foundations are not willing to fund staff positions, yet in the vast majority of nonprofits, paid staff are critical to getting things done. Organizations that cannot attract and retain talented staff are hamstrung, no matter how much funding is available for toolkits, scholarships, case studies, and community roundtables. (For an inspiring, insightful and funny perspective on this topic, be sure to read Vu Le’s Capacity Building 9.0: Fund People to Do Stuff and Get Out of the Way.)

Nonprofit leaders can join a nationwide movement to “own our costs” and we all must engage individual donors, foundations, board members and staff in these important conversations about when and how staff are critical to impact.

4. Improve Your Storytelling

All too often, we struggle to tell the stories of why our work matters. As was noted by many ELF participants, we hesitate to spend precious money from tight budgets on developing the skills, data and tools that will help us communicate about how we’re making long-term impact, and conversely, what the long-term risks are of not acting now. We need to be storytellers, investing in training and materials that bring to life for donors and other stakeholders the end goals of our day-to-day work.

Building a storytelling culture is such a critical strategy for effective advocacy and donor engagement that we’ll be revisiting this theme at our fall Executive Leadership Forum. Stay tuned for the date and speaker for this event, and we hope to see you there!

 

Through our Executive Leadership Forum series MANP brings leaders together to learn about and discuss critical issues facing the sector, so that together we can develop creative approaches that maximize impact. 

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