Give While You Live & Give Without Strings
Non-profits Are Not Businesses, Part II: Program vs Operating Costs
Give While You Live and Give Without Strings
In part I, I said that:
The non-profit sector has done a spectacularly lousy job of explaining what it does and how it does it, and has spent fifty years convincing the American public that “administrative expenses” are bad and that “program costs” are good and now complains about how hard it is to get unrestricted funds.
Let me elaborate on this point, because I do think it is “chicken and egg question” – which came first, did the donors request to know the percentage of administrative costs, or did the non-profit in an attempt to compete for funds, say “Our administrative costs are lower than the other guy’s.” What a dumb thing to say. Only in the non-profit world do we push the “how” of a service or good as the means of convincing donors or grant-making organizations to fund us.
Think about it for a minute, when you go to get your car repaired, you presumably go through these steps:
1. You take it to a garage or dealer that you either have direct experience with, or was recommended by a friend, or you looked it up on the web.
2. You describe the problem with the car (your need).
3. Their mechanic diagnoses it, and calls you back with the recommended solution and estimated cost.
At this point you make your decision, and there are only 3 possible choices:
1. You have them fix it.
2. You decide their price is too high and you might be able to get it fixed somewhere else cheaper.
3. You decide that the problem is not as critical as you thought and you can live with it for some amount of time, whether the ultimate solution is to get a new car, or to have it fixed later.
Notice, nowhere in this decision process did you ask these questions:
1. How much are you paying your mechanics?
(I only want the cheapest mechanics possible to work on my car.)
2. What brand of tools and diagnostic equipment are you using?
(I don’t want to pay for the use of modern tools and computer equipment, my grandfather was a mechanic and he didn’t need any new-fangled gear to fix cars).
You can substitute almost any service or good you want and you can have a similar sequence: Dentist – I only want the old drills used (you know the slow, loud, painful ones from your childhood). Coffee server: What brand of coffee roaster/maker are you using, I’m only going to pay for one that’s cheap.
What the non-profit sector does not do well, is to make the case as the difference between “What & Why” versus “How.” “What & Why” should matter a lot to the potential donor, that is why you are talking to them, and why they are considering giving you some of their money. Your mission resonates with them in some way, whether because they or a family member or someone they know has had direct experience with your organization, or they just have heard about you and care about what your organization does.
The things that truly matter to donors are “What does your organization do?” and “Why do you do it?” If you answer those two questions, and you can certainly say, “Ten dollars a month helps us do ________ for the _________ in our community, or overseas, or in ________ this part of the country.
In a rush to compete against other non-profits, many non-profits then also answer the “How question” – even if it hasn’t been asked. What’s said is “We keep our overhead costs low so more of your money goes to program.”
What’s not said is this, even if it is true:
“Keeping our “overhead low” means that we pay our staff a barely living wage, and have 30% turnover because as soon as someone has any outside needs (home, family, etc.) they can’t afford to stay here.” The fact that 30% turnover keeps the program from ever being as successful as it might be, is never mentioned.
In the 21st century, the distinction between “overhead” and “program” costs is meaningless. Ask the potential donor or funder if they use the telephone, e-mail and the computer in order to do their job, and if they work in an office do they sit on a chair and work at a desk, because given the emphasis on “low overhead” all those things are bad. Then ask them to keep track for 3 days of how they spend their time: are they using the phone and computer for personal, work, or civic functions, and that they need to submit the detailed timesheet with this to their supervisor.
The fact that in our modern society we still use accounting methods that were developed 7000 years ago to count crops and cattle is a subject for a different article, but it’s worth mentioning. All marketing experts will tell you that your customers (donors) can be educated as to what’s important and why they should choose you and your product or service. Just because it’s for a non-profit and the direct benefit to the donor is harder to describe, it doesn’t mean that it’s not real.
The non-profit sector although it likes to although it likes to talk about the importance of collaboration, is often very close minded when it comes to fundraising. It views the world has having a “money pie” of a set size (charitable giving) and competes mainly against other non-profits for a slice of that pie. My experience is that it is possible to “grow the pie” by working in colloboration with other non-profits, and that the real competition for the donor’s dollar is not between two different non-profits, but it’s competing for attention among other discretionary spending, including sports, cable TV, $4 coffees, $200 shirts, toys, etc.
A lot of the problems that the sector faces, and believe me, I know that this is a particularly tough economic time, would be helped if this attitude and direction were encouraged: “Give While You Live and Give Without Strings.” If you don’t trust our organization to do what we’ve been doing, and have been successful at, that’s fine – choose some other organization, but if our mission does resonate with you, don’t hamstring us, we appreciate your unrestricted gift and you are making a difference by helping us meet our mission.
P.S. I have just about finished updating my CFC Special report for 2010, please go to cfcfundraising and request it, it will be sent soon.
Thanks very much!