Six Degrees of Kevin Bacon
If you watched the opening ceremonies of the Winter Olympics, you saw a credit card commercial starring Kevin Bacon, in which he intoduced a half dozen folks, each of whom represented a link in a chain of relationships between himself and some character of trustworthiness. (I didn't catch the whole thing. Torrents was pouring himself a scotch.) Dig around in the archives of NonProphet and you'll find an important reference to the Six Degrees of Separation, the brainchild of one Stanley Milgram, psychologist, who coinded the idea that we are only an average of five or six relationship links away from anyone on Earth we would like to meet.
The Six Degrees Hypothesis is a key principle for fundraisers. We have board members, whose personal relationships we mine for contributions. A game popular among college students and Hollywood types a few years ago was known as "Six Degrees of Kevin Bacon," the object of which was to name connections between Bacon and other actors to connect the guy to anyone else in Hollywood by the people involved in his many movies. Torrents STRONGLY recommends this game to his readers who are trying to fire up their board members to make fundraising contacts on their behalves.
Friday, February 08, 2002
Six Degrees of Kevin Bacon
Community Foundation Bonanza/Baloney
There's good reason to nurse a healthy suspicion of community foundations, that is, if you happen to be a nonprofit organization. Torrents wonders, "What happens if your organization tanks and you need your money?"
According to a trustee of the Oklahoma City Community Foundation, "That's too bad... There's no way you'll get that money back... it belongs to the community foundation."
To which Torrents says, "Baloney."
There are plenty of legal instruments available to nonprofit organizations who entrust their endowments to community foundations that can help them reclaim their funds if financial crises strike. The important thing is to lock these in before they turn over the store to the CF. But, even if you didn't, there are some weapons at your diposal.
The best way to secure your future financing from surrendered funds is obvious when you think about it. As long as you don't actually expect to need the corpus (the principal funds) back, just have your donors contribute directly to the CF and designate their earnings 100% for you. (If you haven't figured this out already, you don't have any business running any kind of business, Doofuss!) That way, you've effectively set up an operating foundation, but you'll probably save many of the costs associated with conventional approaches. Your CF also probably offers you a way to surrender your collected endowment funds that allows you to designate your organization as sole recipient of the earnings. (If not, bitch like hell and see a mean ass lawyer before you surrender.) And never forget: your wealthy supporters are your best weapons against a CF. The CF wants their money REAL bad, and if they piss them off, they just may not get it.
That brings us to the next-best way to get your money back out of a CF if you really need it in a crisis. Blackmail. If you've got a wealthy patron who has not yet rolled over for the CF, get him to contact the following people: the fund manager, the director of the foundation, the chairman of the board of trustees, and the president of the board (if they have one). He should say the following: "If you still want my Eleventeen Million Dollars, you'll annuitize the XYZ Organization's endowment out to XYZ Organization in the following annual payments: Payment One: 100% of XYZ Organization's corpus." Power is sweet.
What if you have no such power? Then, bubba, you need the CF worse than you think. Dump every dime you can get your hands on into the CF and let professional money managers make it grow for you. Without the clout of megadonors, it's your best shot. Chances are, yes, you'll run into a financial crisis. But the best thing for you (and your community) in that eventuality is to have your corpus in the hands of somebody that isn't itching to spend it. Your endowment donors never wanted you to blow their cash on last ditch efforts to keep a weak business plan going, so let it slide, brother, let it slide.
Then again, if you do have megadonors in your corner (and alive), you have little to fear. That is, unless they have been stupid enough to turn over their whole estates to the CF. This brings Torrents to his last and very best suggestion: Ask your megadonors to turn over only part of the farm to the CF on your behalf. Then the CF director must deal with the unpleasant thought that if he pisses you off, he's pissing the donor off, too, and that he'll lose out on the big bonanza when Mrs. Megadonor kicks. That's real power.
What it comes down to is this: community foundations are a fantastic boon to your NPO, as long as you manage the whole thing strategically. You'll save on endowment administration costs, which can add up to millions over a decade or two, with growth. On the other hand, if you plan on messing up your finances and having a crisis, by all means, keep your money under the mattress. And go back to your day job.
Fundraisers: Cover Your Butt
A simple extra step when logging gifts will help prevent audit problems--at least it will help you personally stay out of any flack.
When you log the donor's check in your gifts database, be sure to indicate a "fund" to which the gift is to be applied. This is also known as a "designation." If the donor tells you what she wants you to spend her money on, make sure you indicate that fund on the gift record. Then, at least once a month, print a report of your giving and circulate it to the executive director and finance manager. Make sure the report includes the fund designation for every gift.
For donors who do not designate, enter "unrestricted" in the fund field. But be sure that the donor's check is not a response to a letter or other appeal you sent that said you'd apply that gift to something in particular. If you told the donor that their gift would go to education, be sure to enter an "education" fund in the gift record. If you tend to make such promises in your letters, code the reply envelope somehow so you'll know what you promised when you receive the donor's check in that envelope.
Tuesday, February 05, 2002
What’s Your Pulse?
Your executive director and finance manager know your organization’s bank balance, and they are keeping track of budget projections month to month. But are your programs on target? Are you serving as many clients as you projected? Are you doing the kinds of services you promised funders you would provide? Are client demographics hitting your goals?
If you don’t know, then probably nobody else knows either. And, if nobody can tell you within, let’s say 60 seconds, when you ask, it probably means that your organization isn’t keeping up with accountability technology.
AT is the Next Big Thing for nonprofit organizations. It’s been around for years in large institutions, but for smaller community nonprofits, this modern oracle is just now coming onscreen.
The advantages are obvious. First, if not foremost, is that funders need to know that management is on top of things. Better still, they want you to be able to file timely reports on the status of program effectiveness. Gone are the days when the ABC Foundation will drop $200,000 on a program that they won’t gets stats on until the end of the funding period. These guys want quarterly, even monthly, updates on how well their money has been working. Remember, they are reviewing applications from many other organizations every month or quarter, and they’d like to know which ideas work, and which ones they should set aside. If your organization can give frequent reports to funders, they’ll know you’re on top of things, and they’ll love the fact that you are providing important information they can use to make new decisions.
The other advantage, obviously the most important one, is that with instantaneous effectiveness information, program managers and administration can better steer resources to meet goals. If a new program isn’t meeting the needs of a target client population, finding out six months down the road is too late.
Imagine one of those heartbeat charts you see in the hospital. Every heartbeat is shown on the screen, and if the patient misses a couple beats, an alarm sounds. Somebody runs in and does whatever is necessary to get that heartbeat online again. The same idea works for programs. If you have the technology to track client information and services, program by program, other technology—accountability technology—can sound an alarm when things aren’t right.
Now, I know that case managers and other professional staff are likely to sound an alarm (bitch?) when certain things aren’t happening. But what if program managers and administration could set up software to keep tabs on what they want to know? These folks are more likely to be in sync with funders, especially when development staff do their job properly and tell them what funders expect. This is where computers really excel. They don’t care about politics. They don’t get pissed off at personnel.
New technology has recently become available for doing all of this. Rather than direct you to specific companies, I’d rather tell you what questions to ask.
First, look for a software vendor that specializes in software for nonprofit organizations. (This is where I caution you against SAP and the other big dogs who are way too proud of their stuff and way too disconnected from your business.) On the other hand, be careful not to select a vendor that only does software for one or two kinds or organization (this is the “mom and pop software shop” warning). The idea is to find a vendor who keeps abreast of best practices in a broad range of nonprofit services fields. Preferably, find someone who will give you a representative who has had personal experience in running a nonprofit. It’s best to look for a vendor who does software for both healthcare, education and human services, and/or other fields. The reasons? One, you’ll pay less if the vendor works in several different markets (economies of scale). Two, the software will probably offer more productivity features since larger markets means the vendor can justify adding more features. Three, the software will probably be more flexible, so that as your organizations grows and changes over the years, the information model will be broad enough to accommodate any new programs or services your offer.
Second, ask whether your software can report on the services you offer from many different axes. That is, can you show services by client, payer, provider, funder, staff member, etc.? That way, you can do reports for individual funders, and find out how you’re doing on cash payments to outside providers, and how well you are doing on collecting from third-party payers.
Third, buy the whole damned thing. Don’t skimp. Get the scheduling module, the volunteer management module, and the billing module. Why? It’s actually cheaper this way. The cost of setting up the software is huge, and the “consulting” services you pay for will be paid all over again later when you want to add another module. It’s a fact of life in technology services. The more you do in the beginning, the less you’ll pay in the long run. Of course, if the price is too high, and you can’t find a vendor that hits your price point for the whole can of worms, you can always buy just what you need now, as long as you have an arrangement with the vendor about future add-ons. Get an agreement that later add-ons will be discounted, and that “consulting” and “setup” or “implementation” charges will be prorated. Naturally, you’ll also want to find out if the software product is actually extensible. That is, will it be able to handle later add-ons at all? If you buy from a vendor that only offers you just what you need now, then that’s probably all you’ll ever get.
The most important concept in this whole rant is that you MUST get started. Get some software installed NOW that can record and report on the service you provide, and that offers analytical capabilities. It’s a competitive environment out there, and if you’re still using Excel spreadsheets to record your client services, you’re soon gonna be screwed.