Good governance demands good fundraising
Fundraising has an important role for many not-for-profit organisations, writes Daryl Kibble. He explains why directors must demand that it takes centre stage in the boardroom.
The ideal make-up of a not-for-profit (NFP) board should consist of a diverse range of skill sets, including experience within the dynamics of fundraising. The Australian Institute of Company Directors’ (AICD) 2014 NFP Governance and Performance Study highlighted that 53 per cent of NFP executives and 47 per cent of non-executive directors (NEDs) desire more highly skilled board directors. Within the boards of NFP organisations there is a larger gap regarding fundraising competencies to that of other boards.
This gap impacts how boards seek advice from external professional fundraisers. NFP boards rarely question the need to outsource professional services such as legal and accounting, but often don’t consider external fundraising professionals. This is highlighted in the white paper, The Challenge of Sustainable Funding for the NFP Sector by BDRC Jones Donald, published in 2015.
The paper shows that around 75 per cent of NFPs used external services in legal, accounting and insurance but only 15 per cent sought external assistance in the category of “other” (including fundraising).
Fundraising as a profession
NFP boards are failing to invest in a discipline that ensures their very existence – raising funds – because many lack an appreciation of fundraising as a profession.
In the April 2013 edition of Company Director magazine, Marelle Thornton, chairman at the Cerebral Palsy Alliance, stated: “One of the things we don’t do well in the NFP sector is give fundraising the professional identity it deserves.”
Research conducted by Wendy Scaife, Alexandra Williamson and Katie McDonald in 2013 at the Australian Centre of Philanthropy and Nonprofit Studies tabled the two greatest challenges facing fundraisers – both were related to board engagement in fundraising:
- Lack of board understanding and leadership in fundraising.
- Lack of resourcing to undertake successful fundraising.
Many NFP directors appear not to appreciate the “profession” of fundraising. As a result, fundraising only receives token input by directors. This leads to a lack of internal and external resourcing in fundraising. The question to ask an NFP board is this: “Is it possible to have good governance inside a fundraising vacuum?”
Fundraising is the number one issue impacting NFP organisations according to surveys undertaken in recent years. This is highlighted in the 2015 BDRC Jones Donald paper, where it is noted that the challenge is not only in the sourcing of new funds for growth, but for the organisation itself to remain viable. Remaining viable is a critical governance issue. In the same report, 54 per cent surveyed did not achieve a funding surplus over the past five years.
Further examples of the importance that should be placed on raising funds in the context of “viability” are cited below.
AICD 2013 Directors Social Impact Study
- Funding uncertainty was rated as the highest issue of importance (95 per cent “very to extremely important”) for disability service organisations.
- Income certainty in the NFP sports sector was rated as the highest issue being faced (90 per cent “very important to extremely important”).
AICD 2015 NFP Governance and Performance Study
- The number-one issue identified in the arts and culture sector for the next three to five years is increasing private and corporate philanthropy.
In demanding good governance, directors need to pay greater attention to fundraising by ensuring that:
- At least one board member has a fundraising skill set.
- The board is both trained and educated in fundraising strategy.
- A strategic plan devoted to fundraising is not only developed, but effectively implemented and monitored for performance.
- External help is sought by fundraising professionals when required.
- Adequate resources are invested in quality fundraising professionals within the organisation.
Many NFP directors appear not to appreciate the 'profession' of fundraising.
Even when an organisation does have capable internal fundraising staff, external fundraising consultants are necessary when an objective perspective is required. This is typically in areas such as campaign feasibility studies (credibility requires independence), strategic planning (to stretch the board and staff), and development audit (an unbiased review of your fundraising practices and performance).
A lack of fundraising understanding and leadership at board level also has a flow-on effect to the culture of the organisation. It reduces morale in particular. In the Australia Post 2015 Innovation Index of the Australian NFP Sector , those working in marketing and fundraising roles felt the least empowered in their jobs compared to other functions.
If the board shows no interest in fundraising, perhaps simply due to lack of understanding, then adequate resources are not invested in fundraising. The result is that key staff will not remain around long enough to have any positive impact on the organisation.
Research published in the April 2012 Chronicle of Philanthropy (surveying 1,700 fundraisers and 8,000 NFP CEOs), tabled the following findings:
- 16 months is the average time a fundraiser stays in the job.
- $127,650 is the combined direct and indirect costs for finding a replacement.
- Less than $50,000 is the cost to keep a good fundraiser happy by providing better salaries/benefits.
A better paid fundraiser should result in a better-quality fundraiser. A better-quality fundraiser should in turn be able to provide board stewardship, promoting board engagement in effective fundraising practices.
The board needs to understand the interrelated, but different, functions of “fundraising” (transactional) and “development” (relational). Fundraising focuses on solicitation to achieve specific, short-term, financial goals, which are often modest gifts from a donor.
“Development” builds over time and is a continuous, life-long connection between a donor or philanthropist and the organisation. Development as a process includes cultivation and stewardship, eventually leading up to an appropriate ask. Success in development requires support from the board down, and effective fundraising evolves from development.
A mistake made by NFP boards is that they have a belief that they have no responsibility in the fundraising process. Everyone on the board is responsible. Kay Sprinkel Grace in her 2009 publication Fundraising Mistakes that Bedevil All Boards , sums it up perfectly.
She says: “There is a difference between development and fundraising. Development is the process of identifying and cultivating potential donors, and maintaining relationships once these individuals have given. It is the responsibility of the entire board to be involved in development. Fundraising focuses on the actual asking, it’s possible that only selected members can be involved in asking”.
A mistake made by NFP boards is that they have a belief that they have no responsibility in the fundraising process.
Effective NFP fundraising needs to be seen in the context of:
- Success in fund development is a long-term project – fundraisers cannot work miracles in a short period of time to address the organisation’s funding problems.
- Fundraising as a profession – the professional body of knowledge and best practice in fundraising is well established. What works is well known and it is backed up by research data.
- Return on investment – there is a significant return on investment (ROI) in fundraising, but most boards do not understand this.
- Fundraising mix – boards need to understand which aspects of fundraising provide the best ROIs, which by default should drive the fundraising strategy and resource allocation.
Fundraising is not the next local event. This is one of the least impact areas of fundraising as regards revenue generation and ROI.