HARD SELL: Making the Case for Large Investments with Unpredictable Results
How much time and money will it take to find effective cures for cancer, juvenile diabetes, or a dozen other seemingly incurable diseases? For organizations that address social needs, what will it take to rescue a single person from an opioid addiction, eliminate human trafficking, or counter the effects of multiple generations of abject poverty? What about nonprofit advocacy fighting uphill battles for unpopular causes? How much will it cost to change the long-time perceptions and prejudices of the general population?
The common characteristics of these really big problems are: they are systemic, extremely complex, and very expensive. Nonprofit leaders can give donors detailed cost projections of programs that address these needs, but usually they’re just tactical responses to systemic problems; more like insulin shots to a juvenile diabetic—treating only the symptoms in the absence of a cure. Fundraisers can break down the cost of the insulin shots four times per day, but what would be the true cost of developing and delivering an effective cure for juvenile diabetes or any other previously incurable disease? No one knows. The same is true for many other nonprofit mission objectives. In short, treatments are relatively simple, while cures are very complex and unpredictably expensive. Think about it for a few moments. What are the systemic problems underlying the mission of your organization?
The common characteristics of these really big problems are: they are systemic, extremely complex, and very expensive.
DONORS’ RETURN ON INVESTMENTS
There are clearly defined mission objectives at every well managed nonprofit. Those performance metrics are frequently used to create a rate of return on investments (ROI). Whether or not your particular organization tracks and reports that kind of data, other organizations like Charity Navigator, GuideStar, and Charity Watch certainly do. However, the ratings assigned by these charity “watchdogs” are not always fair assessments. Nonprofits address persistent social and medical needs at different levels. Some take deep dives into underlying issues, attacking the root causes and investing significant resources trying to solve systemic problems. Others focus on the results of those systemic problems. Both approaches are important and can be funded as parts of the overall solution. However, nonprofits with deep-dive mission initiatives typically cannot tell donors how much it will cost to solve the problems, find the cure, or change the world. That’s what makes fundraising a hard sell at some of the most strategically significant, mission-clear organizations. We’re trying to convince donors to continue throwing big money at problems that have no completion date. However, without those strategic investments, we’ll just have to settle for giving kids insulin shots four times per day for the rest of their lives.
If you are a fundraiser for an institution that takes a deep dive into addressing root causes to systemic problems, it will certainly be reflected in your institution’s ROI and possibly in the ratings from the charity watchdog organizations. Thus, funding to change the world or even your organization’s little corner of the world can be a hard case to make. Since donors often want to support organizations that give them the most bang for the buck, they ask, “Why isn’t your program more efficient?”
In this post, I want to provide some perspective and encouragement for organizations attacking root causes—those forced to continually make the case for program efficiency.
STRATEGIC AND TACTICAL APPROACHES
In the novel, The Silver Skates by Mary Mapes Dodge, Hans Brinker discovers a hole in the dike and plugs it with his finger. The heroic little Dutch boy stays there all through the frigid night and saves the town from a catastrophic flood. You can probably think of many occasions in which donors have responded in a time of crisis to plug the leaky dike and have continued to do so until others arrived to help stabilize the organization.
If you are a fundraiser for an institution that takes a deep dive into addressing root causes to systemic problems, it will certainly be reflected in your institution’s ROI and possibly in the ratings from the charity watchdog organizations.
Imagine this scenario: we’ll call it Silver Skates 2. Holes have developed in hundreds of dikes all throughout the Dutch countryside because of the constant ebb and flow of rushing seawater. The situation constantly required hundreds of people willing to periodically insert their fingers into the weakened dams. With a tactical response to each crisis, heroes would avert the impending disaster and save the day. Eventually, a forward-thinking visionary comes up with an outrageous idea—a storm surge barrier. The tremendously expensive barrier indirectly solves the problem of a thousand dikes and creates prosperity throughout the land for generations to come. And all the people rejoice and build a statue in honor of the great strategic thinker.
There are several fundraising realities implied by the illustration above. All of us who have been in fundraising and/or charitable estate planning for a while have seen examples of the principles below:
1. Strategic giving is almost always visionary and future-oriented. Tactical giving is usually a response to foreseeable or unexpected obstacles standing in the way of the strategic objective. Consequently, strategic giving is more often proactive while tactical giving is usually reactive—thus the term, “tactical response.”
2. Strategic giving usually has residual impact. For example, building an interstate exit will solve a traffic problem. It will also have a residual impact on local commerce and property values, creating new buildings, new businesses, new jobs, and an expanded tax base. The strategic gift to build a storm surge barrier didn’t avert one crisis but a hundred.
With the above examples and illustrations in mind, below is a comparison of the characteristics of tactical and strategic gifts:
TACTICAL GIFT STRATEGIC GIFT
One Finger in Each Dam Building the Storm-surge Barrier
To Avoid Failure To Advance Strategic Objectives
Reactive Response Proactive Planning
Immediate Impact Long-term Impact
Solve Single Problem Fix System / Structure
Single Issue Solved Hundreds Solved by a Single Gift
Direct Impact Indirect, Residual Impact
Smaller Investment Largest Investment
Lower Efficiency Higher Efficiency
Saves the Day Makes History
Annual Donor Award Create Personal Legacy
3. Strategic gifts are usually far larger than tactical-response gifts given to solve an immediate crisis. If you craft your funding appeal wisely, those gifts can be considered far more efficient (not less efficient) because the return on investment (ROI) of a large strategic gift (or a reoccurring gift commitment) is measured in terms of years, decades, or generations of residual impact. The ROI of a tactical-response gift to avert a crisis is measured only in the timeframe of that immediate need.
4. Strategic donors with high giving capacities prefer a game-changing approach. Dr. Paul Schervish uses the term “hyper-agency” to describe the perspective of wealthy donors. They don’t think in terms of game tactics. If the game is not going their way, they think in terms of changing the rules. They are, however, less interested in problem-solving on a single issue than they are visionary towards structural changes. That is not to say that strategic donors are unwilling to step in to plug the hole in a single dam. However, they are far less comfortable with large or long-term gifts to avert one crisis after another. What gets them excited are the game-changing gifts.
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If you represent an organization that invests heavily into solving systemic problems (root causes for drug abuse or research for a cure to cancer), your return on donor investments can be hard to justify. However, fundraisers seem more reluctant to make the case for a dismal ROI than donors are to understand and accept it. In other words, fundraisers see themselves on the defensive when the subject of relative-program costs comes up. My recommendation is to get ahead of those issues by addressing them directly. Remember, strategic donors almost always focus on outcomes not ROI percentages.
Eddie Thompson, Ed.D., FCEP
Founder and CEO
Thompson & Associates
“If we merely aim for the industry standard, then our goal is mediocrity. Emulating the average nonprofit, we are destined to live with all the problems the average nonprofit faces. So, we suggest you aim to be exceptional in your approach to fund development.”
copyright 2022, R. Edward Thompson