I thought we’d take a break today from talking about the arts—or our United Arts Campaign—to talk a bit about nonprofits in general. I encourage anyone who’s ever worked for a nonprofit, volunteered for a nonprofit, or donated to a nonprofit to watch the TED talks video below featuring Dan Pallotta:
He discusses some interesting ideas and raises a few interesting points. Where should nonprofits be investing their donor dollars? Those who contribute to a nonprofit organization or a charity, myself included, expect the lion’s share to go directly to services; at the Arts Council, that would be our grant programs, which provide financial support to more than 150 local arts, heritage and cultural organizations.
But what if more money was invested in revenue-generating activities instead of services and grants? More money to build capacity in fundraising activities, or even in earned income (ticket sales, memberships, subscriptions, etc.) that have the potential to multiply that donation hundreds of times over. It’s the classic battle between a short-term, immediate need and finding a long-term solution; yes, your donation can help feed the hungry, clothe the homeless, give a child an arts education experience right now, but shouldn’t some of your generosity go towards ensuring that there continue to be and services for hundreds of thousands of hungry people, homeless people, children, for years to come?
I was having this same conversation with a nonprofit executive director the other day and she gave a great analogy: picture a problem—let’s say, for example, people drowning in a river. You’ve got two options. You can either hire as many ‘hands’ as possible to pull people out of the river downstream. Or, you can invest in a couple of smart people to scout ahead and find out why people are falling in the river in the first place. Which is best?
I agree with Dan Pallotta that “overhead” is an ugly term, and doesn’t give our donors an adequate definition of how their money is being invested. The truth is, fundraising costs money–and any nonprofit that claims they don’t spend money on fundraising is just lying. But, I think there needs to be some standard, some measure, of how to judge the effectiveness of fundraising and earned income strategies. In a corporate environment, marketing and advertising dollars come matched with analytics and formulas to judge their effectiveness; how are we, as nonprofit professionals, judging the effectiveness of our fundraising initiatives? What Dan doesn’t mention is that donors—our “shareholders”—need to have some way to make sure the organization is investing in the right revenue-generating strategies, and not spending donor dollars in wasted efforts.
This video reminds me that as a nonprofit professional I need to do a better job of educating our donors and investors in how we’re using their contributed funds. There is a real case to be made in investing in fundraising, and the Arts Council has always been honest with our donors that a portion of their contribution goes toward identifying new supporters for the arts. If nonprofits can help “shareholders” learn all the ways their donation is useful—direct services, programs, re-granting, and infrastructure investment—maybe our organizations can start making an impact on both short-term and long-term problems.