How do you find a great Head of Development?

I’ve been asked this question a lot, and was asked it again the other day by the CEO of a growing, successful nonprofit, so here are some thoughts.

First, let’s clarify who’s asking the question and what this means about what they’re looking for.

For a long time I’ve argued on this blog that the nonprofit sector has radically misunderstood what fundraising means, what fundraising jobs are, and, consequently, how to staff the fundraising (“development,” whatever) department.  To recap: it’s not separate from “the real work.”   It is core to your strategy, to who you are, and to how you deliver on your promise to the world.

There’s a lot of talk about what “traditional fundraising” is and isn’t, and whether in the brave new nonprofit world in which we live, we need to re-imagine fundraising (yes) and what a fundraiser looks like and does (probably).

I think part of the reason we’ve ended up walking down the wrong path is because professional fundraising was born in a university setting – which unfortunately is a poor model of what most nonprofit fundraising is really like.  Referring to the 2-by-2 matrix below, I’d describe university fundraising squarely in the bottom-left corner: “existing constituency” and “primarily execution.”  That is, there is an established constituency (alumni) with an existing ties to and strong relationships with the university, and the role of the professional university fundraiser is largely to execute on a set of giving targets for this constituency.  University fundraising for really big donations can certainly drift to the top left corner of the matrix – think new chairs, new fields of study, new departments – but by and large the ability of the Development team to regularly and significantly impact the overall university strategy in the short- to medium-term will, in most cases, be limited because of the sheer size and scope of the institution.

Contrast this with the world of the startup / growing nonprofit: it has no constituency and its strategy and aspirations are evolving, expanding, taking sharp turns.

Suddenly it’s obvious that you’re looking for a different set of skills than what’s needed in a big, established institution.  An organization in the top-right corner is mobilizing resources against an idea with no defined constituency in place, and it is going through a period of its evolution in which there will be a constant interplay between the financial resources that can be mobilized, the promises made to funders and the overall organizational strategy.

So how do you find a successful top-right corner fundraiser?  There are no simple answers, but I think that this role is different enough from the traditional nonprofit fundraising path that you don’t need to put “demonstrated track record” on the top three list of things you have to see (great if it’s on the list, but you have to decide in advance if the absence of that disqualifies folks.  I’d say it doesn’t).

This is a terrifying notion if you don’t know what you are looking for, so I put together this list of things I’d be on the lookout for when scouring those non-traditional resumes:

  • You want someone you want to be with, someone who has both the gumption and drive to get the first meeting and who is consistently interesting, personable and engaged enough that he’ll consistently get the second meeting.
  • You want someone who cares deeply about your organization’s mission, who has a personal reason for being there
  • You want someone who can tell the whole story of the organization, who can dive in and across the organization and get into the weeds with folks, but who naturally thinks in and talks in terms of narrative.  The person absolutely doesn’t need to be (and won’t be) an expert in everything you do, but they have to have the intellectual facility and curiosity to get their hands dirty.
  • Inevitably you will want someone systematic, because when you have a few people (your team) managing a lot of donor relationships, you’ll need to build some sort of systems to make the whole thing work.  The level of sophistication of these systems will vary, but if you want to build something lasting for your organization, you’ll need to build more than your funding base and your funds raised – you’ll need to build out HOW you do this in the long term.
  • Gumption (whoops I’ve said that twice now…maybe I should say it a third time), fearlessness, drive and passion go a long way
  • Obviously they have to be articulate
  • And finally, if you’re looking for nontraditional cues that might indicate success, you might look for people who have an element of performance / “it’s showtime” in their background.  This could be artistic, athletic or even military, but some element of: “the lights are on…now go!”

How did you raise all that money?

“I hustled.”

“Yeah, but what else?”

She already answered your question.

Scarcity, urgency, and a sense of accomplishment

Here’s how a great bebopper on the subway was selling his CDs.

“We started today with 100 CDs and we’ve sold 48… we’ve got 52 to go.  They’re only $5 each.  If you stand up and buy one you’ll create a cascade of other buyers!”

Nice.

Let’s parse that pitch:

–          “We started today with 100 CDs and we’ve sold 48:” these things are good and they’re selling fast.  Other people have decided that they’re good already.  You’re joining that crowd when you buy one.

–          “, and we have 52 to go….” we’re getting towards the finish line, and you can help us….

–          “If you stand up and buy one you’ll create a cascade of other buyers!” your actions are bigger than just you.  A lot more is going on here than you giving us $5 and us giving you a CD.

Without a doubt, it’s almost always better to create scarcity, a sense of urgency (a deadline) and a feeling of accomplishment on the part of your buyer (donor).

And no, it doesn’t always have to be “act fast time’s running out” (though that’s usually a good thing…but then again it’s not true each and every time).  But there’s a lot more you can do than describe just the thing that you’re selling and how much you’re selling it for.

Help people understand that you have a limited number of seats (scarcity), where the finish line is how they’re helping you get there (urgency), and how their actions can and will influence others for great impact (sense of accomplishment).  And then take the concrete steps that allow you to keep each of these promises that you’re making.

The big ask

A colleague asked me today, “what different strategies would you use to ask someone for $250,000 as opposed to $50,000?”

The first thing to clarify is whether you’re asking the same person for these different amounts of money.  Put another way, are you asking “how do I get someone to shift from making a donation that’s not a big decision to making a donation that is a big decision?”  Or are you asking, “how do I get up the nerve to look someone in the eye and ask them for a quarter of a million dollars (or more!)?”

Regardless of which of these questions you’re really asking, in each case you need the same basic elements.  You need a story that is real, compelling, that has emotional content.  A story that you believe in, that you think is important.  A story that is true for you, for your organization, for its beneficiaries.  A narrative that resonates with and reinforces the world view of the donor.  A narrative that the donor can be a part of – can place themselves in and, in the best of cases, can help write themselves.

The size of the donation (the “ask”)?  It has to come out of this narrative and this truth – you can’t bolt it on afterwards and have any hope of success.

So, going back to the two questions, if someone is giving much less than then can, then the story is not holding true for them on some level.

If you are asking for much less than you should, then the story is not holding true for you on some level.

Which one is it?

Inefficient nonprofit marketplace – addendum

For those who don’t subscribe to the comments section of this blog (horror!) you might be interested to see the comments from last week’s post.

I’d like to highlight Sean Stanndard-Stockton’s point (paraphrased): it is specifically because donors do not directly experience the end product of most nonprofit work that the feedback loop (from “purchaser” to the “end product”) is likely less well-developed than in other sectors.

I think there’s probably something in what Sean is saying, though I would still ask whether, for example, the buyer of High Price Mutual Fund X (or Crummy Subprime Loan X) really has much of  a feedback loop at all (since the data says that, in the long term, nearly all mutual funds underperform the market, yet the money persists year after year in these funds.)  And I think Sean highlights another important question that we can ask, namely: in which sectors/products are feedback loops strong and where are they weak, and what can we in the nonprofit sector learn from these observations that will inform our work?

More broadly, my latest reflections a week after the post are:

a) I’m all for more transparency and better feedback loops, I just think we should be realistic about what the impact will be (less, I think, than some are claiming)

b) There’s a lot to learn from other sectors – specifically the corporate responsibility space (new standards and transparency launched a decade ago were meant to drive wholesale shifts in corporate behavior; changes have been much more incremental); and the individual investing space (multiple suboptimal products successfully competing for investor dollars).  And I’d like us spend more time looking at adjacent spaces that have things to teach us, and less time beating ourselves up about how messed up the nonprofit capital markets are.

c) I firmly believe that for significant changes to occur in how capital flows in the nonprofit sector, leading advocates will have to get into the capital moving business.  This could be by moving money in $10 increments (by building a powerful new online platform) or $10 million increments (by raising capital from forward-thinking philanthropists); it could be with predictive markets or challenge funds or some other mechanism…  But “provide better information and great stuff will happen” has, I believe, proven to be an ineffective model for making real change happen.

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Time to outsource fundraising?

Peter Haas, the Executive Director of the Appropriate Infrastructure Development Group (AIDG), has a strongly-worded post up on the TED Fellows blog called Show Me The Money – Disasters, Restrictions and The Future of the Fund Raising Industry.  If you’ve ever thought that this “fundraising question” is something off to the side for nonprofits, read Peter’s post.

Peter argues that there’s an untapped business opportunity for professional fundraisers.  The logic goes as follows:

  • It’s really hard to raise money as a small nonprofit
  • Large, capacity-building grants are harder to come by than they were in the 80s and early 90s
  • It’s too expensive for small nonprofits to hire salaried fundraising staff who can raise millions of dollars
  • Many nonprofit CEOs aren’t good at this
  • And, Peter implies, maybe it’s not a particularly good use of nonprofit CEOs’ time to fundraise (in Peter’s words, “I’ll tear through the BS in a system and get to the core error. But I’m not a salesman for high end luxury goods.”)

Peter proposes that professional fundraisers could fill the gap by signing up as fundraisers for hire, taking a cut of the funds they raise. This way, goes the logic, nonprofits don’t have to pay hefty salaries upfront, and fundraisers who have proven that they can raise real money can work their magic.  In Peter’s words: “Somebody accustomed to raising 50-100 million for a big org could probably do a lifestyle changing business, cutting their work week dramatically while earning the same salary, by only raising 10-20 million divided between a handful of smaller up and coming orgs.”

It’s an interesting idea.  In truth there are a handful of these people out there, and I think they and the sector would get a nice shot in the arm if more people stepped up to take this kind of risk and put their skills to use for small, growing nonprofits.

But before we go too far, let’s dig a little deeper into Peter’s post, since he says out loud something that is often left unspoken, namely:

If the mission of the NGO is the service to the community, and fund raising is truly something administrative (as most donors like to classify it in cost analysis), then it should be something an NGO can easily subcontract.

This is where we, our donors, and the sector as a whole go awry – when we think that there’s the “real work” of the nonprofit and this peripheral activity of raising funds.

In 2008 I wrote a Manifesto for Nonprofit CEOs.  Here’s an excerpt:

I’ve met too many nonprofit CEOs who say “I hate fundraising.  I don’t fundraise.”  If you’re being hired as a nonprofit CEO and the Board tells you that you won’t be fundraising, they’re either misguided or lying.

Tell them they’re wrong.  Tell them that your job as a CEO is to be an evangelist for your idea and to convince others about the change you want to see in the world.  Tell them that if this idea is worth supporting then they should jump in with both feet and support it with their time and money and by telling their friends it is worth supporting.

Spending your time talking to powerful, influential people about the change you hope to see in the world is a pretty far cry from having fundraising as a “necessary evil.”

Apparently I still have a few people left to convince.

Which got me thinking, again: why do we keep on running into this wall in the nonprofit sector?  Coke just sells colored sugar water, yet the people who make it a multi-billion dollar company are the storytellers who created and sustained the brand over the past 120 years.

What’s so different in our sector?  Is it because the people we serve (“beneficiaries”) and the people we who are our source of revenues (“donors”) aren’t one and the same person?  And do we honestly think that this bifurcation of stakeholders is healthy or sustainable?  Is there even another sector where we would entertain this kind of dichotomy?

Let me put it another way: if a CEO of anything but a nonprofit said, “I’m starting a new business.  I see a gap in the market and I’m jumping in with both feet and am prepared to sweat blood to make this thing work.  But I don’t want to deal with the whole revenues side of the business.  I’m not THAT guy.”   Could a tech entrepreneur say that they’re not willing to talk to customers and VCs?  Did Kelly Flatley and Brendan Synnott, the founders of Bear Naked, say they’re weren’t willing to talk to the folks at Whole Foods?  Of course they didn’t.  How is this any different?

I’m not saying it’s not hard to raise millions of dollars in grant funding – it is hard. It’s really, really hard.  And this isn’t the same skill as being on the front lines making your programs work.  And, sure, a gutsy fundraiser-for-hire could help.  But funders aren’t cash registers, funding conversations aren’t switches seamlessly from one organization to another, and any nonprofit CEO who thinks he is going to secure million-dollar gifts without seriously rolling up his sleeves and being the person those funders bet on is wishing for a market opportunity that just ain’t there.

So my question for Peter is: are you proposing a short-term solution to a cashflow issue (“I need someone today to help me raise that first million”) or a business model issue (“what I do as the ED is and should be separate from this whole fundraising thing.”)?

If it’s the first one, let’s go for it.  If it’s the second, then I think we’re kidding ourselves.

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The third pocket

The next wave in the social investing space is to create a market of socially-oriented investment funds that are neither purely philanthropic nor purely market-based in their return expectations.

Put more simply – there’s a belief and an assertion that somewhere between pure philanthropy and pure investing, there’s a class of capital that’s willing to get a lower expected economic return for a higher expected social return.  The most common term for this is “impact investing” and it’s applied quite loosely – but it implies a level of proactive care for social impact that’s a generation beyond the screened investment funds of the 1990s that invested in various flavors of “vice-free” stocks.

There’s no doubt that there’s a middle ground here, that it’s important that we find it, describe it, and understand it, because by doing so we will, over time, find much more capital and much more savvy investors willing to occupy that space.

That said, it’s not as easy as it sounds.  There’s a pervasive myth out there that there are enormous piles of investor money poised to be “unlocked” if we create the right product and investment opportunity.

Having raised both philanthropic and sub-market return capital, I would describe the mental model people hold of how this will work as:

That is, people typically expect the holders of capital to look at a spectrum of expected financial return and implicitly find every opportunity further to the right (closer to a positive return) more attractive than every opportunity further to the left.

The reality, I’ve found, is different, with a picture that looks like this (yes, those are pockets).

Namely, the potential individual philanthropist / investor has two pockets, two types of capital that they’re used to deploying.  The first pocket is for their investing, and it’s where most of their money goes and where they think about financial return.  The second pocket is for philanthropy, which is also a defined practice with its own decision-making process – whatever that process may be.

Asking someone to make an impact investment isn’t a move along a rational economic scale, with each step proving marginally more attractive.  It’s asking someone to do two things instead of one:

  1. Create a new pocket
  2. Invest out of that pocket with us

There’s nothing wrong or right about this, it’s just two sales you have to make instead of one; two decisions instead of one – at least if you’re talking to anyone who hasn’t developed that pocket on their own.

Doing this is important – it is, in fact, how markets are created, and the more that this becomes accepted practice (written about, talked about, understood and supported by financial advisers and investment professional, etc), the more that third pocket gets created for everyone, not just for the pioneering impact investors.

It’s important work, but it’s hard work, and until we understand it as such people will continue to throw around numbers blithely, implying that trillions of dollars are waiting on the sidelines, ready to be deployed in pursuit of social change.

Not yet.  At least not until we all, together, create that third pocket.

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