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Steps to a Successful Spend Down: Strategic Priorities

At the Andrea & Charles Bronfman Philanthropies (ACBP), we have continuously researched spend down organizations ...

At the Andrea & Charles Bronfman Philanthropies (ACBP), we have continuously researched spend down organizations since the decision was made to sunset ACBP by 2016.

We have been surprised by the limited content available on the process of how foundations spend down, rather than the more broadly discussed topic of why foundations spend down. (We’re glad to see this starting to change, with resources like Duke University’s online spend down research library).

We therefore went on a mission to consolidate both the process-related experiences of ACBP and other organizations’ research papers and articles relating to spending down. This is the first of two blogs this month that highlights the steps involved and items for consideration that we have organized from our research. This post will highlight strategic priorities, while the next will focus on operational components. We hope these two checklists will help other organizations as they grapple with similar spend down questions.

Let us be very clear from the outset – the spend down process is not a perfect science, nor is there a handbook that can mold a perfect strategy. As GrantCraft often shares, and as is a relevant reminder here, philanthropy and its strategies are not a one size fits all. However, we are of the opinion that by asking the right questions, foundations can make sound judgments about their spend down to make it more meaningful, strategic, and able to achieve goals – rather than being deterred by unneeded challenges. Here’s our guide to asking the right questions:

1. Evaluate overarching programmatic priorities.

    What is the legacy objective, if any? Is it the name of the foundation, the programmatic impact, or both?
    Who will make the legacy decision? The founder(s)? His/her children? Trustees? Staff members? Some combination?
    Will future generations continue the foundation’s legacy or impact objectives through other means?
    If there is a living donor, how will s/he engage philanthropically after the spend down takes place (if at all)?
    How might the foundation need to adjust its current programming to meet the legacy objective?
    Will there be an endowment at the close of the foundation? If so, to whom will it be distributed?

2. Determine when to spend down and how to communicate it.

    Should the date drive the program goals or the program goals drive the date?
    Is the foundation’s lifespan long enough to make appropriate program planning adjustments?
    Who needs to learn about the foundation’s decision to spend down?
    How and when will the spend down be communicated to partners and grantees?

3. Carry out assessment of current programs.

    What types of qualitative and quantitative criteria should be used in the assessment?
    How do those criteria align with the foundation’s present and legacy objectives?
    How might the assessment handle comparisons among grantees and within various funding portfolios?
    Should outside consultants or an evaluation firm conduct the assessment?
    Who should be involved in the assessment? Founders? Trustees? Staff? Grantees?
    Should the assessment be carried out anonymously or publicly?

4. Wind down funding of non-essential grantees.

    Has it been clearly communicated to the grantee that funding will soon stop?
    Is a transparent timeline in place for reduction of funding?
    Has the timeline been communicated with adequate lead time to each grantee? If not, can the foundation consider readjusting the schedule?
    How might the foundation assist with transitional support or attract replacement support from other funders?

5. Enhance capacity and funding for core grantees.

    What steps must be taken to ensure core grantees have the financial and operational expertise to continue after the spend down?
    Will the foundation provide capacity building – monetary or in-kind – to enable grantee sustainability in the areas of:
    Fundraising and donor relations management?
        Financial and organizational management?
        Governance and board management?
        Strategic planning?
        Leadership development and staffing?
    Have actionable fundraising plans been created by grantees with reserves in place in case financial goals are not reached?
    How will the foundation and grantees balance responsibilities to search for new partners?
    If the foundation has incubated grantees, how can the grantee mitigate the “branding” effect that often ensues and onboard new partners?
    Are there merger possibilities for incubated grantees in order to consolidate operational capacities?
    Should the foundation use a dashboard or other tool to track and analyze progress of grantee strength and sustainability throughout the spend down process?

6. Determine if new program initiatives will be considered.

    Will new initiatives invigorate the staff and potentially prevent loss of enthusiasm?
    Is it practical (or necessary) to reduce funding for other grantees to fund new initiatives?
    Can the foundation transition from a grantmaking organization to one that offers non-financial support to grantees through mentorship?

7. Determine closing and post-close strategies.

    How can the foundation spend its time meaningfully capturing lessons learned and networking grantees and funding partners to leverage its investments over the years?
    How should the foundation’s successes and impact be celebrated? If there is an event, who will be invited?
    How will the institutional knowledge created and accumulated throughout the foundation’s lifespan be preserved?
    Where will this knowledge (and documentation) be archived? By a partner or supporting membership organization?

We hope this list will illuminate important spend down considerations and will assist other organizations in thoughtfully examining their own priorities and processes.

Stay tuned for the next post in this series, which will underscore operational practicalities to consider for sun setting organizations.

Steps to a Successful Spend Down: Strategic Priorities, August 31, 2014, eJP, by Mariah Schuknecht
 

Mixing a Successful Fundraising Cocktail: Success of the Ice Bucket Challenge

Since going viral the ALS Ice Bucket Challenge has raised an unprecedented $82 million (to date), nearly $80 million ...

Since going viral the ALS Ice Bucket Challenge has raised an unprecedented $82 million (to date), nearly $80 million more than the same period last year. These are enviable results in the history of fundraising, by any accountancy. The ice bucket challenge will be remembered as a legendary campaign, perhaps one that even finances a cure for a horrible disease. The funds continue to roll in, and we’re all still cheering for the ALS Association’s doused inductees. The ingredients of this campaign cocktail are clearly all top-shelf. And, as we all sober up (and perhaps dry off) from the success of the bucket campaign, it’s time to consider, “What made the ‘Ice Bucket Challenge’ so successful?” What worked?

Here’s your fundraising bucket list:

Keep it Simple

“Donate or douse!” That’s the entire campaign. There’s no dinner, no response card, no environmentally wasteful flyer followed by a glitzy envelope bearing the unavoidable invitation: just a simple challenge over a friendly channel (Facebook) frequented by people who, for the most part, have the means to make a modest, or even generous contribution. The prospective donor, approached by a friend or loved one has a simple choice: contribute or make a public spectacle of yourself and film it. Giving is easier than making a video. (In my case, giving is easier than uploading my video – which is why we need teenagers.) And it would appear that, in most cases, those challenged both donated and doused, which makes the campaign all the more successful – it’s progression is viral. Support A by doing B and/or C; that’s simple.

For your cocktail shaker: The less complicated your campaign activity is, the better.

Make it Fun

The best fundraisers are “friend-raisers.” Encouraging your friends to join you in supporting a cause provides them the opportunity to lift themselves up, in addition to attracting new converts to the nonprofit. In the case of the ice bucket challenge, the appeal is fun and the -raising, be it fundraising or friend-raising, is secondary to the appeal of the campaign. People who’ve never heard of ALS nor learned anything about it since being challenged still doused and donated! Why? Because the campaign’s appeal is purely fun! And it’s not just because a bunch of celebrities participated in it (though surely that helped). The dousing invited creativity and the embrace of community. What creativity is involved in pouring cold water over your head? View one of the Ice Bucket Challenge clip rolls on YouTube and you’ll see.

For your cocktail shaker: Find a way for existing and potential donors to have fun while funding your cause!

Use Social Media the Way It’s Intended

Facebook enables ordinary people to share personal information with their friends, and often reconnect with old friends, by displaying their personal “stuff” on a public platform. The ice bucket challenge is successful across this and other channels because social media was designed specifically for sharing “stuff”. FB built its empire upon recordings of marriage proposals gone awry, cats purring, slips and falls at weddings, links to prescient articles etc. Posting a video of yourself while inverting a bucket of ice water over your head works on this medium. Contrast this with all of the things that don’t get good traction on FB – invitations to miscellaneous events, groups you don’t want to join, etc. and you get the sense that the latter items are all sales pitches as opposed to personal appeals to connect with someone. Social media is for socializing, not soliciting.

For your cocktail shaker: Build your campaign around the idea that friends invite and share information with other friends.

Identify a Meta-Message

“ALS is bad.” That’s all anyone needs to know when challenged by a friend to join the bucket brigade. When thinking about your organization, try to extract the overarching meta-message from your mission statement, making it as plain and easily transmittable as possible. The point is, identify something about your organization’s mission that everyone can agree with. “We make Jews” for day schools is a concentrated version of mission statements about “nurturing schools” that offer “differentiated instruction” in a “holistic Jewish environment.” Figure out what your meta-message is. Is it something that everyone can get on board with? If so, you’ve found your overarching theme to anchor your campaign.

For your cocktail shaker: Align your campaign to a potent meta-message.

Supporters Recruit Donors

I’m so-and-so and I challenge Ploni (my family member, friend, colleague, comrade-in-arms, celebrity crush) to do the ALS ice bucket challenge. It’s more meaningful if the invitation comes from someone you admire and respect. The bucket challenge went viral because each individual invited two or three people who were likely to take up the cause because they are familiar to each other and on the same “level”. I invited my daughter and two friends; Bill Gates challenged Elon Musk and Ryan Seacrest. Like all good fundraising, the best asks are peer-to-peer.

For your cocktail shaker: Design your campaign around the idea that friends recruit friends.

No Penalty for Not Donating

You can ignore your friend’s Facebook challenge altogether, but because of the social aspect (and all the previous bucket list items), I believe many, many people chose to douse themselves. And while many people contributed in support of the ALS Association, there are, I’m sure, people who used the dousing as an out to conserve their hard earned cash. And what do they get for not donating? They earn virtually the same “celebrity” as those who did donate (and douse). The dousers-not-donors help to advance the cause and are given credit for having done so. Further, there’s every reason to believe that dousers are more inclined to donate in the future because of their newly acquired familiarity, however superficial, with the nonprofit. There’s no downside to giving people a respectable out if they really don’t want to or cannot afford to make a contribution. Offer them an opportunity to be a friend of the organization.

For your cocktail shaker: Make friends, not enemies.

With a Twist

Good bartenders put a personal spin on each cocktail, mixing each to appeal to the culture of their club/clientele. The aforementioned six bucket list items, when combined in just the right proportions, will satisfy your community. Experiment with the mix – the result shouldn’t be shocking like a bucket of ice water over the head. Invite some of your trusted inner circle volunteers to a “tasting” of the mixes you’re considering, to fine tune the “taste.” Eventually you’ll develop a recipe that’s certain to make most people happy and keep them coming back for more.

Cheers!

Mixing a Successful Fundraising Cocktail: Success of the Ice Bucket Challenge, August 31, 2014, eJP, by Lev Herrnson

Dashboard Confessional: The Value of a Nonprofit Self-Reporting Tool

The issue of how much nonprofits should spend on fundraising has been a topic of heated discussion for a long time, a...

The issue of how much nonprofits should spend on fundraising has been a topic of heated discussion for a long time, and has given rise to several watchdog groups, such as the Better Business Bureau’s Wise Giving Alliance, Charity Watch, Charity Navigator, and others. The aim of these groups is to help prospective donors see how much of their money goes to programming and how much is spent on fundraising. Recently, the Nonprofit Federation of the Direct Marketing Association (DMANF) established a new dashboard tool to allow nonprofit organizations to self-report on their fundraising expenses. The watchdog groups swiftly responded, saying the tool is ultimately meaningless.

The Nonprofit Federation is the nonprofit arm of the Direct Marketing Association, a trade association “dedicated to advancing and protecting responsible data-driven marketing.” Last year, the DMANF Ethics Committee and the Advisory Council published a set of fundraising principles, and this new dashboard tool is based on some of the assumptions inherent in the new principles. One of the basic principles is that fundraising and management in general cost money. The principles also suggest that most of the money raised by nonprofits should be applied towards fulfilling the stated mission. So far, there is no disagreement with the watchdog groups, although DMANF does not give guidance as to what an acceptable percentage spent on fundraising might be. (BBB Wise Giving Alliance, for example, suggests no more than 35 percent should be spent on fundraising.)

The real divergence is on the issue of time. The BBB and others measure spending and income annually, while DMANF says that an examination of spending over the course of three or more years provides a better look. Their argument is that the costs to acquire a new donor are relatively high and only pay off over time, as the donor moves to making annual gifts that increase in size. Taken over time, the initial cost to acquire the donor is mitigated. As a result, the dashboard tool asks for three years of information, and so can demonstrate trends.

The dashboard, which comes in the form of a downloadable PDF where information can be filled in, saved, and recorded online, invites the nonprofit to self-report information for the past three years about the mission, total revenue, the number of constituents served, program expenditure, expenditure to acquire new donors, the number of new donors, and more.

Charity Navigator’s Sandra Miniutti, in an interview by the Chronicle of Philanthropy, commented that there is no “independent” oversight of the information being provided in the dashboard. Moreover, it hides how much donors are actually giving, meaning that a lot of money may have been spent to acquire donors who stay at very small giving levels. Therefore, the dashboard seems to have been “written for the groups that oversolicit,” according to Charity Watch’s Dan Borochoff.

Essentially, the DMANF believes the dashboard tool is more reflective of the real expenses associated with fundraising, and then leaves it up to the prospective donor to determine if they are comfortable with the ratios and the trends over time. The watchdogs are saying there must be analysis of the information in order for donors to get any real value from the report. However, the watchdogs themselves often differ completely in judgment of the same nonprofit. As NPQ has reported, one nonprofit—the Wounded Warriors Project—received a poor rating, a decent rating, and a high rating from three different watchdog groups.

There is something commonsensical about a tool that gives quick and easy access to basic information, allowing a prospective donor the chance to review it and make up his or her own mind. However, it is valid to criticize that tool for not providing information about the number of donors at varying giving levels, whether they have increased their gifts, and other related information that would justify acquisition costs. Perhaps, in the end, this new tool needs a bit of refinement.—Rob Meiksins

Mark Vanderbeck is the CEO of ACTS Retirement-Life Communities, which operates 23 continuing care facilities across eight states. These communities serve a total of 8,500 residents, and Vanderbeck says that their consultation has helped him enormously over the years.

Here, he recalls the first time he realized what a depth of wisdom he had at his fingertips:

“There was an early contract which was still in force that made life, especially in the 1980s, almost impossible. Any increases in a given year of the residents’ fees were limited to five percent of the original monthly fee. So it’s not just five percent of the current fee, but of the original fee. So here we are, sitting in the late ’80s, with inflation of 16 to 18 percent. Over time, this community was going to be in dire straits, even though anybody walking by would see this beautiful community and not see the financial problems.”

At that time, the head of the residents’ financial committee was the former chancellor of the New York State University system.

“I went to him and he understood very well what the problem was…. We had several conversations and you know, ultimately, he said, ‘Mark, you can’t keep this as something that’s a management problem. This is ultimately a resident problem.’

“At that time in my life, there was a tendency to keep certain things [quiet]—you wouldn’t necessarily fully communicate certain kinds of issues. He encouraged me very strongly to come up with a plan. It was called the Trustees Plan and it gave people the opportunity to pay at market levels and it was communicated that this was needed.”

Vanderbeck says that this formative experience led him to a deep commitment to transparency.—Ruth McCambridge

Dashboard Confessional: The Value of a Nonprofit Self-Reporting Tool, August 28, 2014, Nonprofit Quarterly, by Rob Meiksins