Although the need for nonprofit services continues at an extremely high level, government funding is shrinking. The federal deficit continues to grow and pressure is on government leaders to close the gap between revenue and expenses. Most state governments are under similar pressures. This pressure leads to increased competition between nonprofit organizations for the limited government funding remaining.
Not only is government funding shrinking but the number of restrictions on what nonprofits can use these resources for and how much of their own resources they need to bring to the table in match continues to rise. The Urban Institute documented this trend in a national survey: http://www.philanthropynewsdigest.org/connections/nonprofit-government-contracts-and-grants
The increasing gap between need and government funding is leading to a larger demand for private funding. The amount of private funding is beginning to rise thanks to gains in the stock market and many donors feeling an enhanced ability to give as the recession eases. Even with this rise, there is not enough private dollars to fund all of the worthy requests individual, foundation, and corporate donors receive. Therefore, most donors begin with the organizations they are familiar with.
Even if the donor is familiar with an organization, the ask has a better percentage of success if the donor has a relationship with the person making the ask. No matter how detailed the donor’s file is, there is no substitute for familiarity. Creating small talk and understanding the donor and what is important to him creates an atmosphere where the donor feels more comfortable opening up and discussing opportunities and interests.
In addition, often giving is rhythmic. Foundations and corporations have a calendar and grant proposal deadlines. Many individual donors also give during certain times of the year. An ask is more likely to go flat if the nonprofit is unaware, ignores, or feels compelled to ignore these conditions because of outside pressures- budgetary or otherwise.
Building these relationships and knowing each donor’s habits takes time and persistence. Often the person responsible for building these relationships is the CEO. Organizations getting ready to transition CEO’s need to focus on transitioning critical donors and building a financial cushion, allowing the new leader time to build these relationships without jeopardizing essential services.
Clearly the organization is stronger if it can transfer all of its donors from the transitioning CEO to the Board, but given their other duties and responsibilities particularly during a transition, organizations look to development staff to manage and transition smaller donors and leave the major donors to the Board. This is critical even if the organization is creating an opportunity for the transitioning leader to introduce the new CEO to donors. After all this transition period is limited and the number of topics diverse. Further, the more representatives connected to the donor the stronger the relationship.
Board members seeking to build these relationships should begin by thanking a donor for their contributions. A good database will outline, donors’ preferred method of communication. Donors might be suspicious of a nonprofit representative reaching out. Board members should assure the donor that they are only interested in thanking the donor and providing them an update on the transition and the organization’s programs and services not asking for money. During the meeting, the board member should provide these updates and not ask for money. After the meeting, the Board member should thank the donor for the meeting. Once the relationship is created, the board member can follow up with transition updates and eventually introduce the new CEO to the donor.
New leaders need time to develop relationships. Board members can help the new leader by creating a financial cushion that diminishes the pressures new leaders face to raise resources. In the next blog post we will explore how board members can use the transition to develop new resources.