Past Performance Does Not Guarantee Future Returns: The Imperative for Nonprofits to Position for a Sustainable Major Giving Platform
July 24, 2015
Nonprofit organizations must neither be comfortable nor complacent, and an attachment to the way things are always done is a one-way ticket to irrelevance.
By Avrum Lapin
A recent review of the top performing mutual funds revealed a number of funds described as “blue chip” and “growth” funds. Sure their composition included a diverse mix of smaller aggressive and value-type companies, but the more than double-digit returns over the past decade belies the importance of those companies with long-term growth potential. We hold that nonprofits organizations can learn a great deal from the mutual fund sector.
Sustainability has been a cultural buzz word since the 1960s and the emergence of the environmental movement in the U.S. Plainly put, sustainability is the ability to create a healthy and long-term domain founded on diverse and productive systems. The private sector has understood sustainability for more than a century, and it is high time that nonprofits got on board – especially as they consider their fundraising in today’s aggressive arena. The once-a-year mailing, selected Board asks, silent auction, or raffle, will not enable a nonprofit to flourish in today’s ultra-competitive philanthropic marketplace. To the contrary, today’s donors are entrepreneurial, hands on, and impact driven and they expect a robust and varied fundraising program – especially major donors. Sustainability as the platform for advancement is the expectation rather than the exception.
The key to understanding a mutual fund and its focus is the prospectus – the critical document detailing the investment objectives and strategies. Likewise, a nonprofit’s mission and vision codifies the organization’s vital guiding principles. An organization’s leadership must consistently and constantly champion the mission and vision in an effective fashion. How this is communicated is almost as important as what is communicated. Each potential major donor requires a message tailored to his or her needs and wishes and the how, when, and where this is communicated is critically important.
A mutual fund’s investment goals and strategies indicate a willingness of the fund to take on risk. Potential investors can consider which asset is right for them based on varying degrees of risk tolerance. Prior to making a philanthropic gift, major donors will want to ensure that the nonprofit organization is well positioned, with strategic direction and a sound business plan, to take advantage of future growth opportunities as well as address any potential pitfalls down the road.
Any organization, let alone a nonprofit, is best served by actively challenging the status quo. In fact, nonprofit leadership should be required to repeat the mantra “the status quo is not, actually never, an option” until it becomes an ingrained part of the thinking of the organization and its lay and professional leaders. Many organizations exhibit a natural fear of change and believe that if the nonprofit seems to be cruising along, change is not necessary.
What we refer to is not changing the mission or focus of the organization. Instead, we champion the ability of a nonprofit to look ahead and recognize the possibilities of tomorrow, especially under the auspices of cultivating meaningful and long-lasting relationships with current and prospective major donors. This is not trying to predict the future – it is rationally considering the environment in which an organization operates, and always asking “what if.”
The emerging generation of major donors in the United States, increasingly entrepreneurs and “creators” of businesses and ideas, seeks to connect directly to the causes they care about, to the results that they are generating, and to the impact that those causes are making on the lives of people, communities, and the world. These major donors demand transparency and want to be made a part of the organizations they support. Increasingly, the emerging major donors expect nonprofits to behave like for profits in respect to their ability to strategize, execute, and ensure they are positioned to effect change in meaningful ways.
For example, an Israeli think tank and research/advocacy organization that we work closely with operates a series of programs specifically targeted to address various issues in North America and Europe. It became apparent that a US-based funder, with whom our client had no prior relationship, was considering an expansion of its programs and partners. Internal discussions centered upon: How the organization might have to adapt? Who could be future partners? What new opportunities and challenges would be created? Ultimately, the organization considered the broader implications of new partnership and sources of funding in expanding the reach, and its effectiveness in achieving its mission. It was the recognition that although the nonprofit’s day-to-day concerns, core purpose and needs remained important, consideration of new possibilities would allow for the greatest growth and sustainability.
There are unlimited and unpredictable changes. Diverse mutual funds managed by leaders who are not afraid of rebalancing are well balanced to achieve long-term financial goals for their investors. Those that are stagnant risk significant losses in volatile markets. Similarly, nonprofit organizations must neither be comfortable nor complacent, and an attachment to the way things are always done is a one-way ticket to irrelevance. Sustainability requires embracing the possibility of change and preparing for alternate scenarios. Those nonprofit organizations that are structured to be nimble and open to new dialogues, partnerships, and change, are the organizations best situated to capitalize on building relationships with emerging major donors to further sustainable fundraising platforms.
We welcome your comments and insights. Let us know what you think.
Avrum Lapin is President and Benjamin Ginsberg is a Consultant at The Lapin Group, LLC, a full service fundraising and management consulting firm for nonprofits in Jenkintown, Pennsylvania, outside of Philadelphia. The Lapin Group, a member of the Giving Institute, inspires and leads US-based and international nonprofits seeking fund, organizational, leadership, and business development solutions, offering contemporary and leading edge approaches and strategies. Avrum is a frequent contributor to eJewishPhilanthropy.com and speaker in the US and in Israel on opportunities and challenges in today’s nonprofit marketplace.