Can you kick the crisis management habit?

Some organizations seem to run as smoothly as warm butter dripping down a hot ear of corn. Others seem to lurch from crisis to crisis. Ever wonder why?

All organizations, nonprofit and for-profit, have rough spots. The difference is, some of them seem to be almost unable to function unless everyone is in full panic mode. Others just tweak their plans and everything goes on smoothly. Is there a difference in the type of crisis, or is it the organization?

A crisis can be caused by a sudden external event such as the unexpected loss of a major donor or client, but usually, there is some warning that there's a problem.

If the warnings are ignored, then a minor incident becomes a crisis.

There are two reasons why warnings are ignored. One is poor planning. In established organizations that only happens once. From that point on, someone in the organization starts looking beyond the ideal outcome, puts a plan in place to list all the possible problems and designs a plan to deal with them. If the organization is brand new, they stop and create a proper operational plan.

Then there is the organization that never seems to learn. While the circumstances of each crisis may be different, the outcome is the same. Everybody has to drop their normal work and deal with the crisis. Then they are behind in their work, and that creates another crisis, and the cycle repeats itself ad infinitum.

This is usually a management issue. For instance, if there is a report due to management and it takes several people to create it, the person in charge forgets to tell someone that their input is needed, or fails to communicate a delivery date for final review. If it is a decision, such as whether to pursue a grant, they wait to make that decision until there is barely enough time left to get it completed.

These people are crisis junkies. Either they simply don't seem to be able to function without the adrenaline rush they get from managing a crisis or they are bored with the advance planning needed to avoid it in the first place. Maybe delegation is not something they do well. Occasionally they just don't have the experience to be able to think ahead far enough to avoid trouble.

Here is a real-world example illustrating both scenarios.

A printing company had grown rapidly, and its four-person staff was struggling to get all the work done. Everyone was working nights, weekends and holidays to try to stay caught up. Deadlines started to pile up, a critical machine broke down,  and eventually an important deadline was missed.

This was an avoidable crisis. As soon as it became obvious that there was more work than could be completed in a normal workday and it was an ongoing condition, steps should have been taken to mitigate the problem. Maybe that would have meant turning down work, asking for deadline extensions, scheduling the work so that the deadlines didn't all hit at the same time, or even hiring more staff, either permanently or on a temporary basis.

In the case above, the manager didn't do any of those things, and the business lost an important account. In this case it was determined that the manager had a hard time delegating and preferred to step in himself and save the day. In short, he was a crisis junkie.

While it would be easy to blame just the employee directly in charge, upper management knew that he had a history of barely making deadlines, his employees turned in a lot of overtime,  and he constantly accepted more work than other departments. Since it had always turned out all right in the past, no one stepped in and handled the underlying problem. They simply assumed the best outcome would always happen. When it didn't they professed to be surprised and shocked.

The fix was fairly easy, if expensive. The company retained a process review company that instituted weekly staff meetings, re-trained the manager and hired someone to review the time cards and work-in-process reports and check the floor periodically to be sure that the physical state of production matched the reports. A specific amount of time was allocated each week for machine maintenance, and a downtime allowance was added into the bid planning. Gantt charting was done so that deadlines didn't pile up at the end of the month. Connections were made with a staffing firm so that temporary help could be added as needed.

Production improved, payroll costs were more controlled, and most importantly employee morale skyrocketed.

Nonprofits are particularly prone to crisis management because they traditionally operate in a culture of "do more with less". If everything seems to be in a constant state of turmoil, sit down and find out why. Don't ignore little things until they become unmanageable. If you need more structure or better planning, make that a priority. If it's a people problem, deal with that. 

Don't let crisis management become a habit. No one ever failed because they were too well managed.

Growing your unrestricted funding.

Grants, whether government or privately funded, normally do not allow their funds to be used  for ongoing administrative costs, i.e. overhead. While that may seem somewhat shortsighted on the part of the grantors, it is nonetheless a fact of nonprofit life. Grants usually support programs, not organizations. They are booked as restricted funding, meaning that you can't use it to pay the rent or fund the administrative staff salaries.

So, where does the money come from to keep the lights on and pay the staff?

From unrestricted donations, i.e. donors that designate their gifts as "general support" for your organization.

Some very few foundation grantors do say that their donations can be used at least in part for general support, but mostly, these donors originate from two sources.

Who gives unrestricted donations?

First, the ones that donate small amounts of money or support an event simply because they believe in your overall mission strategy. Secondly, from individual  donors that commit large sums in the form of endowments or a single big donation or bequest.

When designing your fundraising plan, courting these donor categories is at least as important as mapping out a grant strategy. Nationally, over fifty per cent of all nonprofit funding not related to fee-based services comes from individuals. Less than fifteen percent comes from grants.

That should tell you that donor development at the individual level should be at the top of your fundraising priorities.

Tired of the grant rat race?

If I could recommend a few things that nonprofits can do to end the grant rat race, it would be to go out and shake hands, speak at applicable venues, and just generally actively recruit donors that will write "general support" on the memo line of their check.

Take the case of a community event. When you advertise it, be up front with the allocation of the funds received. Tell your donors that while you need money for program Y, that program will not exist, much less accomplish its goal, if your organization ceases to exist. If you feel that the program is the major draw for the event, you could say that funds generated will be used 70% for the program and 30% for overhead.

Relate general support to the donors everyday existence. If you equate your need for general support to the donor's need to keep your organization viable to accomplish your mission, they'll get it.

Honesty pays dividends

Honesty is definitely the best policy. Donors that think their ten dollar donation is going to buy ten meals for the hungry feel ripped off when they find out that three dollars went toward your rent or mortgage payment. If they understand in advance that you will have no place to put the food if you can't pay the rent on your warehouse, they are generally fine with that.

The same thing goes for your major gifts strategy (you do have one, right?). You have to educate the prospective donor so that person understands that while your mission may be rescuing animals, you can only accomplish that if you can pay your day-to-day operating costs, and that includes paying the receptionist that takes the initial call or keeping the lights on in the kennels.

Don't beg. Educate!

Educating the donor community regarding where nonprofit funding comes from is just as important as the feel-good stories about who or what got helped. Ask most ordinary citizens where nonprofits get the money to operate, and they are going to say grants or events as often as they will say "from people like me".

That's at least partially because nonprofits only get in the news when they get a huge donation from a foundation or a big government grant. If that's the only time the general public hears about your organization, who can blame them for thinking you don't need their money?

Tell the whole story, tell it well and tell it often.

Unrestricted funding is the key to your organization's survival. Learning how to develop it should be a top priority.

More on Nonprofit Crowdfunding – Is it leaving the little guy out?

In  my September 13, 2013 post, Crowdfunding for Nonprofits - Hype or Hope, I presented an overview of this form of funding development. This follow-up offers a more in-depth look at how the process is evolving to provide better structure, protection and validation for both donors and nonprofits and some of the pitfalls of that process, particularly for smaller organizations.

The visible problem  

In the above post, after viewing some of the websites catering to this funding model I stated:

 " There didn't seem to be a lot of vetting of the projects and nonprofits for the donor's peace of mind. In some cases, there was no way for the donors to receive an accounting for whether the money actually resulted in tangible gains or completed projects."

Apparently I wasn't the only one who spotted this weak spot. Now there are various approaches to deal with it.

Anything that deals with collecting and spending OPM (other people's money) is generally viewed with some reservations by would-be supporters. There is a good reason why the California legislature is moving forward to pass a law to crack down on what they see as fraudulent fundraising practices in the charity sector.

That's one way to approach the problems of donor exploitation. Another way is for the industry itself to define parameters by which such campaigns can be vetted. It's the old government vs. private enterprise argument. Should government impose a one-size-fits-all regulation, or can the industry police itself?

Public perception vs. reality

Nonprofits on the whole don't want to cheat anyone. Not the donors, not the beneficiaries of their goods or services, and certainly not the nonprofit community as a group. The problem is that one well-publicized bad apple experience taints the whole sector, and no one understands that better than the nonprofits themselves.

The public, perhaps naively but certainly vociferously, demands that nonprofits, like Caesar's wife, be above reproach. They might shrug off insider trading on Clorox as an isolated event, but just let a charity slip up once, and the whole sector gets a black eye.

Then there is the public perception of what constitutes charitable giving. The Nonprofit Times in an article published June 1, 2014 notes that  donors seem to be having trouble differentiating between funding and fundraising.

Measuring honesty

Legitimacy is the keyword, but to have legitimacy, you have to have a standard.

Enter the Accountability Review Wizard as designed and distributed by  the Charities Review Council. This tool seeks to bring uniformity and legitimacy to a rating and certification process.

In a April 16, 2014 posting on the hosting website, the Charities Review Council states that this is the only cloud-based risk and assessment tool currently available. In addition, they promise to provide resources to assist charities to advance to meet the optimum standards.

This fee-based service requires that the charity have the usual documents to verify organizational and financial  legitimacy, and seems fairly reasonably priced, at .02% of the organization's annual operating expenses, rather than total revenue, and ranges at present from $100 to $3,000. That should make it affordable even for smaller charities.

Arguably, someone should also address the vetting of the platforms on which campaigns are posted. Enter the Crowdfunding Bill of Rights developed and sponsored by David Neff and Miriam Kagan and profiled on the Kimbia.com website. For a more in-depth look at this proposed toolkit,  check out the entire article in The Nonprofit Times referenced above. While this is primarily slanted at the donor, it does peripherally note that the fees charged by some of the platforms are quite high.

All this is a step in the right direction. The internet has a well-deserved reputation as a hotbed of scammer activity. Anything that is perceived as or results in reducing the risk for donors or investors is surely better than nothing.

 Or is it?

Are we measuring the right things?

The one problem I see with all of this is the attempt to define what constitutes an acceptable level of administrative costs vs. program investment.

The California legislature ran into this problem when crafting their law. Originally they had a set-in-stone ratio of program spending vs. administrative and fundraising costs. After some educational meetings with nonprofits, they discarded that number.

The problem arises when looking at the vastly different mission requirement costs for nonprofits, and the public perception of what is "good".

No matter who or what agency tries to arrive at that figure, it is going to result in assigning an arbitrary number as the optimum standard. That number will then be the benchmark for the general public to judge which organizations are "good".

This isn't a new problem. Every nonprofit rating website has some sort of arbitrary standard they use to assess nonprofits. That can be anything from a cost ratio tied to the revenue figure of the organization to the dollar figure of the key personnel salaries.

The problem there is that it doesn't necessarily present a total picture of your organization.

A nonprofit delivering a healthcare service may have salary and labor costs in excess of 50% of their operating budget due to the legal requirements to employ highly-trained licensed professionals. A all-volunteer group that collects food, clothing or books for the underprivileged may not have any salary costs, but  does pay out a substantial portion of the budget for fundraising to purchase the items distributed. Very new organizations may have high initial development vs. program  costs.

The above-noted Accountability Review Wizard, as a part of their method to assign a rating, does attempt to address this by having a range of acceptable program spending levels from 65 to 90 percent,  but even in that framework, they suggest that a 90-10 ratio of program to administrative spending ratio is the most desirable.

That just seems to further the notion that all nonprofits have to be broke to be effective.

And therein lies the problem with crowdfunding, particularly if it is an all-online event.

The strategy, which is growing exponentially year-over-year in dollars invested in charitable giving, needs to be more about educating the public.

That doesn't mean that developing these benchmarking strategies is ineffectual or wrong. They just don't go far enough.

Is there a logical next step?

To address that shortcoming, if you think it is a shortcoming, the nonprofits themselves need to be actively involved in providing educational tools that go beyond dividing numbers attained from the 990 or the financial statements to arrive at ratios.

For instance, should the mid-six figure salary of a CEO whose organization requires the holder that position to have multiple master's or doctoral degrees be equated to the $10,000 salary of a  CEO who oversees a newly-formed  local conservation group? The former may only utilize 1% of the organizations funding, while the latter might currently account for 40% of the revenue. Do the ratios tell the whole story?

What's acceptable should be somehow tied to the type of nonprofit and it's relative chronological development as it relates to effectiveness.

In that way, a donor, whether through crowdfunding or more traditional avenues, could assess whether the effectiveness of the organization is improving with the modifiers of age, growth and revenue. Is bigger better?  Should donors fund  developing management expertise in favor of programs during the first five years of the nonprofit's existence?

What about you?

This is an area that the nonprofits would seem to have to move from passive acceptance of other's standards to active participants in shaping those standards. Larger organizations know that, and some of them are doing it, thereby shaping the dialogue.

Smaller and newer nonprofits have a stake in this too. Crowdfunding is evolving into something much larger than a simple social media posting event. The organizations that stand to benefit the most are the little guys, the ones that can't immediately access large grants.

Your messaging needs to address the issues being debated and codified on a national scale by these larger platforms. Even if you choose not to be evaluated, you ignore current trends in shaping public perception at your peril.

You are the folks that constantly contact me to bemoan the fact that you can't compete in the traditional grant marketplace. This is your chance to make the dialogue about effective outcomes, not financial ratios. Make the most of it.

If you need help crafting a message, contact me at granthelp@ida.net, or visit my website at http://www.cloudlancerwriting.com. 

Do you understand donor retention?

It's funny how blogs work. You post something, people read it that day, and you think OK, that's nice, a bunch of people apparently got something useful from this.

Then out of the blue several weeks or months later you get a comment or email about a post that you had sort of forgotten about.

 So it is with my blog post of April 28, "Marketing Your Mission".

Apparently "Tom" took issue with it. "This is the most stupid thing I've ever read" would tend to indicate that Tom doesn't find the use of the word "marketing" to be congruent with "nonprofit mission".

According to Tom, mission is all about emotional engagement. All that other stuff about being a good "investment" for the donor doesn't matter. People just "know" that you will use their money well, because after all, you're a charity.

In Tom's defense, the emotional characteristic is what drives donors to investigate your charity further. It is the thing that defines the need to give that they want to fill. At some level, they have an interest in helping something or someone. Maybe they Google "animal rescues" or "battered women's shelters" or whatever.

At that point they get thousands, if not millions of returns. So then they add their state or county or town to the search terms, and they get a few to a few dozen more specific returns.

That's still a lot, and it's unlikely they are going to send a check or donate online to all of them. There has to be some way to decide which one to support.

At that point they are probably going to be looking for a website or social media page. Who are you, and what are you all about? What real impact or change are you accomplishing?

That process is exactly the same as it is for someone looking for a product. You want to buy a used car so you search "used cars". At that point you may not know if you want a Chevrolet, or Ford or Toyota or whatever. You get a list of used car dealers that are within your search zone, and then you check to see if they have a website and look at what's for sale. There are dozens of bright, shiny cars that fit your basic criteria to pick from on each site. You don't want to visit, much less drive all of them, so you start looking for a way to zero in on just a few.

What happens next?  Well, I don't know about you, but I start looking for the dealer that is going to give me the best value for my dollar. Is their price lower, do they give you a free gas card if you test drive their car, or do they offer a free oil change for a year? I also look at the general premises if they have a picture of their lot or showroom. Does it look clean, organized and at least somewhat permanent?  Have they been in town for a while? Do they have good online reviews?

In short, why should I  pick one car lot over all the rest?

Why would a donor be any different?  There are lots of charities that all focus on the same problem. Their "bright shiny cars" are the stories they tell about who or what they have helped, and 90% of them are going to have good stories, because they really try to do good work.

At that point, two things happen. Maybe one story connects emotionally with the donor more than others, and they just hit the donate button. Those are the "impulse donors". They drop a few bucks and promptly forget about it. Those are "Tom's" donors.

Other visitors do some digging to see how many people have been helped in total and investigate  how much money it takes to help them in a significant way. These can be your long-term supporters.

The latter are probably the people with more money to donate. Nobody misses a single $5 donation even if it is misspent or the charity goes out of business, but if they want to spend $1000 or $10,000 dollars or more, they are going to look under the hood of that bright shiny car. Or maybe they can't afford that much, but they want to send a small donation every payday. They are looking for a connection, not a moment of satisfaction.

And that's where the marketing mindset comes in. The sooner you step out in front and say "We helped change the lives of 100 people for a day at a cost per person of just $10.00/day" the easier it is for the donor to see that $1000 will help one person for more than three months, or all 100 for a day.

Contrast that with the group that says, "You can help more people like Jane. Please give generously". How many more people? What do they really need to help another Jane?  Exactly what is a generous donation? They don't say.

Yes, it does reduce the giving to a dollars-and-cents equation. And yes, the emotional appeal was the catalyst between the donors desire to give and solving your money problem. But the donation was assured by the concrete statement showing the value delivered for the donation. It gives the donor a reason to select your charity to support at a much higher level than just an impulse donation.

Of course, you have to continue to connect with that donor to retain their interest. Maybe through a website, a blog, a newsletter or just by keeping fresh stories on your social media page. But first you have to cultivate the desire for an ongoing relationship.

In the retail world, they call that building brand loyalty. In the nonprofit world, it's donor retention. Whatever you call it, it is all a form of marketing. With all due respect to "Tom" I think you ignore that at your peril.

Need help with your messaging?  Check out my website at http://www.cloudlancerwriting.com