Donors want more than a party from nonprofits

Published in the March 17, 2006 edition of Columbus Business First

Galas are the most visible fund-raising activity of nonprofits.  Intended as a thank you to donors and a celebration of everything positive about the organization, galas are becoming so popular that major donors can easily have one a week at peak times of the year. 

Before you plan your next gala, I have a suggestion: Ask your major donors what they most want from you. Don’t be surprised if their answer is: “What’s most important to us is not your party but your effort to keep us well-informed of what you are doing and how you are doing financially.”

In a certain sense, a major donor or grantor is in a position very similar to a board member of a nonprofit. They both have committed to the mission, one by joining the board and the other by providing a significant gift.

They both believe there is an effective plan to link money to the nonprofit’s mission, the board by approving the budget and the donor by writing the check. They both need to know the plan is being executed well, the board by regular meetings and reports and the donor by ….  And there may lie a problem: After making the gift, donors may not hear back until they get an invitation to the next fundraiser.

Donors need regular, understandable information to carry out their job to know their generosity is effective and getting a reasonable bang for the buck.

Major donors need financial information that is clearly presented in the context of your community’s needs, your mission to fulfill those needs, your goals and priorities in directing the use of funds, and your assessment and measurement of your achievements. Simply mailing them a newsletter, an annual financial report or a  Form 990 federal tax return doesn’t meet this need. The nonprofit board should already receive information that objectively (and persuasively, of course) lets the board know the organization’s needs, condition and performance. You should share that information with donors. 

Insight for contributors

Informing donors the way you inform your board can bring enormous benefits. Providing that same format, that same document that the board regularly sees will enhance the impression that you are telling it like it is  – no varnish, no spin and no skeletons in the closet.

Individual major donors may not have staffs and they may be the most appreciative of your ability to explain your financial situation in a concise and non-technical manner. And what better proof of effective use of their gift than this regular demonstration that you are an organization that has command of what is going on? 

This idea of full and regular disclosure may make some nonprofits uncomfortable. After all, even in the best of organizations, there are spots that aren’t performing as well as others, so the idea of providing board-level information to donors may strike some as unduly advertising the warts and potentially undermining the donors’ confidence in the nonprofit. 

But remember, donors already believe nonprofits are doing something that no one else has been doing or has been able to do. Donors don’t expect nonprofits to be perfect; they expect them to be competent, committed and careful with donors’ money. Keeping donors informed is the only convincing way to meet these expectations.

Try it with one of your donors. You may find the benefits great enough to set aside your worries. 

Back to the party

If information is more important to donors, you may want to reconsider the rationale for your gala. Does the gala truly raise extra funds and attract new donors or does it instead divert scarce donor time and money to the event? Donors, or the staff representing donors, increasingly see work encroaching on family time, and the evenings that galas occupy can take a steep toll. 

In terms of bang for the buck, a gala may not always be the most effective investment. Because a gala provides benefits like food, drinks and entertainment, a $10,000 table is not fully tax-deductible to the donor. Considering staff time and including expenses, the benefit to the nonprofit may be $7,000 or less. 

If you skipped the gala and asked for a $8,500 check instead, the nonprofit’s net benefit would likely be higher than from the gala table and the donor’s after-tax cost would likely be lower than from buying a table. More benefit, smaller check, one more evening free. This may be a win-win worth considering. 

In the meantime, focus on keeping your donors informed. If you still want to have a party, you and your donors will at least have more to talk about than the food. 

Allen J. Proctor was chief financial officer of Harvard University and is the author of “Linking Mission to Money, Finance for Nonprofit Board Members.” Reach him at  www.proctorconsulting.org

Copyright 2006. Reprinted with permission, Business First of Columbus Inc.