I worked for an organization where 40% of the donors gave 1% of the money. In such a situation, why bother with little gifts. What’s the point if they contribute so little to the overall financial picture?

There are four categories for charitable giving. I believe that each category is equal in importance. Together, these four categories constitute a well-balanced development program for a nonprofit organization.

The four categories for giving are defined by the impact of the gift:

Gifts to Transform: A gift that transforms is a large, one-time gift made for a special purpose. Transformative gifts are essential because they result in something new, from buildings to programs. These contributions often retain a close connection to the donor even after the gift has been made.

Gifts to Preserve: A gift that preserves is made in the form of a permanent endowment. These gifts are also large in amount and therefore limited in number. These gifts are essential because they help to ensure the continued operations of an institution, its facilities, or one of its programs.  Often the donor’s name is attached to the gift for the life of the endowment.

Gifts to Sustain: These are annual gifts and they are essential because of the impact they make on a nonprofit organization’s daily operations and ability to deliver on mission. Sustaining gifts often start at about $1,000, but the giving range varies from place to place. The donor’s satisfaction comes from the knowledge that they are enabling the good work of a nonprofit that represents their philanthropic interests.

Gifts to Participate: These are smaller annual or one-time gifts. Gifts at this level are essential because they provide an invaluable, communal vote of confidence in the mission and work of a nonprofit organization. The satisfaction for donors comes from being “counted in” – they are demonstrating their support for a particular cause.

How does this ecology of giving work within a nonprofit?

• Participatory gifts do provide some financial support, but more importantly, reward your nonprofit by providing community endorsement. Acceptance by the community provides a critical foundation for your credibility and boosts the morale of the entire organization.
• Sustaining gifts represent a circle of friends for your enterprise, a pool of well-meaning donors that believe in you and what you do, and would probably be willing to do more if the right opportunities for deeper involvement were made available.
• Preserving gifts help to provide a secure financial base and ensure the long-term continuity of your organization and its core programs. These gifts provide perpetual support as well as build trust by promising long-term viability.
• Transformative gifts enable you to realize your dreams for increasing your reach and impact. The combination of community endorsement, a broad circle of friendly sustaining donors, and gifts that endow programs and operations create a robust environment from which to seek and raise transformative gifts.

And let’s not forget that some donors will have the ability and desire to move up the ladder of giving – there are many examples of participatory donors eventually becoming sustaining, preserving and transforming donors.

While this giving structure is highly functional there is, most crucially, a moral factor at play: No gift should be taken for granted; every gift comes from the heart; every gift is inherently meaningful.

The point is this: ALL giving is GOOD giving. Every gift makes a difference and deserves to be celebrated.

What do you think?

I am often asked (or at least I fantasize that I am often asked), “Michael, if you had only one piece of advice to give to someone running a nonprofit organization, what would it be?”

To which I reply, “EASY! All you have to do is follow this one simple idea –just do this one thing and keep doing it and do nothing else and you’re golden. That’s all you have to do, this is what it boils down to – one, simple little thing.”

Here it is… The one thing you need to do…

Get up at 5 a.m. and exercise because you’re going to need lots of stamina because you have more things to do than can possibly get done and then have three gallons of coffee and then start working by sending millions of e-mails and then call everyone you know and book meetings with all of them because the work you do is brilliant and important and is changing the world and they need to get involved because you can’t do it without them and IT’LL MAKE THEIR LIVES BETTER AND ANYWAYS WHAT IS LIFE UNLESS YOU ARE DOING THINGS OF GREAT BEAUTY AND WORTH and then take a short break, drink some more coffee and then write gorgeous words of infinite meaning that convey the work of your nonprofit organization and post those words all over the blooming internet and then think and plan and dream and return e-mails and return calls and have bunches of face-to-face meetings where you SPEAK ABOUT GLORIOUS THINGS AND MAYBE RAISE SOME MONEY TO UNDERWRITE YOUR AMAZING PROGRAMS THAT ARE DOING SO MUCH GOOD FOR SO MANY PEOPLE and then go home, watch The Office, feed the dog, enjoy your family, and go to bed.

That’s it folks! The magic formula — the secret’s out — the one thing you need to do every day for nonprofit success and glory. No need to thank me, just go forth and apply.

There is an awful lot of griping about nonprofits these days, and most of it has to do with accusations of runaway proliferation and grossly indecent inefficiencies (“my-my, shocking – you’d NEVER see anything like that in a real business!”).

For just a blessed moment, however, what say you that we give it a rest and instead, appreciate just how freaking fantastic it is that we have a nonprofit sector. And I don’t mean for the important, but boring reason that it plays a vital role in enabling an open and democratic society, blah, blah, blah…

No, what I want to talk about is how everything that is most noble and beautiful about humankind resides within the work of our nation’s nonprofit organizations.

From my admittedly minimal survey of human history (mostly “bang-bang you’re dead”), it strikes me that the creation of the nonprofit sector may be the single most redeeming act of our entire species. That we created a sector whose purpose is to serve the greater good gives one some hope for the primacy of compassion within the human spirit.

Of course, the skeptics beg to differ. “Nonsense!” they proclaim. “The only reason that the nonprofit sector exists is as an alternative to Big Government Soviet-Style Socialism!”  Or… “Harrumph! The Nonprofit sector has no moral base, it’s simply a derivative of an evolutionary mandate to create cooperative structures in order to advance our chances for survival!”

Allow me to respond with a story.

Years ago I heard a presentation given by an elderly woman who was a survivor of the Nazi death camps. One of the main causes of death in the camps was diarrhea. She described how when one of the inmates was afflicted each of the prisoners would contribute a small amount of bread from their starvation rations, so that the person with diarrhea might have a slightly better chance of survival.

Now how are we to understand this story? We could say that people were motivated to give-up their precious portions of bread out of shame, or with the hope that they would be provided for should they take ill. I’m sure there is some truth to such an argument.

But I choose to believe something different (and, I’m sure, closer to the point that the elderly survivor was making). I believe that the best explanation for the extraordinary generosity of the bread donors was simple, human compassion for a fellow human being.  It was impossible for them to stand by and watch someone they knew suffer. They acted out of love.

Call me a crazy, romantic fool if you wish, but I believe that the same compassion, the same love, the same sense of care, respect and responsibility for one another, are what drives much of the day-to-day work of our nonprofit sector.

Transparency, efficiency, program evaluation – these are important organizational elements and nonprofits must perform better in these crucial areas. But these elements are not what make the job worthwhile. Where can you find the heart and soul of nonprofit work? In the hearts and soles of nonprofit workers and volunteers – and in the missions and visions that nonprofits pursue in their ridiculously beautiful dreams for a better world.

Does your shop rely heavily on philanthropic hand-outs – maybe too heavily? Not good,  because major donors today have little sympathy for risky bets. Tell a major prospect that you rely on fundraising for 25% or more of your operating revenue and what they hear is “my Board passes deficit budgets.”

You know and I know that you’re raising funds to support your mission, but from the perspective of many business-minded philanthropists, you’re raising funds to plug holes.

Check out this piece recently posted by the Nieman Journalism Lab at Harvard.

http://www.niemanlab.org/2009/12/are-news-nonprofits-doomed-to-reliance-on-big-gifts-a-study-in-fundraising-%E2%80%94-and-sustainability/

While the article makes the interesting point that nonprofit newspapers may ultimately be more successful than for-profits, that’s not what grabbed me. More relevant is the author’s research which shows that the most sustainable journalism nonprofits had diverse revenue streams. It’s not just that these multiple income-stream journalism nonprofits had more business type income – they were also raising more money from donations! Their counterparts, journalism nonprofits that based their business models on substantial philanthropic support tended to get less from donors than those that could show a more diverse funding base.

In the author’s words…

The trend also suggests a cruel and ironic corollary: The journalism nonprofits that can demonstrate the least dependence on foundations and large gifts may be the most likely to succeed in winning them.

So, if you are in a situation where you are too dependent on fundraising for your survival, what do you do? You can’t wean yourself from philanthropic dependency overnight – but you can develop a plan that 1) Diversifies your income streams, 2) Drops or alters programs that are otherwise clearly maladapted to achieving earned revenues, and 3) sets some benchmarks and includes a timetable.

Share your plan with your donors so that they can invest with confidence knowing that you have identified the issue and have a strategy in place. It’s by showing that you will soon need to raise less dollars that you’ll eventually find yourself raising more dollars.