Choosing Between Revenue From Members and Donors
OK, now we are wading into touchy territory—a discussion on the relative value of members vs. donors in a nonprofit.
The reason this topic is so interesting to me is because I see so many nonprofits choosing between them, separating them into little fiefdoms, thinking about them as unrelated functions and, generally, not having a holistic view of the whole thing.
Take a very large charity that has a huge recreational facility. Its sources of revenue drop into four large categories: donations, member fees, facility rental and grants.
Forget about facility rental and grants, for the sake of developing these thoughts, and focus on donations and member fees. This is where it gets interesting.
This agency hires two people:
- A director of membership services who is solely responsible for getting, keeping and satisfying members.
- A development director who is solely responsible to get, keep and satisfy donors so funds will be raised to run the place. Major gifts is usually buried in this system.
I have found that the membership person hardly knows anything about fundraising, and if he does he really doesn't (really, really) care about it. And the development person, while giving some lip service to the need to get members, doesn't really care about those metrics, goals or needs.
So we have these two silos where a great deal of opportunity and revenue are lost.
I know for a fact that buried in the donor file are hundreds of potential members. And hidden away in the member roster are some really good donors. In fact, in one file, where we were able to do the analysis we do, we found some really high-value major donors who were busy giving their money to other charities because this one, apparently, didn't need any! Whew. Makes me sweat!
Here's another problem. We have carefully trained members to believe their member fees are all we need from them. In fact, the manager of that part of the charity, who has the facility that members use, has carefully done his cost analysis to figure out what the member fee should be. And while the exercise is good, because he does need to cover that cost, he is not sitting at the bigger table having his brain pumped full of the other costs to run the charity or the donor value resident in those members.
So, logically and reasonably, he is not thinking about this.
The development director is so consumed with raising money that it's difficult to see that there is a good deal of funds sitting right there with the members. Plus, every time she has tried to enter that sacred place (the membership one) she is nicely escorted out the door, since "it is really none of her business."
Shame on leadership for allowing the silos to continue!
Meanwhile, the donor, who really has not been properly educated right from the start of the relationship, thinks she is doing the right thing by the charity and actually gets upset when she is approached for more. Little does she know how much the charity really needs her! This is so very, very sad.
Had leadership designed the right system in the beginning, donors and members would get the whole picture right from the start of the relationship, the membership person and the development director would be collaborating, and the entire objective would be about getting maximum revenue in the door. It would truly be a happy and productive place, where the financial needs of the charity are fully met, the employees are working together toward a common objective, and the donors are happy and fulfilled.
OK, so you are reading this and saying: "Yup, understand what you are saying, Richard. Got it. But we don't have that problem here. We have it wired really tight." Hmmm ... I've heard that before. In fact, I have a situation right now where when we "looked under the covers," we found $1 million of lost revenue—$1 million!
When I talk to the managers involved about this, they are so entrenched in maintaining their systems that I can't get them to budge. And I can't get the manager of those managers to engage. It is truly unbelievable!
So then I sit back and reflect on the whole thing. What is going on here? I understand how we got to this place. But how is it maintained year after year even when supposedly enlightened professionals are at the helm?
The only thing I can conclude is that it is either protectionism (got to keep MY stuff) or arrogance or a combination of both. It's not about intelligence-these are smart and capable folks!
I am writing about this today because Jeff and I want to do our part in bringing this situation to the light of day. Why? So nonprofits will be stronger and healthier. And so major gifts programs, our specialty, will be more effective.
Do I really think we need to make a choice between members and donors? Nope. We just need to manage both of the programs better and make sure they are treated in a holistic and integrated manner.
If you’re hanging with Richard it won’t be long before you’ll be laughing.
He always finds something funny in everything. But when the conversation is about people, their money and giving, you’ll find a deeply caring counselor who helps donors fulfill their passions and interests. Richard believes that successful major-gift fundraising is not fundamentally about securing revenue for good causes. Instead it is about helping donors express who they are through their giving. The Connections blog will provide practical information on how to do this successfully. Richard has more than 30 years of nonprofit leadership and fundraising experience, and is founding partner of the Veritus Group.