Looking at philanthropy from the other side: a lesson for chief executives?

In my twenty years as CEO of three very different charities, I met and worked with many major donors – both individuals and those representing organisations. I believed in the causes I worked for and always enjoyed working with my fundraising colleagues to bring new donors on board and keep the support of those who had already backed us. I believed I could communicate the cause, the need and what they could do to help us address it.

Looking back, we succeeded sometimes; others we didn’t. What I didn’t think about enough were the potential donors who we didn’t even get to have a dialogue with.

The CEO can of course play a very important part in bringing in new donors. But to do that, you’ve got to get them in front of you. And for every time that happens, how many times don’t we get that far and not even know it?

My recent experience of working for philanthropists suggests that this happens more often than we realise. But it also shows what we can do about it through what we already require of our programme, finance and communication staff and the information we make available on our websites – including annual reports, reviews and other publications.

Research released last month from the Beacon Collective showed that donations by the rich are falling, down 12% over the past five years compared with a 4% drop among the least well-off. But that donors complained about often not being asked to donate a second or a third time, and the research concluded that Britain doesn’t have a developed infrastructure to encourage donations. So what role could CEOs play in combatting this within their own organisations?

I was recently asked by two would-be major donors to help them develop planned giving programmes. After teasing out what they believed in, most cared about, how they felt about addressing causes and symptoms, and where they stood on that continuum from campaigning, advocacy, capacity building through to direct service delivery – itself a process of sensitive exploration and education – I went away to do my homework. In this case the focus was on various elements of UK poverty and exclusion, but what I learnt is just as applicable in any sector. While every donor will be different, I identified some of those issues that arose which resonate with my wider experience, where performance was patchy and which I think organisations ignore at their peril.

Our decision making, even in terms of who to reach out and open a dialogue with, was made easier than it might have been because so many charities didn’t cover the right things in the right way in what they published or readily made available to prospective donors. That meant we just didn’t engage; we simply looked elsewhere. It is the CEOs, programme and finance directors, and the communicators – not the fundraisers – who can do the most to make their organisations more attractive to donors.

By far the biggest issue that excluded any consideration of support was the lack of clarity as to what the organisation had actually achieved. All told us what they do and how well they do it; many told us how many people they did it to, and how many lives they had “touched”.

Many organisations now produce so called “impact reports” alongside the traditional annual report and accounts, but many of these were actually more like traditional PR promotional materials, with some numbers and percentages thrown in, than real qualitative and quantitative assessments.

All too often total numbers reached consisted of adding together people benefitting from everything from one meal or a night’s shelter right through to an education or a new family. And it was often- and unrealistically implied that all improvement taking place resulted from the organisation’s activities. Proper evaluation – especially externally conducted – is demanding and expensive; an organisation can’t do it on all its activities every year. But it was striking how rare it was to publish proper analysis or “warts and all” reviews, whether internal or external.

I was looking to understand a theory of change for the activities pursued; then to gain an understanding of what actually changed, what the contributory factors were and what role the organisation may have played. I seldom found it.

Where the organisation seemed to be taking an evidence-based approach to some of their work, publishing internal and external reviews in full, it was much easier to recognise resource limitations and trust their judgement on other parts.

One other area that many organisations were not clear on was the relationship between voluntary income/activity and that which is paid for by the state. The growth of many domestic and international charities has been built on increased public sector contracts. Ratios of 80/20 between funds from official sources and charitable giving are not uncommon. That makes it hard for a philanthropist to see how they are adding significant value to official funding. It is of course clear in the annual accounts where the money comes from – and it is possible through these to tease out more meaningful real fundraising costs than total organisational income divided by fundraising costs – but how the different sources fit together in developing and financing programmes and covering overheads is less easy to find out.

Yet, many donors don’t want to be subsidising public services; they want to pay for something that the state doesn’t. Understanding just what difference a charitable donation will make amongst tens of millions of pounds of national and local government contracts would make a charity more attractive to philanthropists. This doesn’t challenge collaboration with the state, but it does challenge the lack of clarity and value added.

Many philanthropists are bewildered by the range of charities working in the same space. Many of them include in their values a commitment to partnership, but few of the many annual reports I read clearly report on how organisations actually work together. It is more common to claim or at least imply sole responsibility.

It was a breath of fresh air to read about those charities who described their collaboration with other NGOs, public and private sector bodies, giving credit where due and even recognising that sometimes forces within the government or civil service might have welcomed change rather than been forced into it solely by the charity’s good works. It was also very positive to read about organisations that recognised the linkage between the issue they worked on and the wider context of people’s lives, seeing for example the link between secure housing and mental health, or youth crime and family life and showing how they were working with other organisations on these complex realities.

While it is easy to explain the value of spending properly on management costs and salaries, and many donors recognise this, it’s common knowledge how differently charities interpret what constitutes management costs and what are treated as programming. We were drawn to those who explained their approach upfront and made no apologies for it. We were also struck by the significant variation in senior salaries that seemed to bear little relationship to the scale or complexity of the organisation.

There were a few organisations, worthy in many other ways, where the CEO salary seemed so out of kilter with the size of the organisation, their external peers or other senior staff in their own organisation that they went straight into the reject pile, and that’s of course without ever knowing that they were even being considered. One salary may be a very small part of an organisation’s cost base, but it can say a lot more about its real culture than a list of values in corporate documents.

These and the other areas that stood out to me are not new to fundraisers and they’ve often been written about by advisors. But how consistently are they being thought about by CEOs and the whole top teams? My experience suggests not as often as they need to be.