Episode 236: Crisis Fundraising - How to Best Raise Money During an Organizational Challenge
Welcome to another edition of Around with Randall, your weekly podcast for making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett.
It's a great day here on this edition of around with Randall. And I'd like to say thank you for joining me. Not only this episode, but any one of the ones that have come before or after. And today we delve into a new subject in our 20 minute classroom. We talk about the contradiction. Crisis fundraising versus fundraising during a crisis that leads to outcomes.
And you may think, well, aren't those the same thing? We'll get into that. They're not. We live currently with a lot of nonprofits who are struggling, who are trying to figure out what to do about some of the financial challenges, part of that pandemic, Covid post that some of that is just changing demographics, some of that is changing philanthropy that's occurring across the industry, which we've talked about.
The 5% of our donors making up 95% of the dollars. And we've seen less people make gifts. So there's a shift going on. Some places maybe you're just aren't as well run as others. There's a lot of factors that go into crisis. I'm going to try to stay away from crisis, like what we talked about in several episodes ago around crisis fundraising, like as in the fires in Los Angeles.
I'm talking about crisis, where all of a sudden, probably most likely financial. The organization has got to make some decisions. And the question becomes how you market those, talk about those and fundraise from them. What am I talking about? Well, let me just give you a couple of examples in the last two weeks, in some cases month. In some cases six months, the following hospitals either announced or did close Mount Sinai Beth Israel in New York City.
Rockledge Regional Medical Center in Rockledge, Florida. Christus Santa Rosa Hospital in San Antonio, Texas. We look at universities, not the big ones yet, but we've seen private, smaller schools close. Pittsburgh Technical College in Pittsburgh in Oakland, Pennsylvania. Excuse me. Pennsylvania closed all of that university. By the way, these are all organizations that have been in existence for more than 100 years.
Olivet University in Mill Valley, California. Social and community organizations like the San Francisco Concert Conservation Corps, 42 years of existence San Francisco close friends of the Douglas Library in Hebron, Connecticut, another organization for 40 years, closed. When we look at maybe industry wide, the two probably most monitored or at least industry wide data sets is in universities and in health care and hospitals.
According to Becker's, 37% of the hospitals are currently running with a negative net margin. And when we look at universities, according to S&P global, 50% of the private schools are operating with a negative margin cry. Crisis is existing in lots of different ways. I just gave you a list of places that have closed, maybe inside. Let's take for an example a university.
It's the School of Arts and Sciences that tends to be closing or drama in a hospital. Maybe it's closing obstetrics or a service area or service unit in social service. It's pulling back on the amount of value that the organization provides, the greater community. Crisis comes in many different ways, and because donors choose to give to not only the organization, but most often not in larger dollar figures, unrestricted dollars are giving to specific programs or things within the organization.
What we find out is, is that maybe the organizations in crisis, maybe the departments in crisis, maybe a particular area is in crisis. How do we deal with this? I learned long ago, watched it in a couple of ups and downs in our economic lives that during the Great Recession, so, oh 8 to 12, seven, 12, maybe 2012, certainly during the pandemic, that when we talk about crisis fundraising, I've always believed that an organization has one shot at a crisis, i.e., if we don't receive the funding we're looking for now, we will have to make either enormous adjustments and or we're going to close.
And that's not a guarantee. That's just you got one shot. There may be a situation where you announce that, and then nobody wants to give you money because you don't want to put it down a hole. That doesn't end. So what are we talking about then crisis occurs. But what we want to talk about is about how donors are affected by it, and the importance that leadership has in not only crafting the right messaging in the moment, but creating a long term messaging and relationship building process to engender philanthropy.
Beyond that, one moment. And this may be very practical in the very end about things you can say and do when you're having conversations with. We're really struggling to we want to keep you involved and we want to keep you hopefully giving and doing so in a meaningful way. The leadership dilemma is, is that you are fighting the crisis at the moment, and we're trying to stick with financial.
The moment, the revenue, that's unpredictable. Maybe it's government funding. In the world we live in, and there could be a challenge there. But there's not only enough financial urgency, there's an emotional urgency that comes from this process, but at the same time, donors, sophisticated ones, ones that you want larger sums of money for are not just looking for how are you going to solve this particular crisis?
What they're looking for is how are you going to solve the overall problem? So let me give you an example. I'm working with a nonprofit organization right now, and their strategic planning and the conversation was stemming around, we need to raise more dollars, more philanthropy. And what I asked of the board of the task force is kind of leading us into this strategic planning session wasn't, well, how do you want to do that?
It was what is your goal to raise more money? Or is it to bring a stronger sense of financial stability and growth to the organization over time? And they all just looked at me. So I added one more point. Sometimes the broader perspective is more important. Certainly philanthropy can be a part of creating financial stability. But financial stability also probably lends itself to the organization making some adjustments, maybe their expenses, maybe there's program changes, maybe we're going to change the way we do our business.
But philanthropy isn't going to just solve that problem as much as they want. The organization wants them to. They're going to have to have a larger, more robust conversation, which gets us to the fact that what we're really talking about in crisis is not only what we're doing now, but what's the strategy coming out of it. How are we going to make change?
And this is where leadership sets the tone for both short and long term adjustment. And most importantly, building trust with donors. So let's kind of begin to build into what we're talking about in terms of theory and example. And then we'll get into the tactical. As an organization begins to see its financial future shuddering just a little bit shaky, not quite sure what to do.
Often we see the organizations say, well, we're just going to cut expenses and cut our way out of it. I've never seen that ever work long term. You just can't cut expenses. You're going to have to make changes. And what that does when there's a realization that the changes are coming. And I deal with this from a strategic planning perspective, or an audit slash assessment slash, you know, development review of a fundraising operation.
Say, look, here's some things you can do. The same emotional state exists. There's fear. There's urgency, there's parallelization at times because people aren't sure what to do. And in today's world, where we have an immense amount of social media where people can tweet or X or whatever they call it, or put out information and emails and other things, they can change the facts to make it worse, before an organization ever has a chance to react.
And thus the leadership has to be involved because chaos, fear, or parallelization drive most of the challenges that are coming, or at least what can be done about them. Donors don't give to those things. Philanthropists aren't interested in that. Because what that sounds like is it becomes an ATM syndrome, so to speak, i.e. donors are only giving because or you're asking because there's a panic or that it's really shallow.
It's a, you know, one time gift or there's not the trust that's necessary to indicate or to build into these kind of opportunities. What we know is based on some data from bloom, Boomerang, or is, is that particularly in Covid, we saw that these crisis moments will generate some money, but it's like one time gifts and the retention rate is incredibly low.
But yet when we transition to stewardship to strategy, what the organization is going to do overall once we get over this hurdle, it's not a crisis in just this moment. We're going to change how we do business. We see retention rates double. Organizations, all too often from their executive suite to their boards, only want to deal in this moment.
Philanthropy, particularly if there's philanthropy involved in the solution, meaning we need to raise more money, has to be at the table saying we need an out. What are we doing coming out of this particular moment in time, which gets us into the messaging? And this is from the leadership perspective as well as the gift officers. And we start shifting into that tactical that we aim for.
In the back half of every one of these episodes of A round with Randall, crisis management in terms of philanthropy outcomes or philanthropy efforts, or trying to solve the problem, has to be different than what I tend to hear most often that the situation's desperate, that this is a lifeline. We won't survive. Who wants to give money to those things?
If I had $1 million and an organization that I loved came to me and they were in financial distress for a myriad of different options or reasons and said, well, my gosh, we're desperate because we need your money is a lifeline because we won't survive. I'd say, well, I'm not giving you $1 million because you like flushing it down the toilet.
And yet that's the natural reaction. Think about desperate lifeline won't survive. And juxtapose it. Compare it to this. What happens if the organization positioned itself to say you're helping us continue to serve more people faster and more safely as we go through this challenge? Or how about gifts that will come in accelerate our mission during this critical time?
What we need to do is shift our conversation. So at the leadership level, it's about we're going to continue our mission. We are willing to make adjustments, but the philanthropy that we need is enhancing us to do what we need to do. As we make these changes. From a gift officer perspective, you're sitting in front of somebody. Think about now the individual tactical thought process or verbiage language.
You say things like or hear things like, we need the money now. We need help now. We can't do this alone. We're at risk. I'm not sure those are all that positive. Think about it. If we change that conversation by saying things like, you're helping us to continue advance the mission as we make adjustments together, we are expanding our impact while we make changes to ensure that we're here forever.
We're responding to these challenges with strength, and your money is helping us to do that. The messaging at the top is about the organization is continuing, and we are looking to make some adjustments, but we are continuing to serve that mission and accelerate the changes that will allow us to, to grow to, to be what we should be individually.
It's not about begging, which we talk about kind of at a base level of never doing about still investment, partnership, framing as opposed to desperate desperation framing.
So if we change our vernacular and the organization internally makes changes, so there's some long term planning. And although philanthropy maybe it's table, we don't control that the board and the CEO. But you can push hey what are we doing in six months as we come out of this? Maybe a question that should be asked, what's how are we going to communicate that?
Because that leads us into the messaging and the connection. After this bump on the road. And that's actually where we get into stewardship, where we get into messaging in a way that says we're doing all the right things, and we're looking to continue and want your engagement leaders, philanthropic and otherwise. But in our case, philanthropic leaders should start framing about the future after the crisis.
If you can't talk about what's going to happen after six months, how are you going to attract people to invest in you? That's transactional on your part, not theirs. And if you're already transactional, they're never going to become transformational donors. That is. So think about the verbiage and the thought process of today. Support helps us respond to this moment in time, but we're building on for what comes next.
We're and we're making changes along the way. And so your plan coming out of this, if the goal was we need to raise $600,000 in a very quick time frame to ensure the particular program, the particular area, the organization, whatever it is. Then, while philanthropy is out driving those conversations and we've changed it to being more positive and more forward thinking, and we're engaging high level philanthropy, the philanthropy, office development, office furniture, whatever has to be messaging as soon as this process begins, that stewardship is in instantaneously sought after and engaged, that we are immediately stewarding donors who gave to this.
And I kind of break this apart into three areas. One is, is that you're doing some kind of immediate 30 day impact updating not only 30 days from the gift, but every 30 days. Hey, here's where we're at, and we're making these changes, and we feel good about the fact that we are going to evolve out of this 90 day donor briefings, having them via zoom.
And, by the way, have a client who has gone through an immense merger, and it's caused a lot of consternation in smaller community about the fact that things are changing, not exactly parallel in terms of the circumstances, but they have done an awesome job at having these 90 day donor briefings. They are constantly putting this new CEO, the local leader, the local CFO, the CFO from the large overreaching organization into board meetings, constantly into community groups to say, let me tell you exactly what we're doing.
And what's happening is, is that in that case, much like there would be if there was a crisis, there's trust built. Be honest. This is what we're doing. And then having some type of evolving six month evaluation report of what's next, what's next? Bring people in to a small gathering and say, I want to share with you what our strategy is, what we're trying to attempt to do, that when we think about the broader strategic vision.
It doesn't stop during the crisis. It adjusts and that we need to talk about it from that perspective and that stewarding, if done correctly, crisis can lead into strategic momentum, meaning we're moving forward much more quickly with the changes we probably should have made a while ago. All of this is to say, is, is that there should be some internal process.
As a part of this, the CEO needs to participate very heavily in the communication. If they're behind a door and nobody ever sees them. And I would say this is also true of other executives, but the CEO carries the mission with them when they walk in the room. That's just the way it is as a nonprofit CEO. If they're not actively involved in the post crisis, post challenge donor briefings and personalized thank you's, and these 30 and 90 day updates and briefings, then there is a piece missing that's going to be hard to overcome.
That might be an interim leader, that might be the current leader, that might be a board chair who's supporting the CEO. You got to get the CEO involved and that the board is active, engaged not only in the thank you process, but in answering donor questions. The more people you have all saying the same thing, singing the same tune, here was the plan.
Here's the problem. Here's how we're changing. Now you can build into deeper, more meaningful donor retention. My money, the example million dollars a few minutes ago and we talked about it from the perspective of we're going to be desperate. Your lifeline. We won't survive without this money. Think about it. If I gave that money and all of a sudden, every 30 days, I'm getting an update.
We're doing great. Let me tell you what we're doing. Maybe I'll invest more money. Maybe I'll be more philanthropic. If they have everything buttoned up, changed, improved. This is why you need that CEO, the board and everybody on alignment so that you can get to framing this post crisis, post moment communication, recognizing those that made the difference in the network you helped us get through this challenge.
You are helping us look into the future. During a moment when there was a little bit about people, you stepped up in this critical moment, and we're now inviting you to help us shape what the future's going to look like based on some of the work that we've done because of you. During this, whatever that is, you were able to help us by doing this, and now we want to continue with that opportunity.
All this is to say is there's a lot of tactics and verbiage today as we have either small parts or large organizations, but small parts of organization, small programs, whatever you have to frame this as, it's yes, there's a challenge. Yes, we're going to be honest, but it's not the end of the world because we've seen the wolves close the place.
What we're talking about is resetting, needing some additional dollars to do so with the mission being pure and a new direction of us, how to solve that, and being able to communicate that with donors and the community so that you feel and they feel as if you're moving forward internally and externally. That's the way you handle crisis. That's the way you handle philanthropy in those moments.
And again, it doesn't have to be the whole organization. We part of it particular service area or college or whatever has a challenge. Here's what we're going to do. Donors might, given crisis. They're more likely to give in crisis. If you think about it strategically and are willing to admit there's a challenge and make changes along the way.
And in doing so, you shift from an emergency to a strategy that builds out toward the future. All too often, organizations that just throw their hands up and say, if we don't get the money, we're closing pretty much end up closing. Those that come out and say, we have a challenge and we're going to adjust our operational internal direction or things that we do every day to meet the strategic vision and the mission of the organization are the ones that survive.
Help your organization be positive, looking for strategy, and not just chaotically looking for a savior. You won't find it, but the saviors in the strategy that comes out of the chaos. Don't forget to check out the blocks at Hallett Philanthropy two per week. And if you'd like, email me a podcast. Hallett philanthropy.com. Today's episode or conversation classroom 20 minutes of issue and challenge and hopefully some tactical solutions is all about moments where there's a lot of ups and downs and we have that.
We coming out of Covid, we've got some political unrest, we've got some economics ups and downs. We're trying to figure out our governments changing. All this to say is, is that there's a lot of ups and downs, crisis. How you deal with it's important because the better you deal with it, the more you live up to what I always talk about.
Some people make things happen. Some people will watch things happen. And then there are those who wondered what happened. It's the people who make things happen, who have strategy and long term, the view, vision. They're the ones who are so critical because they set the agenda and they make it possible for the organizations and the people who are wondering what happened to exist, to see hope, to grow, for the missions of organizations, to help them.
What I'm hoping for every day when I do these podcast, when you listen, is that you take tactical things, and today it's to slow down a little bit, realize that strategy still exists if there's a challenge and lean into that strategy with the adjustments needing to be made to communicate with your donors, because that's how you help people in organizations who are wondering what happened so you can be someone who does make it happen.
I'll look forward to seeing you the next time, right back here on the next edition of around with Randall. Don't forget, make it a great day.