Episode 264: Counting Planned Gifts for MGO's: Incentives that Drive the Correct Behaviors
As I like to say, it's another beautiful day in the neighborhood right here on this edition of around with Randall. Thank you for taking a few minutes of your time as we talk a little bit. I didn't intend it as a part one and part two, but today, maybe part two of a mini conversation around plain giving. Last time we talked about plan giving in.
Why now is the time to have these conversations. Today I want to talk about how we incentivize gift officers to really begin to have the appropriate conversations, including plain giving in our discussions with potential donors. You might remember last time we spent a lot of time talking about the great wealth transfer that's going to be occurring. That is the largest in history of mankind here in the United States over the next 25 or 30 years, that people don't tend to want to, particularly the larger, and want to leave every dollar to their children.
And the people want to make a difference. And this is how they get to transformational gift opportunities. But let's shift the focus instead of looking outside of organization, let's look inside. This was all stemming from a conversation I had after an email from Ann in Florida who asked about this question. As they build their program, how do I or how do she incentivize the gift officers to put more emphasis in plain giving conversations?
Because there are challenges with this one. So, let's start at the top. I'm not advocating. Let me repeat that. I am not advocating massive changes with Facebook. The Facebook is the written rules of accounting and what they tell us about recognizing plain gifts. And you probably know this, is that if the gift can be rescinded, changed, i.e. or e.g. maybe it's better we put it, for example, a bequest has you listed in it as a beneficiary.
They could change that beneficiary, which means that that gift is not complete accounting through its rules fast, but does not allow us, from an accounting perspective, to go ahead and remember or to memorialize or complete that gift in the accounting software so it doesn't show up on the books. So you might remember in the previous podcast talking about the difference between accounting and accounting, and what we're talking about today is counting.
That was episode 241, in case you want to go back and listen about the differences between the two. We're talking about counting. I'm not here to try to figure out how to change rules that I don't think can be changed. Nor am I advocating that we have to figure out how to do that. The key here is, is how do we incentivize by using counting in the CRM, not accounting, not finance records, a way to do so.
And so we might start with why this is important. We know human nature. This isn't just about gift officers. This is about the way I raise our children or my wife and I raised children. How I was raised, how life is, is, is that we tend to do the things that are incentivized. People do what they're rewarded for, and there's lots of different kinds of rewards from the joy of an amazing marriage that I have with my wife.
I want to keep that hope. She just keeps me. But that's one or the you practice something, you practice something, you practice something. I think about my children in their, their sports or, or academics and they practice something and they get it right and they're like, wow, that was really cool. And what are they likely to do? Well, whatever the next thing is, is to practice, practice, practice because it felt good when you step on a scale and maybe you've lost some weight because you were walking, you were eating less.
You were you tracking your food. That's an incentive to keep doing that. The world is made up of people who are being incentivized all the time. By the way, the largest one in terms of macro is our tax code. It incentivizes certain behavior. You have a child, you get another deduction. That's what you study in tax classes in law school is not just the tax piece, but what was the purpose of the incentive to do so.
So incentives are important. And research has taught us a couple thoughts about this. What's thought of is the expectancy theory that if we incentivize behavior with certain rewards or certain, positive enforcements in this process, that people expectedly will go ahead and do those things. That's just from, the author. Vroom. And some of this research that was done that he did many years ago.
There's also this idea of what's called goal setting research that when we put goals down in front of people, the right goals, or I guess maybe even the wrong goals, they tend to do the activities that increases behavior to meet those goals. And so that's research by Locke and Larson. This is all about human nature. And so what I'd like to do is take what's in human nature.
And actually use it to our advantage in this gets into the core problem. If gift officers naturally do like human beings always do, what's incentivized, we're incentivizing the wrong things. If we want to elevate planned giving conversations, because what do we incentivize? I'll give you the big I think it's six. How many calls do you make? How many visits to make, how many people to bring on?
How many cultivation visits or moves did you have? How many assets you make? How many gifts did you close? And you put dollar figures with the last two?
Well, if accounting through fast be rules doesn't allow us to count gifts that can be rescinded can be changed, then we're incentivizing cash or pledges, because pledges can be recorded in the year in which that pledge comes in. And then the cash comes in and paid off over time, but you get the credit for it in the first year of the total amount of the pledge, we're incentivizing cash.
And yet all the money, the assets is what we talked about in this last episode. Then the 85 to 90% of the assets in the world are behind a marketable wall. They're not in cash, which means if you're not elevating plain giving conversations, you're not even accessing a majority of the wealth in the United States. Or, by the way, anywhere else in the world, which means we're left with, as we've discussed, talked about a number of times the last couple of years, a lot of transactional giving.
We're trying to get to more transformational giving. The point is, is that we have to find different metrics, incentives to do so. So this gets into our tactical piece, which I try to get to throughout the back half of every episode. How do we do this? It's actually really easy, but you got to have some thought. You've got to have the right conversations with finance, and you have to have the right willingness to create a different kind of metric system.
Or maybe it's additive. You're adding more metrics. We still want cash. I'm okay with that. But if that's all we're seeking, then we're leaving all the options, the assets off the table. So let's start at the top. First option. There are five options that I would recommend. The first is that we're counting not accounting counting the gift.
The planned gift at face value. And this one is probably throwing some people right off the road. If you're driving or falling out of your chair at your desk, because we're always taught in the CRM, whatever CRM you use, not to put a dollar figure, or if I've seen a couple places and I actually did this, put a dollar no matter what I'm advocating is why don't we put the face value in?
If somebody has the nonprofit or nonprofit in for a half $1 million gift in their state, put it in for a half $1 million, put it in the record, because if it's in there, you can run a report on it. If you run the report on it, then the gift officer can receive credit for it. How do we do this?
Well, that's where it gets really tricky because you can't do this by a verbal comment from a donor. I put you in half $1 million. Now we gotta have. And if you do this one, we actually probably need more than just an intention or a single page. A I intend to leave you in my state and now you remember the legacy society.
We probably need a copy of the trust or will that shows that value. And this makes this one really challenging, because many donors don't want to share that kind of level of information. Some do, but many don't. Even the single page in which maybe your nonprofits mentioned, but if we could do this and show the documentation, what we get is incentivization of the activity and gift officers, if they could count, it might do more of it.
So, the first is recorded at face value. The second is what I call a dual accounting or dual accounting.
Counted when it comes in and count it when the intention comes in and counted the second time. Yes, you heard me a second time. When the money comes in, why would we ever do this? Because this tends to be what happens, especially with the ten year being about 1819 months for major gift officers. They get the estate gift.
It's maybe not given even a dollar figure. And then all of a sudden they leave a new gift. Officer comes in, they take over the portfolio, see the plan gift in the records, and don't do anything with it because they know they can't get any credit for it. So we lose stewardship opportunity. And this is most likely true with smaller shops where you don't have a stewardship office person.
Who would be the bridge in that conversation. Count it both times, counted for half a million. When it comes in the intention, count it for half a million because somebody now they have to actually steward it when the money's brought in. Now, what are the challenges here? Because this is promoting both acquisition and long term stewardship. Good things.
It requires documentation on both sides. You, like we said at the first, have to have something that's just more than the donors word. And number two, we have to have proof that the second gift officer, if that's example or third or fourth whomever actually did something, there are actions to show they actually supported the guest. This requires a clear method of credit at the beginning when we're doing metrics and a clear accounting.
And I don't mean by financial, but accounting in the CRM of the work done. But this is really a good model for sustaining long term donor engagement, as well as incentivizing gift officers to both bring those conversations to bear. And number two, to keep them alive through stewardship.
Number three, it's kind of a parallel to number one, but instead of using the face value. So we said the 500,000, you get a copy of their will. That's what it states. It's a it's a specific intent with a specific gift that's mentioned your primary. So we talked about last time a primary donor or primary a beneficiary. Well there are ways of what is thought of as discounting the value.
And you can do that by their age. So what actuarial science teaches is that that there are standard, ages in which we look at both male and female, they're likely deaths. It's an average. And you can discount it backwards. So a $500,000 gift for a 65 year old maybe only valued it instead of 500 and 310,000, but it may be the full 500,000 if they're 85, because the actuarial science would say they should have mathematically died when they were 76 or 75, depending on male, female, and some other factors.
The point is, is that this is something finance is more willing to listen to. Even though this isn't about accounting, this is about counting. The downside is, is it has two major factors. Number one is it's tough to administer. You gotta have someone who knows how to do actuarial science. Actually, you can do it on your computer and Google it.
But somebody has to be able to do it. And the second thing is, is, is this does that actually incentivize a gift? Officer, if they know that they're working with a 58 year old, you know, just sold their company, multi-million dollar donor, are they willing to do this if they know and figure it out fairly quickly, although they may not understand actuarial science discounting, but they're not going to get full credit and that they can understand.
So those are two issues on the cons. But this is an opportunity. If you have a bigger or more robust or more sophisticated finance office who's looking at this going, you can't do this. Well, here's let's talk about this. And if they have the ability to have what I would think of as analytical rigor to be able to capture those dollar figures and then discount them appropriately.
The fourth is to, in this, maybe the easiest to execute is to offer metrics around behavioral credit, meaning more counting activity, not necessarily the dollars. How many documented intentions did a gift officer bring in? What was the goal? How many? How many conversations were brought up that can be documented? We're not even talking about getting an intention. How about the number of people that became qualified as plan giving options through their past, giving history, and then maybe an additional conversation?
How many stewardship? Because we talked about the situation in which potentially you would have a gift officer. They get the estate gift and then they leave in the next hour. You incentivizing stewardship? The pros on this one. It's pretty simple and it's actually about activity. We have more control over that. But the con is that it may under-recognized the gift officers who are securing larger gifts because you're not rewarding them by the dollar figure.
And at the end of the day, even though I think we need more activity goals and dollar goals, there's still a dollar goal. Because when ROI or return on investment, we get paid X plus benefits. We should be delivering X, whatever that is. Times depending on number of years two, three, five, ten times. We can't do that if you have a dollar figure.
So this is about organizations who want to really push the activity pieces they're willing to to let the dollars go, but they're going to really push on the activity that can be done to move major gifts forward. That plan gets forward. The last option five, is just combining any one of these other four options. You know, could you put the dollar figures with activity, with the activity, with the discounting?
The answer is yes. So, I'd be remiss if I didn't have an option that allowed for any one of the four to be combined or heck, three of the four. I mean, it's kind of hard to do face value and discounting in the same, metric because the numbers are going to be different, but you can have 3 or 4.
There's lots of different ways of looking at it. But the thing I want to impress upon everybody is, is that, number one, this can't be based on verbalization of intent. This is not verbal intentions. This is documented and even probably more so, the next step of not only a form, but of a copy of the of the documentation in their estate planning.
Number two is, is that if you if you start changing it one year to the next year, gift off should get frustrated. If you're going to do this, set it in stone. Make the organizational wide effort and bring all the players to the table. Make it spend some time figuring out how to do it correctly that fits your culture, but don't change it out year after year because that's when people get frustrated.
Make sure that your executive leadership as well as finance are on board or at least knowledgeable about this, which may cause some challenges. And it doesn't like this to be candid, in most places, but that's where a conversation can end. Explaining why this is important, which was the previous episode, and finally making sure that it's very clear in writing and everybody understands the rules of the game.
If you do those things and just broach this subject in some way, shape or form, we could have dramatic effect on changing the incentive of our gift officers to the place where there's the most amount of money to get to more transformational gifts. Yes, they're delayed. Yes, that affects strategic planning and execution. But at the end of the day, that's going to allow us the opportunity to maximize philanthropy.
And that's really what our job is. That's our responsibility, not just the organization, but to our donors to give them a chance to make the biggest difference possible in a way, through plain giving that they may not even understand or think about. So if you piece last time, why now is the time and this time how we incentivize it, you can dramatically change your plan, giving efforts without a great deal of money in this process, just by making it available to your donors and making it worthwhile for your gift officers to motivate everyone to do more transformational giving through their states.
That is a worthy strategic thought for any organization to build long state, long standing sustainability for their organization. Don't forget to check out the blogs and how it's going to be two per week. 90-seconds really surprised how many people are reading, to be candid, but there's just an opportunity for you to have something on a Tuesday or Thursday to think about Halletphilanthropy.com backslash blogs and an RSS feed right to your inbox.
And if you'd like to like today within Florida, reach out to me and give me something to think about. Or you disagree with something. When I've got a great topic or a question podcast, it helps to be.com. I appreciate what you do. My hope is, is that you do as well and realize the impact that you're making because at the end of the day, that's the definition.
Definition of philanthropy, love of mankind, love humankind. It isn't money. That brings me to my all time favorite saying, which I conclude every podcast with in nearly every series of remarks that I make. Some people make things happen, some people watch things happen, then there are those who wondered what happened. We are people. You're someone. The donors, the board, the executive team, whomever you are and whoever you partner with on a daily basis are people who make things happen for the things in the places in our community that are wondering what happened, filling that hole between free enterprise, who doesn't want to do certain things, doesn't make money in government, who's not very efficient.
So that's the way to spend a career in helping others. I can't imagine a better way to wake up every morning saying, I am making a difference and I want to go to work, or I want to go volunteer or I want to be involved with that because it makes me feel good. I'm making the world a better place.
I'll look forward to seeing you the next time, right back here on the next edition of Around with Randall. And don't forget, make it a great day.