GuideStar Webinar (01/25/12) - Strategic Philanthropy in the "New Normal"

Strategic Philanthropy in the “New Normal”

January 25, 2012

John Wm. Thomas, Managing Director, OAIEdwin (Ned) K. Zechman Jr., Senior Consultant, OAI

Copyright © 2012 Orr Associates, Inc. All Rights Reserved.

Introductions

John Wm. Thomas, Managing Director•33 year career in development•COO of CHF 1994 – 2008•Completed campaigns for $40 million, $301.5 million and began $500 million “Transforming Children’s Health” Campaign•OAI Consultant since 2009, Managing Director since 2011

Edwin K. (Ned) Zechman, Senior Consultant•30 years as CEO of pediatric medical centers•CEO of Children’s National since 1994•Tripled budget and plant; international reputation secured•CEO during 3 comprehensive campaigns. Total Value: $1 billion over 17 years at CNMC

www.oai-usa.com2

Copyright © 2012 Orr Associates, Inc. All Rights Reserved.Follow the Event on Twitter: #newnormal

Agenda

The “New Normal”: • What is different and why• What it means for fundraising• Overview of the new “strategic philanthropy”

New Era Strategic Philanthropy: • How it works and why• Fundraising impact• What’s a leader to do?• Wrap up/questions

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About You

45%

34%

12%

3%6%

Size of Organization

Organizations under $1 million

Organizations between $1-10 millionOrganizations between $11-50 millionOrganizations between $51-100 millionOrganizations over $100 million

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About You (cont’d)

30%

40%

30%

In general, revenue from philanthropy since 2008 is:

Trending DownTrending UpUnchanged

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About You (cont’d)

Trending Down

Trending Down

Trending Up

Trending Up

Unchanged

Unchanged

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Recipients(academic, community

foundations, education, faith based, healthcare, membership and public

chairity organizations)

Methods (corporation foundations, government and

grantwriting organizations)

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It’s Time for an Alternative Model for Strategic Philanthropy: Why?

Our proposal:1. The recession’s impact is far reaching

2. National and global economies have been changed permanently

3. Institutions will be more dependent than ever on philanthropy

4. The pressure on philanthropy will increase

5. Strategic philanthropy is reinventing itself

• “Necessity is the mother…”

• Campaigns will continue to be relevant

• Campaigns will be different

6. Imaginative, bold leaders will grasp the new realities and forge ahead

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Our Thinking Based on Experience (1994-2012)

• First Campaign: 1990-1995– Traditional

– Cookie cutter

– Fatiguing

• Next Two campaigns: 1996- 2012– Massive

– Untraditional

– Successful – over goal

• Maybe this is telling us something!

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Global Recession History During our Children’s National Years

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1990 – 1992 “V” shapedBush I administrationClinton years begin

2001 – 2002“U” shapedResponse to 9/11Stock markets dropTech bubble pops

2007 – 2012“W” shapedHousing, mortgage debacle and high unemployment5-7 year recovery


The “Traditional Campaign” Model

Key Elements:• Driven by organization’s strategic plan

• “Feasibility” Study

• High-level Campaign Committee

– Serves for life of campaign

• Sequential giving/top-down asks

• Gift table and donor pyramid

• Limited gift acceptance policy

• Volunteer driven, staff supported

• 5-year horizon

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This Model Worked Until 2008…What Happened Next?

Actions that rocked philanthropy:1. The global economy goes south

2. Traditional funding sources shrink

3. Regional economies are volatile

4. Government support is retracting

5. Reliance on philanthropy increases

6. Business methods applied to giving

7. Social media fundraising grows

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A “new normal” economy:

• Countries in default

• Biggest states in the U.S. nearing or in bankruptcy

• Long term debt soaring. Unemployment at 9%

• War as a certain uncertainty

• Fears keep gold high BUT stock markets surging

• Governments trimming social programs

• Governments dependent on NPO sector

• Health reform as an uncertain certainty

The New Era for Philanthropy

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What This Means for Campaigns

1. Recession recovery endures 3-5 more years

2. Campaigns will end, begin and continue during that period

3. Strategic planning horizons shorten

4. Private funds needed more than ever

5. Pressure on philanthropy is acute

But will our willingness to give keep pace with need?

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New Era: New Model

Characteristics:• Strategic: mindful of the new world• Strategic and philanthropic plans intertwine• Aimed at a new type of donor• Unannounced• No campaign chair(s) • No steering committee• Donors become leaders. Leaders become ambassadors• Staff driven cultivation and asks• Decentralized volunteer structure• Continual

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New Era Strategic Philanthropy

1. NPO leaders integrate plans:

– NPO leaders “get” the interactivity of strategic and philanthropic plans

– Strategic and philanthropic plans develop in parallel

– The two plans are in constant dialogue -- this begins at the top

– Strategic and philanthropic planning and evaluating never stops

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New Era Strategic Philanthropy (cont’d)

2. Cases and case statements respond to the times

– It’s about the parts, not the whole

– Business plans supersede large case statements

– People/corporations connect to the program NOT the institution

– It is less about “bold” and more about “achievable”

– “Sustainability” a constant issue

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3. Campaigning never ends

– Margins for philanthropy are better than any other revenue source

– NPO’s weave together strategic and operational funding into “comprehensive” campaigns

– Strategic plans require strategic philanthropy

– “Gift structuring” changes donor relationships and stewardship

– Consequence: As one campaign ends another begins

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4. Cultivation strategies take new era into account

– Fear and uncertainty drive donor caution

– Donors less willing to part with their capital

– Large gifts take longer to consummate

– Gift structuring reduces near term cash outlays

– Gift tables bulge at the lower middle

– Largest gifts come from unusual sources

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5. Givers become Leaders

– Old fashioned campaign committees out

– Campaign connects donors to parts about which they care most

– Givers become philanthropic leaders for critical organizational subsets

– Organizational subsets have mini-boards or councils to capture and motivate donor enthusiasm

– But boards don’t always turn to philanthropic leaders for membership!

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CEO/CDO Alignment

• Will CEO’s agree? Support this approach?• If not, how does the CDO persuade?• Others ways for black and white CEO’s to

embrace gray?

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Three Elements of Leadership

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Strategic LeadershipVision

PurposeCommunication

Values

Team LeadershipOperational Leadership

EnergyBehavior

Manager as CoachCreating the Work

Climate

Task

TeamIndividuals


What is a Leader to Do?

Strategically:• Look two hills ahead

• Have clear hypotheses about the future

• Communicate them clearly

Operationally:• Translate hypotheses into plans

• Translate plans into actions

• Communicate these at every opportunity

Team work:• Get widespread ownership of strategies and tactics

• Assemble teams to execute tactics

• Expect that all will go forward together

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“Managers solve problems…Leaders anticipate them.”

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“Operating with the mindset of an entrepreneur is the only fruitful way to

proceed. Successful entrepreneurs take calculated risks, quickly.”

-- Rebecca Sive (on surviving the ‘new normal’), The Chronicle of Philanthropy,

February 10, 2011

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The New Era Requires Strategic Philanthropy, New Thinking and Risk Aware Execution

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This… …becomes thisSequenced plans Co-dependent Plans

Case dependent Business Plan Dependent

One case Many Cases

One Cabinet Many Councils

Hour glass GT Coke Bottle GT

Long term volunteers Ad Hoc Volunteers

Five-year horizon Longer Horizon


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Questions? Feedback?

John Wm. Thomas Edwin K. (Ned) Zechman

202-338-6100 ext. 112 202- 338-6100

[email protected] [email protected]
