This article originally appeared in the Fall 2005 issue of the Stanford Social Innovation Review. (www.ssireview.com).

You can hardly turn around in the nonprofit world these days without tripping over yet another pronouncement on how to achieve greater

accountability in the sector. Besides the hearings in the Senate and House, the attorneys general in at least 20 states are now moving to impose new regulatory regimes modeled after Sarbanes-Oxley. Practitioner organizations like the Council on Foundations, Independent Sector, National Committee for Responsive Philanthropy, and others have also put forth a blizzard of papers about various legislative and self-regulation proposals.

Unfortunately, neither new legislation, nor accreditation and training initiatives and exhortations to adopt “best practices,” will prevent fraud or mismanagement -- at least not without a credible threat of enforcement. Further, though nonprofits could seemingly drown in the flood of accountability initiatives, there is virtually no support for nonprofit leaders in dealing with actual ethical crises. The following are a few suggestions for private initiatives that might make a difference.

Moving Beyond Reproach Accountability Proposals Should Focus More on Ways to Help Nonprofits Deal With Actual Ethical Crises Peter Manzo, Former Executive Director, Center for Nonprofit Management

Volume 9: Issue 1 | March 2006

“there is virtually no support for nonprofit leaders in dealing with actual ethical crises”

Also in this Issue

2 Letter from the Executive Director 4 Lapsed Donors: Word of Wisdom from Don Kuhn 14 From Devastation to Discovery 17 Crisis of the Moment 18 Monthly Giving

cont. on page 10

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ChAIRAngie MooreAmerican Cancer Society

VICe ChAIRTim BurgessMerkle|Domain

MeMBeRsMary ArnoldChristian Children’s Fund

Vinay BhagatConvio

Kelly BrowningAmerican Institute forCancer Research

Phil ClaiborneElks Magazine

Christopher CleghornEaster Seals

Bobby DeanCal Farley’s BoysRanch & Affiliates

Jack DoyleAmergent

Craig FloydNational Law EnforcementOfficers Memorial Fund

Lindy LitridesLitrides & Associates

Susan LothDisabled American Veterans

Joel MacCollamWorld Emergency Relief

Larry MayMay Development Services

Kristin McCurryMINDset direct, LLC

Dennis MeyerMeyer Partners

Sherry MintonAmerican Heart Association

Pegg NadlerPegg Nadler Associates, Inc.

Chris ParadyszParadyszMatera

Geoffrey PetersCreative Direct Response

Barbra SchulmanMarch of DimesBirth Defects Foundation

Jo SullivanASPCA

Sue SwordChristian AppalachianProject, Inc.

Joan WheatleySpecial Olympics

Kevin WhortonWhorton MarketingResearch

sTAFFSenny Boone, Esq.Executive Director

Helen LeeConference OperationsManager

Jill MurphyMember Services Manager

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2005-2006 LeadershipFollowing are the members of the DMA Nonprofit Federation’s Advisory Council with leadership responsibilities:

ArE you tAKING FuLL ADVANtAGE oF your DMA/DMANF MEMbErSHIP?

Subscribe to the News Update and State Hot Sheet.

CoNtACt: Jill Murphy tel.: 202.861.2497 or Email: jmurphy@the-dma.org

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During your busy days, you may find it difficult to plug in and connect to your peers and advisors as you seek to get many tasks done. You may

not think of us every day, but believe me, we think of you often. Several times a day, in fact.

I am hoping you are finding it easier to plug in as a member through our newer products and services. Or, at a minimum, that you know we are always within reach to help you if you face an issue or problem you can’t resolve alone.

Let me give you a partial roadmap:

1. If you are up a tree on postal matters, we have counsel and direct ties to the U.S. Postal Service to help you resolve very specific concerns. Contact me for assistance.

2. If you have trouble understanding a new regulation or ethical guideline, we are able to help point you in the right direction.

3. If you need an expert within a certain area, we are happy to provide you with suggestions, since we represent some of the best fundraising agencies and companies serving the nonprofit and marketing arenas in the world.

4. If you are lonely on the fundraising front and facing an irascible fundraising issue, or a plain tough problem, you can plug into our new listserve and

get ideas from your peers, or let off a little steam. Subscribe by sending an email to: subscribe-dmanf_online@list3.ga3.org

5. If you are looking for ways to interact with your peers and gain recognition in the professional fundraising arena, we have numerous volunteer committee opportunities. Please contact me if you would like to volunteer.

6. If you wish to steer us toward a better policy stance on a particular issue, we have a 25-member Advisory Council that is meant to reflect your needs, ideas, concerns, and positions. They are listed on the second page of the Journal and on our web site. You may contact them directly or through the Federation.

7. If you are looking for top-quality educational opportunities, look to our four annual conferences

— DC Nonprofit (February 07), New York (August 9&10), Leadership Summit (June 13 & 14) and Critical Issues (April 19).

These are just some of the ways you may get involved in the DMANF. But, don’t hesitate to pick up the phone to call me and let me know how else we can serve you. Let us know how you are progressing in your many areas, so that we can be sure to better reflect who you are, as we try to represent nonprofit direct marketing -- an important, and often unrecognized, part of the nonprofit sector.

Letter from the Executive DirectorConnecting to our Community as a DMANF MemberSenny Boone, Esq., Executive Director, DMANF

Mark Your Calendar for these Upcoming eventsApril 19, 2006Critical Issues Facing Nonprofits ConferenceHoliday Inn — Washington Capitol, Washington, DC

June 12-14, 2006Nonprofit Leadership SummitWestin LaPaloma resort & Spa, tucson, AZ

August 9-10, 2006New York Nonprofit ConferenceWaldorf-Astoria, New york, Ny

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In an online professional give-and-take that took place last August, Don Kuhn shared his thoughts on how to best encourage lapsed donors back into the fold. His comments, drawing on his more than 50 years of hands-on experience as a fundraising professional, are offered here as lasting pearls of wisdom.

The online discussion originated with seven points made by Larry May, CEO of DirectMedia, Inc., regarding lapsed donors. Don Kuhn’s comments follow.

LARRY MAY’s ThoUghTs on LApsed donoRs: 1. Lapsed donors think they are current.

In surveys and focus groups, people indicate that they are unaware of their lapsed status. In fact, people think they give to organizations they’ve never given to. So it’s important, I think, to remember that the donor you’re talking to thinks he is an active donor.

2. Lapsed donors who renew have greater long-term value than newly acquired donors. Ignoring their pre-lapsed giving, comparing only from the point of renewal onward, lapsed donors who renew are 30% to 50% more valuable than newly acquired donors. This makes sense if you consider that every renewed lapsed is at minimum a two-time donor.

3. Due to this greater LTV, you can (and should) spend more on renewing a donor than gaining a new donor.

4. The tendency to spend more on lapses than on actives, and build special “win back” programs is an odd phenomenon. In my experience,

I was first exposed to this when telemarketing was popularly used to renew lapses, starting for me in the mid-1980’s. Organizations were hesitant to use telemarketing to actives for fear of aggravating them, but willing to use it to lapses, usually 13-24 month $25+, with whom the cost of telemarketing could be justified.

The “aria” style packages came next -- hand-written outer envelope, First-Class stamp outgoing and also on the return envelope. These were first used in my experience with the same fairly recent and higher-dollar lapses.

In fact, I’ve observed that what works for actives also works for lapses, and vice-versa. High-response packages produce a high response from actives and lapses both. I haven’t seen any unique lapsed packages that produced any special response from donors (this could be different for membership).

5. Almost universally, mailers don’t do enough reactivation of lapses. I’ve

Lapsed donors: recent Words of Wisdom From DM FundraisingLegend Don Kuhn

“I’ve observed that what works for actives also works for lapses”

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heard people say things like “they’ve left us, so we’re better off finding new donors.” Some organizations, incredibly, suppress lapses from acquisition, then don’t mail them reactivations

-- in effect, banning them for life.

6. Several years ago, a respected competitor of ours took over a major program and told me the previous agency was mailing the entire 0-36 file every appeal they made. I agreed this was a wasteful practice, but now I think it makes perfect sense. I have a hard time convincing myself that it’s not a good idea to mail lapses all the time.

7. Renewal is all about RFM. There is probably benefit in looking at other factors, such as what packages the lapsed donor previously responded to. But ultimately, it’s about frequency. As you dig further back into the lapsed file, you can consider dropping one-gift-only lapses. But again, consider whether these lapsed singles are not still better prospects than outside names.

don KUhn’s CoMMenTson LApsed donoRsDon Kuhn then responded toLarry May’s points:

Larry is correct on all counts. As for messages, I’ve seen all kinds of messages work and not work. Brief follow-up messages, in my experience, generally do a little better than stand-alone appeals, and are much less expensive. (The “we missed you” is best implied.) Donor gripes re: duplicates, and other errors, should be welcomed as opportunities to be of service to donors, and to further your bond with donors. When we wrote “We haven’t heard from you since 1998 (or generically “a number of years,”), won’t you make this the time to renew your support (of our cause)? Any amount, large or small, will be gratefully accepted, (etc.),” in addition to returns nearly always better than that from acquisition, we could expect a lot of donor comments, both positive and negative, all of which we responded to, while enclosing return envelopes for their further use. We also found that humor, which is not helpful

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in stand-alone appeals, often works well in follow-ups: “We’re not asking for the Moon;” “We found it quite shocking. Your Yuletide gift was not in our stocking;” “Help, they’re going to FIRE me if you don’t contribute.” Such phrases as this usually generate a high response with and without gifts, thus confirming that donors are indeed reading your mail. All of us have observed that the mail with the highest responses with money also have the highest responses without money. This applies especially to lapsed messages. And I have learned to not write off the “No” people. They will respond better in the future than those unheard from. And those unheard from will generally respond better than those receiving acquisition appeals. Eric Hoffer, in his book, The True Believer, observed that Catholics who converted to Islam on pain of death became just as good Muslims as existing Muslims. I have found this to be true with lapses. A lapse hounded into recontributing, responds in the future equal to or better than the segment they joined. The ultimate aim of direct mail fundraising is the gaining of bequests and planned gifts, a sizeable number of which originate from lapses of any length, and of any amount. Therefore it is important that lapses be contacted at least annually, as they inexorably grow older, becoming better prospects for bequests. By the way, I grew to view 0-36 month donors as current donors, at least in terms of messaging. I view 37-60 months as recent lapses, and 61+ months as long lapses. Both of these segments should be messaged differently in terms of RFM, in my experience. It is sort of fun to try to get under their skin to get them to re-contribute, which means that I could never bring myself to send them a prospect package. Horrors.

Don then expanded on a few key points:

On not using acquisition packages with lapsed donors, to better maintain a long-term relationship: All of our policies developed from tests, conducted mostly

in Minnesota and Michigan, and later when I was at the ALA national level, in groups of states. But there is also common sense involved. Bonding is a long-term process. Giving recognition to donors that they are an important part of the donor base, even though they may not have contributed for a long time, can only help and never hurt. It is something like the family with the prodigal son: no matter what, he knows that he is still loved, valued, and welcomed.

I am impressed with National Geographic, for every time they solicit me for a renewal, even though in my many moves I am sure I have lapsed occasionally, they bring to my attention on their reply slip that I have been a valued member since 1950. In this way, they try to make sure that I am aware that they are aware and appreciative of my longevity with them. That’s great bonding! When we became computerized, we began putting “Donor since (year)” on our reply slips. It

certainly didn’t hurt, and it didn’t cost any more. Once lapsed donors renewed, they never received a Welcome Back package, mostly because we had other priorities in testing. One third or more of our direct mail budget was devoted to acquisition. Two thirds was devoted to our donor base of

current and lapsed donors (anyone who ever made a gift) -- of which we had 20 million. Our policy was to test cautiously among current donors, liberally among lapses, and most liberally among prospects. This led to a dirt-cheap acquisition package that did not even have a free-standing letter. When I became a national fundraiser, I was saddled with a very small and frustrating testing budget, $17 thousand, as I recall, which was about what I spent in Michigan. Later, after I moved to Walter Karl, Inc., the ALA testing budget was increased many times over. Before computers, our testing led to inexpensive note enclosures to lapses. (Current donors also received specialized copy on their note enclosures.) One note enclosure to currents, in testing, returned several 1,000s-percent over the cost of the note and its insertion. After computers, these notes were converted into personalized paragraphs, PS’s, and reply slips. co

ntin

ued

on p

age

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I know that many of today’s organizations are content with sending acquisition packages to lapses. That’s OK, but I wouldn’t do it, because I know that there is a better package somewhere out there waiting to be discovered and tested, to which lapses will respond in superior fashion. I want lapses to know that we are aware of them and value them, even though they have not contributed recently, and I want them to know this every year, at least, as they grow older. On donor memory: As for donor memory, it’s probably better than we think. Lapses of 36 months usually consider themselves to be current givers; 60-month donors less so. However, I once sent a survey to randomly selected prospects in our acquisition database. None, to our knowledge, had ever made a contribution to us, but 15 percent claimed they had, for hundreds of reasons personal only to them. (I like to think they didn’t want to hurt our feelings.) As a life insurance agent early on, I was taught that the toughest part of a sale to a qualified prospect was the prospect’s reluctance to tell the truth regarding not accepting a policy. And I think that some of this reluctance spills over in fundraising surveys regarding donor contribution

history, preferences, and patterns. I don’t spend much time thinking about this. It’s a dead-end street. And your conjecture is as good as mine. On persistence and enthusiasm: Calvin Coolidge made a great

quote on persistence, by the way, calling it the essential element of all success, and adding that: “...education is not. The world is full of educated derelicts...” I would add to that Fidelity Mutual insurance agent Frank Bettger’s plug for enthusiasm as an essential: “To be enthusiastic, act enthusiastic.” Persistence and enthusiasm are essential elements of a successful fundraising program.

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The Direct Marketing Educational Foundation is pleased to announce the establishment of an educational fund in honor of direct response fundraising pioneer Don Kuhn and his outstanding contributions to the practice of fundraising and his commitment to the philanthropic sector. The Don Kuhn Fund for Research & Education will support testing and research in the area of charitable giving and donor development techniques as well as grant scholarships and fellowships to students and faculty interested in study of philanthropy. The DMA Nonprofit Federation will work closely with the DMEF to create and operate these programs. The project’s committee was formed by Larry May, president of Direct Media, and Easter Seals executive Chris Cleghorn who will serve as chair. A lead gift of $10,000 by Direct Media launched the initiative, and contributions from the committee represent over $20,000 already committed to the fund as it begins. “Don was a guiding force in the growth of the DMA Nonprofit Federation, and we believe he would have treasured this kind of tribute - one that invests in the future of fundraising through learning from data driven information through assisting those who wish to enter the field, something he did with innumerable professionals throughout his career.” said Larry May, a longtime colleague. The committee has set a Fund goal of $100,000 for the first year, with the hope and expectation that it will continue to grow each year as individuals and companies continue to support the purpose of this fund. The Fund will be administered by the Direct Marketing Educational Foundation, with a panel of nonprofit direct marketing professionals advising the selection of projects and scholars.

Research will be conducted in key areas of interest to direct response fundraisers and the reporting of findings will be under the auspices of the DMA Nonprofit Federation.

The intention of linking this with the DMA Nonprofit Federation, assures that the projects undertaken and the information dissemination will support the community of nonprofit practitioners committed to effective and ethical direct and interactive marketing. “As a committee, we see this fund as unique. First, we believe it is a fitting honor to Don who truly was a pioneer and one who dedicated literally a lifetime to fundraising” said Chris Cleghorn who first worked with Kuhn over 25 years ago at Walter Karl. “Apart from honoring our industry’s friend and our dear colleague, Don Kuhn, we believe anyone committed to this field of direct marketing for nonprofits will be interested in the work that the Fund will sponsor.” In addition to Cleghorn and May, members of the memorial fund committee include: Don Austin, Matrix Strategies, Inc.; Paula Cain, Susan G. Komen Breast Cancer Foundation; Kory Christianson, St. Josephs Indian School; Diana Estremera, May Development Services; and Lisa Greene, Specialized Fundraising Services. Those interested in learning more about the campaign can contact Laurie Spar, vice president & general manager, of the DMEF (lspar@the-dma.org). Contributions should be made payable to the Direct Marketing Educational Foundation (a not-for-profit 501(c)3 public charity as defined by the IRS), note “Don Kuhn Fund” 1120 Avenue of the Americas, New York, NY 10036.

dMeF establishes don Kuhn Memorial Fund Proceeds to Support Education & research in Nonprofit Fundraising

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pUnIsh The BAd,enABLe The good Despite decades of promoting better governance of nonprofits and periodic changes in the law, the same ethical problem areas persist:

1. Those organizations (or bad actors within them) that intend, purposely, to commit deception

2. Those organizations that want to be better governed but do not have the ability to develop the necessary systems and skills

All of the laws under discussion to address these problem areas, and other calls for reform, suffer from two critical flaws:

1. They offer no realistic prospect of increased resources for enforcement

2. They offer neither positive incentives for prioritizing improvements, nor resources to enable organizations to actually improve their governance and financial management systems

California’s Nonprofit Integrity Act, for example, significantly increased the volume of reporting to the Attorney General’s Registrar of Charitable Trusts section -- composed of approximately 12 attorneys who try to oversee more than 25,000 nonprofits in the state -- yet made no provision to increase or even maintain the current level of staffing. At the national level, the IRS is straining to move more resources into enforcement without substantially increased funding.

In addition to lacking “sticks,” the absence of “carrots” for improving oversight systems is a particularly glaring fault. Regulatory efforts almost always add burdens where many small- and moderate-budget nonprofits are weakest – in their infrastructure, internal systems, and staff capabilities. These kinds of “overhead” or indirect cost areas are precisely the ones that government and private funders do not want to support. It might

help if government funders, for one example, offered either bonus points on competitive bids, or even bonus awards in contract funds, for demonstrated or planned improvements in oversight.

no “good goVeRnAnCe CooKBooK” Neither enforced nor self-imposed “best practices” are certain to actually improve nonprofit governance. As Jeffrey Sonnenfeld at the Yale School of Management has pointed out, recommended “best practices” rise and fall in favor over time, and their presence or absence does not determine whether an organization is well-governed. Well-governed and poorly run

organizations alike have followed such recommended practices.

As Sonnenfeld observed,1 Enron had an audit, had board members with impeccable business and finance credentials, had only two “inside” directors on its board, and had separate committees for audit and compensation (as virtually all publicly held companies do and have done for some time). By contrast, nearly half the board members of

such admired companies as Microsoft and Home Depot in recent years have been inside directors.

The lesson is clear: The quality of board governance ultimately depends on how well the members of the board act as a unit; formal prescriptions of governance practices, such as what particular

committees a board must have and what reports they must receive, are blunt instruments, at best.

The same is true of accreditation and training programs. Accreditation works best in situations where there are fairly well-settled and observable measures of quality, and importantly, where losing that quality will have serious negative impacts on organizations (think hospitals and schools) or individuals (attorneys, doctors).

There is no one right way to manage an organization, however, and similarly, there is no agreed-upon set of desirable, verifiable skills for nonprofit managers. Even assuming we could develop accepted standards of practice, accreditation is time-consuming

Moving beyond reproach,continued from cover

10 11

and expensive. And, while it can raise standards and reduce malpractice in a profession, it is not necessarily effective in preventing fraud or poor management. Training is helpful, but as the history of response to sexual harassment shows, it’s the threat of litigation that really moves companies to put efforts into compliance – that is, to really commit to changing their systems and to enforcing discipline.

In any event, by the time a nonprofit is confronted with alleged malfeasance or unethical behavior, it is too late for accreditation or training to help.

eARLY dIAgnosIs, BeTTeR pRospeCTs oF CURe While we can’t control whether better enforcement will be forthcoming, if nonprofits and donors work together, we may be able to do some useful things that will help nonprofit leaders in sticky situations, and perhaps also be more effective at addressing public concerns. Rather than putting so much energy into yet more standards and training, perhaps we should dedicate more resources to help nonprofit leaders deal with actual ethical challenges. We also need to have some ways of clearly punishing bad behavior, and recognizing or rewarding good behavior.

Compliance hotline.One approach may be to create a viable compliance hotline and investigative service for small- and moderate-budget nonprofits. Compliance experts often note that in most problem cases, someone within an organization is aware

of the problem. Sarbanes-Oxley’s whistleblower protections already apply to nonprofit organizations. Unfortunately, insiders are likely to rationally conclude that it is not worth the risk to raise the alarm, unless they are offered a reliable promise of anonymity, and perhaps more importantly, the added pressure an organization may feel when it knows that the outside party will require follow-up information about actions taken so that the anonymous source can check on the response.

Fortune 500 companies and very large nonprofits (such as hospitals, universities, and, increasingly, foundations) commonly engage the services of outside firms to help them develop governance and compliance policies and procedures for encouraging anonymous reports of potential malfeasance or inappropriate activity. Such companies also dedicate senior staff resources to implementing policies and investigating allegations.

Perhaps donors and nonprofit leaders could create an independent compliance system to serve small- and moderate-budget nonprofits, since they obviously could not afford this on their own. The point of creating an independent system, overseen by a coalition or commission of nonprofit leaders, and finance, legal, and ethical experts would be twofold:

1. To enable nonprofits to get earlier notice and an opportunity to cure unethical, fraudulent, or other inappropriate conduct

2. To offer employees and stakeholders real avenues for pushing for an investigation

HAVE you bEEN to our MEMbErS-oNLy SItE?

www.nonprofitfederation.org

LoGIN toDAy!cont. on page 12

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Private commission.Another complementary approach may be to establish a private commission of nonprofit leaders and legal, financial, and ethical experts, whether national or local in scope, to investigate possible abuses. Such a body could function like a private Securities and Exchange Commission (SEC) of sorts. (Exempt organizations, lawyers, and academics have debated creating an actual national government equivalent of the SEC to oversee nonprofits for years, but this is unlikely to happen for many reasons.)

Such a private commission wouldn’t have power to revoke exemptions, bar people from practice, or settle controversies, of course, but it might provide a means of speaking for the sector as a whole on high-profile scandals, and perhaps organizations would even invite the commission to review a situation, in order to assure the public that a problem is being

handled, to pre-empt negative publicity, or to forestall litigation or prosecution.

Some associations of nonprofits, funders, and fundraising professionals may be moving to create such ethics panels. A

truly independent, freestanding commission would be more effective, however, for several reasons. With ethics and accountability as its sole focus, it would not divide its energies between other areas, like member services or other programs. Also, since a key function would be to signal that appropriate remedies had been taken, independence

would be essential to impartiality; fairly or no, membership organizations are vulnerable to the perception that they may go easy on a favored or influential member organization.

Board members and managers need an opportunity to learn about and resolve problems as early as possible, and aggrieved employees, stakeholders, and citizens need access to more than just the phone numbers of the IRS, their state’s attorney general, or the local media. Independent efforts to spur and support investigation of possible misbehavior can point to problems disclosed or resolved as tangible successes, and enable the nonprofit sector to show that it is taking at least some direct steps to make a difference.

Discussions about nonprofit accountability often present a false choice between government enforcement or self-regulation. In truth, both are needed. Regardless of the merit of the particular suggestions offered here, it is clear that the nonprofit sector can do more good by focusing on ways to provide real support for dealing with actual crises than by trying to abolish them by decree.

1 J.A. Sonnenfeld, “What Makes Great Boards Great,” Harvard Business Review, September 2002.

PETER MANZO is the former executive director and general counsel of the Center for Nonprofit Management, a Los Angeles-based nonprofit organization that seeks to build healthy communities by counseling nonprofits through change, building skills, and providing knowledge services for leaders and managers, and by supporting nonprofits in recruiting and retaining talented people.

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2005 will go down in history as the year when people from around the world gave generously to support humanitarian relief in disaster-struck areas. The year began with heroic efforts to aid victims of the tsunami that had devastated many parts of southern Asia in the last days of 2004. After the first week in January, it was estimated that more than $350 million was raised online, with donations to large organizations such as CARE USA, Oxfam America, and Save the Children USA accounting for more than $65 million of the total.

As the new year unfolded, the volume of donations continued to grow at an unheard-of rate: according to Ed Granger-Happ of Save the Children USA, “At the peak, our online giving was coming in at the rate of $89,000 per hour, with traffic to our Web site over eight times the normal rate for December -- a typically heavy month.” Oxfam America experienced a similarly unprecedented volume of donations via various means, including the Internet. The Oxfam America Web site was reported to be taking in over $2 million a day between the time the tsunami struck and New Year’s Day 2005.

The tsunami relief efforts taught us a great deal about mobilizing online resources in response to breaking news. Nonprofits around the world realized the importance of being prepared for natural disasters and their aftermath, quickly implementing the processes and

technology that would enable them to react while the event is still in the news and has captured the attention of millions around the globe. Regular Web site updates, informative e-mail campaigns, and compelling fundraising appeals were all essential to successful fundraising in support of disaster relief.

Few could predict that the lessons learned from the south Asian tsunami would be put to use so quickly, but hurricanes Katrina and Rita struck less than a year later. The resulting devastation took the lives of many hundreds of American victims, and uprooted the lives of thousands more. This time the news hit much closer to home. As a nation, we were inundated with images of areas that many of us had visited, but that were now unrecognizable.

In the wake of the hurricanes, nonprofit organizations were able to quickly mobilize support to assist in the relief efforts throughout the southern states. As the tsunami had earlier in the year, hurricanes Katrina and Rita encouraged online giving in unprecedented volumes. Americans gave generously once again, but this time even more people made donations, many of them online.

A shIFT In gIVIng… The sheer volume of online donations clearly indicates a paradigm shift in the

From devastation to discoverythe rise of online Fundraising in response to Natural DisastersSheeraz Haji, CEO, GetActive Software

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way that people give. The Pew Internet & American Life Project reports that “since the beginning of 2005, the number of Americans who say they have ever made an online donation has increased by 53%.” Donors are attracted to the ease and convenience of online giving, and following the hurricanes, they also used the Internet to search for loved ones and to research ways to donate money, goods, and accommodations, or volunteer time. According to the Pew report, 50% of all Internet users searched for news about the hurricanes online (usually from mainstream news outlets), with 17% of these individuals reading blogs to gain additional insight into the devastation and get personal accounts of the disaster.

…And In oRgAnIzIng VoLUnTeeRs Hurricanes Katrina and Rita also showed us that the Internet could be an effective organizing tool for nationwide volunteer efforts. Volunteers and organizations from far and wide connected online following the hurricanes, and together they descended on the devastated areas to assist those in need. Online donations helped to pay the way for volunteers, many of whom traveled from across the country to help their fellow citizens.

The California Nurses Association and the National Nurses Organization Committee recruited over 500 nurses to assist with on-site medical relief, posting online donation forms to help offset the costs of airfare, food, water, and shelter for nurses deployed to the affected region. Another group, United Animal Nations, used e-mail to reach out to 2,300 trained Emergency Animal Rescue Service volunteers and, within just 72 hours, had over 1,100 volunteers ready to assist them in their relief efforts. “Automating this process has allowed us to keep our manpower focused on helping animal disaster victims,” said Karen Brown, Program Director at United Animal Nations.

According to a recent e-newsletter published by The Humane Society of the United States (HSUS), the organization rescued 8,500 animals in Mississippi and New Orleans. The 2005 recap stated that:

“In September, shortly after Hurricane Katrina slammed into the Gulf Coast, The HSUS launched its largest disaster relief operation ever. Working with local authorities and other national groups, we opened emergency animal shelters and sent dozens of animal rescue teams into devastated areas, literally breaking down doors to reach stranded pets.”

A hIsToRIC YeAR FoR nonpRoFITs Last year’s events wrought massive destruction around the world. With the help of modern technology, charities were able to react quickly to these disasters, mobilize support, raise money, and assist those in need. The Internet removed geographic boundaries and allowed organizations of all sizes and people from around the world to play a role in relief efforts. The work to rebuild the devastated areas is underway, but along with decreasing media coverage, the stream of donations has subsided. Despite this, many organizations remain active in the regions that need relief. To this day, The HSUS continues its efforts in hurricane-affected areas to reunite pets with their owners. co

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I am hoping that when you read this in March, postal reform will have been resolved. Somehow, I doubt it.

As you know, Public Law 108-18, the Postal Civil Service Retirement System Funding Reform Act of 2003, was passed in 2003 to prevent a $105 billion overpayment of the U.S. Postal Service (USPS) pension obligations. It included a provision transferring the cost of military retirement of

postal employees earned through military service, previously paid by the U.S. Treasury, to the USPS.]. (No other agency pays this cost.)

The Act creates a new formula for funding retirement that will avoid the overpayment by cutting USPS payments to the Office of Personnel Management annually by nearly $3 billion. When it passed in 2003, no impact was felt because the law allowed the USPS to use the savings as it saw fit to pay expenses and reduce debt to avoid an increase in your mail rates until 2006.

But now, in 2006, the law requires the USPS to act as though it were under the old retirement formula -- requiring the saved funds be put into an escrow account, to be spent only after Congress determines how the money will be used. The

escrow is now treated as an expense in determining the increase in postal rates.

As a consequence, postage increased by 5.4% on January 8, 2006 — only because of the escrow. And — the increase is permanent without Congressional action. This means that additional payments are due by the USPS each year to pay for the escrow. Therefore, the USPS will charge mailers:

2006 $3.08 billion2007 $3.31 billion2008 $3.60 billion2009 $3.70 billion 2010 $4.069 billion, etc.

Without a legislative fix, mailers will pay at least a 5% increase in addition to any other increasing costs of the USPS. Who can afford that? Over the past rate cycle, the USPS was fortunate to have no increase beyond the escrow, but times are different now: costs are increasing, as more than one million addresses are being added each year, fixed costs are increasing, and other costs are on the rise. Meanwhile, the volume needed to sustain the enterprise is shrinking, so that fewer mailers are available to absorb the costs.

The mailers, including the DMANF, have worked over the years on postal reform legislation that is meant to offer new incentives to the USPS by way of flexible pricing for products and services, while indexing or capping nonprofit and other monopoly mail. Embedded in postal reform legislation is the elimination of the escrow account — with some strings attached in terms of future spending of the escrow.

As nonprofit organizations, I urge you to consider the amount you are spending on postage

Crisis of the Moment How Much is too Much for Postage?Senny Boone, Esq., Executive Director, DMANF

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each year and determine whether you can absorb at least a 5% increase each year because of an “escrow” — rather than some firm public policy reason. Nonprofit organizations have told us that they will be forced to curtail needed programs in order to pay these increased costs -- or for some smaller organizations, cease operations.

Meanwhile, as of this writing, the USPS’s Board of Governors has issued statements contradicting their earlier support of postal reform legislation and the escrow, saying they no longer support the Senate version of reform because it may lead to further oversight by the Postal Rate Commission. Without discussing the merits of that debate, this may be a good reason for you to now pick up the phone and urge passage of postal reform legislation so that there is some better control placed on the costs that you will have to pay, in addition to the escrow.

CALL To ACTIon Be assured that the DMANF is doing everything possible to fight the escrow, but we need your active involvement with the House and Senate. We have sample letters, but the best communication is via the telephone, due to delays in mail processing for the Hill. I am happy to help you reach your representative; just give me a call at 202.861.2498, or send an e-mail to me at sboone@the-dma.org.

directLINK ONLINE

DirectLINK online is a searchable collection of high quality, highly

relevant, and reliable information resource carefully selected and compiled by The DMA Library & Resource Center as a value added member service.

It provides DMA Members 24/7 access to state-of-the-art information and statistics regarding direct and interactive marketing trends and usage. Included are abstracts and full-text articles from hundreds of direct marketing and related business magazines, newspapers, and newsletters, as well as, over 4,500 ECHo campaign case studies, executive summaries of research reports, White Papers, and DMA brochures, and guidelines. DMA staff, as well as other industry experts covering industry issues, trends, statistics, facts, and techniques contribute to the information-rich content.

You can access DMA’s DirectLINK Online through the Web site www.the-dma.org by using your DMA Member Login and password.

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For those of you who have already started a monthly giving program, congratulations! I’m sure you are very pleased to see money you can plan on pouring in on a regular basis. For those of you who are still thinking about it, let me ask you a question: “What are you waiting for?”

The new staff member? Is IT dragging its feet (again?) Is the database not quite right? Are you afraid your donors are not going to like it? Or do you feel you don’t have enough donors?

If you are a tiny organization with only a few hundred donors, I’d say, yes, maybe it’s not quite the time to initiate a monthly giving program

– yet. But, if you have a few thousand supporters, I suggest you seriously look into starting one.

It doesn’t take much to do so, but it does take commitment. But, isn’t that just what you’re asking of your donors, anyway? Trust me: Once you are committed to generating monthly giving, you will make it work -- guaranteed!

Yes, IT WoRKs When I got into fundraising, monthly giving was not a common thing. The organization I worked for had introduced it to the United States through the experience they had had with their European

offices. People there part much more easily with their bank account information; in fact, companies put it on their bills. And most organizations there have very successful monthly giving programs because of that practice.

But, guess what? It works here as well, with some slight adjustments.

Just a few years ago, nonprofits asking their donors to commit to regular gifts were few and far between. But now, electric, gas, and phone companies, among many others, have joined the practice, because they all see its tremendous advantages: having money come in on a regular basis without additional data-entry. It’s time that more nonprofit organizations joined the movement as well.

hoW IT WoRKs First, for those who are not familiar with monthly giving: it’s a very simple commitment that the donor makes to have a specific amount taken out of their bank account (via electronic funds transfer -- EFT), or from their credit card on a regular basis (typically monthly). There is no renewal needed. It keeps on going until the donor cancels or changes his or her account. Many organizations also offer a monthly statement program, where they send reminders (statements) to their donors.

oFFeR opTIons… Ideally, you’d like to offer the automatic option only. If this were Europe, I’d say: “go ahead, it will work.” However, in the US, it’s wiser to also offer the “bill me” (monthly statement) option. It then depends on your communications plan to find ways to make the process the least labor-intensive for your development department.

The beauty of the monthly statements option is that you can regularly communicate to donors why their monthly commitment is so important to your organization, and you can ask them for an additional gift for a particular purpose as well.

…BUT pUsh FoR AUToMATIC gIVIng But, it does not end there. I recommend immediately converting those statement monthlies to automatic givers. If you develop very specific quantifiable reasons, they will convert -- a few percent at a time. You can start the minute you send them their thank-you for joining the monthly giving program. And you can ask them to convert each subsequent month. Try collecting testimonials from other donors who have already started giving automatically via EFT or credit card, and use them to convince others. You’d be amazed how well it can work!

Monthly giving:Worth the CommitmentErica Waasdorp, Vice President, Fundraising, DMW Worldwide

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AsK, And AsK AgAIn I always recommend asking for an additional gift from monthly givers, and guess what? It still works like a charm. You see, for most organizations, appeals are their way to communicate with donors, and monthly donors want to continue to receive those updates. Time and again, they prove that they will give if they are asked. Please do acknowledge in a simple way that you realize they are already giving their monthly gift, and that you appreciate any additional support.

Keep IT sIMpLe Monthly giving can be easy or difficult, depending on how you look at it. It’s important to keep the program simple. It can be as simple as a variation on the giving option on your Web site (recurring versus one-time). It can be a simple variation on the thank-you letter reply slip. Later, you can do mailing inserts, or variations, and telemarketing -- all very successful ways to acquire monthly givers.

No matter how you start, do stay committed as an organization. Once the donor makes that commitment, he or she in essence becomes a very special donor, and needs to be treated like one -- as he or she can be with you for a very long time. It’s important to make sure the whole organization (and I mean the whole organization, from the people opening the mail to the CEO) understands this. It’s always a long-term commitment, but it will also have tremendously positive results!

A CAse sTUdY An organization I work for has a very successful monthly giving program. About 20% of their donor base is on it. They have come up with a wonderful name for their monthly givers, and they’re able to give them a lot of recognition in communications through their newsletter and otherwise.

They were looking to expand the program further, and convert more

of their statement monthlies to automatic givers.

They have an aggressive direct mail plan, with appeals going out about every three weeks -- so adding an additional appeal just to acquire monthly givers did not seem to be the wisest choice. Rather, to grow their monthly givers, we introduced a few small changes to their communications plan.

We first introduced a monthly giving ask in every thank-you letter, both to new donors and to existing donors. They were able to convert 1% to 2% to monthly giving this way, and generate a healthy response in single donations as well.

Then we tested a conversion ask in a monthly statement, and reviewed the positive and potential negative impact. Their typical response rate was 70%; it did not seem to be hurt by the conversion ask that converted some 3% of those asked to automatic givers. We now have a conversion ask in every statement -- but we do alternate the way we ask.

We also tested acquiring new monthly donors via a very small but targeted segment who received a

monthly giving ask plus a single donation ask as the last out.

We offered all three options: Bank, credit card or check statement and some 3% of the target group (those donors who received the ask) joined the program with only a 10% drop in single

donations for that group. (Note: there is typically a drop of 20% to 50% in single donations if you ask for monthly giving in an appeal. That drop is always offset by the long-term income generated by the monthly donors).

Finally, we have also successfully acquired new monthly donors through telemarketing, and we continue to focus on retention and upgrades.

Erica Waasdorp, is vice president of Fundraising at DMW Worldwide, LLC. She has extensive experience running monthly giving programs, previously at an international nonprofit, and now with her clients at DMW. She can be reached at 774.773.1200, ext 224, or ewaasdorp@dmwdirect.com.

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To register or for more information, visit:www.nonprofitfederation.orgMention KEY CODE: NPJOURN when registering.

HOW GOOD CHARITIES CAN AVOID GOING WRONG:“What you don’t know can definitely hurt you!”

11TH ANNUAL CONFERENCE:

Critical Issues Facing Nonprofitsin The Year(s) AheadApril 19, 2006 • Holiday Inn Capitol Washington, DCKeep abreast of the latest developments on government regulations and restrictions and how they affect your organization and fundraising:• Federal & State Regulations • IRS Classifications and Lobbying Limitations• Accounting Fundamentals • Accountability and Ethics• Donor privacy and preference • Management compensation• Outsourcing fundraising • Bidding and contracting• AND MUCH MORE!

REGISTEREARLY and

SAVE $$$!

in the next edition to the DMA Nonprofit Federation

ADVErtISE

For more information and Ad rates please

call the DMA Nonprofit Federation at

202.861.2497

• Gain More Exposure

• Speak Directly to your target Market

• Expand your business

pointers: Donor CultivationSherri Birkland, Vice President of Development and Planning, North Country Health Services Foundation & Charles R. Hillary, President, Hillary Lyons Associates, Inc.

Reprinted with permission from the December 8, 2005 issue of the NPT Instant Fundraising Newsletter, “Good Cultivation Grows Great Donors”

Donor cultivation is a concept that is accepted throughout the philanthropic universe, but many individuals have their own ideas about what constitutes good donor cultivation.

Speaking at a recent international conference on healthcare philanthropy, Sherri Birkeland, vice president of development and planning for the North Country Health Services Founda-tion in Bemidji, Minn., and Charles R. Hillary, president of Hillary Lyons Associates, Inc., of Dimondale, Mich., stressed the importance of donor cultivation, and shared their insights on the subject.

ACCoRdIng To BIRKeLAnd & hILLARY, good donoR CULTIVATIon Is: • Deliberate - Cultivation efforts must never be

haphazard, but must be made with deliberation, just as major gifts involve careful deliberation by the donor.

• Well-planned - Careful planning ensures that cultivation efforts will take place on schedule and will meet the needs of the organization.

• Well-organized - A specific cultivation plan should be in place for each major gift donor or prospect.

• Thorough - Cultivation efforts should reach all possible donors and prospects in the community.

• Continuous - Continuous recognition ensures continuous giving.

• Well executed - Professional efforts are recognized and appreciated by those who support the organization.

• Detail-oriented - Small slips can cause big problems. Careful attention to detail is essential.

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WhAT LIes AheAd?

Looking forward, we predict that fundraising online will continue to mature, eventually providing over half of non-major donations for charitable and public-interest organizations. The “fear factor” behind giving online has decreased significantly, and with the tools available today, more people are not only willing to give online, but are requesting opportunities to do so.

In 2006, we also expect to see a shift in how all types and sizes of nonprofit organizations view their fundraising initiatives: traditional fundraising organizations will increase their investment in online fundraising tools, tapping into a growing technology-savvy demographic that expects instant access to online donation opportunities.

Sheeraz Haji is the CEO of GetActive Software, a leading provider of online constituent relationship management solutions that help organizations easily recruit, engage, and retain constituents. He can be reached at sheeraz@getactive.com.

Devastation to Discovery,continued from page 15

Do you HAVE A toPIC you WANt to bE CoVErED IN tHE

tHE DMANF StAFF IS HErE For you!

Contact us for membership questions, policy issues, conference information, and more!

Don’t forget about the Members only area of our Web site, which includes a new section on

research & statistics and a member list.

Senny Boone, Esq., Executive Director sboone@the-dma.org202.861.2498

Helen Lee, Conference operations Managerhlee@the-dma.org202.861.2496

Jill Murphy, Member Services Managerjmurphy@the-dma.org202.861.2497

1111 Nineteenth Street, NW, Suite 1180Washington, DC 20036

www.nonprofitfederation.orgE-mail your suggestions toJill Murphy@the-dma.org

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