The paperwork was endless.
Every year, Second Harvest Food Bank of Santa Clara and San Mateo Counties was bidding for more than a dozen grants from local cities, each with applications that took hours to complete. Yet the payoff was typically small: $5,000 here, $10,000 there. Private foundations offered more, but the grant manager, elbow-deep in municipal forms, had little time to apply.
Finally, after years of chasing city funding, Second Harvest officials began to wean the organization off the grants. It was a scary step. City dollars weren’t big, but they were reliable and familiar. “When you step away, you don’t necessarily know for sure that you’ve got other funding to replace it,” says Kathy Jackson, the food bank’s chief executive.
The group did find new funding. The grant manager shifted his focus to private foundations, and beginning around 2010, the organization launched a major-gifts program that’s helped make it one of Silicon Valley’s biggest nonprofits. More important, it started to cast a critical eye on its entire fundraising program. Federal grants, cause marketing, events — they all came in for fresh scrutiny and change.
Not all dollars, the food bank came to realize, are created equal. Some money is just not worth the chase.
For many nonprofits, this is hardly a self-evident truth. Some officials argue that organizations should scrap for every available dollar. Shaun Keister, vice chancellor for development and alumni relations at the University of California, Davis, says his strategy is simple: Do as much as possible.
“We have to use every tool we have,” he says. “We’ve got to get in front of everyone we know with all means possible with great frequency.”
Still, some nonprofits are beginning to think that doing less can produce more. Rather than hunt for every grant or donation, they are analyzing their fundraising program, studying the returns of each strategy, and questioning longstanding efforts — even time-honored fundraising conventions.
It’s taken discipline to check the natural impulse to go after every available dollar, Ms. Jackson says — but doing so has yielded dividends for her organization, and for others:
• The National Wildlife Federation is letting its membership numbers slide and focusing on a smaller yet likely more fruitful donor pool.
• The YMCA in Charlotte, N.C., ended its years-old annual December phone-athon as it turned away from the traditional year-end fundraising push.
• A branch of the Junior League closed its thrift store, a revenue mainstay for affiliates of the century-old organization. It replaced the store with a rummage sale that leaders hope can yield the same dollars for a smaller investment of the organization’s time and money.
• A Tennessee charity for people with disabilities is shrinking its annual schedule of fundraising events and may one day pull the plug on them all.
High-Yield Strategies
None of these moves should be interpreted as a blanket rejection of all traditional fundraising approaches. Rather, they are examples of analytical efforts to identify high-yield strategies. In the simplest terms, charities must find ways to deploy their often limited resources in ways that pay off most, says Peter Kim, senior director of learning and innovation at nonprofit consultant the Bridgespan Group. “Instead of seeing every funding lead as a good lead,” he advises, “take a methodical approach to assess every opportunity.”
It’s hard to take a leap of faith and change the way you’re doing things.
The increasing availability of data makes such evaluations easier and seemingly more popular. But the decision to pull the plug on a revenue-generating approach can be a gamble. In a recent survey of nonprofits by the Nonprofit Finance Fund, more than half of respondents reported that they have at most 90 days of operational cash on hand. With so little cushion, it’s hard to let go of a reliable grant or gala and try something new, particularly when the payoff could be long in coming. “Trying something that doesn’t work has an existential risk to many organizations,” says Antony Bugg-Levine, chief executive at the Nonprofit Finance Fund.
High turnover among fundraisers can also dampen the drive to innovate. Development officers whose tenure lasts only months have time to do little more than replicate what their predecessors did, regardless of whether those methods were effective, says Joshua Birkholz, a principal at consulting firm Bentz Whaley Flessner.
Sentimentality and fear may be even bigger hurdles to throwing out the tried-and-true. Board members scared to take a leap may dig in their heels at change. Donors nostalgic for black-tie galas may balk at a more cost-effective business-casual cocktail party.
“It’s hard to take a leap of faith and change the way you’re doing things,” says Rachel Baker of the Evelyn and Walter Haas Jr. Fund, which is studying fundraising at small charities.
Most of all, groups may struggle to identify what works and what doesn’t. Too often, development officers settle for the idea that their fundraising techniques will “raise awareness,” says David Hessekiel, president of the Peer-to-Peer Professional Forum. “The very loose concept of awareness is often a screen that event organizers can hide behind to avoid close evaluation of their fundraising results.”
Still, some nonprofit leaders are taking a hard look at their strategies and making tough choices.
A crunch on staff time may force new thinking. Senior managers’ time is one of an organization’s “most precious resources,” Mr. Bugg-Levine says.
Goodbye to $250,000
The African Services Committee, which supports immigrants and provides access to AIDS treatment in New York City and Ethiopia, evaluates grants with an eye to conserving its staff resources. It rarely applies for those that don’t cover administrative costs.
“It’s hard to say goodbye to a $250,000 grant without something to replace it,” says Kim Nichols, co-executive director of the New York-based group. But the decision becomes much easier, she adds, when there’s no money included to help with rent or salaries. African Services no longer applies for grants that allocate less than 5 percent of funds for administrative expenses, a threshold it’s likely to push higher in the future.
Sometimes, a new leader’s fresh perspective leads to change. Soon after Grace Bonilla became executive director at the Committee for Hispanic Children and Families last year, she decided to end the nonprofit’s contract for a $1 million government grant that it regranted to other organizations. With help from the Nonprofit Finance Fund, Ms. Bonilla had discovered that administering the grant cost nearly $200,000 in staff time and resources.
As a newcomer to the organization, Ms. Bonilla says she was not emotionally invested in the grant. But the decision upset some employees worried about abandoning recipient organizations. Board members didn’t like the optics of reducing the nonprofit’s $5 million budget by a fifth.
Ms. Bonilla moved forward, however, because the decision freed resources to advance the charity’s new bilingual program to help family and professional child-care providers become effective early-childhood educators. For example, the organization recently signed a contract to train teachers for the United Federation of Teachers.
The group now has the opportunity to concentrate on what it does best, Ms. Bonilla says, adding, “I’ve already started to see the staff focusing on new opportunities” to expand the work of its early-childhood education program.
Invest in the Future
For groups that step back from grant money or ditch underperforming fundraising strategies, the question becomes, How do we replace those dollars?
The answer can take many forms, some of them quite simple. In 2014, the Junior League of Jackson in Mississippi shuttered its 20-year-old thrift shop, a victim of growing competition from discount stores.
“We were working hard and making less money,” says Lori Sanders, a volunteer fundraiser.
The organization wanted to replace the $30,000 it earned from the shop each year with a fundraising effort that would honor the Junior League’s history and the supporters who donate items for resale. The group introduced an annual three-day rummage sale called the Junior League Jumble.
Net proceeds from the first sale last year were slightly lower than the store’s profits. But expenses totaled only $50,000 — $150,000 less than the annual cost of running the shop. The new event also energized volunteers and community members.
The Junior League’s move typifies the pragmatic innovation that Anne Wallestad, chief executive of BoardSource, suggests nonprofits should embrace. Savvy leaders, she says, should identify a fundraising goal and consider “other ways you might be able to accomplish that in a lower-cost, higher-ROI way.”
Mr. Birkholz warns that organizations obsessed with the “cost-to-raise-a-dollar” numbers may think only about the short term. Better, he argues, to think creatively and invest in strategies that might pay off in the long run.
Ultimately, finding the right revenue model requires a balance between conserving resources and investing in innovation, Mr. Kim says. It also requires patience, he adds, because the process “may not bear immediate fruit.”
Just Say No
“Patience” has become a watchword at Second Harvest Food Bank of Santa Clara and San Mateo Counties. Since its pivot away from government grants, the organization’s grant writer has focused exclusively on building relationships with foundations.
The charity also hired development officers and a director of major gifts to spearhead its new strategy, which it launched with a capital campaign.
The result? Since 2012, the group’s annual fundraising revenue has grown from $25 million to $35 million. It’s now the top fundraising food bank in the country; nearly 90 percent of its operating revenue comes from private sources, and it’s cut its reliance on government funding nearly in half.
This success stems directly from that early decision to turn down city money, says Tami Cárdenas, the food bank’s vice president of development. “We were able to say ‘yes’ to individual major gifts in a meaningful way because we said ‘no’ to most government grants.”
Debra E. Blum contributed to this article.
