What People Are Talking About

By Mal Warwick

Copyright © 2004

 

Have you ever wondered whether all the predictions of the multi-trillion-dollar “intergenerational wealth transfer” will prove to be true—and fill the coffers of your favorite charity (presumably, your own)?

 

Have you considered whether it’s really true, as many people say, that direct mail response rates have fallen over the years—and how that affects your organization?

 

Some months ago I wrote a number of colleagues, requesting answers to these and eight other questions in an informal poll of some of the most pervasive questions making the rounds in the nonprofit sector. Below you’ll find a summary of the results along with a few interpretive remarks.

 

For the most part, the results represent a clear perspective on the issues I posed. Of course, there’s nothing statistically valid about these findings. I “polled” fewer than 200 persons of a sample that was gathered in anything but a scientific manner. Anyway, though nearly half responded, that number was far too small to permit statistically defensible conclusions.

 

Please let me know what thoughts this brief report stimulates in you. I’d love to hear from you.

 

1) Observers of the nonprofit sector in North America have commented that employee turnover rates are remarkably high, especially in the fundraising field. To what extent, if any, do you believe this is a problem for the sector?

 

50% of respondents said that “High turnover rates are problematic,” and another 17% that “High turnover rates are a very serious problem.” This is fully two-thirds of those who returned the survey. This mirrors my personal conviction that turnover among fundraising personnel at the nation’s nonprofit organizations is disturbingly high and is one of the major impediments to improving performance in many nonprofit fundraising programs.

 

2) If you agree that the nonprofit sector is characterized by high employee turnover rates, what do you believe is the principal reason?

 

Opinion on this question was somewhat more divided than on the preceding one. 44% ascribed the problem to “Poor management or weak leadership.” Another 30% pointed to deficiencies in the jobs themselves: 19% to “Inadequate pay” and 11% to “The lure of better jobs in the private sector.” Only 16% identified “A short supply of qualified candidates for jobs” as the principal explanation for high turnover. In other words, about three out of every four respondents (74%) agrees that there’s something inherently wrong in the jobs or working conditions offered in the nonprofic sector.

 

I agree. Though many assert that “benefits” are typically higher for nonprofit jobs than they are in the private sector, I suspect this would be difficult to prove. And, judging from what I’ve seen, employees in nonprofit organizations tend to receive even less respect and appreciation than do those in for-profit companies. (Studies show that it is such intangible factors, rather than mere money, that have the greatest influence on employee loyalty.)

 

3) For a decade or longer, some leaders in business, philanthropy, and in nonprofit organizations themselves have advocated the adoption of proven business management techniques to the nonprofit sector. To what extent, if any, do you believe this advice has been followed?

 

Nearly two-thirds (63%) of those who responded indicated agreement with the statement that “Some nonprofit organizations now operate efficiently.” Another 25% asserted either that “Most nonprofit organizations now operate efficiently” (15%) or that “Nonprofit organizations have always operated at least as efficiently as businesses. The advice is misdirected.” (10%).

 

In a quarter-century of work that has spanned both sides of the fence, I’ve come to believe that, on the whole, nonprofits do about as good a job as profit-making businesses at putting their resources to good use. I’ve also seen exceptional nonprofit organizations that would be the envy of any for-profit venture. However, just as there are dinosaurs in the world of business, they’re to be found in the nonprofit sector as well: the difference is that moribund businesses tend either to be swallowed up by more successful firms or simply go under. By contrast, some nonprofit organizations that have outlasted their usefulness or relevance manage to hang on for decades, living off endowments or even misrepresenting their work to the public.

 

4) During the past two decades, one of the most significant developments in the nonprofit sector has been the establishment and growth of university programs offering academic instruction in nonprofit management generally, and in fundraising in particular. To what extent, if any, do you believe this development has constituted a positive contribution to the sector?

 

“Academic programs for nonprofit managers have been only moderately successful in raising the level of competence in the sector,” according to 63% of those in my informal poll. However, nearly one-quarter (24%) agreed that “Academic programs for nonprofit managers have dramatically raised the level of professionalism in the sector.”

 

I tend to lean toward the majority opinion on this question—not because I think poorly of the sector’s academic programs but because I believe it’s too early for their impact to be fully felt. It took many decades of constantly upgraded professional training and certification procedures for physicians and attorneys to gain the level of professional respect they now command in our society. To extend the analogy, I believe that the low regard in which elementary and secondary school teachers are now held has something to do with the decidedly uneven quality of the professional training they receive and with the inconsistent certification requirements from state to state.

 

5) Many fundraisers report that rising costs, increasing competition, and other factors have significantly reduced the cost-effectiveness of their direct mail fundraising programs. Yet, almost without exception, these programs continue. On what basis, if any, do you believe it is justifiable for a nonprofit organization to conduct a direct mail fundraising program today?

 

If you believe that “Direct mail fundraising has become less cost-effective, but it is still an important source of revenue for nonprofit organizations,” then you’re in agreement with about half (49%) of the respondents in my survey. An additional third (32%) asserted that “Direct mail fundraising can be justified today only when it is viewed as part of a broader direct response program, including telemarketing, online communications, and other techniques” (which isn’t a fundamentally different point). In other words, more than four of five respondents see direct mail as of continuing importance in nonprofit resource development programs—but they see it in a realistic light, not as the cash cow it used to be for so many nonprofits but as a set of techniques that can be put to decidedly profitable use when properly integrated into the work of the development office. As an advocate of this perspective for many years, I’m very pleased to see such broad agreement.

 

6) Certain members of Congress and other critics of foundations have advocated that the present requirement that public foundations expend—not give away in grants but simply expend—at least 5% of their assets each year should be sharply raised. To what extent, if any, do you agree?

 

I wasn’t surprised to see that responses to this question were more at odds with one another than to any of the previous questions. Debate on the “5% rule” provoked widespread controversy in the nonprofit sector. However, more than four out of 10 respondents in my survey (42%) agreed with the statement that “I believe the 5% requirement should be increased only very gradually and very slightly.” A slightly smaller proportion (29%) held that “I believe the 5% requirement should be increased substantially.” The rest of the responses were all across the board, either “completely in agreement” or in “total disagreement.”

 

It’s clear to me, having worked with many hundreds of foundation grantees over the years, that the practices of some foundations have made them decidedly unpopular within the sector. (Terms like “arrogant” can be freely heard in off-the-record conversations with many grantees.) I, for one, would hope the foundation community turns its attention more squarely to our society’s economic and social challenges before it appeals to the nonprofit sector for renewed support.

 

7) Some independent observers contend that, in the U.S. today, substantial contributions by foundations and individual major donors rarely promote social change. Instead, foundation grants and major gifts go disproportionately to universities, arts institutions, and other beneficiaries that reinforce the status quo. To what extent, if any, do you concur with this observation?

 

Nearly half (46%) contend that “I believe there is some truth to this observation, but I also believe philanthropy alone underwrites much of the effort to foster social change in the United States.” Only a slightly smaller number (37%) agree with the statement that “I believe there is some truth to this observation, but I also believe this position views social change through too narrow a lens. Higher education and the arts are essential to creating a better society.” Just 17%, almost equally split, either totally agree or totally disagree with the assertion.

 

However, I believe the statement is essentially true, notwithstanding the valid qualifications stated above. For example, studies of the burgeoning community foundation network in the United States have shown that a disappointingly small proportion of grants go to community-based organizations that seek to narrow social and economic inequities. If one of the principal roles of philanthropy is to support efforts at social betterment ignored or shunned by government, and to back fresh new ways to address social problems, then, on balance, big-money philanthropy in the U.S. today isn’t fulfilling its responsibility.

 

8) Many observers see the rapid growth of state-level regulation of fundraising as a response to high-profile scandals in the nonprofit sector in recent decades. Some in the nonprofit sector welcome this development. Others are vocally critical. Where do you stand?

 

Opinion among my respondents was almost equally divided four ways on this question. Here’s how responses stacked up:

 “I believe tough regulation of nonprofit fundraising practices at the state level is essential if the sector is to maintain its all-important credibility with the public.” (31%)
 “I believe tough regulation of nonprofit fundraising practices at the state level is completely uncalled-for, having more to do with legislators’ desperate search for new revenue sources than it does with a desire to protect donors from unscrupulous fundraisers.” (25%)
 “I believe tough regulation of nonprofit fundraising practices at the state level is simply an expensive nuisance. It has no significant impact on either the donor public or the nonprofit sector.” (27%)
 “I believe tough regulation of nonprofit fundraising practices at the state level is the wrong answer to the challenge faced by nonprofit organizations whose reputation is damaged by the illegal or unethical practices of some managers. The only way to come to grips with this problem is for the federal government to pre-empt state laws regulating fundraising.” (25%)

 

Having struggled for two decades with the continuously changing regulation environment—spending in the process hundreds of thousands of dollars to comply with registration requirements—I’m biased on this question. (Please understand: this doesn’t make me a Republican—it just means I’m human.) In theory, regulations make sense as a check on a sector that is, after all, underwritten by taxpayers’ dollars. However, in practice the execution has been uneven at best—and its meager results difficult to justify. (How many crooked nonprofits or fundraising consultants have been driven out of business by state regulation? Not many!)

 

If anything, I’m inclined to think that—in theory—federal regulation of the sector would be preferable, since it could eliminate the inconsistencies among the states and reduce the abusive overcharging of some regulatory bodies. However, given the pathetic performance of the United States Congress on far weightier matters during the past decade, I have no confidence that an attractive federal solution would emerge.

 

9) Even today, a dozen years since the advent of the World Wide Web, there is considerable debate within the nonprofit sector about the potential impact of online fundraising. Where do you stand on this question?

 

Seven out of 10 respondents (70%) agreed that “I believe that the popularity of online fundraising will steadily increase during the years ahead. Revenues generated online will increase at a rate of fifty percent or more each year for the foreseeable future.” Another 24% said “I believe that funds raised online will never account for more than ten percent of all philanthropic revenue” (a statement that’s not necessarily inconsistent with the first one).

 

Having studied this question and given it considerable thought, it’s clear to me that the adoption of online giving is proceeding much more slowly than most observers assumed it would in the first flush of enthusiasm for the Internet in the early- to mid-90s. However, it seems equally clear that the trajectory points sharply upward. I suspect that what some now call “e-philanthropy” will some day account for well over 10% of all giving in the United States. How much more, and when? That’s anybody’s guess. 

 

10)  In recent years, the concept of the “intergenerational wealth transfer” has gained great currency in the U.S. nonprofit sector. Research suggests that more than $40 trillion will shift from one generation to the next during the coming half-century. As a result, the potential for growth in fundraising is said to be huge. Where do you stand on this issue?

 

I did a poor job suggesting answers that included the full range of possible views on this question. (For instance, there was no option to simply register agreement with the assertion.) Still, it’s clear to me that the answer most commonly chosen could easily represent majority sentiment in the nonprofit sector: “I find the research persuasive in general terms, but I don’t believe the potential for growth in philanthropic revenue is necessarily that great. The cost of health care and other costs associated with an aging population will discourage philanthropy.” 57% chose that response.

 

I tend to share that sentiment. However, I believe that factors other than those related to aging may weigh just as heavily: trends in governmental funding (which won’t necessarily continue on a straight line downward) and attitudes among younger folks about philanthropy. To my mind, though I remain hopeful, it’s anyone’s guess what the future will hold!

 

Well, now you know how I feel about these questions. How about you? Where do you stand? Drop me a line!