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Appleton - Philanthropic Reaction to Economic Crisis - AFP - Boston College

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I took these abbreviated notes during a two-day Association of Fundraising Professionals "Executive Institute" at Boston College in summer, 2009. While not all information is covered herein, there is …

I took these abbreviated notes during a two-day Association of Fundraising Professionals "Executive Institute" at Boston College in summer, 2009. While not all information is covered herein, there is enough to provide a solid overview. The seminar was interesting and helpful - following on the heels of the economic travails of 2008 and 2009 - and although time has moved on, some of the information still rings true today.

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  • 1. Photograph of the building at Boston College where the Institute was held (Carolyn M. Appleton) Association of Fundraising Professionals Boston College – Center on Wealth and Philanthropy June 9, 2009 First part of a two-day seminar Carolyn M. Appleton, CFREEach presentation given today was quite good. One given by Scott Nichols, Vice President of BostonUniversity and a member of the AFP Massachusetts Board of Directors, was exceptional. The belownotes are a bare sketch, but I wanted to pass them along. Prior to Boston University, Scott served forover 17 years as the chief advancement offer for Harvard Law School. He has authored 5 books onadvancement and has many other credentials – but the list is too long to note here. Suffice it to say, heis well qualified.Scott notes: 1) Donors are tougher (meaning, they are asking a lot more pointed questions of grant seekers), and they are taking longer to make decisions about their donations. Gift consideration used to take approximately 1 year. Now donors are often taking a minimum of 18 months, or more to decide. 2) Donors are more publicity-shy than ever. Some do not want to be perceived as cutting back in terms of their business operations, while making substantial donations to nonprofit causes. 3) Successful gifts are made after “high touch” involvement. There needs to be more quality interaction and communication between donors and the organizations seeking funding, more quality “connecting points.” Development is a contact sport. One must strive to build personal relationships, and to maintain them for the long-term. And, donors are thinking long-term. 1
  • 2. 4) Donors do what they wish to do, and are not funding your menu of “funding opportunities.” If you want them to fund your priorities, then you must involve them in the initial planning process at the very start. The trend is, however, that donors have things they wish to accomplish, and that is what they want to fund. 5) It is a global economy. Some American donors are living overseas, or have significant business interests there. Borders between nations matter much less than in previous years. Wealth is growing substantially and oftentimes quickly, outside the borders of the United States. It is wise not to lose sight of this. 6) Back to basics. One thing remains constant, and that is donors believe in the importance of the mission statement(s) of the organizations requesting funding. One must underscore what is actually being accomplished and how successfully you are achieving your organization’s mission and goals. Donors are seeking strong track records, and efficiency in how goals are being attained.Other brief points made by Scott include: fear-mongering is at an all-time high, and the media is notalways well informed (hence there is more misrepresentation – “some media representatives are youngand have little historical knowledge” – CMA UPDATE 2011: in two years, this has changed dramaticallyas donors of all ages are increasingly using social media); it is okay to be confused, but not frightened, inthis erratic economy; history tells us that charitable giving does not decline much at all duringrecessions; significant donations are still occurring regularly, but we do not hear about them quite asoften (relating to item #2 above).A second excellent presentation was given by Jonathan P. Ashworth of Barclay’s London. Jonathan is aneconomist. He shed light on what has transpired already, and what Barclay’s believes will occur, next.In brief:  The second half of 2009, the U.S. will return to “growth mode.” The “fear” index indicates a return to normal levels in the last three months.  No one can argue that the past 12-18 months have been challenging. In London financial circles, they believe policymakers across the globe have been properly responsive to the economic crisis, and have averted what could have been a much worse global economic collapse. Policymakers have learned their lessons from Japan’s experience in the 90s, in fact, and have responded more quickly to the issues at hand. This has been a very good thing.  Stocks should move higher in the second half of the year and on into 2010.  Barclay’s believes investing in Asia and the Pacific is the best scenario for investors. It will be the strongest market over the course of the next 15 years. The U.S. falls in the middle in terms of attractiveness for investors, with Europe being the least preferred area for investment.  Regrettably, the American “peso” (sadly nicknamed), will be weaker for a few more years as it is overvalued against the Asian and other emerging markets. 2
  • 3.  Asian has suffered with the recent economic upheaval, but they are currently reorienting their market strategy to focus on their own internal consumers, rather than so heavily on U.S. consumers.Other general points made by participants in today’s session include:  One philanthropist attending reports the federal government is not recognizing private philanthropy and its important role in society, and is only focused on promoting federal grant programs. This “crowds out” a more comprehensive, realistic vision of philanthropy and what it can and does achieve for society.  Two philanthropists attending expressed worry about how the federal laws under consideration will affect their families and their charitable giving. They also say they are more focused in terms of their giving today, and have pared-down to supporting fewer, better known organizations where they have prior relationships, rather than developing new funding relationships (“depth not breadth”).  Several people mentioned that the messages nonprofits convey about the importance of their work need to be “sticky.” One must be compelling in presenting one’s case. Also, organizations must demonstrate they operate efficiently, and are not redundant in terms of the services they offer. Organizational mergers, collaborations and partnerships are seen as a “plus” overall.  Some of the philanthropists attending pointed to the use of challenge grants to jump-start giving as a good idea.  Some also said expensive printed pieces are a waste of money, and are being seen as inefficient use of money. Some donors reported nonprofits could make better use of e-mail, however.  Several participants noted they are spending more money to raise money, while other staff positions are being temporarily frozen. More funding requires more time to cultivate/educate donors, and more writing of grant proposals in the end. 3
  • 4. Association of Fundraising Professionals Boston College – Center on Wealth and Philanthropy June 10, 2009 Second and final part of a two-day seminar Carolyn M. Appleton, CFREThe day began with a panel discussion on wealth and giving in 2008, and prospects for 2009. Therewere several excellent presenters, but I only mention a few of them here.Melissa Brown, Associate Director of Research and Managing Editor of Giving USA (based at IndianaUniversity), presented the latest calculations about giving last year, which are not terribly different fromprior years. In brief:  Individuals account for 75% of all giving; foundations for 13% of all giving; bequests for 7%; and corporations for 5%. Overall giving was high at just over $307.65 billion, but still declined 2% from the prior year.  Religious causes received 35% of all gifts; education, 13%; gifts to foundations, 11%; human services, 9%; community development (United Way type agencies), 8%; health causes, 7%; undetermined, 6%; arts and international giving were tied with 4% each; the environment stood at 2%; and grants to individuals (as in medical groups that gave free supplies and services to individuals), at 1%.  It is worth nothing that the only area that experienced an increase in terms of giving was the religious sector. The panel attributed this to people seeking church support in times of stress and need.Other general findings:  Annual giving is less affected by the stock market. Those organizations with strong annual fund drive programs – universities among them – are in a stronger position than other organizations from a financial standpoint.  Those relying on endowment income are hurting. It is likely we have not seen the end to the pain in this regard. The decline in income (and hence, grant giving) by foundations should continue through 2010. Expect even less in terms of grant funding from foundations in 2010.  Capital giving is more affected by the stock market than annual giving. Some donors will be more prone to give a capital gift than an endowment gift for a time, however, until the dust settles from the economic crisis at hand.  The panel felt now is an excellent time to open dialogues with future donors, regarding future gifts of all kinds. 4
  • 5.  It is not a terribly good time, however, to approach entirely new prospects, as foundations and donors are focusing on the causes where they have long-standing relationships. Donors are returning to “basics.” An idea might be, if one is turned down for a request, to ask what kinds of projects the donor is funding, and then to determine if a different kind of match might be made.  Communication with donors is essential. Greater mutual understanding is required. More reporting about how past donations were used is a smart idea.  Foundations are more interested in seeing collaborative ventures between nonprofits, but also are interested in seeing what other kinds of assistance (i.e., non-monetary), that they might be able to provide.  During the first half of 2009, everyone was “frozen,” trying to figure out what was happening. That mentality seems to be shaking loose a bit now.  Northeastern organizations are seeing an increased focus on health and welfare needs.  Unlike some high tech entrepreneurs in Austin (I mentioned to this group a recent conversation with an attorney formerly at Graves, Dougherty, Hearon and Moody, MariBen Ramsey, who now serves as Vice President of the Austin Community Foundation), foundations are not “spending down.” The Northeastern U.S. has a strong tradition of family philanthropy, and carrying on from one generation to the next. It would appear Texas entrepreneurs are sometimes differing from this traditional model, and that they care less about leaving their foundations to their children, wishing instead to see immediate results for the gifts they make to charity.  A great deal of discussion today focused on getting to know one’s donors. As I have said personally to several people with whom I work, individuals make most of the donations in this nation (75% - see above), and hence, we should focus more on people in our fundraising. Foundations and corporations are important, but the current economic crisis means they are less able to respond to our many requests.  Last but not least, people have sadly not stopped passing away. Estate gifts (planned giving), continues to be an important focus area for fundraising, regardless.Anne Sternlicht of Eaton Vance was particularly articulate about donor psychology during the currentcrisis. In brief:  Even if they did not lose much of their investments during the current economic crisis, many donors became paralyzed. They did not necessarily panic, but where in a state of shock.  Because all asset classes were affected negatively by the crisis, donors could not react quickly to protect their assets by reallocating them.  There is no historical similarity to the kind of crisis we are currently experiencing, although the media often tries to compare it to other time periods.  Some donors have over-reacted to the crisis, but are regaining a sense of reality mid-year. Many of them thought they lost more of their investments than they actually did, in fact.  Anne advised fundraising personnel to remain positive with donors about the causes they are promoting, and to keep promoting those causes. Donors need to know now, more than ever, 5
  • 6. that their gifts make a difference, but they are asking more pointed questions about how the nonprofit sector is achieving its objectives.  It was suggested that one include the chief financial officer in discussions with major gift prospects, so that information is readily available regarding how the organization handles its budget and investments. Barring that, get to know your organization’s tax return really well, so as to avoid embarrassment when asked tough questions.On a personal note, I was the only Texan attending this seminar. My colleagues told me they recognizedthat Texas has done quite a bit better than others during the current economic crisis, and they respectthat. There were several positive comments made about Governor Rick Perry’s handling of Texasduring the crisis. In the end, however, I did feel (and with a chuckle), that many Northeasterners stillthink Texas is the “wild west,” where anything goes. I kind of liked that.Onward! 6