Monday, December 8, 2008

Interesting Article by Penny Stephens

A few weeks ago I was one of four speakers who kicked off a jam-packed forum organized by three special interest groups of the Institute of Fundraising in the UK. It was an excellent cross-discipline coming together of fundraisers all keen to discuss what actions they could be taking in light of the financial climate. After some perspectives from the speakers, attendees split into groups to share information on and discuss four key themes. Penny Stephens attended and wrote the article below following the event which I thought other ‘recessionwatchers’ might want to read over.

Jan Chisholm
International Development Director


How will the recession affect fundraising now and into the future?

Fundraising departments could shrink by up to a third by 2010 to see charities through the recession, according to Andrew Thomas of Charity Consultants.

Thomas was speaking at a round table event organised by the Insight, Trusts & Statutory and Major Gifts Special Interest Groups of the Institute of Fundraising this week.

Looking at historical data, Thomas said that charities generally go into recession later than other sectors. He said he was expecting severe cuts in fundraising departments during this recession because there were not sufficient cuts in the last economic downturn. “Trustees will be looking for more cost-effective fundraising,” he told delegates.

Stephen Dodds of DMS felt there is a strong likelihood that donors will change their behaviour and that we should be paying close attention to the demographics of our donors. “There is a sense of unease about the financial situation,” he said. “In research donors have said they will hold back generally to see what happens, or they will not extend their giving for the same reason.”

However, he said that the recession was likely to just emphasise existing trends and that we should expect to see response rates on direct mail continue to fall, and experience more difficulty getting donors to commit to a second or regular gift. “Donors increasingly see through our efforts, are more marketing savvy and cynical,” he said. Fundraisers should stay close to donors to understand how different groups will be affected and they should be able to engage with donors to prove that they understand motivations.

But maybe there isn’t so much of a problem. Jan Chisholm of Pareto Fundraising deals in data, not opinions. “We see opinion surveys saying people will cut back, charity CEOs saying they will see income drop. It’s scary that decisions are being made on the basis of these opinions,” she said. “It will be self-fulfilling prophesy: if you cut back, you won’t recruit as many donors.”

She advocated investing in top data analysis to give fundraisers the best chance of understanding their donors.

Conversely Stuart Sheriff had sought the opinions of trusts who generally feel that they will have less to give but anticipate the number of applications increasing significantly. They advise that charities will have to show they are planning for the recession and not just carrying on as normal and will really have to demonstrate exactly why they need the trusts’ support.

Have targets been increased to an impossible level? Several delegates agreed that their targets had been increased dramatically for the next year and had in some cases become quite unrealistic. Sightsavers is expanding and therefore looking at new markets to maintain trust income. Delegates have experienced trusts reviewing giving strategy with the feeling that most will do the same. They are likely to give to those they know best, first. Advice is to maintain good relationships with trust and to use stewardship to get buy-in across your organisation. Sense advocates getting support from other departments, and particularly relevant information from CEO.

Charities need to be very transparent to get money and may also need to consolidate and start working together more. Trusts are going to want to see economies of scale and cost-effective fundraising being done. This could lead to more mergers in the sector.

Delegates argued that the organisation cannot be led by a donor or trust, but it was agreed that organisations should see this as an opportunity to save resources and work more efficiently.

Do donors consider how the recession impacts on charities, and should you talk to them about it? No consensus because people had very different views on this. Majority felt it was reasonable to point out that costs had risen, exchange rates worsened and that programmes might have to be cut or replanned without additional resources.

Major donors are asking deeper, more insightful questions and charities need to be ready with answers for these. Donors want to be better informed about where their money is going and what it’s being spent on.

Some charities have noticed a big drop in individual giving, but not in trusts – others vice versa. More have seen a downturn in corporate giving. Anecdotal evidence that there are fewer regular donors but they’re giving more.

Groups

Internal comms

Transparency should be mirrored internally and externally.

Need to know what our contingency plan is if our income falls off.

Need a visionary CEO out there talking to people and not letting accountants take over.

Communications initially differs hugely between large and small organisations.


Targets

Expectation that targets will rise each year, but have a need to be flexible and should have a yearly plan to be reviewed at regular intervals.

Targets should be set in a consensual manner, not just picked out by CEOs.


Data

Need to keep a close eye on figures and to use 10-year-on files.

Look at trends of data over time – response rates could be falling for another reason.

If the organisations still has data silos then now is the time to integrate it all so you have all your data in one place.

Focus on major donors and look after them.

Benchmarking – share data to see if trends you’re seeing are being shared in different sectors.


Donor communications

Need honesty and transparency with donors but need to reassure them.

Fundraising efficiency feels to be increasingly relevant.

Donors still think money is wasted on fundraising. OK to have conversation with donors about effects of recession and use facts to talk to them but need to be able to point to evidence.

Safe to assume if you don’t understand your donor base then your fundraising won’t be as effective as it should.

Are you making the most of thanking your donors and making them feel as great as possible about giving to you.

Speakers suggestions:

Stephen Dodds – use the internet more. It has a role in drastically reducing the costs of communicating with donors. As a sector we don’t know how to use the internet and this should force us to find out.

Jan Chisholm – We should use this opportunity to get to know our data. Really get in and find out what’s going on in our programmes so we can see what changes. Gives us the chance to look and interrogate data.

Jeremy Payne – Look at gaming and gambling. People gamble more in a recession.

Andrew Thomas – Imagine a scenario where a third of the fundraising team is cut and how you could reallocate staff into more profitable areas, include your CEO and finance director in the discussion.

Stuart Sheriff – Make sure you have projects that are attractive enough for trusts to want to fund them.

John SauvĂ©-Rodd – Donor level profitability. Identify the most profitable and most loyal donors, allocate someone to look after them because we really don’t want to lose them.

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