Charity's dollars: Don't knock professional fundraising

Simon Jackson on the need for Canadian charities to become more professional and businesslike.

From Toronto's municipal election race to BC's anti-HST campaign, it is clear that economic populism now rules the policy agenda.

It's no different within Canada's charitable world. Witness the recent public uproar after a CBC investigation discovered that Canadian charities spent $762 million on professional fundraising over a five-year period, with some organizations spending more money on donor cultivation than they received in donations.

The article brought to light serious issues, which should be of concern both to non-profit agencies and to those who support them. But it also portrayed fundraisers in an unnecessarily negative context and was somewhat misleading on the fundraising policies of Canada's charities.

In today's tougher economic environment, more charities, representing more causes, appear to be chasing fewer dollars. (CBC graphic)

As the Association of Professional Fundraisers points out on its web site, a one-year snapshot of some group's fundraising practice is not always a fair sample size.

For starters, many fundraising campaigns do poorly in the first year, but pay off in spades over a two- to three-year timeframe. That can reduce the start-up costs dramatically, a fact acknowledged by Revenue Canada in its guidelines.

Also, according to the CBC article, the cost of professional fundraisers equaled 10 per cent of the funds raised over a recent one-year period by charities (well below the suggested limit by Revenue Canada of 35 per cent).

But when you look more closely at the period in question, 2004-2008, $35 billion was raised by Canadian charities and the percentage that was paid to professional fundraisers drops to below two per cent.

What's more, if it weren't for professional fundraisers, many organizations would be without the kind of critical expertise many clearly need to avoid failed campaigns and wasted advocacy.

Give to get

This is not to say there are not issues with professional or outside fundraising.

But tarring everyone with the same brush can only lead to increased donor skepticism and the kind of economic populism that would have funds go directly to the cause, rather than to fund operational costs, a practice that comes with its own set of problems. 

No one likes funding the very unsexy core expenses of an organization. Yet the reality is that with fewer and fewer wealthy foundations and government agencies providing basic operating funding to non-profits, the need for successful strategies to help cover operations is more critical than ever.

Funds generated for a specific cause — say, teaching literacy in inner-city neighbourhoods — will likely be wasted unless an organization has the appropriate leadership talent to ensure a program is executed effectively.

As an example, a fundraiser recently told me about one Canadian charity that was celebrating the fact that it only paid its executive director $35,000 year.

However, the response to this from granting agencies wasn't positive; it was the opposite, in fact. Potential backers refused to donate to a cause they assumed was led by someone who lacked the required skill set to effectively manage their money.

The fundraiser told me that this organization's effectiveness was always in question because of the little it was paying critical support staff. Its penny-pinching, seen as a virtue in some circles, was really leading to a downward spiral.

Strong leadership

On the other hand, another organization I'm aware of recently decided it would become more effective if it increased its executive director's salary from $40,000 to over $100,000.

The increased pay brought in dramatically stronger leadership and the organization saw the impact almost immediately.

Still, even with an increased national presence and dramatically improved performance, several supporters questioned the noticeable increase in operational costs, which charities are obliged to post.

In today's market, $100,000 is a steal for a capable executive and the cost for non-profits to obtain and retain good people is only going to increase.

The question we must ask ourselves is how can we expect charities to be effective and sustainable without reasonable compensation and sophisticated management tools.

In today's skeptical climate, it appears that charitable groups are damned if they do and damned if they don't go the professional route — which is not a cycle for long-term success.

Social entrepreneurs

Today, many organizations clearly play to the economic populism that is out there and either try to hide or fail to communicate clearly the full extent — and critical importance — of core expenses.

Charitable groups clearly have their different approaches and priorities. Here, Nahanni Johnstone and her eight-year-old daughter Chloe Avakian have covered themselves in cocoa and vegetable oil to resemble a human oil slick, as part of a G8 protest organised by Oxfam Canada in Toronto in June 2010. (Chris Young/Canadian Press)

If we were to be objective, we would have to say there are far too many non-profit agencies in this country with far too many doing the exact same thing.

If more organizations were willing to be collaborative, either indirectly or by merging outright, there would be much less wasted effort.

Of course, some organizations can't work together as their philosophical approaches are not compatible. Fair enough: It's this mosaic of views that creates healthy debate and, ultimately, better policy.

However, in order for this diversity to be sustainable, innovation is required, innovation like social entrepreneurship, which can mean creating a for-profit revenue stream within the context of a charitable or non-profit cause.

It is a concept that is being embraced by many organizations from Kiva, which makes small "micro-loans" in developing nations, to Me-to-We, which helps sell Third World crafts to bring in money for schools.

Creating new revenue streams like these can help tilt non-profit groups towards adopting better business practices while at the same time helping them wean themselves from the whims of funder or economic cycles.

More importantly, commercial ventures allow an organization to generate dollars for those core operational costs that increasingly fewer funders want to take on.

Clearly, though, it is not an option for everyone, which brings us back to the article.

While no organization should be complacent or flippant when spending donor dollars, both the media and the public need to be more cognizant of the challenges that non-profits face in today's economic climate.

If we donors are not willing to fund operational costs or support a group that brings in professional help, then we must be constructive in our criticism and armed with all of the facts.

As a society, we need to come up with new ideas that will allow for these critically important, non-profit advocates to exist and excel at their work — even when the price tag can seem a little higher than we expect.