Hildy Gottlieb

Donors are Not Extemely Happy

Hildy — Thu, 18 Sep 2008 15:00:48 +0000

The Nonprofit Times reports the following:

“Only slightly more than 1 in 10 donors (13 percent) say their experience as a donor exceeded expectations, according to a new survey. While 83 percent of donors said their experience met expectations, it leaves “more room for improvement for nonprofits to wow their donors,” said Dirk Rinker, president and CEO of Campbell Rinker, a marketing research firm.”

When will we see surveys that ask the only people who matter – the communities we serve? When will we begin getting a real read on what we should be accomplishing, and for whom?

As long as we continue to see ourselves primarily accountable to donors, we will continue to disappoint BOTH our communities AND our DONORS.

Debunking “Accountability to Donors” – Finale

Hildy — Mon, 19 May 2008 04:04:18 +0000

We accomplish what we hold ourselves accountable for.

In wrapping up the past week’s rant about the issues related to Donor Accountability, I want to first share what triggered that rant. And then I want to share what we can do to hold ourselves accountable in a way that makes donors happy and, most importantly, makes our communities happy.

(If you have not read the posts leading up to this one, you can start at the beginning here.)

First, the trigger. It was a discussion at the always-thoughtful and thought-provoking Tactical Philanthropy blog. I appreciate Sean Stannard-Stockton for consistently raising issues that are important to the work we all do, and this was no exception.

Here was the question, from several months back: As we search for the keys to board effectiveness, should donors vote for nonprofit board members?

I won’t go into all the answers I had just to that one question – I think you all have had enough of my ranting to last quite a while!

But back to the issue of donor accountability – if demanding more donor rights is not the answer to the question of organizational effectiveness, then what is the answer?

And that answer is that we stop aiming at the symptoms, and start aiming boards at their potential. And then have them hold themselves accountable for that.

And what is that potential? It is no less than the community’s highest aspirations – the aspiration for our communities to be safe, healthy, vibrant, humane, joyful places to live.

Here’s the thing about the Donor Accountability Movement: It stems from the same frustration everyone seems to have about the work of this sector. It is the frustration reflected in the title to the book that yes, I promise, will be released this fall: Why Nonprofits / NGOs Have Not Changed the World and How They Can.

Donors and boards and everyone else want the same thing from community organizations – we want amazing places to live. To date, the systems this sector relies on fail to aim at that, and in some cases aim glaringly away from that.

But if we change both governance systems and governance culture, making it not only acceptable for boards to hold themselves accountable for creating the future of our communities, but making that the norm – then they will be accountable to their donors and everyone else.

Boards cannot accomplish “extraordinary” if they are wasteful and inefficient. And, more to the point, if boards are holding themselves accountable for creating extraordinary communities, donors will be excited and engaged, rather than critical.

Donors are a hugely important part of what makes our organizations work. They are, in fact, investing their dollars, their in-kind gifts and their time. And they are, in fact, frustrated with the fact that our communities do not seem to be dramatically changing.

Unfortunately, those advocating for donor rights are making the mistake of aiming their complaints at the money, rather than the results. But that does not invalidate their reasons for doing so. They want what we all want – better communities, and healthier organizations leading that charge.

And so, I propose the following:

If the board is holding itself first and foremost accountable for creating an amazing future for anyone whose lives are touched by the organization, and
If a board is making every single decision based on vision, mission and values, and
If that board is creating plans that aim first at the difference they want to make, and then at ensuring they have all the means to accomplish that,
Then our organizations will have far more than just happy donors.

Our organizations will have boards that are committed.

Our communities will have organizations that are energized.

And we will all have communities that are becoming all they have the potential to become.

The issue of where we aim our accountability is therefore the most important question any organization can ask. It is why I took a whole week of posts to debunk the current “wisdom” of accountability to donors. It is why I roam the country, teaching boards how highly practical and do-able it is to Govern for What Matters Most – holding themselves accountable for creating visionary change in their communities.

Thanks to you all for letting me rant this past week. In the next week or so, we will be assembling those points into a white paper. So please just let me know if you would like a copy, and we will get that to you!!

Debunking “Accountability to Donors” Part 6

Hildy — Fri, 16 May 2008 01:44:45 +0000

Is the Donor Accountability movement correct? Should community organizations be aiming their primary accountability squarely at their donors?

Having spent the week throwing grenades at that notion, today’s is the last argument I will make before wrapping up this subject tomorrow.

(If you have not read the posts leading up to this one, you can start at the beginning here.)

Accountability for “The Money”
Now we’re at the heart of the matter. If organizations are to be held accountable to their donors, the only logical thing they could be accountable for is “The Money.” And if you ask a room full of nonprofit board members what they are primarily accountable for, that is the response you will get from many, if not most of them. “The Money.”

We know this because we have asked board after board. And almost always, that is their first reply – “The Money” – as if “The Money” were some special deity deserving of capital letters and quotation marks.

And as you have probably guessed by now, that is just not true.

As we saw in yesterday’s post, the corporate model actually points away from nonprofit accountability for “The Money.” So, then where does the logic behind “Accountability for The Money” come from?

Perhaps it comes from the law. Aren’t community organizations LEGALLY accountable to donors and funders? Aren’t they LEGALLY accountable for the money?

Well, no. Legally, community organizations are accountable for upholding the law. That’s it.

Now in some cases, the laws they must uphold may include contract law. For example, if there is a contract between an organization and a donor / funder / government contracting office, the organization must legally uphold its end of that contract, just as it would be legally bound to uphold any contract. But in those cases, it is not because the other party is a donor, but because there is a contract involved.

And so, short of ensuring that money is not used for an illegal purpose, the “legal accountability for the money” argument doesn’t hold any more water than the corporate argument.

Well what about tax exemption? In exchange for their tax exemption, community organizations must be accountable for the money, right?

Sorry – wrong again. Organizations receive their tax exemption for one reason: to provide community benefit. The prime example of that is tax exempt hospitals in the U.S., who often find themselves scrambling to put a cash value to the benefit they provide to the community. The IRS wants to know that the community is receiving at least as much in “community benefit” as the hospital is saving by not paying taxes.

Again – not the money; Community Benefit.

But just because it is fun to do, let’s take the tax exemption argument one step further.

If the reason an organization would be accountable to its donors has anything to do with the tax exemption the organization enjoys, then it stands to reason that the reverse is true as well – that donors are accountable to the organization.

Why? Because the organization is not the only one getting a tax advantage; the donor will receive a tax deduction for his/her gifts. And depending on the net worth and sophistication of the donor, he/she may get tremendous personal tax advantages for giving a particular gift in a particular way. So perhaps we should just leave the “tax exemption” issue alone…

Which all combines to leave us here:

IF accountability for the money is not an issue of legal accountability or the tax code; and
IF corporate accountability actually proves that organizations are accountable primarily to the community, rather than primarily to donors; and
IF it is almost impossible to discern to whom an organization would owe its accountability for a government grant; and
IF we have to think hard to determine why a cash donor should be the object of accountability over an in-kind donor or volunteer; and
IF we have to think just as hard, if not harder, to determine cut-off donation levels for varying degrees of accountability – and again determine what exactly that means;
And if we cannot for the life of us figure out to whom an organization would be accountable if it was fully endowed and did not have to raise money through donations or grants…

Well then maybe it is time to put to rest the notion that our primary accountability is for the money, and that we are primarily accountable to our donors.

Perhaps it is time to start looking not at the issue of accountability for the means – the money – but for the end results: community change. And perhaps it is time to start considering what could be accomplished if boards held themselves first and foremost accountable to their communities, rather than to their donors.

Tune in tomorrow, when I will wrap up this thread, by considering what is possible when we start governing for our potential to do amazing things in our communities, and stop aiming our boards’ accountability myopically at dollars and donors.

Debunking “Accountability to Donors” Part 5

Hildy — Wed, 14 May 2008 21:49:37 +0000

As I have noted throughout this series, the notion that organizations are primarily accountable to their donors not only misdirects organizational focus, but it is fraught with logic holes large enough to comfortably house a family of four.

In my posts today and tomorrow – the last posts before I wrap this up – I will move away from the absurdity of that logic. Instead, I will aim these remaining posts at the faulty assumptions at the root of this whole argument.

(If you have not read the posts leading up to this one, you can start at the beginning here.)

Faulty Assumption: The Corporate Comparison
Both Corporate and Nonprofit Accountability are about the fiduciary obligation to represent the interests of others.

When we state that a nonprofit organization is primarily accountable to its donors, therefore, we are stating that the organization’s primary allegiance is to represent the interests of those donors.

If that is not enough to make one stop in one’s tracks, we must ask the next question:

What factors determine whose interests those organizations should be representing?

The most commonly cited factors in the “donor accountability” argument look something like this:
1) In a for-profit corporation, shareholders invest the dollars that allow that corporation to do its work.
2) In a Community Benefit Organization*, donors provide the dollars that allow the organization to do its work.
3) Therefore, because for-profit corporations are accountable to their shareholders, “nonprofit” corporations are accountable to the donors.

Seems airtight, doesn’t it? Unfortunately, it is not true.

Here is the reality:

1) One can only be held accountable for one’s own actions. Therefore, a corporation can and should be held accountable for the actions it takes.

2) The purpose of a for-profit corporation is to generate profits. The actions for which the corporation will be held accountable will therefore be aimed at that end goal – generating profits.

3) The shareholders will receive those profits. That is their return on their investment.

4) For-profit corporations are therefore accountable TO their shareholders, and accountable FOR taking actions that will provide the very most benefit / reward possible – the highest return on the shareholders’ investment.

5) Corporate accountability to shareholders, therefore, is NOT due to the fact that the shareholders provided the funds. The corporation is accountable to those shareholders because the shareholders will reap the benefit that derives from the corporation’s actions – the actions for which the corporation is accountable!

This is not a difference of semantics. It is, in fact, everything. Corporations are not accountable because their investors put the money in, but because the investors are the ones that will reap the rewards.

Which begs the question, “In the world of Community Benefit Organizations*, who will reap the benefit of what the organization does?”

Yes, it is the community – everyone, including the donors, but also including you and me and our neighbors and friends.

Therefore, the “shareholder / investor” argument does more than simply fail to prove that community organizations are accountable first and foremost to their donors.

The corporate analogy actually proves instead that community organizations are primarily accountable to the community they have promised to benefit.

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Tomorrow, in Post #6, I will provide the last argument in this series – rooted in the biggest and most dangerous of all faulty assumptions. And then, on Friday, I will wrap up this thread with the moral of the tale, and suggestions for change. And I’ll do that all in time for Monday’s Rock-Out (which we will all sorely need by then!).

So stay tuned!

Curious about our use of the term “Community Benefit Organization?”

Debunking “Accountability to Donors” Part 4

Hildy — Tue, 13 May 2008 23:38:29 +0000

In this series, I have considered the logic flaws in the argument that organizations should be holding themselves primarily accountable to their donors. So far, I have considered the following questions:

1) Are fully funded / endowed organizations with no donors accountable to no one?
2) Should different levels of giving receive different levels of accountability?
3) Do “donor’s rights” apply equally to volunteers and in-kind donors as they do to cash donors?

(If you have not read the posts leading up to this one, you can start at the beginning here.)

Today, Post #4:

Are Thousands of Organizations Accountable to ME?
There are thousands of organizations that receive large grants from the various layers of various governments – local government, state / provincial government, federal / national government.

If organizations are primarily accountable to their donors and funders, to whom, exactly, are these organizations accountable?

Are they accountable to the whole government? And what does that really mean? I understand what it means for government to be accountable to the people it governs, but to what or to whom would an organization be accountable if it is accountable TO the government?

Perhaps, then, those grantee organizations are accountable just to the division of the government whose budget provided the funding. Or within that division, perhaps they are accountable to the proposal review team, or to the individual program officer who approved the grant.

Or are those grant recipients accountable to the Division Chief that oversees all those program officers? Or to the elected officials who appointed the Division Chief – the folks to whom that Division Chief is accountable?

But wait – that money didn’t really come from the government. You and I gave that money to the government! So is each and every one of those organizations then accountable directly to each and every taxpayer?

Are they all accountable to ME?

The questions “To whom are we accountable? And for what?” are about more than just dollars and donors. These questions are at the heart of everything community organizations are able to accomplish. And the reason for that is simple: We accomplish what we hold ourselves accountable for.

Click here to go to the next post in this series.

Debunking “Accountability to Donors” Part 3

Hildy — Mon, 12 May 2008 20:16:57 +0000

The notion that organizations are primarily accountable to their donors is a dangerous one indeed – dangerous because it misdirects organizational focus, thereby preventing organizations from creating an amazing future for their communities.

It is also a notion fraught with logic-leaps.

And so, here is Post #3, as I continue to debunk the illogical constructs at the heart of the Donor Accountability movement.

(If you have not read the posts leading up to this one, you can start at the beginning here.)

Donating What?
If an organization is first and foremost accountable to those who provide the resources to make their programs possible, are those organizations only accountable to donors who give them cash?

What about the donor who provides $100,000 in free rent every year? What about a volunteer who works 40 hours a week, every week, for free?

If we are primarily accountable to our donors, are we accountable to our volunteers and our in-kind donors to the same extent we would be accountable to our cash donors? And if not, why not?

These are not just glib arguments. Because we do indeed accomplish what we hold ourselves accountable for, the issues in this thread are at the heart of what organizations can and will accomplish for the communities we all love.

If we hold ourselves accountable for creating an amazing future for our communities, our donors will be happy, because our communities will be healthy, vibrant, resilient, humane places to live.

Yes, one of the many contributing factors towards those lofty ends is the extent to which organizations are fiscally prudent and responsive to donors. However, ultimate accountability for a Community Benefit organization means more than a focus on the dollars.

Accountability asks and answers the question, “Whose expectations matter?”

And unless the primary answer to that question is, “The Community,” we will continue to see fiscally prudent organizations creating little impact in their communities.

Click here to go to the next post in this series.

Debunking “Accountability to Donors” Part 2

Hildy — Fri, 09 May 2008 21:20:29 +0000

In my first post on Donor Rights / Donor Accountability, here is what I said:

The notion that organizations are primarily accountable to their donors is a dangerous sidetrack from where organizations must aim their primary accountability if we are to create an amazing future for our communities.

And so here is Post #2, as I continue to debunk the illogical constructs at the heart of the Donor Accountability movement.

Bill Gates vs. My Grandmother
If the Donor Rights advocates are correct, an organization owes its primary accountability to its donors, because their dollars make everything possible.

Does that mean the organization is more accountable to the person who writes a $1 million check than to the person who gives $10? Are we then really talking about a sliding scale of accountability, where the organization is accountable to each and every donor, in direct proportion to the level of his/her gift?

And how does that work out in practice? What exactly do those “donor rights” buy in terms of levels of accountability based on gift size?

Taking that logic one step further, does the same “accountability” apply if the $1 million check came from Bill Gates, representing a fraction of his total wealth, while the $10 came from my grandmother, living on a fixed income, to whom that $10 meant giving up something else she would have purchased that week? What rights would each of them deserve as donors to whom the organization might hold itself accountable?

Which raises the next question – if two donors are making 180 degree opposite requests / demands on an organization, and they both gave the same amount, to whom is the organization accountable? Which one of those donors’ best interests should be the primary concern of the organization?

If we hold ourselves accountable for creating an amazing future for our communities, our donors will be happy, because our communities will be healthy, vibrant, resilient, humane places to live. And we will provide those results by being fiscally prudent and gracious to our donors, simply because it is impossible to produce incredible results if we do our work in any other way.

Click here to go to the next post in this series.

Debunking “Accountability to Donors”

Hildy — Sun, 04 May 2008 18:53:00 +0000

Nothing gets my teeth gnashing like the discussion of Donor Rights and Donor Accountability. It is such a dangerous sidetrack from where organizations must aim their primary accountability if we are to create an amazing future for our communities. And yet, the notion that organizations are primarily accountable to their donors prevails, and it is growing daily.

The essence of Donor Rights / Accountability is that organizations are primarily accountable to their donors, as the donors (according to this theory) are the organization’s investors – the ones that make everything possible. Therefore, organizations owe their primary accountability to those donors, for spending the donors’ money wisely.

It sounds good at face value, but it is a logic that goes beyond being just seriously flawed (which it is). It is a concept that is hazardous to the ability of community organizations to create visionary improvement to the quality of life in our communities.

(To get a glimpse of where accountability must focus if we are to create an extraordinary future for our communities, this post is a start. And this article goes deeper.)

And so, over the next few weeks, I will be debunking, one by one, the illogical constructs that lie at the heart of the Donor Accountability movement.

To open the discussion, let’s start with an easy one.

Consider that rare animal – the fully funded, fully endowed organization.

If organizations are primarily accountable to their donors and funders, and an organization has no donors to be accountable to, to whom is the organization accountable?

And if the logic works for that organization, why is the logic different if someone has given a donation?

Does accountability really relate to the level of organizational financial security? If an organization starts out with many donors, and over the years grows an endowment to the point where it needs to do virtually no fundraising resulting in very few, if any donors – to whom is the organization accountable?

And does true accountability really change over time if an organization’s purpose does not change over that time?

Head to the next post in this series.