Strategic Philanthropy in the New Normal

Strategic Philanthropy in the “New Normal”

January 25, 2012

John Wm. Thomas, Managing Director, OAI
Edwin (Ned) K. Zechman Jr., Senior Consultant, OAI

Copyright © 2012 Orr Associates, Inc. All Rights Reserved.

Introductions

John Wm. Thomas, Managing Director
•33 year career in development
•COO of CHF 1994 – 2008
•Completed campaigns for $40 million, $301.5 million and began
$500 million “Transforming Children’s Health” Campaign
•OAI Consultant since 2009, Managing Director since 2011

Edwin K. (Ned) Zechman, Senior Consultant
•30 years as CEO of pediatric medical centers
•CEO of Children’s National since 1994
•Tripled budget and plant; international reputation secured
•CEO during 3 comprehensive campaigns. Total Value: $1 billion
over 17 years at CNMC

Copyright © 2012 Orr Associates, Inc. All Rights Reserved. www.oai-usa.com
Follow the Event on Twitter: #newnormal 2

Agenda

The “New Normal”:
• What is different and why
• What it means for fundraising
• Overview of the new “strategic philanthropy”

New Era Strategic Philanthropy:
• How it works and why
• Fundraising impact
• What’s a leader to do?
• Wrap up/questions


About You

Size of Organization
6%
3%

12% Organizations under $1 million

Organizations between $1-10
million
45%
million
million
Organizations over $100 million

34%


About You (cont’d)

In general, revenue from philanthropy since 2008 is:

30% 30%

Trending Down
Trending Up
Unchanged

40%

About You (cont’d)

Methods
(corporation foundations, government and Trending Down Trending Up Unchanged
grantwriting organizations)

Recipients
(academic, community
foundations, education, faith Trending Down Trending Up Unchanged
based, healthcare, membership and public
chairity organizations)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


It’s Time for an Alternative Model
for Strategic Philanthropy: Why?
Our proposal:
1. The recession’s impact is far reaching
2. National and global economies have been changed permanently
3. Institutions will be more dependent than ever on philanthropy
4. The pressure on philanthropy will increase
5. Strategic philanthropy is reinventing itself
• “Necessity is the mother…”
• Campaigns will continue to be relevant
• Campaigns will be different
6. Imaginative, bold leaders will grasp the new realities and forge
ahead


Our Thinking Based on
Experience (1994-2012)
• First Campaign: 1990-1995
– Traditional
– Cookie cutter
– Fatiguing
• Next Two campaigns: 1996- 2012
– Massive
– Untraditional
– Successful – over goal
• Maybe this is telling us something!


Global Recession History During
our Children’s National Years

1990 – 1992
“V” shaped
Bush I administration
Clinton years begin

2001 – 2002
“U” shaped
Response to 9/11
Stock markets drop
Tech bubble pops

2007 – 2012
“W” shaped
Housing, mortgage debacle and high unemployment
5-7 year recovery


The “Traditional Campaign” Model

Key Elements:
• Driven by organization’s strategic plan
• “Feasibility” Study
• High-level Campaign Committee
– Serves for life of campaign
• Sequential giving/top-down asks
• Gift table and donor pyramid
• Limited gift acceptance policy
• Volunteer driven, staff supported
• 5-year horizon


This Model Worked Until 2008…
What Happened Next?

Actions that rocked philanthropy:
1. The global economy goes south
2. Traditional funding sources shrink
3. Regional economies are volatile
4. Government support is retracting
5. Reliance on philanthropy increases
6. Business methods applied to giving
7. Social media fundraising grows

The New Era for Philanthropy

A “new normal” economy:
• Countries in default
• Biggest states in the U.S. nearing or in bankruptcy
• Long term debt soaring. Unemployment at 9%
• War as a certain uncertainty
• Fears keep gold high BUT stock markets surging
• Governments trimming social programs
• Governments dependent on NPO sector
• Health reform as an uncertain certainty


What This Means for
Campaigns

1. Recession recovery endures 3-5 more years
2. Campaigns will end, begin and continue during that period
3. Strategic planning horizons shorten
4. Private funds needed more than ever
5. Pressure on philanthropy is acute

But will our willingness to give keep pace with need?


New Era: New Model

Characteristics:
• Strategic: mindful of the new world
• Strategic and philanthropic plans intertwine
• Aimed at a new type of donor
• Unannounced
• No campaign chair(s)
• No steering committee
• Donors become leaders. Leaders become ambassadors
• Staff driven cultivation and asks
• Decentralized volunteer structure
• Continual


New Era Strategic Philanthropy

1. NPO leaders integrate plans:
– NPO leaders “get” the interactivity of strategic and
philanthropic plans
– Strategic and philanthropic plans develop in parallel
– The two plans are in constant dialogue -- this begins
at the top
– Strategic and philanthropic planning and evaluating
never stops


(cont’d)
2. Cases and case statements respond to the times
– It’s about the parts, not the whole
– Business plans supersede large case statements
– People/corporations connect to the program NOT the
institution
– It is less about “bold” and more about “achievable”
– “Sustainability” a constant issue


(cont’d)
3. Campaigning never ends
– Margins for philanthropy are better than any other
revenue source
– NPO’s weave together strategic and operational
funding into “comprehensive” campaigns
– Strategic plans require strategic philanthropy
– “Gift structuring” changes donor relationships and
stewardship
– Consequence: As one campaign ends another begins


(cont’d)
4. Cultivation strategies take new era into account
– Fear and uncertainty drive donor caution
– Donors less willing to part with their capital
– Large gifts take longer to consummate
– Gift structuring reduces near term cash outlays
– Gift tables bulge at the lower middle
– Largest gifts come from unusual sources


(cont’d)
5. Givers become Leaders
– Old fashioned campaign committees out
– Campaign connects donors to parts about which they
care most
– Givers become philanthropic leaders for critical
organizational subsets
– Organizational subsets have mini-boards or councils to
capture and motivate donor enthusiasm
– But boards don’t always turn to philanthropic leaders
for membership!


CEO/CDO Alignment

• Will CEO’s agree? Support this approach?
• If not, how does the CDO persuade?
• Others ways for black and white CEO’s to
embrace gray?


Three Elements of Leadership

Strategic Leadership
Vision
Purpose
Communication
Values

Operational Team Leadership
Leadership
Energy
Task
Behavior
Manager as Coach
Creating the Work Individuals Team
Climate


What is a Leader to Do?

Strategically:
• Look two hills ahead

• Have clear hypotheses about the future

• Communicate them clearly

Operationally:
• Translate hypotheses into plans

• Translate plans into actions

• Communicate these at every opportunity

Team work:
• Get widespread ownership of strategies and tactics

• Assemble teams to execute tactics

• Expect that all will go forward together

“Managers solve problems…
Leaders anticipate them.”


“Operating with the mindset of an
entrepreneur is the only fruitful way to
proceed. Successful entrepreneurs
take calculated risks, quickly.”
-- Rebecca Sive (on surviving the ‘new
normal’), The Chronicle of Philanthropy,
February 10, 2011


The New Era Requires Strategic
Philanthropy, New Thinking and Risk Aware
Execution

This… …becomes this
Sequenced plans Co-dependent Plans

Case dependent Business Plan Dependent

One case Many Cases

One Cabinet Many Councils

Hour glass GT Coke Bottle GT

Long term volunteers Ad Hoc Volunteers

Five-year horizon Longer Horizon


Questions? Feedback?

John Wm. Thomas Edwin K. (Ned) Zechman
202-338-6100 ext. 112 202- 338-6100
jwmthomas@oai-usa.com nzechman@oai-usa.com


Strategic Philanthropy in the New Normal

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