Financing Human Services: Philanthropy Finds a New Role
Following the worst economic downturn in recent history, the human services funding landscape is shifting. For those organizations largely dependent on government support, the situation can be difficult as local municipalities, states and the Federal government execute cutbacks and withdraw available sources of support. Both state and Federal budgets are expected to remain in deficit for the next several years.
A 2010 survey by the Urban Institute found that, in comparison to 2001:
- 59% of human service nonprofits had less state government revenue
- 49% had less municipal government revenue
- 31% had less Federal government revenue
In light of this financial dilemma, human service organizations are increasingly turning to private philanthropy to fill in the gap and to create a more predictable and sustainable source of ongoing programmatic and general support.
For some organizations, this means a deeper reliance on private support. For others, it represents the first time that non-government sources of support have become necessary. In either case, significant private fundraising often requires a cultural sea change within an organization. At its core, private philanthropy is about building meaningful relationships with philanthropic investors who share a common passion and commitment to your mission and who, in turn, expect to be partners in your work and to see clear impact as a consequence of their support. Before human service organizations can begin raising substantive private dollars, certain key elements must be in place. These include:
- A Fundraising Board of Directors – Nonprofits with healthy philanthropic revenues are governed by Boards who are deeply engaged in the fundraising process in all of its dimensions. Board support – financial as well as networking leadership – is one of the most important signals to potential donors that your work is worthy of investment.
- Dedicated Executive Leadership – An organization attracts private philanthropic support when its leaders passionately champion demonstrable impact to potential donors. Such leadership also drives cultural change from the top down and models the importance of these changes to staff by dedicating significant time to growing donor relationships.
- Alignment with Programs – In many human service organizations there is a divide between the program staff and the development office. To be successful this divide must be bridged so that all teams are working together to create a valuable case for support and intentional opportunities for donors to engage in your work. The first step in constructing the bridge can be as simple as educating the program staff on the value of private philanthropy. You may also consider including your finance team in this process as a shift to private philanthropy can impact their systems and procedures.
- Development Staff with the Appropriate Skill Set – A robust private philanthropy program is best supported by staff who have, among other skills, the talent and instincts to build and nurture donor relationships. The first two can be taught; the third is an innate gift that can be nurtured through mentoring and coaching. This is true of both external and internal facing staff.
- A Long Term View of Success – It takes time for donors to build towards significant philanthropic investments. On average it can take 18-24 months before a new donor makes his or her first major gift (as defined by your organization). You must be diligent but also have patience to allow these relationships to take root and grow. Allowing this process to naturally evolve can lead to a significant return on investment. Our clients often see a revenue curve that looks more like a hockey stick than a straight line; that is, if they have the fortitude to walk alongside their donors and prospects for the time it takes them to decide your work is a philanthropic priority.
Raissa Smorol, Senior Managing Director, and other Changing Our World consultants are experts at helping human service organizations navigate the changes that lead to fundraising success and building the systems that ultimately raise significant dollars. If you would like more information, please contact Raissa at 646.264.2668 or email@example.com.
This fall, Changing Our World will publish an original research report examining the role of private philanthropy in bridging the increasing funding gap in the nonprofit sector. If you would like to receive this report, please join our mailing list at www.changingourworld.com.
- The Philanthropy Compass: Mapping Donor Beliefs (tacticalphilanthropy.com)
- From fundraising to resource-raising (newphilanthropycapital.wordpress.com)
- Tom Tierney on “Underperformance in Philanthropy” Debate (tacticalphilanthropy.com)