Fundraising challenges facing larger nonprofits

Nonprofit fundraising is a story of haves and have-nots. The haves are disproportionately larger nonprofits such as universities, teaching hospitals, museums, and national charities. They have sophisticated fundraising approaches, large development staffs (including specialists in annual giving, capital campaigns, major gifts, etc.), and longer time horizons and often use national and international reach to complement local and regional efforts. These larger organizations often spend years getting to know prospective donors and are accustomed to the complex issues involved in raising both restricted and unrestricted gifts, such as tax law, gifting vehicles, trust and estate law, and more. Moreover, they can capture the full scope of fundraising costs and make them explicit both internally and externally.

Although larger organizations do have some advantages over their smaller counterparts, they still face challenges. Let’s take a look at some of the most common ones.

The size and perceived staying power of large nonprofits, particularly in higher education, may work against them. For example, a Harvard alum may wonder why the school needs their money. This issue is likely to increase in importance as donors see the extremely strong returns posted by many higher education endowments for the year ended June 30, 2021. Inside Higher Ed estimates that endowments above $500 million—about 200 of them—enjoyed a median return of 34%; Washington University in St. Louis saw values rise by 65%.¹ To counteract this challenge, higher education could encourage alumni to make donations earmarked for scholarships and other financial support for students. Although institutions typically prefer unrestricted gifts, this might be a way to keep the donation pipeline flowing.

Large nonprofits must be cautious of alienating donors by behaving like big, impersonal organizations. Above all, they should treat donors as people, not writers of checks. We’ve witnessed these issues in a variety of nonprofit verticals. For example, there are numerous articles written about the pushback hospitals received from both doctors and patients when development offices asked doctors to request donations from grateful patients. Similarly, controversy has dogged museums from Brandeis University to the Baltimore Museum of Art, which have wanted to sell off donated art. In addition, higher education institutions sometimes seem engaged in never-ending capital campaigns, producing donor fatigue.

What is the difference between your existing profile of donors and your ideal? Would you like more regular donations versus onetime gifts? Do you want more unrestricted gifts? Do you wish to develop new donors? No firm has unlimited resources, so where do you want to focus your efforts and what methods best fit the profile of your donors? There are good reasons Harvard doesn’t run radio ads encouraging listeners to “donate your car, working or not” and why your local food bank doesn’t have a staff of 20 looking for major gifts with naming rights.

Are you striking the right balance among donor types (small, medium, and large) and solicitation frequency? Do smaller donors believe they are being solicited too frequently? Or do they feel ignored because the organization is pursuing larger gifts?

It’s important to know your donor constituency. Have you done as good a job as possible in both educating and building loyalty among your donor base? Even organizations that have a good sense of existing givers can improve their understanding of nondonors, such as former givers or people who give to similar institutions. Beware unintended consequences. If the development office favors major gift officers, it won’t take long to demotivate other fundraisers, which can affect turnover, efficiency metrics, and the balance of gifts.

There are numerous examples within the past few years of major gifts gone wrong.² At best, these incidents can be embarrassing—at worst, they can damage institutional reputations and fundraising. Such situations can often be traced back to poorly drafted or inadequate gift acceptance policies, failure to understand how much influence a donor might have over how the gift is used, inconsistent processes around naming rights, or efforts to ignore or circumvent existing policies and procedures.

We are in a highly polarized climate in which many issues are politicized, and this is reverberating in fundraising. An article in The Chronicle of Philanthropy cites a recent example at Washington and Lee University:³ “The Generals Redoubt—a group of Washington and Lee University alumni and others—seeks to oust president William Dudley because of what it describes as the institution’s ‘toxic ideological drift.’. . . As part of its pressure campaign on the university, it urges its more than 10,000 followers to suspend their giving. . . . The Redoubt claims that dissatisfaction with the university’s direction led to its 10 percent decline in annual giving last year, though Washington and Lee officials attribute the drop to the pandemic and other factors.”

Many successful nonprofits have older donor bases. This makes sense, as older cohorts tend to have more in the way of assets and are more focused on charitable activity. That said, millennials are giving money to emerging causes—and doing so with emerging technologies, such as flexible giving options (digital wallets, trusted payment apps, cryptocurrency), personalized donor experiences, and new recurring giving methodologies.⁵ Millennials also have very different views from prior generations about what causes to support. They support a wider range of causes, often smaller nonprofits, and are more vocal about encouraging peers to support those causes via giving circles and crowdfunding.⁶ It will be essential for the haves to learn how to cultivate these donors.