Wednesday, January 16, 2013

BIG’s Blog: The Fundraising Business Model Must Change

One thing a newcomer to the nonprofit fundraising world like myself (8 years in)
learns very quickly is that the whole of the fundraising industry (with few exceptions) is extremely incestuous, and I chose the word “incestuous” very carefully.

The nonprofit organization (NPO) fundraising world has two sides; the organization side and the vendor side. And the path that most people in the industry follow is to begin their career on the organization side and then sometimes migrate to the vendor side. While young people and others just entering the nonprofit world tend to want to work on the organization side, this tends to change as they get older, get married, and are forced to take on more life responsibilities.  If they cannot land a fundraising management position or earn more money in their fundraising position, but want to stay in the nonprofit sector, they typically move to the vendor side.  This is especially true of nonprofit consultants.

This arrangement is not unique to the nonprofit world. In the commercial sector of marketing, for example, people routinely move back and forth between the client side and agency side . . . and there are other areas in the commercial sector where this also happens. The big difference between the nonprofit and commercial sectors, however, is that in the commercial sector, people move across many different industries, creating cross-pollination of ideas from one industry sector to another.

This cross-pollination of new ideas rarely happens in the nonprofit fundraising sector, which is why the same methodologies and practices get passed around in one big circle.  Hence my term, “incestuous.”

Now to be fair, practices don’t evolve in a vacuum. The advantage of this incestuous system in NPO fundraising is that “best practices” move much faster than in the commercial sector. However, these best practices are merely the perfected iterations on the fundraising business model that virtually all NPO fundraising organizations use. The one element that is missing in the NPO fundraising sector is “innovation.”

“Group Think” and “Institutional Momentum” are anathema to a culture of innovation.

And if things don’t ever change, then this system works just fine.

But of course, things do change. Fundraisers today face three major changes to their fundraising environment, and the changes they face are unprecedented within the history of their industry.

The three major changes are:

1) Declining Numbers of Donors - the generational shift in supporters as the Depression and WWII era cohorts decline in number and the Boomer, Gen X and Millennial-era cohorts rise to take their place.
2) The Rise of Competition for Donor Dollars – the proliferation in the number of NPOs over the last twenty years.
3) Communications Shift - the societal technological shift in how we communicate.

And coupled with a culture that clings to the status quo, the prospects for fundraising stability, let alone a return to year-over-year growth look dimmer and dimmer with each passing year.

What’s the answer?

It certainly isn’t iterations on the current fundraising business model. This has been described as akin to rearranging deck chairs on the Titanic. It may make you feel like you are doing something useful, but in the end, the ship is going down.

What about the common refrain of “thinking outside the box?” On the surface it sounds promising, especially to those who are used to a status quo culture. But again, if we are merely addressing “the current fundraising business model,” now referred to as “the current box,” at the end of the day, it is still the same box.  

It is time to go beyond thinking outside the current box.

Fundraisers today need a new box. Fundraisers today need a new fundraising business model that addresses the fundraising environment the way it is today…not the environment of 20, 30, and 40 years ago.


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