Here is an opinion piece that we thought worthy of sharing. We have often used the investment analogy to frame the major gifts equation. Mr. Shaw has picked up on another aspect of this concept in his article. We might add two additional points: 1) considering donors as shareholders can be very effective if the organization recognizes that donors are “voting no” by not giving. And, donors vote no when the organization fails to communicate and to present an appeal, or when that appeal is rejected. 2) This approach works best with a major gifts program.
While nonprofits will never exactly mirror their for-profit counterparts, they can learn from corporations that work with their shareholders to deliver the most results for the company. Shareholders keep management accountable for results and expect transparency into how the corporation operates. It’s a mutually beneficial relationship that ensures the company is working to achieve its goals in the most efficient and effective way possible.
By contrast, nonprofits tend to provide little insight into the direction, goals and performance of the organization. There is very little accountability, and charities can act against the wishes of donors with very few repercussions. For example, the Juvenile Diabetes Cure Alliance found that, although 93 percent of type 1 diabetes donors want a near-term cure, only 2 percent of donor funds go toward projects that support that goal. This sort of disconnect is not only deceiving; it’s also unsustainable.
Consider donors partners in your success and keep them informed and, therefore, engaged and responsive. Here’s how.
What are shareholders, and how do companies interact with them?
For public companies, a shareholder can be defined as an individual who invests in a corporation and thus becomes a partner in ownership of the company. Because partners have a stake in the organization, they are included in key operations decisions, provided with timely financial reports and given a say on where finances are directed. Shareholders can use this information to decide to invest further, to pressure management to improve performance or to weigh in on the goals and objectives of the organization.
Viewing contributors as stakeholders or partners, rather than simply as one-time donors, assumes a level of reciprocity. Taking that first step in bestowing donors with more information empowers nonprofits to strengthen relationships with donors and lays the ground for a partnership in which donors feel not only an emotional and financial connection but also a return obligation.
Why a “donor as shareholder” approach would benefit both nonprofits and donors
Donors should have as much power as shareholders to improve company performance by weighing in on goals and objectives. With donors’ needs prioritized, charities can effectively steer their funding toward objective-driven initiatives that will reap results. If donors discover through financial reports that their funds are not being used properly or not going where a majority of the stakeholders agree money should go, they can act as partners and consult with staff about reconsidering their spending decisions.
In terms of benefitting cure progress, the Juvenile Diabetes Cure Alliance counsels donors and, through stipulation, ensures that their money goes directly to projects most likely to deliver a cure for type 1 diabetes. If this type of individual attention occurred on a much larger scale within the major nonprofits, we could potentially see more progress toward charities’ individual goals.
In terms of improving awareness, a partnership with donors could lead to a domino effect. The increased transparency, clarity and timeliness of the information released by the charity will increase donors’ overall trust in the organization. This will inevitably drive future donations and create a thriving community of individuals with greater loyalty.
How nonprofits can start treating donors as shareholders
Charities must consider reorganizing how they view donors from the inside out. Transparency is more than a buzzword – it enhances donor understanding and prevents donors from blindly giving money and never seeing results. Being transparent requires nonprofits to harness relationships with donors and take time to ensure individual needs are being met.
Instead of struggling with your next fundraising request, consider what your organization can give back to the partners who are invested in your success. Transparency, clarity and timeliness will create a culture of respect that both elevates the profile of your organization and makes donors more willing to become actively involved. By reframing the role of the donor, your organization can create a network of evangelistic donors who take part ownership of the organization’s mission, values and goals.
As general manager of the Juvenile Diabetes Cure Alliance, Phil Shaw uses his for-profit management experience to bring a metrics-driven approach to type 1 diabetes non-profits. Shaw has over 20 years of marketing, business strategy, and general management experience both in the United State and in Asia.