SPEA – V558 Fund Development for Nonprofits
Jamie Levy
Assessment of BBYO Development Program
The above graph (not to scale) is a reflection of the development program at BBYO, Inc. BBYO is an independent, pluralistic, Jewish youth movement that recently (2002) became independent of its parent body, B’nai B’rith (a Jewish fraternal and social service agency). Since this time, BBYO has worked very hard to court a number of major donors. However, it seems that the donative spectrum is too heavily skewed towards a number of major donors; while small to medium size gifts are a relatively small part of the revenue stream. I believe this is a most unwelcome development. The reasons why I believe this phenomenon to be problematic are two-fold. Any organization that becomes dependent on a small subset of donors for over 91% of its revenue runs the risk of losing operational and mission-related control of the organization. Additionally, it seems that a great deal of donative income is “left on the table.” The organization has apparently expended far too little effort searching for small to midsize donations. I believe that a great deal of untapped development potential is waiting to be realized. BBYO is an 85 year old Jewish Youth Movement that has an alumni base of over 35,000 individuals. When one considers that this number does not reflect the parents of alumni, one can only conclude that this very large donor base has mainly gone untapped. It would be interesting to compare the percentage of revenues solicited from major donors to revenue percentages of other youth groups, both Jewish and non-Jewish. While such figures are not presented in this study, I believe it is fair to conclude that the donative revenue structure of BBYO is far too heavily weighted towards major donors. In fact, the graphic representation of the Donor Period on the preceding page actually looks like an inverted pyramid. Figure 3 (Number of Donors – by donation level) listed below is a graphic representation of the total number of donors to the organization in 2009. As expected, 80% of all donors are small donations (less than $100). As donation size increases, the number of donors decreases.
I have also chosen to list the average donation size (by donative category). This too, demonstrates how skewed towards major donors BBYO has become. It is significant that the top 1.5% of donors make an average donation in excess of $50,000. This is probably reflective of a development strategy of pursuing “the big fish.” Procuring one $50,000 donation is certainly easier than pursuing 50 $1,000 donations. However, the pool of $1,000 donors is exponentially larger. BBYO has not utilized its field staff effectively in pursuing this category of donors. While a program of this sort has been developed (it is called the FAN network – Friends And Alumni), such a program is still in its infancy and underperforming. There is also very little effort to dramatically enhance this program from the national office. Field staff are thought of primarily as providers of teen programs. The development ability of this staff has largely gone untapped. Figure 5 listed below, is perhaps the most troubling figure in this analysis. When juxtaposed with Figure 3 we are faced with a organization wherein 1.5% of donors contribute 91% of donative revenues. A revenue structure of this sort leaves the organization in a rather perilous position. If a small subset of donors decides to redirect their philanthropic dollars to another organization, it is possible that the entire financial underpinnings of the organization are imperiled. The organization can ill afford to lose donors of this size. The organization is also susceptible to changing its mission and philosophy at the behest of some of these donors. BBYO’s major donors have essentially purchased 91% of the “equity” in the organization. Their ability to shape the organization according to their own vision – not the mission of the organization – is readily apparent. Total philanthropic revenue (Figure 6 listed below) is also out of step with the national average (as represented in Figure 7). Over 97.5% of BBYO’s donors are individual donors, so the revenues received from Foundations, Corporations, and the Endowment is negligible. Due to the sectarian nature of BBYO’s offerings it is unlikely that a Corporate campaign will ever become a substantial part of BBYO’s annual campaign. That being said, there are a wide array of Jewish foundations whose missions are largely in line with BBYO’s activities. I would strongly recommend an aggressive pursuit of these dollars in order to diversify the organizations revenue stream. The amount of money garnered from the BBYO endowment is also negligible (less than 1%). This situation is understandable when one considers that BBYO has only been an independently funded organization since 2002. Before this time, the organization procured most of its funds from its former parent body, B’nai B’rith. I am pleased that the organization has decided to invest in an endowment although the dividends are not yet paying out. A well funded endowment will serve as a hedge against the loss of major donors. It is also a way of strengthening the organizations independence from the whims of a handful of donors. While a study of BBYO’s endowment is beyond the scope of this assignment, I believe that additional information about this component of the development program is necessary to fully understand the development strategy of the organization. I would like to know what the current size of the endowment is. It would be extremely helpful to know what percentage of donative profits are annually directed towards developing the endowment.
The figures that I received from the national office also raise a number of questions. The donative origins of BBYO donations was further parsed into a number of categories (which I simplified above) that included categories such as parent, alumni, foundation, federation, etc. One particular omission that captured my attention was the category labeled “Federation.” This describes donations from Jewish Federations in the various cities in which BBYO operates. According to the figures given to me by BBYO’s national office there were 41 Federation donations. Only two of those donors could be described as significant (one donation was for $500 and the other was for $5,000). I know that the region for which I work (Miami) is the recipient of an annual grant of over $60,000. This figure is simply not represented in the list of donors. I plan to discuss this omission with the organization’s CFO. Was this simply an erroneous omission or is this Federation allocation simply classified as something else?
Part IIB
Why this type of comparison is useful
An analysis of this sort is very useful because it graphically represents the precarious nature of BBYO’s donative structure. We are able to visualize (in a manner not totally possible with simple numerical figures) the tremendous imbalance of major donors to our organization (compared to small and medium gifts). This imbalance is readily apparent when one juxtoposes Figure 5 and Figure 3. There we can see that 1.5% of donors contribute over 91% of the organizations revenues. Information such as this often needs to be graphically represented in order to understand the full ramifications of what it means to the organization.
How an organization should use this type of chart
Of course, all the information in the world will not be of any use unless the information is internalized by the financial managers of an organization and shared with members of the financial management and development team. It is also important to share this information with the Board of Directors of the organization. This presents some challenges because the Board of Directors may overlap significantly with the roster of Major Donors to BBYO. We would need to be careful before suggesting that placing too much potential influence with a small set of donors is potentially harmful. I would suggest “selling” an expanded campaign to small and medium donors as a way of shoring up the finances of the organization and improving the bottom line. Similarly, I would suggest that building the organization’s endowment is simply sound financial policy and a hedge against downturns in giving.
An analysis of this sort can be used over the course of many years in order to gage improvements over the course of many years. The current organizational structure of the organization did not materialize overnight and a corrective path towards a more “balanced” donative structure will likewise take years to significantly alter. The development team needs to see updated these figures and graphs updated quarterly in order to determine if we are moving in the right direction. Are Friends And Alumni (FAN) programs developing as planned? Are additional small and medium size donations coming in? Are additional sources of grant monies being secured? Is sufficient funding being provided to the endowment? This graphical analysis can be used to provide answers to all of these important questions.
What it means to how we develop our fundraising program
Metrics need to be put into place in order to achieve the various goals as set out by the CFO and development team. Setting quarterly goals for FAN program development can be one of the uses of this study. For example, we may require all regions to hold a FAN event in the upcoming quarter and solicit a set number of gifts in the $100-$500 range. We should make field staff accountable for these goals and have Area Executive Directors help assist the field staff. If these changes are put into place, hopefully the projected increase in small donations will comport with the increased revenues brought in at this level. Similarly, all of the goals set forth in the preceding paragraph can be projected one quarter in the future and actual figures can be compared to projected ones. This use of metrics makes sure that improvements are measurable and sustainable over the long term. It also makes employees feel that they are “on the right track” by having them celebrate small successes. We can continue to project these goals over the course of many years and set one year, two year, and three year goals in addition to the immediate quarterly goals.
However, it is important that donors are not treated simply as metrics or commodities. We hardly want to contribute to a situation where a commodity based fundraising model becomes the norm for the organization (Philanthropic Sustainability, chapter 4). Proper training of field staff in the best values and practices of relationship fundraising will have to take place if optimal results are to be achieved.
Part III
Top Items that the Organization Should Address * A donative structure that is too reliant on a very small subset of donors * Underperforming Development structure that does not utilize BBYO’s enormous network of Friends and Alumni. These newly acquired donors can easily become low to mid level donors. If relationships are properly developed, many of these donors can be persuaded to give at more significant levels. * Current level of independent grant funding needs to be increased. * Develop the endowment. The endowment can serve as an insurance policy against revenue fluctuations. It can also preserve organizational independence by moving the organization away from an overreliance on a small subset of donors.
The above mentioned items are all areas of improvement that the organization will need to address. As mentioned earlier in this study, the basic donative structure of the organization is seriously imbalanced. To restate the problem; more than 91% of all revenue comes from 1.5% of donors. Small and mid-sized donations will have to be increased dramatically.
Future fundraising dollars will need to be redirected towards developing a more meaningful friends and alumni network. The organization already has field professionals in place in various communities that should take on increasing responsibility in the fundraising realm. Of course, this will require additional training and compensation, but if properly executed – the organization stands to improve its donative structure and source of revenues. This is critical in identifying potential donors, engaging existing donors, and turning many small to mid-size donors into major donors.
Training field staff properly before embarking on a FAN development program is essential. Internal planning and prospect research is essential for success (Campaign Essentials Primer, pg.1). Setting appropriate and achievable goals as well as a gift range chart is an essential part of this process. Once again, we should view the current figures as well as quarterly, annual, and multi-year goals.
Grant funding is another area of improvement that the organization should address. The national average for grant revenue for an American non-profit is 12% (Giving USA chart, TFRS Course Binder). BBYO’s current level of grant funding is roughly 1.5%. Future fundraising dollars will have to be spent finding appropriate grants and applying for them. While it is unrealistic to believe that BBYO can immediately close the gap between the national average of grant funding and BBYO’s current level of grant funding, time and resources must be given to doing this. Quarterly, Annual, and multi-year goals will have to be established. Perhaps a goal of a 2% increase in grant funding (as a percentage of total funding) will be established. This takes into account the increase expected in small to medium size donations.
Additional fundraising dollars will have to be provided to the endowment. Although it is beyond the scope of this assignment, I do not have sufficient figures about the endowment necessary to make an informed decision. However, this study does have the ability to contextualize the importance of endowment development to the overall development campaign. The current size of the endowment will need to be determined, the amount of revenue that is annually devoted to the endowment will have to be determined, and any alterations in the size of these funds will have to be determined. Currently, less than 1% of all annual funds originate from the endowment. This situation will have to improve. Once again quarterly, annual, and multi-year goals should be set and shared with development staff.
