In my hands is a slick, well done brochure for a capital campaign. The nonprofit organization that has produced it wants to build a new $6.5 million facility. Dates are given for ground breaking, commencement of construction, building completion, and dedication of the new facility. It tells of several encouraging, pacesetting donations that have already been received. An impressive campaign leadership group is identified. Attractive naming opportunities are listed. Everything in the brochure speaks to a well thought out project.
It’s a great brochure touting a well planned project and campaign. All looks good, except for one thing—one sentence: “Pledged donations may be paid over three years.” Eight words, such a small thing, but those eight words are the seeds for potential disappointment, even failure.
Let’s suppose I’m a prospective donor, a supporter able and quite likely willing to make a gift of $100,000. But, for a variety of reasons I will want to pay my pledge over five years not three. I’ve got taxes, personal obligations, and commitments to other worthwhile organizations to think about and plan around. Think about how being put on notice that I cannot make my gift according to my timetable is likely to impact my receptivity to solicitation by the organization.
But the Money Is Needed Now
Organizations raise money because they need it to meet expenses. Annual-fund campaigns designed to cover operational shortfalls are the best example of the need for explicit payment schedules. The money they raise is needed to cover anticipated expenses in the coming year. In many ways the same holds true for capital campaigns such as the building campaign outlined in the brochure. The organization will need cash according to a schedule that will allow it to keep current with its ongoing construction expenses. Failure to do so will endanger completion of the project. Timing pledge payments to meet expenses as they come due looks like good project management, but is it?
Good project management assures that a project will be completed on time, on budget, and meet quality standards. A capital campaign to support the cost of construction of a new building should be thought of as just as much a part of the project as the bricks and mortar. The campaign needs to be given the same respect as designing the building, constructing it, and fitting it out. Fundraising needs to be part of the overall project management. You wouldn’t ask the plumbing contractor to design the electrical layout and wire the building. You shouldn’t ask anyone other than your fundraising team to design and manage the capital campaign.
I’ve designed, managed, and consulted on more campaigns than I want to remember, and I can’t even begin to tell you how many times I’ve been asked, “How long should we give capital campaign donors to fulfill fundraising pledges?” My answer always has been, “As long as the donor wants.” To do otherwise is to possibly lose donors altogether or to risk some donor’s reducing their gifts in order to meet the organization’s payment schedule.
A campaign can almost certainly raise more money when tight constraints are not placed on the time donors have to fulfill fundraising pledges. My experience has been more time to pay equals more money pledged. If you ask me to give and pay today and I’ve got two $10 bills in my pocket, you’ll probably get one of them at best. But give me till tomorrow after I’ve been to the bank, and I’ll be more inclined to give you $20. I’ve always been ready to work with donors when it comes to scheduling payment of pledges. That’s why I never published a predetermined time for pledges to be fulfilled.
Once we had a capital campaign to support a three-year project at the Cleveland Orchestra. One donor wanted to fulfill his pledge over ten years. “No problem,” we told him. He pledged the full amount we asked for. I am positive that had we said, “Sorry, but we need your donation to be in our hands in full within three years,” we would have lost part—maybe even all of the gift.
I know organizations need cash from capital campaigns to pay for expenses as they come due, but that can be done with cash payments made up front by other donors. Any pledge balance to be paid is a receivable that will be coming at some future date. Good project management will take into account the reality of extended fulfillment time for some pledges. You build it into the aging of your receivables from the campaign. That’s good project management!
Longer Time to Pay Fundraising Pledges Has Benefits
Sometimes I’ve heard it said that the cost and effort expended to maintain and keep pledges on the books over a longer period of time is troublesome. I’ve found the cost and effort to be negligible. But whatever inconvenience might result is a happy problem to have when you consider that the more time a donor has to pay, the greater the possibility that a larger amount will be given. And let’s not forget that by extending the length of the stewardship/relationship we gain added opportunity to strengthen donor loyalty and interest.
I have always believed and continue to believe that imposing a fixed limit—especially a short one—on the amount of time over which a pledge can be fulfilled is big mistake. Not only may you receive less money, but if the donor takes umbrage with the time limit, you might not get any at all. In general, I have found that absolute and intractable stands are likely to be counterproductive when it comes to nurturing relationships with donors. Let’s not forget, it’s their money. Donors have the right to expect us to accept their gifts in ways that are advantageous to them as long as those ways are legal and ethical.
At the Cleveland Orchestra we always offered and promoted accepting pledges on a multiyear basis. Our campaign pledge cards left the schedule of payments open to discussion between solicitor and donor. An example of a generic pledge card follows.
To assist the ______(organization name)______ in meeting its Fund For The Future Capital Campaign goal, I/we agree to contribute the amount of $_________________.
I/we plan to make payment(s) on the following basis, understanding that I/we can do so on a multi-year schedule if I/we choose:
Amount pledged: $ ____________
That open ended opportunity to fulfill their commitment encouraged donors to extend pledges over whatever length of time worked best for them. We eliminated timeframe as an objection to giving or as a reason for giving less. And yes, in a few cases we had to take out a bridge loan to pay some ongoing capital expenses while we waited for pledges to be fulfilled. But because of our flexibility, we always received considerably more money overall. By being willing to wait, we always came out ahead.
A limit on the time donors have to fulfill pledges runs a high risk of smaller gifts and fewer donors, and that can result in the need to borrow even more money to complete a capital project than would be required to bridge the time between project completion and pledge fulfillment.
Chances Are You’ll Get the Money Earlier Anyway
My experience with capital campaign pledges has been that a very high percent of the pledges are in fact paid earlier than the donors initially scheduled—sometimes much earlier. In the case of the ten-year pledge mentioned above, it turned out the donor paid in full after only five years.
While you can structure, suggest, even impose what you want them to do, donors in the end will make the decision that is best for them. It’s their money to give when they want to give it. Refuse to accept this and you may lose.
Is there a comprehensive description of the role and responsibilities of a campaign fund manager? Our community foundation has been approached by a large local non-profit to receive, receipt, acknowledge and provide tax information for donors of all sizes to their upcoming $17M campaign. We are very interested, and I am making a presentation to their board within the next few weeks. We will most likely begin accepting gifts after the quiet phase of the campaign, so we estimate perhaps $5-$7M will come through our doors. I want to make sure we cover all the bases in our presentation. Thanks!
As a current School Board President, I am looking to set up an endowment made up of local high school Alums, Board members, staff, and stakeholders from the community. Setting up a Charitable Foundation outside of the normal booster groups is what I had in mind. We are a close community with a proud heritage. Any suggestions?
The purpose of the proposed foundation will establish the mission.
The good and needed things the endowment income would make possible, must be compelling to those whom you expect to lead the effort, and to those contributing to it.
From where will you obtain the number of large donations required in the first place?
From the income generated, where will you make grants and provide support to identified needs?
These are the main components of such a campaign you must consider.
The articles below should be a good guide, starting with the first piece, which will have three key elements to consider before you go any farther.
These days, the third caveat to endowment raising looms large because low interest rates will require a considerable amount invested/banked funds for any meaningful income to be generated.
I am confident that upon reading my four articles regarding endowment fund-raising, that you will know exactly what to do.
— Endowment Funds Go On Forever — An Endowment Campaign Should Not
— Setting an Endowment Campaign Goal
— Making Your Endowment Funds Work for Your Organization
— How Much Endowment Is “Right” for Our Organization
I had a similar question to Carol’s above i was hoping to get some guidance on. I am involved with a charity that does a big annual luncheon to raise donations. The Luncheon is their biggest event of the year with about 2000 people present, who all are given a call to action during the event to fill out a form to give by Credit Card. Excluding the large donors, to simplify lets assume all donors make smaller donations in amount usually around $200. What i was wondering is if there are any industry statistics on how collection rates change as time passes for individual donor events. The current charity i am working with has not processed payments for the event and it has been over two weeks now. I would like to be able to show them some type of industry statistics that show how noncollectable donation rates grow significantly the longer the time has lapsed from the initial donation ask. Maybe the rate isnt significant since they are pledged through credit cards, but I would love to see any research out there on the topic to see if my theory is correct, or if this isnt as big of deal as I suspect.
Thanks for your time, I appreciate the information you share!
There are no such industry standards, benchmarks, or even rough comparative data, for all the reasons you read in my reply to Carol.
In general, as I see it, it is likely that a rate of cancelled and unpaid pledges would be even higher in such an event setting.
The highly-charged atmosphere during the Luncheon alone would have some folks having an initial rush of wanting to give, but having that high later lessen, even the day after.
And, depending upon how many attendees are guests of others who are close to the charity who make pledges in appreciation or from being courteous or self-conscious, those factors too, would significantly influence whether or not they carry through and honor their pledges.
However, though what I told Carol applies to the situation you described, it does so, more or less — depending:
1. If the forms which were filled by the donors included their card type, card number, expiration date, and they signed the form, then all in all, you should have 100% payment, even if the charity is slow to process the credit card transactions. (That’s sort of like sending a check to a charity and having the charity be slow to deposit the check. Folks may call the charity when they do not see the check payment on their bank statement to ask what gives, but they would not cancel the gift, asking that the check be torn up.)
So, in this instance, the real issue is why the charity is slow in processing the credit card payments. That is poor donor relations.
2. On the other hand, if the form the attendees filled out only has their pledge amount and contact information, and the charity then must mail credit card forms to have filled out, signed, and mailed back, then I think the charity is in real trouble—double trouble, i.e., the natural drop-off of enthusiasm and intent, made worse by the delay of the charity to follow up.
In summary, if No 1 scenario above is in play, and I hope it is, I feel certain of there being no problem with getting payments. The bigger problem is the poor follow-through.
If No 2 scenario is true here, then when all is said and done, and the final returns come in, you may be lucky to collect 60% or so, in my opinion, and even less, should the charity take even longer to get the credit card forms in the hands of those who pledged and expect those who pledged to make good by sending back the credit card information.
Such a percentage of unfulfilled pledges by donors would vary greatly, depending on the type of campaign (annual fund, capital, endowment), the methods of solicitation (personal asks, telefunding, direct mail, e-solicitation, new media), and usually, the size of donation. The latter, meaning that major donors are far more likely to honor their pledges than many giving small donations which were not as well solicited from proven and reliable donors.
Naturally, the degree of association and direct benefit to donors coming from the receiving organizations will have a great influence: high rates of pledges fulfilled by alumni, arts patron donors, grateful hospital patients, etc., as opposed to those giving initially to social service organizations, being asked or made aware of the need, when moved by emotion or a crisis which may not be sustained in the longer run.
When I was involved with numerous capital campaigns, those capital campaigns usually followed the desired “80 – 20” rule, where you strive to receive about 80% of the money raised from about 20% of the donors. Whatever level we set as what was considered a “major gift,” had pledges paid to a near 100% level. When those campaigns went out to the general community to those who gave “small,” the rate of unfulfilled pledges was far greater. Perhaps even to a 15 to 20 percent loss.
With annual campaigns, the rate of loss would be as great, or even greater, were the donation pledges booked through some of the less-than-reliable means as described above. I have heard of some instances where there was a fifty percent and more rate of pledges not paid.
Again, you must look at the types of campaigns, the means available for the donations, and the methods employed. As well, at the back end, and not to be ignored, would be how well and how often any organization follows-up with pledge payment reminders to those lagging with their payments.
All of the above is presented to try to satisfactory reply to your query to point out that, were you to see any such data meant to be explicit and as an “industry standard,” you now know that it would have little value if it was to be applied as a benchmark for any other organization.
What is the percentage that you normally expect to see for unfulfilled pledges?