Overheard… Competing Against Ourselves?
Will Our Capital Campaign Endanger Annual Giving?
By Avrum Lapin
One of the often heard hesitations among nonprofit boards and professional leadership is the fear that a capital campaign will compete with and ultimately erode annual giving. More times than not, when leaders discuss the need to launch a capital campaign, these questions arise. Will embarking on a capital campaign negatively impact our ability to obtain the funds that the organization needs to operate? Will a capital campaign effort “cannibalize” annual giving?
Though counter-intuitive to some, many annual giving campaigns actually advance and increase as a result of a capital campaign. By creating a platform for philanthropy and strengthening a culture of giving, annual campaigns most often benefit from the capital campaign activity.
Annual giving is the yearly cycle of organizations asking for support for ongoing programs and operations. These funds can be realized from individuals, foundations, government, or corporate giving and vary in scope, shape, and size. Though the giving can come anytime and by any means (such as online, in person, through events, or direct mail), they are most typically made during the last quarter of the year.
Nonprofits use capital campaigns as means to raise funds for projects that are not meant to be covered through annual operating budgets. A capital campaign is intended to raise money for capital projects such as building, expanding, or renovating a building, and can also extend to endowment development. Capital campaigns are a milestone occurrence and require investment, planning, and a different level of involvement and participation.
Different Pockets
It is often said that the funds for a capital campaign come from a different pocket. While most people think of their assets as part of a whole, there is some truth to this description. The typical annual fund donation is generally assumed to be a gift from one’s checkbook, while capital campaigns are often gifts made from investments, or from liquid funds pledged during the campaign period and paid out over time, typically over 3 to 5 years. Commitments to capital campaigns tend to be exponentially larger gifts and could include donor recognition such as naming rights or a name on a permanent plaque or brick. Therefore, even if the annual and capital donations are coming from the same source, they still have a different look and feel and are often considered, at least from the organizational point of view, as being separate.
Foundations and government granting organizations see ongoing support as different that project support. Often grants are awarded for either ongoing support or a specific project, and the application process is often different. Project based applications usually require a separate project budget and description on the application form. For many of these grants, there are actually two separate pools of funds – one for ongoing support and one for projects. Though it is hard to secure grants that cover endowment, there are indeed foundations and government support for capital projects.
Corporate sponsors also may have different policies when it comes to donations. Corporations may sponsor an event from a marketing budget or an annual giving fund yet might also have access to larger donations for a capital project from a corporate foundation that has naming rights attached to it. Often the annual giving criteria may be lower than a large one-time gift may have.
Building for Future Giving
Though annual gifts and capital gifts can be very different in nature, mounting a capital campaign can have surprising benefits to annual giving. Though the positive effects may take a few years to realize, there are many factors which support the idea that annual campaigns benefit from mounting a capital campaign effort:
Donor Tracking: Though data is accessible to most nonprofits, many do not review it on a regular basis. Donor data is important (see our recent post here) and can shed light on the ways in which donors give, timing of asks, and how best to engage supporters. By going through the capital campaign process, which will involve reviewing and analyzing of donor data, organizations gain knowledge about their supporters which will strengthen giving for years to come.
Focus on Interest and Inclination: Philanthropy comes from the heart. Charitable intent is more innate and less learned. A consistent supporter of a nonprofit’s annual appeals is a likely prospect for a capital campaign, though the annual giving speaks to a donor’s interest and inclination rather than the ultimate size of the capital gift. A major capital gift, though it is obtained through a focused separate strategy, different from that which attracts an event sponsorship or the “purchase” of a table, or a direct gift due to Board membership or a personal ask, is driven by the same instinctive desire to support. Engaging and building upon that interest will benefit a capital campaign and future giving in general.
Increased awareness: Typically a capital campaign starts with the inner circle of supporters and radiates outwards, finding a broader audience through existing connectivity and the building of relationships in the community. By sharing a campaign with a larger circle, awareness about the mission spreads and deepens. By highlighting the campaign, the organization moves into the spotlight. This can attract new support, or reengage lapsed donors. Furthermore, through the capital campaign process, organizations are forced to articulate their mission and show their impact on the community they serve. This process can build a larger awareness of the organization’s good work.
Closer Connections: Face-to-face meetings are critical for capital campaigns but are rare during the annual giving appeal process. Learning about donors’ priorities, needs and expectations will help to shape the relationship beyond the capital project. Internally, working together on a shared goal creates community among the constituents, stakeholders, and leadership that might not be present normally. Accomplishing a project together brings a greater sense of ownership and community for staff, leadership and supporters. It also punctuates the importance of personal contact and keeping in touch, even when there is no gift involved.
Understanding the Marketplace: Much effort is put into the framing and messaging of an organization’s “value proposition,” the way that it create positive results that impact on the lives of people. That “value proposition” is at the core of both annual and capital campaigns. The “selling proposition” or Case for Giving for a capital campaign is different than for its annual counterpart. From “inside” the organization, capital and annual giving are distinct and discernable from each other. Often from the “outside looking in” perspective, and especially when it comes to the Gen Xers, who are more results/impact oriented and decidedly less brand loyal, it is another ask from the organization. We need to understand this challenge and be prepared to gently and clearly explain the distinction. We also need to embrace it. During the period of the capital campaign we would combine the two efforts into two elements of one ask, avoiding the perception of “nickels and dimes.”
Internal Structures: During the planning stages of a capital campaign, an assessment is taken of the internal structures that are needed to run the campaign. This might include making sure that there is sufficient administrative support, proper donor recognition, and legal and procedural processes are in place. In addition, organizations may purchase donor tracking software or invest in training from a consultant. These investments will prove to benefit annual giving long after the capital campaign is over and the project has been funded.
Leadership Development: A well-run capital campaign requires a determined leadership team and a partnership between volunteer and professional leaders who will be responsible for framing and implementing the strategies that will engage the community. Though this team may be comprised of current Board members and organizational leaders, it is important to attract new supporters to join this team. Having new leaders strengthens the organization and creates new ambassadors to carry the message. Leaders who are trained in fundraising as part of the process learn new skills and approaches that will reap the benefits for years to come.
The capital campaign should by definition strengthen the organization as a whole, making it more competitive for future giving and drawing the attention of donors. The project itself will have a positive impact on how the organization functions and serves its community. And, the benefits will extend far beyond the actual project. Investing time and resources that it takes to complete a successful capital campaign process are exactly the kinds of investments that will strengthen the development capacity of the organization as a whole.
Avrum Lapin is President at The Lapin Group, LLC, based in Jenkintown, Pennsylvania, a full-service fundraising and management consulting firm for nonprofits. The Lapin Group inspires and leads US-based and international nonprofits seeking fund, organizational, leadership, and business development solutions, offering contemporary and leading-edge approaches and strategies. A Board member of the Giving Institute and a member of the Editorial Review Board of Giving USA, Avrum is a frequent contributor to eJewishPhilanthropy.com and speaker in the US and in Israel on opportunities and challenges in today’s nonprofit marketplace.
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