The Meaning of FRD: Where’s the Money?

During the last several years there has been a perception that nonprofit organizations have become more knowledgeable about financial resource development. Recently I had two experiences with two large well established and sophisticated organizations in Israel. Although I expected there to be an understanding that fundraising is not about collecting checks it was surprising to learn that the development professionals working in the nonprofits were far more attuned than the chief executive officers of the organizations.

The CEO’s of nonprofits feel the day to day pressure of balancing their budgets and not having to deal with a deficit at the end of the month. There is the continual struggle of paying the monthly salaries on time. In addition they have to pay suppliers 60 or 90 days after receiving a bill for services rendered and materials delivered.

When the agency’s finance committee meets each month to review the actual receipts and expenditures the CEO does not want to be in the position of having to explain the reasons for the expenditures exceeding the income. The volunteer leadership does not want to be burdened with having to press the CEO for budget cuts in services provided to the community. The agency does not want to announce cutbacks in the budget or cancellation of services provided to the community.

Thus, the experience I had with the two CEO’s is understandable from the perspective of their positions. However, I was somewhat surprised that their approach to financial resource development (FRD) was focused on the amount of money that was “brought into” the agency each month and not on the process of building a base of committed friends and donors. It was as if they were not accepting either the philosophy or practices of financial resource development in the voluntary sector.

In discussions with the development professionals in both organizations they were quite clear that they were frustrated by being evaluated by the monthly receipts. There was lip service given to the strategic process of developing a plan for the financial resource development of the organization. It did not matter whether the discussion was focused on developing, building or strengthening the donor base in Israel or overseas.

During the course of this week I spent time speaking with FRD professionals who were trying to develop a strategic approach to increasing the organization’s base of financial support. They shared their stories with me about how they have planned for reaching out to identify new friends and donors. They understood the importance of inviting new people to learn about the organization and encouraging them to visit one of the agency’s programs. They were clear that the process of cultivating people who will not only take an interest in the agency but also consider providing financial support is essential to initiating a strategic approach to fundraising and friend-raising.

In the examples above the CEO’s want to engage the expertise of an outside consulting firm, however, they are only willing to consider those consultants that are prepared to work on the basis of the percentage of the funds raised. This is not only an unethical approach (as discussed in previous postings), but there are no donors who would be happy to know that a percentage of their contribution goes into the pocket of the consultants. CEO’s are drawn to this approach because it does not have a direct impact on the organization’s budget. The consultant’s fees are paid based on results and not on the effort made to strengthen the nonprofit’s approach to increasing its donor base.

Professional consultants should be engaged to assist in professionalizing and coordinating efforts to develop interested parties into active volunteer leaders. There work must be coordinated with the CEO as well as with the FRD staff. When the roles are fully coordinated it means that there is an opportunity to bring people close to the organization and keep them involved. If the CEO and the FRD professional are not synchronized with each other there is no possibility of achieving the desired results and increasing the donors’ support of the nonprofit.

For example, the FRD professional in an organization wanted the CEO to assist in arranging a meeting for a donor and an Israeli politician who was involved in the organization. Since the donor had given substantial funds to the nonprofit the FRD professional thought the request was appropriate and he appealed to the CEO. The CEO perceived the request as unreasonable and refused to arrange the meeting. The donor was insulted and has threatened to cease her support of the agency.

Although this appears to be a trite example of an approach to donor relations it is reflective of a misunderstanding of the importance of strengthening the donor’s connection to the organization. Actually had the CEO thought more creatively about the request, the meeting between the donor and the politician could have been used to the organization’s advantage. It could have been an opportunity for the Israeli politician to learn more about the people who support the organization and the reasons for providing the needed funds.

It is not easy to be a CEO and responsible for the day to day operations, however it is important to not lose sight of the bigger picture and the longer view of developing an organization. There must be a focus on the importance of strategically cultivating support by developing and maintaining positive relationships with donors. The CEO has to provide support and encouragement to enable the FRD professional to be able to be effective in assuring the nonprofit’s financial sustainability.

Stephen G. Donshik, D.S.W., is a lecturer at Hebrew University’s International Nonprofit Management and Leadership Program and has a consulting firm focused on strengthening non-profit organizations and their leadership for tomorrow. Stephen is a regular contributor to eJewish Philanthropy.