Competitive Charities - it seems to be a bit of an oxymoron.  Why would people who are focusing on doing good need to worry about outperforming another organization?  

The common good may be the ultimate goal - but that requires individual success of many organizations.   This has always been an issue, and with the addition of almost 500,000 charities in the past decade, the art of being a charity and being competitive has become more of a challenge.

The  growth in “competitors” is compounded by reports that suggest a declining trend in the number of donors which was masked by the rally in giving during Katrina and the Indonesian Tsunami. For the short term, this decline has been overcome by increasing the amount of giving per donor. The combination of these events is intensifying the competitive marketplace.  

Being competitive does not mean focusing only on financials or wishing for the demise of other nonprofits.  In fact, there are numerous situations that call for the collaboration of nonprofits to propagate a particular cause or issue.  Being competitive means recognizing the need to focus on the strategies required for sustainable growth. 

We have worked with multi-billion dollar national groups as well as very small local organizations and the issue remains the same - growth is getting more difficult and it requires some new ways of thinking. Typically, three primary issues have prevented organizations from investing in growth:  1) undercapitalization of staff and resources; 2) lack of expertise; and 3) the ubiquitous fact of the urgent overtaking the important.  This new environment requires that organizations work to overcome these obstacles and create a new focus on building engagement and funding.

The situation facing organizations now requires a more intense focus on issues that in prior years could have been overlooked or improvised. 

Successful nonprofits that have done well in this environment have built a more competitive approach and addressed the following key elements:

1.  Managing through Budget Cuts

Charities clearly understand the importance of their mission. It is the cause that drives involvement of the staff, volunteers, and supporters.  Unfortunately, more and more organizations are experiencing the reality of undercapitalization and how that can easily translate into cutting staff.  The result is a “death spiral” where cuts in staff make it more difficult to raise money which requires more cuts in staff.  While the mission is still of paramount importance, it is the funding or “margin” that fuels sustainability and growth.  Without an active strategy to drive revenue, the altruistic elements of the organization will quickly grind to a halt. 

Budget cuts are a reality, but it does not mean that the organization must forego the key elements associated with planning and developing future growth initiatives.  In fact, it is in the times of crisis that some of the greatest opportunities appear.   Even when budgets are slim, it is essential to continue to invest in activities that directly and indirectly drive revenue.

2.  Research the market

While for-profit companies may spend substantial amounts on market research, it is often seen as a luxury for the non-profit marketplace.  The greater cost, however, is making large investments in campaigns or other activities based only on intuition or guesses.   Isn’t it better to have a fairly assured understanding of what targets may respond better to in the next mailing or which messages are most likely to motivate action? Research does not have to take the form of six figure investments into sophisticated decision models.  Over the past few years, more and more insight can be accessed by using information gathered from existing databases.  By using data provided by companies such as Claritas or Acxiom, organizations can begin to use existing data on donors as a tremendous asset.  With the proper guidance, information from these firms will enable companies to model their donor base and then use that information to prioritize and map out future potential partners.  This will enable an improvement in return on investment from marketing which can create an immediate improvement in funding - both from increasing revenue and reducing wasted expenditures. And it all can be done with data that may already exist.

In addition to the internal analysis, organizations need to spend the time to understand the decision criteria of stakeholders and gatekeepers.  This can be done by staff or by third party teams to ensure impartial synthesis of the information. 

Information on donors is essential to creating an organization that reflects the needs of the market versus the internal desires of the current organization.  While staff desires are important, they can only move forward if it is consistent with that of the donors.  Take the time to understand the market - it is difficult to move forward while wearing a blindfold.

3.  Define the Position & Value Proposition

Those with the most passion for an organization have the greatest understanding about how it is different from other groups and why it needs ongoing support.  That core, alone, is not able to fully fund the charity and for groups with less direct involvement, differentiating elements of the group become less clear.  The remainder of prospects must be informed of the mission and positioned through shorter, but compelling methods.

For example, when people think about humanitarian relief, they know the names of organizations such as United Way, American Red Cross, Salvation Army, Samaritans Purse, or Catholic Charities.  However, when pressed, many people may not be able to articulate the difference in how these organizations serve the community.  Without that level of clarification, it becomes more difficult to motivate donors and increase their level of engagement.

If an organization has trouble defining its difference, then so will its supporters.

4.  Develop the Strategic Plan

What is the overall mandate for the organization?

What types of needs do donors want solved?

What are they willing to support?

Where do we have the greatest competencies?

Where can we outperform the competition?

Non-profits are excellent planners — they just don’t always carry that strength through to all parts of the effort.  They plan disaster relief efforts, conduct major research, organize events, etc.  The problem is that charities don’t spend the same amount of effort planning their own growth.  The lack of planning is not due to lack of desire, but often to the fact that resources are limited and the more tactical elements of the day take over.

Effective teams need clear direction and leadership.  The strategic planning process offers the opportunity to set the direction for the organization and designate the priorities that will be in place for the coming years.  It should address areas related to the offerings, targets, appeals, initiatives, metrics, partnerships, etc.

Too often this process is seen as a burden rather than an opportunity to truly position the organization in a way to create innovation that propels the organization to the next level.

The great temptation in any planning process is to look within.  Instead, the effort should be donor-centric.  The plan, at a minimum, should assess the market situation, set objectives, define growth strategies, establish implementation timelines, and develop metrics.

For-profit companies may spend months or years developing their plans, but nonprofits are not able to dedicate that level of resources.  In some cases, the approach of simply having an annual one-to-three day planning session and then implementing a series of monthly “check-points” provides the initial jumpstart required to propel the organization forward and ensure accountability.

Even organizations with small budgets and limited staff can have effective strategic plans.

5.  Set up Metrics and Monitoring

Did the campaign work or not?  Which message generates the most return on investment? While crystal balls are a bit hard to come by, there are definite ways to improve the odds of performance. 

The first phase of any effort should be to establish the objectives in clear and precise terms and establish ways to track performance.  For example, some groups will use different response phone numbers or post office boxes to determine which campaign generated the greatest return.  Metrics should be established to track the success of a particular campaign (return rates, target market, etc.) as well as the overall health of the organization (trust, preference, awareness, etc.)

It is also important to work to prevent the strategic plan from becoming one more book on the shelf that collects dust.  Instead, develop a series of specific initiatives that will be implemented during the year and identify what is required to make those ideas come to fruition.  For each major initiative, there should be a point person who is its champion.  With larger organizations, this may be a paid staff; for smaller ones, it might be a volunteer.  In either case, someone needs to be held accountable.

By having periodic “vision checks” the organization can avoid the scenario where the goal originally seen as important becomes overtaken by the more urgent, yet less critical  tasks.  In some cases, the executive can provide this accountability and in other situations, it makes sense to have an outside third-party to help moderate and facilitate the process.

Know what worked so that it can be replicated and know what did not work so it can be avoided.

6.  Manage the Donor Relationship

A good friend and client of ours once said that we need to manage the target from the “cradle to the grave.”  His goal was to try and make sure the group was able to offer a benefit throughout their life - either as a recipient, volunteer, or donor. While the choice of terms may be a bit strange, it is actually a lofty goal and one that more organizations should embrace. 

Too often, we put the burden of the relationship on the donor/supporter to remember how they have been involved with the organization.  The result is that the people sometimes get lost in the shuffle - this is especially true with larger organizations that do not have the direct relationship with their donors that smaller groups do.

Research has shown over and over again that the best donors for one organization are usually the best donors for another group as well.  This increases the potential competitiveness for donations, especially during times of economic downturns when disposable income is less available.

Organizations must segment and prioritize their market to have a clear picture of which markets offer the best opportunity and what activities generate the greatest result.  Donors are the lifeblood of the organization and it is essential that the strategy is clear and precise.  It is more than getting the latest database, but means having a defined approach to prioritize donors, articulating the different ways to interact with the different groups, measuring the performance of fundraising efforts, etc.

Manage donor information and relationships as if they were the most important element in the organization’s survival — because they are.

8. Collaborate Carefully

As competition among charities continues to increase, an organization’s brand becomes essential.  It represents the promise to both the donor and the recipient. Constant opportunities arise to join with other nonprofits to support particular causes or events.  However, direct partnerships should be treated with great care. 

Corporations protect their brands very carefully and non-profits should do the same.  Whether it is an offer from another charity or from a potential corporate sponsor, carefully evaluate the offers before committing.  The law of unintended consequences is always a threat.  In the 1800s, the Red Cross licensed its brand to Johnson & Johnson.  That decision resulted in severe limitations on what Red Cross could do with product licensing and was the foundation for a lawsuit between the two groups in 2007.  Who would have expected that a decision made 150 years ago would still have an impact today?  While that is an extreme example, there are many organizations that regret decisions made only three to five years ago.

Partnerships between charitable groups are positive and should be supported whenever possible.  However, they should also be entered into carefully and with an understanding that both organizations benefit equally.  Even now, many organizations rely on their partnership with the United Way as a primary vehicle for fundraising.  However, as the United Way suffered damage to its trust, it also had a direct impact on the partner charities. Partnership offers opportunity, but also creates vulnerability.

Accepting a partnership offer simply because revenue is attached is a bad idea. Make sure it is good for the long-term health of the organization.   Set thresholds and criteria and make sure each offer is measured against them.

The non-profit marketplace continues to evolve.  Those shifts, combined with overburdened staff and increasing requirements, create a difficult situation for charities.  With the right mindset, guidance, and focus, charitable organizations will be in a much stronger position to succeed. 

© Copyright 2007.  All Rights Reserved.Confidential Property of Group Newhouse, Inc.

This article available in pdf format: Competition in the World of Altruism