By Kirk Walden, Advancement Specialist

For many ministries, Year End also means the end of the budget year. If we are trying to catch up on the budget at this time, we need to be careful in our appeal.

Our friends do not want to hear—every year—that we are behind. If we stay on this road year after year, our readers are going to question our stewardship.

Instead, let’s look at some items—which are likely in our budget—that might make for good Year-End Appeals.

Catching up on the budget

Didn’t we just say to be careful about this? We did, so here is how to be careful. Take the ministry that needs $15,000 in new funds in order to finish the year in the black.

Instead of talking about how behind we are in the budget, why not say something like this: “$25,000 for First Choice at Year End will not only finish our 2014 on a strong note, these funds will also launch us into a successful 2015, when we plan to . . .”

See the difference? The budget shortfall may be $15,000, but our letter is looking beyond ‘14 and into ‘15, with a positive outlook

Fatherhood Initiatives

Thinking of hiring a person to run your Fatherhood initiative? Factor in not only salary, but all materials, the cost of heating and cooling office space, etc. Roll it into one number and ask—not for simply a new person, but for a fully staffed Fatherhood Initiative.

Marketing

Advertising and marketing is expensive; and some of our constituents don’t understand our need to advertise, making this ask more difficult. Phrasing matters. How about, “In order to best connect with those who need us, we must have a powerful online presence, and we need to be wherever they go. To make this connection through television, radio, the web and social media, we plan to invest $22,500 in 2015. The result, we believe, will be as many as 175 saved lives.”

Brick and mortar

No doubt, renovations and any building projects are effective asks. If we connect our renovations to reaching clients more effectively and saving more lives (and changing lives!), our odds of success grow.

Medical conversion

If we are considering a conversion in the next year, there is every reason to be asking now. There is no reason to wait—year end is a great time to start the process.

Click here for more of this month's Advancement TLC.

By Jor-El Godsey, Heartbeat Vice-President, Ministry Services

From Take Heart | Vol. 2, Issue 6

Pre-2009 celebration at Heartbeat.  Even the birthday cakes for staff fell to cost-cutting measures.  Counter clockwise, starting with birthday girl:  Peggy Hartshorn, Joe Young, Deb Schirtzinger, John Ensor, Betty McDowell, Virginia Cline, Jor-El Godsey.

The water cooler is long gone.  Paper plates, plastic-ware, coffee and creamer are strictly by contribution only.  Even the birthday cakes for Heartbeat staff have been reduced to a simple card and a group sing.  (Seriously, picture a dozen people standing near your desk belting out the familiar tune!)  Expenses for office supplies have been cut dramatically.  Many such ideas came from staff brain-storming sessions during some very lean months.

Cost-cutting measures for Heartbeat turned really serious beginning with the summer of 2008.  The pregnancy help movement felt the economic downturn earlier than most non-profits.  As you well know, cost cutting is hard to do when you’re a non-profit and already operating on somewhat of a shoestring.  We took even more stringent measures.  We trimmed budgeted expenses, reduced benefits, and the whole staff even took two sacrificial, week-long furloughs.

While cutting expenses dramatically, we also put the word out that we needed help.  The first and (fortunately) only emergency plea for funds went out to donors and affiliates alike.  In addition, special, one-on-one asks to major donors helped us close the gap between income and outflow.  As we began to understand the extent of the crisis we took an additional step...

Two years of fasting and praying. . .   Boy are we hungry!

Yep, you read that right.  Fasting for two years!  Well okay, it wasn’t every single day for two years.  Actually, it wasn’t even every week.  But one day each month since July of 2008, the Heartbeat staff has set aside a day of fasting with specific times throughout that day to gather in prayer for the needs of Heartbeat.  Okay, that’s not nearly as impressive sounding as fasting for two years, but still that’s how long we’ve been practicing the discipline as a staff.  (Fasting is optional, but almost everyone fasts on our special day. Even board members, intercessors and other close friends join us.)

Prayer is hardly foreign to us at Heartbeat.  We gather each and every day around 9:15 a.m. to pray for our affiliates, staff needs, upcoming events, faithful and generous donors, our partners and the mission and pregnancy help movement.  So, if you’re calling our office between 9:15 a.m. and 9:45 a.m., you might not reach us directly because we’ve gathered to pray.  It’s not mandatory but everyone’s usually there if they can be.

Setting a specific time to fast and pray clearly has been vital in getting us through some tough times.  Focusing on God in the midst of our crisis and working diligently to do what we could saw us through a very difficult time.  In the waning hours of 2008, we watched the Lord work a miracle where the year-end giving closed the year’s expense gap!  In gratitude, we rejoiced!  We partied!  And then we went to work implementing our newer, leaner budget for 2009.

I’m glad to report that in 2009 we finished in the black.  In 2010, things are challenging but not at crisis level.  God is faithful.  And we’ve continued to fast and pray one day each month. And yes, we’re hungry.  Hungry for God as He leads and provides for the mission and vision that He’s firmly planted in our hearts.

Prayer helped us in many ways cope with the crisis we experienced. Prayer served to calm our fears and to put our trust in the best source – God.  Prayer helped us unite as a staff even as we faced significant threats to our work and vocation. Prayer helped us not to get “mean” even as we were getting lean.

So take heart in your situation. Set aside time to pray.  Consider a time of fasting.  Always remember to look upward as well as inward in any time of crisis.

Back to Take Heart | Vol. 2, Issue 6

by Kirk Walden, Publisher of The LifeTrends Connection

The discussion Ellen Foell initiates elsewhere in On the Leaderboard is an important one for all of us because it reminds us of the fact that in a sense, many pregnancy help organizations (probably the vast majority) are likely unknowing participants in The Overhead Myth.

For most non-profits in our sector, we look closely at those administrative and development costs, wary of going over a certain percentage of our overall expenditures. Is the number 20%? Is it 15%?

Regardless, we try hard to avoid giving the perception that we are spending a large portion of our income on non-client related services such as fundraising, salaries and staff who are not directly connected to our clientele.

There is a good reason for this. Stories of non-profits and ministries that have abused the public trust by shoveling outrageous amounts into the hands of the organizations’ leaders, spending large portions of money simply to get more income (while leaving behind those who the organization is designed to serve) abound.

As a result, foundations to which we are writing grants, and major donors, tend to look closely at our administrative expenditures. And with the web, in the last ten years many more who are considering giving to us can quickly look at our 990 forms and may make a funding decision based at least partly on these figures.

The fact is, while most pregnancy help agency boards have never considered “The Overhead Myth” or sat down and asked “How much is too much” for our administrative and fundraising costs—we are all wary of going over the line with these expenditures.

The bottom line is, we do not want to be perceived as wasting our donors’ hard-earned gifts.

Under Investing ≠ Overly Wise

To all of us in this movement, we must be wise stewards of every dollar that comes into our organizations. But . . . if we get caught up in fretting over percentages and perceptions, we could miss God’s best for our centers, maternity homes and adoption agencies.

The fact is, it costs money—big money for many of our organizations—to send our entire staff and board across the country for an event such as Heartbeat International's Institute for Center Effectiveness this Dec. 9-13 in Columbus, Ohio. And if we do, much of that expense will fall under “administrative” costs.

It also costs money to bring in that consultant or trainer to upgrade our development plan, to implement a powerful event or to walk us through the steps necessary to better connect with and envision those who partner with us financially. This one falls under fundraising.

For some of our organizations, the two “expenses” listed above might cause us to recoil a bit because we ask, “What about the clients we see? Can’t we spend that money on them instead of on us?”

And this is where we find the trap. We begin to see dollars spent as “expenses” and worry about whether our donors would appreciate their money going toward a trip to Columbus for our director. Or, we fret over spending money just to raise more . . . money.

If we fall into this trap, we can miss the big picture. A wise board and staff understands that every dollar spent should ultimately be an investment in our clients—whether it falls on the 990 form as “Administrative,” “Fundraising,” “Services” or anywhere else.

Stretching Your Donor Dollar by Investing in Leadership

An investment of in-depth training for board and staff should, in the end, provide a powerful return for our clients with more effective services, a larger vision for the impact we have on their lives and more.

Why? If we are investing in training our board, this group is better equipped to lead the ministry through future changes and growth. If we are investing in our staff (let’s remember salaries at this point, too) we have less turnover, more consistency in service and stronger bonding among team members.

By the same token, an investment in our development/fundraising practices should provide a return in a greater ability to reach and serve our clientele.
While we need to watch our administrative and fundraising investments, an over-emphasis on percentages can be to our detriment. The questions we ask regarding these figures should be about the ultimate impact on clients’ lives, not about whether our 990 form might look odd or because our perception among donors is at risk.

My hope is that soon, we can look those who support us in the eye and say, “YES, we spent this amount on administrative costs, and on fundraising we stepped up our investments as well. Here are the reasons why, and here are the amazing results in the lives of our clients.”

Should we be watching our fundraising and administrative costs? Just like any other investment in our organization, the answer is an unequivocal “Yes.”

Should we then, be shackled by traditional “rules,” such as the idea that no more than 15 or 20% of our expenditures should fall under administrative and fundraising? While we all need wisdom in this, the answer is “Probably not.” Best practices in fact, may encourage us toward breaking such rules at times in order to ultimately best serve those who come in our door.

Kirk Walden is publisher of The LifeTrends Connection, a monthly e-newsletter geared to help pregnancy help leaders set, evaluate, meet, and enhance fundraising and development goals. Subscription to The LifeTrends Connection is an automatic benefit of affiliation with Heartbeat International. Kirk is also author of a recently released book, The Wall: Rebuilding a Culture of LIFE in America and Ending Abortion as we Know it.

by Jay Hobbs, Communications Assistant

As your pregnancy organization’s board meets to craft this year’s budget, take a moment to give the room a silent once-over.

Are you looking at a gaggle of starry-eyed dreamers or a collection of bone-dry bean-counters? What if you could tip the scales… to the middle?

You see, two kinds of people need to be involved in the budgeting process. You want your organization’s budget to reflect a sort of modest ambition—a reasonable approach that still has the ability to stretch your organization and its mission. A budget that reflects wisdom and reliance upon the leading of God’s Spirit.

As valuable as starry-eyed dreamers are—the rest of us are happy to have you aboard!—these visionaries often need reigned in a bit by faithful, brass-tacks bean-counters who are best-geared to convert a vision to a reality by executing a plan and process from Point A to Point B.

A board full of visionaries may have an ever-increasing treasure trove of great ideas and lofty budgeting goals, but at some point, these ideas need evaluated, vetted, and implemented by folks with calculators, spreadsheets, and bank statements.

On the other hand, a board comprised of bean-counters will lack the kind of ambition your organization needs in order to truly grow and take those “next steps” visionaries are so very fond of.

Peter F. Drucker, who Business Week once heralded as “the man who invented management, had the following to say in his book, Innovation and Entrepreneurship: Practice and Principles:

The people who work within these industries or public services know that there are basic flaws. But they are almost forced to ignore them and to concentrate instead on patching here, improving there, fighting the fire or caulking that crack. They are thus unable to take the innovation seriously, let alone to try to compete with it. They do not, as a rule, even notice it until it has grown so big as to encroach on their industry or service, by which time it has become irreversible. In the meantime, the innovators have the field to themselves.”

So, we ask again… Who is sitting at your board table?

Who is missing?

by Ellen Foell, Legal Counsel

Financial services company Standard & Poor’s rates corporations and nations on the ability and willingness of an issuer—such as a corporation or government entity, to meet its financial obligations in full and on time.

Many Americans became familiar with Standard and Poor’s when the United States fell from AAA to AA-plus in 2011, reflecting the instability caused by Congress’ inability to meet budget deadlines during that timeframe.

Americans are also familiar with standards for corporations such as the Dow Jones Industrial Average, which guides our fanatical tracking of current stock prices as they roller-coaster up and down at breakneck speed. Meanwhile, medical providers are subject to a variety of standards, both specific and general, in addition to standards determined by The Joint Commission.

Standards exist on the homefront as well, where my children are judged (in a sense) on their learning capacity over the previous nine weeks by the ever-dreaded report card… which, as we know, goes on their permanent record. It seems impossible to go through life for very long without a set of standards measuring and accounting for performance, efficiency, and profitability being applied in various areas of our lives.

In the nonprofit sector, keeping an organization’s administrative overhead at somewhere between 0 and 20% has been the Holy Grail for a number of years. In other words, the “standard” has been to report to donors that less than 20 percent of all funds donated is being spent on administrative overhead, including salaries, advertising and marketing, staff training and education, costs of operation, and other less-than-exciting—albeit necessary—items.

This year, the three major evaluators and nonprofit trackers, Better Business Bureau Wise Giving Alliance, Charity Navigator and Guide Star joined together in a first-ever united effort: an open letter to donors asking donors to rethink the “overhead myth.”

Without negating the value of the overhead factor altogether, this letter asked donors to reevaluate the importance and significance of overhead expenditure in rating a given nonprofit’s value.

These organizations’ desire to put the overhead figure into a more realistic and holistic perspective is a welcome reaction to the over-estimated value many donors place on overhead, which also drives nonprofits to sacrifice mission for the sake of meeting a somewhat arbitrary standard.

According to the organizers of The Overhead Myth, the myth itself is problematic in at least the following ways:

• Starves charities of the freedom they need to best serve the people and communities they are trying to serve;
• May, at times, put organizations into the untenable, and unacceptable position of fudging numbers in an effort to meet the magic acceptable ≤20% figure;
• Limits the pool of capable and willing talent because of the lure of the for-profit world;
• Reduces the innovative risks nonprofits are willing to take simply because it is difficult to justify the risk to donors weighed against the expense, and possible loss, of taking the risk.

This discourse, of course, is not entirely new. As early as 2009, the Stanford Social Innovation Review published a critique of the unbalanced weight overhead tends to play in the measure of a nonprofit’s performance in its article, “The Nonprofit Starvation Cycle.” The article’s authors cited a few of the effects of starving a nonprofit in an attempt to keep overhead costs low.

Among their many dismaying findings: nonfunctioning computers, staff members who lacked the training needed for their positions, and, in one instance, furniture so old and beaten down that the movers refused to move it. The effects of such limited overhead investment are felt far beyond the office: nonfunctioning computers cannot track program outcomes and show what is working and what is not; poorly trained staff cannot deliver quality services to beneficiaries.

Even with the discussion brewing over the past few years, the fact that BBB Wise Giving Alliance, Charity Navigator and Guide Star have chosen to tackle this issue together is rather significant.

Another key factor in the rise of this invaluable conversation was a now-famous TED Talk by Dan Palotta, entitled, “The Way We Think About Charities is Dead Wrong,” delivered in early 2013. Although I wouldn’t by any means endorse everything Palotta has to say in the talk, he does make a strong overall argument to expose the, frankly, ridiculous inconsistency in the behavior or practices we consider acceptable in the for-profit world, yet totally unacceptable within the nonprofit world.

The very same advances, innovations, and ad campaigns which reap huge profits, accolades, and awards in the for-profit world, Palotta argues, render accusation, criticism, and—at times—character assassination in the nonprofit world.

Our apparent disconnect between the for-profit and nonprofit worlds, as well as the relevant measures of success and performance, has sparked the following challenge from the editors of Nonprofit Quarterly:

Imagine that you went traveling and refused to take a room until you were informed about how much the inn spent on administration. Even if you were given that information, would you then compare that ratio to that of, say, your local airline?

When I started the organization, I was young, idealistic, and naive. Not experienced enough to know better, I bought the hype: that to be truly altruistic and efficient, we needed to operate at the highest possible levels of self-sacrifice. We needed to direct almost all money raised to buying pencils rather than building infrastructure, we needed to expect our staff to work for the lowest possible wages (or ideally none at all), and we needed to do it all with an eager, grateful smile.

Erickson writes bluntly about her failures as the 20-year-old founder and CEO of FORGE, a nonprofit founded in 2003 to assist refugees in Zambia and Botswana, “We under-invested in systems infrastructure, we under-invested in fund development, and we under-invested in human resources.” The rest of Erickson’s article essentially analyzes reasons for the demise of her once-successful nonprofit organization, and her lament for the “could have been.”

If not Overhead… Then what?

The rising chorus of these voices raises the legitimate question: If not overhead, then what metric? What measure? What standard by which to judge efficiency and performance? Surely, it would be unwise to give to an organization spending 50 percent of its funds on overhead. How can a donor choose wisely?

Surely overhead has a place as a factor to consider… Right?

Absolutely.

The three major organizations recommend consideration of factors such as “transparency, governance, leadership, and results.” While, a thorough discussion of each of these factors is impossible in this forum, they do serve as a prompt to a full-bodied discussion at your pregnancy help organization’s board table.

Indeed, Heartbeat International seeks to steward every dollar donated with utmost wisdom and care. We recognize we are but servants, and are accountable to our donors, to our Board, and—more importantly—the Lord for our overhead costs. And, as we state specifically in GOVERN Well: Your Personal Board Member Manual™, and elsewhere, we expect the same from our affiliates.

Nonetheless, as boards and executive directors go forward into a new fiscal year, it is perhaps worth considering and discussing how to balance the dream, vision, and mission to which God calls each affiliate with the inevitable, less-than-pleasant, yet no less necessary, discussion of how to fund the dream and mission by which we expect God to work His Kingdom values on earth as it is in heaven.

Let the discussion begin!

 For more views on this topic, see:

• Six Reasons Non-Profits Fail, Reason #4: Obsession with Percentages: Although this article is from February of 2012, the author candidly points out how some nonprofits respond to the pressure of maintaining low overhead.
  
  
• What Do Good Outcomes Cost?: Nonprofit advisor Ann Goggins Gregory discusses different ways nonprofits can address the overhead myth.
  
  
• Overhead Ratios are Essential for Informed Giving: CharityWatch presents a view to keep overhead as a significant factor to consider a nonprofit’s effectiveness.