Donor service critical for community foundations

In an increasingly competitive philanthropic marketplace, donors are more likely to give to community foundations that provide good customer service and make a meaningful impact on the community in ways that are clear to donors, a new research report says.

“Donor satisfaction is vital for community foundations,” says the report from the Center for Effective Philanthropy.

“Donors who are more satisfied with their community foundations are more likely to indicate that they plan to continue giving and more likely to recommend the foundation to others,” the report says. “The consequences of donors not being satisfied with their community foundation are simple — donors will walk away and won’t help bring new donors to the foundation.”

The report, What Donors Value: How Community  Foundations Can Increase Donor Satisfaction, Referrals and Future Giving, is based on surveys of over 6,000 donors from 47 community foundations that commissioned a donor perception report from the Center for Effective Philanthropy between 2009 and 2013.

Growing competition

Based on a model of philanthropy created 100 years ago with formation of the Cleveland  Foundation, community foundations serve as a partner for donors, who create funds at the foundations; a funder of nonprofits; and a resource for local issues.

But the past 10 years have been a period of “challenge and questioning” for community foundations, with growing competition and questions about whether their business model is sustainable or needs radical change, the report says.

Helping to drive that competition with local community foundations has been the rapid growth of donor-advised funds offered by big financial services companies like Fidelity and Vanguard in the face of research estimating that trillions of dollars in wealth will be transferred between generations over the next 50 years.

Donor satisfaction

Community foundations can take tangible steps to maintain or improve donor satisfaction, it says, “but it’s not a simple formula.”

The strongest predictors of donors satisfaction are “donors’ sense of the foundation’s level of responsiveness when they need assistance and donors’ perceptions of the foundation’s impact on the community,” the report says.

Donor communication

Communication with donors is critical, it says.

“Both the frequency of a foundation’s communications with its donors and the extent to which staff clearly communicate the foundation’s goals matter,” it says.

And donors who find staff to be more responsive tend to be more satisfied with the foundation overall, it says.

“Failing to be responsive can cost community foundations their donors,” it says.

If donors are not satisfied with their community foundation, they are “more likely to turn to one of many alternatives for their giving,” it says.

Capacity and impact

“To thrive,” it says, “community foundation boards and leaders must pay careful attention to the capacity of their organizations to deliver excellent customer service while positioning themselves to have an impact in their communities.”

The data also suggest that community foundations “may be best served by capitalizing on their strengths rather than changing to compete in areas, such as administrative fees, where they’ll be harder-pressed to do well against companies with massive economies of scale.”

Todd Cohen

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Few foundation CEOs see progress on goals

Change is slow in coming on issues that foundations care about, and it could be accelerated through better collaboration, communication and information, according to a survey of foundation CEOs.

Only one in four foundation CEOs surveyed by the Center for Effective Philanthropy sees a lot of progress by organizations focused on the goal in which their own foundation invests the biggest share of its resources.

And just over half say they are only somewhat or a little confident in their assessment of that progress, says a report from the Center, which is based on survey responses from 211 CEOs of U.S.-based foundations.

Still, 60 percent believe their own foundations have contributed a lot to the progress that has been made, while 30 percent believe their own foundations have contributed a modest amount, says the report, How Far Have We Come? Foundation CEOS on Progress and Impact.

Ninety-four percent of CEOs who responded believe improved communication across organizations about what they are learning through their work could improve their assessment of  progress that has been made, while 91 percent believe more evidence about what works and does not work in making progress could improve their assessment.

And 88 percent believe greater consistency in metrics and indicators that organizations use to measure progress could improve their assessment, while 73 percent believe more research about social factors connected to the foundation’s goal could improve their assessment.

Forty-five percent of CEOs strongly agree that, compared to a decade ago, their foundation has made progress in being able to understand its impact, compared to 46 percent that somewhat agree.

And 14 percent of CEOs strongly agree and 64 percent somewhat agree that, compared to a decade ago, foundations overall have made progress in being able to understand their impact.

Asked what is the greatest barrier to foundations’ ability to make progress, 76 percent of CEOs cited the current government policy environment, while 76 percent cited the current economic climate, 54 percent cited the availability of evidence-based practices, and 51 percent cited grantees’ difficulty in accessing their progress.

Asked what practices could increase a foundation’s impact, 86 percent of CEOs cited working with organizations across sectors toward a shared goal, 86 percent cited working with other foundations toward a share goal, 73 percent cited seeking feedback from the ultimate beneficiaries of foundation’s work, 71 percent cited supporting nonprofits’ efforts to collect data about their performance, 70 percent cited scaling successful programs or organizations, 43 percent cited impact investing, and 17 percent cited sunsetting.

While the share of CEOs who said their foundations do in fact engage in those practices generally was similar to the share of CEOs who said those practices could boost a foundation’s impact, only 59 percent of CEOs said their foundations actually seek feedback from the ultimate beneficiaries of their work.

Seventy-seven percent of CEOs said they believe foundations do not  do a good job of publicly sharing what has not been successful in their experience, 57 percent believe foundations should provide more funding to increase the availability of evidence about what works, and 55 percent believe foundations are too risk-averse.

Todd Cohen

Nonprofits say foundations unaware of their needs

Many nonprofit leaders say key challenges their organizations face are off the radar of foundations, which they say do not use their resources to help address those challenges, a new report says.

Nearly half of 121 nonprofit leaders surveyed by the Center for Effective Philanthropy believe foundations are not aware of their organizational needs, and over two-thirds believe foundations do not use their resources help strengthen their organizations, says the report, Nonprofit Challenges: What Foundations Can Do.

That perceived failure by foundations likely is rooted in a “crucial knowledge gap” between them and nonprofits they support with grants, the Center says.

Key needs

Nonprofits want more support in meeting demand for their programs and services, using technology to improve their effectiveness, and developing leadership skills, the report says.

Seventy-three percent of nonprofit leaders surveyed, for example, say they lack the resources to develop their leadership skills.

“That’s a huge opportunity for any foundation that wants to take the long-term view and fuel leadership development,” Ellie Buteau, vice president of research at the Center for Effective Philanthropy, says in a statement.

Barrier to openness 

The fact that only 52 percent of nonprofit leaders believe their foundation funders are aware of the challenges their organizations face may be partly the result of the “strength of relationships” that grant recipients have with their funders, and in particular their “degree of comfort with being open and honest,” the report says.

“The more likely nonprofits are to feel that they can be open with their funders about their organizations’ challenges, the more likely they are to report that their funders are aware of the challenges,” it says.

Foundations could do more

It also says the data “clearly show that nonprofits are not looking to foundations to solve all their problems,” but that they are looking for more help “and do not believe foundations are doing all they could.”

Only 36 percent of nonprofit leaders surveyed believe foundations share their knowledge about the ways other nonprofits are addressing similar challenges.

Still, on a range of common challenges, such as how to productively engage their boards of directors, and develop and train their staff, “most nonprofits are not looking for foundations’ help, the report says.

Demand for services

With a 2012 survey by the Nonprofit Finance Fund finding 52 percent of nonprofits could not meet demand for services, up from 44 percent in 2009, the report by the Center for Effective Philanthropy says over two-thirds of nonprofit leaders surveyed want more help from their foundation funders to address that challenge.

‘Leadership deficit’

And with the nonprofit sector finding it tough to attract talent, facing a potential “leadership deficit as Baby Boomers retire, and needing to develop the next generation of leaders, the report says, 73 percent of nonprofit leaders surveyed believe they “lack sufficient resources and opportunities to develop their leadership skills.”

And among nonprofits that try to influence public policy, it says, most want more help from foundations in that work.

Earned revenue

The report also says that among 85 percent of nonprofit leaders who want to maintain earned revenue, which in the sector has not grown as a share of total nonprofit revenue, an overwhelming proportion of leaders find that effort challenging.

And while 18 percent of nonprofit leaders do not believe foundations are in a position to help, most in fact are looking for more help from foundations on that issue.

Most nonprofits also find it challenging to increase their earned revenue, although 25 percent of them do not believe foundations are in a position to help them.

Big opportunity

The findings overall “indicate how much opportunity still exists for foundations to help nonprofits with some of their most difficult and persistent challenges,” the report says.

Past research by the Center for Effective Philanthropy has shown that while foundation staff “tend to be interested in providing assistance beyond the grant,” they “often do little to understand what their grantees need.”

The new survey says it “shows the consequences” of that failure on the part of foundation staff — “nonprofit leaders who do not believe foundations understand their challenges, and who are looking for foundations to do much more to help them in specific areas.”

Relationships key

Underlying much of the research by the Center for Effective Philanthropy about the work that foundations and nonprofits do together, the report says, is “the need for foundations and grantees to form strong relationships.”

Nonprofit leaders likely would not “be comfortable being open about the various challenges their organizations face if their relationships with their foundation funders do not feel strong enough to withstand that honesty,” it says.

“Clearly, foundations cannot do everything, and it is likely the case that nonprofits will always be looking for more help from funders than can be provided, given limits on staff time and resources,” the report says.

Pressing challenges

But the data also show that nonprofits “are not looking for their foundation funders to help them with everything they find challenging,” it says. “They are looking for more help to deal with some of their most pressing challenges.”

If foundations “depend on their nonprofit for the work they do to achieve their shared goals, then they will benefit from working to better understand nonprofits’ challenges and from dong more to help nonprofits address them,” the report says.

The report findings indicate that instances of foundations doing that “remain relatively few and far between.”

Todd Cohen