Three of the world’s richest people have issued a challenge to their peers on the Forbes Billionaires list:  Give half your wealth to charity!

But to what end?

If Bill and Melinda Gates and Warren Buffett are any example, it will be for whatever they damn well please.

On one level, who could argue with that?  It’s their money after all.  And they are all successful people who can and do get things done.  Who better then these people to find and fund the opportunities that will transform the world for the better?

Yet here’s the wrinkle: With a few notable exceptions, like the Gates’ and Mr. Buffett, the Forbes Billionaires are not experts in making charitable investments.  At their best, they might carefully consider projects, closely scrutinize organizations and budgets, interview organizational leadership and compare notes with peers.

They will have several significant disadvantages, however.  First, they will not have at their disposal the quality and depth of information available to them if they were considering a financial investment.  Second, the same types of analysis used in assessing the wisdom of a financial investment are not necessarily the same as those which would guide a good charitable investment.

This may explain in part why major donors typically rely on some level of familiarity with and trust in an organization in making a decision to make a major gift. That type of trust and familiarity comes with relationships built over time.

Here, therefore, is the potential difficulty of sudden, massive infusion of philanthropy in the third sector:  Since time is limited and trust takes time to build, donors might consider taking matters into their own hands, simply because they haven’t yet had the opportunity to meet the organizations which are the best fit for them.

This is the route of many duplicative efforts.  New operating foundations.  New social entrepreneurial ventures.  All launched with the sincere wish to get something done and often innocently unaware that some organization is already doing the same work quite well but without sufficient financial support.

Now imagine that this is all happening on a massive scale.  Just consider what would be possible if all those on the Forbes billionaires list accepted the challenge and committed half their wealth to philanthropy.  Fortune magazine suggests that another $600 billion could find its way to charity.  That’s almost twice current annual giving levels in the United States and likely many times the goal of all capital campaigns currently running combined.

Absent many new big projects conducted by organizations the Forbes Billionaires already know and trust, or a new body of data and set of analytics to make significant new charitable investing more efficient and effective, these donors will have nowhere to turn but to their own devices to take on the challenges of the world.

Of course, we could fix that.  Charities could view the Gates/Buffett announcement as a challenge not only to billionaires but to nonprofit organizations worldwide as well.  A set of once in a century goals could be developed which brought charities together to address problems too large for any to deal with individually.  Perhaps plans to build model sustainable cities, develop clean energy, provide food and schooling for every child or eradicate major diseases.  Something big enough to capture the imagination of big thinkers and warrant significant charitable investments.

Most great philanthropy occurs not because of the charitable impulse alone but as a result of the marriage of ideas from solution providers (nonprofits) to visionary individuals with significant resources (major donors).  Bill and Melinda Gates and Warren Buffett have issued a global challenge far greater than simply asking wealthy people to give up some cash.  They are, in effect, asking the world to rethink what philanthropy can and should do.  Donors will need our help to fashion that vision and we owe it to them, ourselves and our beneficiaries in this generation and the next to dream bigger than we have ever dreamed before.

So, what would you do with $600 billion?

It was the best of times, it was the worst of times…

If you read or heard many of the leading voices in philanthropy recently, you might well come away with the impression that fundraising is in tough shape.  The comments have been so dour you may have missed one very important detail:

Giving in the US is at near historic levels!

Here are just a few examples of how industry leaders and media outlets are saying that the resource development glass is half empty.

• At the annual conference of the Association of Fundraising Professionals in Baltimore, AFP CEO Paulette V. Maehara told attendees that “we’ve never seen so many organizations raise such few funds.”
• PNN Online reported it as “the worst year for charitable fundraising in a decade…”
• The much anticipated Giving USA 2010 introduced its Executive Summary with the sullen statement that “This is the steepest decline in current dollar terms since Giving USA began its annual reports in 1956.”

The Chronicle of Philanthropy went even further, challenging Giving USA’s overall characterization of the fundraising marketplace as overly optimistic.  “Evidence that giving might not be as strong as Giving USA suggests can be found in numerous studies conducted over the past year,” wrote Holly Hall.

There is no question that 2009 was a difficult time and 2010 offers continued challenges to nonprofits.  Unemployment, while just half that of the Great Depression, is significant.  The US stock market, although significantly rebounded from the crash, is way off its highs.  The real estate market, although now apparently turning a corner, had collapsed and triggered near historic defaults and foreclosures.  Businesses retrenched.  Foundations saw shrinking endowments.   And yet…

Giving in 2009 exceeded $300 billion for the third consecutive year!

2009 is one of the three biggest years in the history of US philanthropy!

That’s right.  Buried in the bad news that both confirmed our worst suspicions and excused our greatest failures is a harbinger of hope.  But within that hope is a challenge that many of us have yet to confront directly.

That challenge is to first better understand what we are doing, to do the best of it more often when times are lean and to expand our market to new audiences.

This is not some abstract concept.   It is routed in one core belief and a series of specific measurements.  The belief is that fundraising drives philanthropy.  That our acquisition, cultivation and solicitation are the reasons that people give to us rather than to some other institution or perhaps not at all.  The measuremeants are all about the numbers and type of people we contact.

By way of example, businesses routinely make sales projections by estimating the ratio of suspects to prospects to sales.  In other words, it might take 600 people vaguely interested in a service to come up with 100 who would actually consider buying it and, finally, 25 who will decide to buy this year and to buy from you.

This is pretty similar, in fact, to planning for a capital campaign and using a gift pyramid.  Or perhaps to assembling a portfolio for a major gift officer.   Or conducting donor acquisition.  The ratios are all different but the process of estimating based on historical averages, and then learning to modify those ratios in good and bad times, however difficult and inexact, is the way to determine if you are doing the right things, in the right volumes, with the right people and at the right times.

Unfortunately, without knowing whether more or fewer solicitations were conducted last year, and without knowing whether we asked for more or less money in 2009 than in 2008, we really can’t judge whether Americans were being more or less charitable or, for that matter, how much the economic crisis had to do with the outcome.

Sure, times were tough.  But if the Giving USA numbers are in any way close to reality, it is helpful to note that the $300+ billion given in 2009 was raised by an ever growing pool of nonprofits.  According to Giving USA 2009, there was a 53% increase in the number of nonprofits in the decade between 1999 and 2009.  In short, more institutions likely received these donations, driving down average cumulative giving per institution.  Additionally, certain types of charitable activity are particularly appealing to donors in times of public hardship, making it more difficult for some types of organizations to raise money than for others.

In short, if an institution did the same things in 2009 that it did in 2008, they would likely have seen a different result since there was more competition and the public’s attention was redirected to the needs so vividly displayed in the media.

As everyone in the nonprofit world knows, difficult doesn’t mean impossible.  In the world of fundraising it simply challenges us to commit to a higher ratio of suspects to prospects to donors, to continuing to ask for support even when times are tough and that we need to open the doors at the base of the pyramid to a much wider spectrum of support.

What if Google charged you $3.00 to conduct a search?

When your organization looks up constituent contact information on the web, it is likely spending that much or more.  Not in fees to Google, of course.  Nor in technical or software fees.  That is all “free.”

So where is all that money being spent?  Your time.

In addition, what you are not doing when you are conducting these ostensibly free searches may be costing your organization far more in something you may vaguely remember from your school days: Opportunity Cost.

Put staff time and opportunity cost together and it’s quite a bit of money.

That doesn’t mean we shouldn’t conduct research, of course.  Knowing more about constituents helps us to focus our time on the right opportunities in the right ways and to treat our friends and contributors with intelligence and sensitivity.  The question is rather how we use the vast treasure trove of data now available to us efficiently and effectively.

In order to make that leap, it’s important to first face the reality that our time isn’t free.  A staff member paid $35,000 plus benefits costs $0.39 per working minute.  A supervisor paid $65,000 plus benefits is clocking in at $0.73 per minute.  Assuming you had a staff member engage in a five minute internet search and that you also applied a reasonable supervisory time allocation (20%) to that activity, the cost of time would be $2.68.  (Yes, that’s 5 x $0.39, or $1.95, for the staff member and 20% of 5 x $0.73, or $0.73, for the supervisor.)  Do it another way—say an Executive Director or Vice President for Development searching for something on the web—and the staff time costs could be significantly higher.

In the grand scheme of things, $3.00 may be a small price to pay for vital information gathered quickly and efficiently by a knowledgeable and responsible member of the staff already under salary and working for you.

To make clear the cost implications, however, let’s look at the matter more holistically.  Rather than doing one lookup, we might perhaps do this simple task 25 times a month.  Just like those occasional calls on your cell phone that surprise you when they all show up together on the bill at the end of the month, little things do add up.  Those 25 lookups are over 2 hours of time and a minimum of $67 per month or $804 annually.  Just imagine how you might spend that money differently if you could!

But of course you can’t.  This is staff time not cash.  So perhaps an even more important consideration might be whether you could apply that time to a task that would generate more revenue.  In other words, what is the opportunity cost, or the cost of passing up another opportunity, of having people typing searches into web browsers.  This is, of course, even more critical when we have line fundraisers conducting their own research since the alternative could be actually visiting with donors and asking for gifts.

Again, none of this is said to dissuade us from conducting research.  Quite the contrary!

In fact, if we truly recognize the value of our time, both in terms of cost to our institutions and in the opportunities that we can pursue when focused on our most important work, then we can sharpen the edge on research and make a greater commitment to it as well.

How do we begin?  Make a general plan for research which is centered in the belief that knowing donors better can bring efficiency to our offices and more money to our institutions.  This plan might define what constitutes a prospect, for example, so that everyone is operating with the same concept in mind, both bringing the right prospects to the table and taking action on those provided to them.  The plan might also determine what type of research is most desirable and establish the preferred sources to be used in order to discourage staff from looking endlessly for information or checking source against source in an effort to understand a person or institution perfectly before engaging them.  In addition, the plan might address how and when it’s best to use products and services to take care of functions like ongoing address updating (batch processing through a vendor) or large scale prospecting for a campaign (with a database screeening).  Finally, the plan can establish research goals, determine research priorities, make a commitment to resources and staffing and set down policies and procedures for obtaining and handling information in a secure, ethical and confidential manner.

Such a plan could be written in a day and be no more than three pages long.  It could written by the Director of Development or, if you are lucky enough to have one, the Director of Research.  But it should be written down, approved by the top of the shop and made an integral piece of the development plan.

It is precisely because most organizations neither have the benefit of professional prospect research staff nor any policies and plans governing development information that we get confused about what research is, what it can be, what it costs and how much more money it can help us to raise.

To many around us, it might appear that “Googling” is research.  And a pretty cheap way to do it, too.  But it’s not.  And in fact the “free” aspect of it is precisely what makes it so very expensive. So the challenge to us all is to stop dabbling and to take the research opportunity seriously, making a plan and providing the resources and staffing to do so.