COVID-19 and Unrestricted Giving, Part 1: Now Is the Time

By April 2, 2020October 5th, 2020Industry Trends & Commentary

The full economic impact of COVID-19 will not be known for years. While health and safety should remain the top priority of public policy, certain sectors of the economy have been more greatly affected by the pandemic than others. Nonprofits, like small and large businesses alike, are at real risk, with major nonprofits predicting nearly insurmountable deficits.

Fortunately, the adage that opportunity is born of crisis holds true, particularly where philanthropy is concerned. Now is a good time to review and consider the next Big Idea.

Or, perhaps like the fashion industry, now is the time to revisit the past – to a time before business trends became a norm in philanthropic activity. In fundraising, this applies to expectations around unrestricted and restricted giving.

Since the early 1990s, there has been an upward trend in restricted major and principal gifts. While restricted gifts are undoubtedly beneficial in many ways, their downsides can be significant:

  1. Organizations can lose control of their mission.
  2. Program teams must pivot and create new programs in response to donor wishes or interests.
  3. If organizations are not careful, major gifts add to the budget rather than relieve it.
  4. In crises such as the COVID-19 pandemic, restricted gifts cannot be accessed and put to work, leaving organizations and those they serve at risk.

During today’s pandemic, the existence of restricted gifts – created with noble intentions to drive impact and address critical needs – are instead preventing nonprofits from accessing readily available funds that could have immediate and profound impacts on their missions.

Restricted gifts have long worked to channel some of the biggest gifts in history to organizations, and it is not our intention to diminish their utility nor the efforts of fundraisers who have asked for and received them.

Rather, consider current circumstances as an inflection point.

The fundraising industry has conditioned donors to expect a restricted major gift ask. That’s in large part because fundraisers have convinced themselves that a donor will only commit to a large or mega gift if they can see clear, tangible outcomes. At best, such thinking is misplaced. At worst, it leverages significant assumptions regarding donor motivations.

Remember, fundraising is a marriage of a donor’s values with the mission of an organization. It’s a fundraiser’s job to properly align all those factors and create a compelling reason to give.

But the compelling reason need not be new and novel each time. Focus on fundamentals: namely, the mission. Let the core mission, rather than side projects or assumptions about your supporters, drive investment.

Is it risky? No, it’s imperative.

Jennifer Harris, Ph.D., is Senior Vice President at Graham-Pelton Consulting. Contact her by email or by calling 1-800-608-7955.

COMING UP: In part two of the series, we will discuss the ways both nonprofits and donors alike can learn if they’re ready to embrace unrestricted philanthropy.

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