One of the best ways to evaluate the efficiency and effectiveness of a nonprofit is in terms of its net momentum. And, there’s no better way to illustrate that principle than with a drag racer — specifically the 1962 metallic blue Chevy Impala Super Sport that I bought as a junior in high school. My dad and I rebuilt the 327 cubic inch balanced and blueprinted engine. It had a Hurst competition clutch, air shocks, and white undercoating. We had to cut out part of the frame to accommodate ten-inch wide L60 high-performance tires.
The car was street legal (barely), but what I did with it definitely was not. On Friday and Saturday nights, 30 to 40 drivers became organized trespassers on old coal mine strips. We marked off a quarter-mile and set up our own homemade starting tree made out of a series of switches and floodlights painted red, yellow, and green.
All that mattered to the weekend drag racers was speed and acceleration. Efficiency and fuel economy was the least of our concerns. I used more fuel in a few quarter-mile runs than I did driving around town all week.
Just like my Chevy, it expended far more energy than a similar car (or organization) with only a little bit of momentum at the starting line.
My ‘62 Chevy is a perfect example of why organizational endowments are so important. If you do the math, you’ll discover that propelling a 3,000-pound car down a quarter-mile track in five seconds from a dead stop requires quite a lot of energy (i.e. gasoline). You can also discover that the same car traveling the same distance in the same amount of time but with only a five mile per hour rolling start requires one-third less energy. So, momentum at the starting line has a huge impact on both fuel and efficiency.
FOR-PROFIT / NONPROFIT SCENARIOS
Suppose you had a business that you had to start from scratch each year. Facilities, staff, intellectual capital, relationships, trademarks, logos, patents, etc… all to be recreated as a startup every calendar year. The business, of course, could never make progress or profits because it carried no momentum into the next year. And, just like my Chevy, it expended far more energy than a similar car (or organization) with only a little bit of momentum at the starting line.
Now, imagine an institution with many of its key positions funded as endowed chairs. That is, in effect, the rolling start an endowment creates.
APPLICATION TO SYSTEMS
One of my associates, Walt Walker, created a method for conducting a qualitative analysis of any kind of system. Each element and function of an organization, objective, or business relationship is assigned a score based on positive or negative momentum. In other words, Walt identifies the thrust or drag of each function in the effort to overcome organizational friction or gravity. Often, the results can be like an epiphany to business or organizational leaders. The process helps organizations understand why various tasks can be very easy for one organization and very hard for a similar organization. For the purpose of this article, the question is: Why is fundraising so easy for some organizations and so difficult for others? The comparison below provides one possible explanation.
THE TALE OF TWO HOSPITALS
Two competing healthcare institutions are similar in size, have almost identical mission statements, and are located only a few miles apart. However, they have very different long-term funding strategies. The slightly larger hospital has an endowment of a few million dollars, while the smaller hospital — well over $125 million.
The smaller, well-endowed hospital, like all hospitals today, faces many significant challenges. And, they do some things better than others. What they seem to do very well, and with little effort, is raise money. Each year around $8 million in unrestricted donations seems to just wash in over the transom. That may be overstating the effectiveness of the development staff a bit, but the relative ease of raising money is certainly one of the positive elements contributing to their net organizational momentum.
The larger and less endowed hospital has plenty of events and campaigns, but by comparison the net dollars raised are far less significant. Over the years, they’ve had excellent people working for them but also have a high rate of turnover at all levels.
The momentum and sustainability of their $125+ million endowment had a lot to do with that recent ($35 million) bequest.
Organizational momentum is built up over time and very intentionally. It does not happen by accident. The $125+ million dollar endowment began 76 years ago with a single leadership decision to hire a planned giving officer. In the first few years that decision probably resulted in a net financial loss, but they continued through the decades with the commitment to investing in momentum-generating gifts. Apparently, the leadership at the larger hospital never made any long-term commitment to building an endowment, and still don’t consider it to be a high priority. Their development staff is like a group of cyclists struggling to peddle up a steep hill. Whatever momentum they create by their collective effort quickly dissipates when they stop peddling. The fundraisers at the well-endowed hospital are peddling hard too, but more like cyclists traveling on a downhill grade.
A college president once told me, “Eddie, it’s a lot easier to raise money when you don’t have to.” I didn’t understand it that well back then, but I sure do now. Money tends to attract more money. Thompson & Associates just finished working with a donor whose estate plan created a $39 million bequest to that already well-endowed hospital.
The momentum and sustainability of their $125+ million endowment had a lot to do with that recent bequest. Strategic donors understand they cannot control their social investments after their death and that they need to make decisions about bequests with a very long ranged perspective. They also know that without an endowment, a few lean years can put an organization, along with their investment, in jeopardy. Consequently, good leadership and financial sustainability created by an endowment make those end-of-life investments far less risky and far more likely.
The overall value of any single gift can be viewed in terms of the momentum it creates. Tactical gifts that meet an immediate need can also create momentum by their precise targeting, i.e. the right kind of gift, at the right time, to the right cause. Gifts to an endowment make a strategic impact because they enable the organization to carry momentum into the start of each year. The best time to have made a commitment to building an endowment was 76 years ago. The second best time is now.
For more on fundraising momentum, go to
Eddie Thompson, Ed.D.
Copyright 2014, R. Edward Thompson