To Sue or Not to Sue Over Unpaid Pledges?

Sometimes, nonprofit organizations sue philanthropists over unpaid pledges. This was recently the case with the Kansas City Art Institute. When a charity pursues this type of legal action, it sends shockwaves throughout the nonprofit and philanthropic sectors.

I do believe there are times when a nonprofit can and should sue a donor. However, this should only be done as an absolute last resort. The three instances when a lawsuit might be acceptable are:

1. The donor dies with an outstanding pledge and an heir challenges the will. In that case, the nonprofit might need to sue the estate to establish its claim and collect.

2. The nonprofit incurs real expense based on the donor’s commitment. For example, based on a pledge agreement, the nonprofit breaks-ground on a new building. The nonprofit might need to sue simply to survive.

3. The donor is about to or has entered bankruptcy. Suing the donor would be a way for the nonprofit to establish its claim. (By the way, I suspect that this fear might be what may have triggered the Art Institute case.)

In any case, suing a donor should only be done after careful consideration and only when all other options have been exhausted.

To sue or not sue over unpaid pledges? That is the question. The answer, offered by Brian M. Sagrestano, JD, CFRE and Robert E. Wahlers, MS, CFRE, is: Avoid the problem in the first place!

Brian and Robert are friends of mine. They are both seasoned, wise development professionals who have served on the national board of the Partnership for Philanthropic Planning. I’m pleased that they have offered to share some of their wisdom below as they introduce us to the concept of “concierge stewardship.”

Brian and Robert both generously provided insights and material for my book, Donor-Centered Planned Gift Marketing, for which I won the AFP-Skystone Partners Prize for Research in Fundraising and Philanthropy.

Now, Brian and Robert have written their own book, Philanthropic Planning Companion: The Fundraisers’ and Professional Advisors’ Guide to Charitable Gift Planning, and I’m honored to have been included in their comprehensive volume. The book is part of the AFP/Wiley Fund Development Series.

The official description of the book notes, “For fundraisers and professional advisors alike, The Philanthropic Planning Companion is the one-stop resource you’ll keep by your side to help your donors/clients meet their charitable and personal planning objectives.”

So, do you want to avoid a nightmare at your organization? If so, read on:

 

The Kansas City Art Institute recently sued Larry and Kristina Dodge for failure to pay $4 million on a $5 million pledge that was to be used to pay for construction of a new building, according to The Kansas City Star.

When the Dodges attempted to defend themselves (rather than hire an attorney they indicated that they could not afford), they made procedural errors and a default judgment was entered against them for the full $4 million due on the pledge. According to The Star, the Dodges made three payments on their pledge before their financial situation was impacted by the Great Recession, limiting their ability to fulfill the commitment.

In the article, Larry Dodge is quoted, indicating that he and his wife were in negotiation with the Institute to come up with a payment plan when it unexpectedly filed suit to collect on the pledge.

Regardless of the outcome, the reputations of both the Dodges and the Institute are forever harmed. Prospective donors will think twice before making a major commitment to a charity that would sue them to collect on a pledge. Meantime, the Dodges reputation, despite their many years of generous philanthropy, will be forever tarnished.

We cannot judge the merits of the Art Institute’s action or the ability of the Dodges to pay on their pledge, as we are not privy to all of the facts of the case. However, it raises a much larger issue about charities and pledges.

Avoid These Mistakes in Your Next Fundraising Ad

I recently heard from my friend Ligia Peña, CFRE, Senior Development Advisor at Canada World Youth in Montreal, Canada and Fundraising Coach at Diversa Consultants. She Tweeted me a snapshot of a fundraising advertisement that appeared in her alumni magazine. Her message read:

#PlannedGiving marketing #fail from my alma mater @concordia Leaves me cold & I know what PG is!! cc: @MLInnovations”

Before I even peeked at the photo, I knew I was in for a treat. First, Ligia used not one, but two, exclamation marks. Second, she made a point of copying me so that I’d be sure to see the message. She wouldn’t do that without a good reason. Third, she struck an unusual, harsh tone in her Tweet. Fourth, I know she’s a sharp development professional with interesting insights.

When I opened the photo (presented at the right), I immediately understood Ligia’s reaction to the ad. It is a wonderful example of how not to write and design an ad.

For starters, the headline shouts “planned giving” with the word “giving” in boldface. There’s a good chance that readers won’t know what the term means. As I reference in my book, Donor-Centered Planned Gift Marketing, The Stelter Company commissioned a survey that found that only 37 percent of Americans over the age of 30 are familiar with the term; I doubt that the stat is much different in Canada. Even if readers don’t know what “planned giving” means, they certainly know about “giving.” Why would anyone read an ad that they know is going to ask them to give? Rather than drawing in the reader, the headline rebuffs them.

I was going to write a critique myself until I learned that Ligia intended to so. I couldn’t wait to read her analysis. So, I pestered her for it. While she plans to post her critique to her own blog site, she’s kindly given me permission to share it with you now:

 

Last week, I received my alma mater’s summer magazine filled with interesting articles on recent studies conducted by students and professors, news from other alumni and what the university is planning for Homecoming. Ah, happy memories of Homecoming!

Until I get to page 17, and what do I see? A full page advertisement on planned giving. That’s expected. After all, this is the alumni magazine, and the advancement department should raise awareness among alumni on ways we can contribute to the future of the university.

However, if you’re a fundraising professional, you can see how this advertisement falls short on many fronts. 

According to Frank Minton and Lorna Somers, Canada’s foremost experts on the matter and authors of Planned Giving for Canadians, using a current publication is an ideal way to promote planned giving. To be successful they recommend using a “donor testimonial that includes interesting details about the donor’s background, relationship to the institution and reasons for making the gift, describe the gift vehicle and the benefits to both the donor and the charity” (p. 380).

While this advertisement uses a donor testimonial, it has left me cold for various reasons:

4 Simple Steps to Raising All the Money Your Nonprofit Needs

Sandy Rees, CFRE is a nonprofit fundraising coach who has a particular knack for simplifying complex concepts in a helpful way. She’s distilled her ideas into a book: Get Fully Funded: How to Raise the Money of Your Dreams.

Her book breaks the fundraising process into a number of steps that many fundraising professionals are likely to find familiar while the territory might be new for chief executives and board members. But, not satisfied with providing just a review of the fundamentals, Sandy does two valuable things:

1. She includes a step that is often taken for granted, and thus overlooked, by many authors: preparation. In this section, she looks at things like how to: make fundraising a priority, manage time, get organized, be ethical, and build an infrastructure that will allow fundraisers to be successful.

2. For each step of the process, Sandy drills down into the subject to get readers to address issues and ideas they may never have considered.

I appreciate that Sandy has chosen to share some of her insights here. Those new to fundraising will certainly appreciate Sandy’s accessible approach. Readers with fundraising experience will find that many, if not all, of the overarching ideas in the article will be familiar. But, from time-to-time, it behooves us all to not only review the fundamentals, but think of them more deeply. As we gain experience throughout our careers, we’ll be able to gain new insights as we revisit the basics.

Want to raise the “money of your dreams”? Read on:

 

In the world of nonprofits, you can’t do much in the way of service delivery or mission fulfillment without money.

For fundraising staff, that means it is all about raising money. Sometimes, it can be a big challenge. I’ve spent years raising money for all kinds of nonprofit organizations, and I know what works and what doesn’t. One thing I know for sure is that we must aim high.

I learned early on in my career to shoot for the stars. This came from my unwillingness to settle. I saw so many people waiting to be helped at the rescue mission and at the food bank. I knew that if I raised more money, we could help more of them. So, I started working toward fully funding my organization. I wanted to do everything in my power to make sure that people had a warm bed and a hot meal. 

I call it “Getting Fully Funded.” It means that your nonprofit’s staff have everything they need to deliver service. It means that all the bills are paid and you have a rainy day fund established. You have lots of happy and engaged donors. You have diversified revenue streams and fundraising is fun. It’s a wonderful place to be!

Before you can Get Fully Funded, there are a few things you need to have in place. You must have:

10 Essential Tips to Protect Children from Real Monsters

There are many ugly problems in the world. For many of those troubles, we’re powerless to do much, if anything, to change the situation. Sadly, monsters are very real. 

I want to bring a heinous problem to your attention. But, fear not. I will also show you some very simple things that you can actually do about it. Oh, and it won’t cost you a cent.

Child sexual abuse is a nightmare affecting one in four girls and one in six boys in the United States, though it is a worldwide problem. It is a problem that knows no geographic, ethnic, racial, religious, or economic boundaries.

Fortunately, you can actually save a child, perhaps your own, from ever having to experience this terrible crime. Here’s what you can do:

First, read “The 10 Tips for Protecting the Children You Love from Sexual Abuse.”

Second, make this my most read blog post ever by sharing the URL with friends, family members, and colleagues. Post the URL on Facebook, Tweet it, email it, post it on your blog. The more people that read “The 10 Tips,” the more children that you and I will be able to spare.

Two simple things is all I ask of you: 1) continue reading, and 2) spread the word.

The following was written by the terrific staff at the Philadelphia Children’s Alliance, an organization on whose board I serve. The article first appeared in Parents Express Magazine (June 2009). With permission, I’m reprinting it here:

 

As parents, we’d like to think that there are no dangers facing children in our society today. But as staff members of the Philadelphia Children’s Alliance, we can’t ignore the fact that a staggering proportion of American children are affected by sexual abuse. Research from the Centers for Disease Control shows that by their eighteenth birthdays, one in four girls and one in six boys will have been sexually abused. Furthermore, children who have been sexually abused often suffer long-term consequences, including increased risk for substance abuse, eating disorders, behavioral problems, prostitution, depression, and physical health issues. The phenomenon is quietly enormous, and although it may be difficult to safeguard children everywhere, it is important to know that parents do have power to protect their children.

In celebration of Child Abuse Awareness Month in April, here are some suggested ways to decrease the risk of sexual abuse occurring to your loved ones:

1. Make your home a “No Secrets Zone”

Kids are naturally intrigued by secrets and oftentimes parents inadvertently ask them to keep secrets for seemingly harmless reasons. As one Forensic Interviewer explains, “When I allow my niece to eat a huge candy bar right before dinner, I am always tempted to tell her to make it ‘our’ secret.” The problem with this—aside from massive sugar shock and possible wrath from her sister-in-law—is that secrets are also the fuel that keeps sexual abuse going. Perpetrators use secrets to keep kids silent and to continue the abuse. Make sure that your child knows that secrets are never okay and that no one should ask them to keep a secret. It can be difficult to explain, but teach your child the difference between a secret and a surprise. Secrets are something you are never supposed to tell and can make you feel bad; surprises, like birthday gifts, are good and can be revealed at a certain time.

2. Respect your child’s personal boundaries

When you arrive at Grandma and Grandpa’s house for a holiday and they run to give your children kisses, inevitably, kids at a certain age will protest. Their “yucks!” are then followed by our insistent prompts to “Go ahead and give Grandpa a kiss.” You might be trying to avoid hurt feelings and to teach respect, but children must be able to show love and affection in ways that feel comfortable to them. Do not force kids to give hugs or kisses if they don’t want to. When you force unwanted physical contact, you send kids the message that adults do not have to respect their physical boundaries and you leave them vulnerable to abusive situations. Listen when a child says “no.” There are other ways to show affection and respect—a high five, a handshake, anything—that your child may find more appealing. 

3. Teach kids the proper names for body parts

When you’re in the middle of the supermarket and your daughter starts screaming, “Mommy, my vagina hurts,” it might seem like a good idea to come up with a cute and discrete code word for that body part. The list of creative nicknames we’ve heard over the years goes on and on: “peach,” “pocketbook,” “princess,” etc. Yes, these names might spare you from public embarrassment, but what if your child is being sexually abused and tells her teacher that her uncle touched her “cookie”? It suddenly becomes very hard for that teacher to discern just how serious the problem is. By teaching children the correct names for their body parts—especially their genitalia—you enable them to communicate more effectively with others about their bodies and any contact that they do not like. We know it can feel uncomfortable to constantly use the words penis and vagina, but it would feel infinitely worse to know that your child was trying to speak out to stop abuse and no one understood her. 

4. Monitor “one-on-one” situations

One-on-one situations with an adult leave kids at risk for abuse. For working parents reliant on childcare or parents that are desperate for a revitalizing date night, this can be especially tricky to negotiate. It’s not realistic to say that your children should never be alone with a babysitter or another adult, but when they are, whenever possible, make sure that they can be readily observed by others. Keep blinds open in the house, doors to rooms open, and try to check in at irregular intervals to give potential perpetrators the message that you and others are watching.

How NOT to Run a Capital Campaign

From time-to-time, I will invite an outstanding, published book author to write a guest post. If you’d like to learn about how to be a guest blogger, click on the “Authors” tab above.

This week, I have invited Linda Lysakowski, ACFRE, author of Capital Campaigns: Everything You NEED to Know. Linda is a friend, and I have joked with her that she is the Stephen King of the fundraising world. I tease her about this, not because she writes horror stories, but because she is nearly as prolific as King. She has at least eight titles to her name!

I know, from personal experience, that writing a book requires a great deal of time and effort. Linda has long been willing to do what it takes to share her wisdom. Her books are always practical, accessible, and full of useful tips culled from her decades of experience.

Capital Campaigns is her latest book. The official description of her book says, “Do you work for or serve on the board of a nonprofit that is thinking about or ready to launch a capital campaign? Capital Campaigns: Everything You NEED to Know will equip you to determine your organization’s readiness for a campaign; help you decide if and when you need a planning study; show you how to allocate your human and financial resources effectively; guide you in creating a compelling case statement; provide you with the tools to evaluate your chances for success; give you how-to advice to plan every aspect of your campaign; and put at your fingertips ample examples of sample forms and charts.” Like I said, Linda always offers practical advice in her books.

For her article here, I played on my Stephen King joke and asked Linda to share some capital campaign horror stories and to let us know what we should NOT do in our capital campaigns. Here’s a chance to learn from the mistakes of others:

 

I’m an eternal optimist. So, I generally focus on the best ways to do things. But, for this article, I decided I would look at capital campaigns from a different perspective. I thought about some of the campaign mistakes I’ve seen organizations make over the years and realized I had, unfortunately, a lot of negative experiences from which I’ve learned. As I share some of the mistakes I’ve encountered, I hope you will learn from them, too. So, here is my list of things you should not do in a capital campaign:

Don’t underestimate the value of volunteer leadership in your campaign. If you asked me to list the most successful campaigns I’ve been involved with to the least successful and then asked me to list the best volunteer campaign leaders to the worst, guess what? The list would be just about identical. In other words, the campaigns that have the best volunteer leaders are the most successful ones.

I’ll share another story with you that proves my point in a positive way. Another organization sought out a top community leader to serve as honorary chair of its campaign. Although this community leader did not have a real strong tie to the organization, he was very persuasive in making the case. The “honorary chair” not only agreed to serve, but attended and led every meeting, made a significant gift to the campaign, and his leadership was enough to convince the presidents of four local banks and other top community leaders to get involved. This campaign went over goal in the time allotted.

3 Reasons Why You Don’t Need a Development Plan

From time-to-time, I will invite an outstanding, published book author to write a guest post. If you’d like to learn about how to be a guest blogger, click on the “Authors” tab above. 

This week, I have invited Amy M. Eisenstein, MPA, CFRE, author of 50 Asks in 50 Weeks, to share her thoughts with us about the value of planning. In addition to being an author, Eisenstein is a fundraising consultant for local and national nonprofit organizations; her firm is Tri-Point Fundraising. In her post, she looks at when planning is not necessary and, when it is necessary, just how easy it is to write one. 

As the official description of her book says, Eisenstein helps readers “Raise more money; create a basic development plan; identify new prospects; ask for gifts more frequently; review the basics of fundraising; work with your board on fundraising; hire your first development staff member; and work as a cohesive development team with your executive director, development staff members, and board members…. 50 Asks in 50 Weeks is a development planning tool that focuses on frequency of asking, but also the importance of having a diversified funding base, as well as making sure you are fundraising as efficiently and effectively as possible.”

Whether you’re new to development or an experienced veteran, I think you’ll like Eisenstein’s frank, simple, no-nonsense, common-sense view of development planning:

 

Not all nonprofit organizations need a development plan. You may be one of them. Here are three reasons you may not need to write a development plan:

1. Your organization does not need to raise money because it has an adequate, sustainable revenue stream that is either earned or unearned.
2. Your organization comfortably raises enough money every year without a development plan.
3. Your organization is closing its doors.

If you happen to work for an organization that does not fall into one of those three categories, and most development professionals do, then you need a development plan.

A development plan is beneficial for all organizations whether yours is a large institution with dozens of fundraising professionals or a small shop where you wear all of the advancement hats. A sound development plan will benefit you in a number of ways:

1. It will help you, your colleagues, and superiors better understand what will be necessary to achieve your goals in the coming year.
2. It will allow you to clearly prioritize your activities.
3. It will make it easier to justify the resources you will need to execute the plan.
4. It will ensure that you stay focused on key functions such as getting out and asking for gifts rather than being constantly distracted by the daily minutia.

5 Things Never to Do in Your Phone Fundraising Calls

With this blog post, I’m launching a new, regular feature at Michael Rosen Says. Periodically, I’ll invite an outstanding, published book author to write a guest post. If you’re an author who would like to be considered, please contact me directly.

For the first author-guest-post, I invited Stephen F. Schatz, CFRE, author of Effective Telephone Fundraising: The Ultimate Guide to Raising More Money, the definitive book about how to make a successful appeal using the phone. Steve and I worked together as telephone fundraising pioneers. In his book, for which I wrote the Foreword, he reveals most of our proven techniques. Step-by-step, his book shows the right way, the most effective way to do telephone fundraising. As the back-cover says, “Despite the advent of sophisticated fundraising methods via the Internet, social media, and other online platforms, the bottom-line truth is: good old-fashioned telephone fundraising still works, bringing in over one billion dollars annually from generous Americans. It’s a wellspring of untapped funds your nonprofit could be reaping. Savvy, straightforward, and humorous, Effective Telephone Fundraising: The Ultimate Guide to Raising More Money shows you how to secure more donors, raise more money, and build donor loyalty.”

For this post, Steve looks at things from a different perspective and shares what he believes are the things fundraisers should never do in their phone fundraising programs:

.

When my wife heard that I was writing an article about the DON’Ts of telephone fundraising for Michael’s blog, Michael Rosen Says, her helpful suggestion for #1 was “Don’t pick up the phone — it might be a telemarketer!”

I had to explain the slant was to help telephone fundraisers, not to hurt them. In my recent book, Effective Telephone Fundraising, I suggest plenty of “DOs” — things you can do to make effective telephone fundraising calls. But here for your reading pleasure are some of the DON’Ts!

1) DON’T NEGELECT TO ASK PERMISSION TO SPEAK

In the cyber fundraising world, they call this “Opt In” or “Opt Out.” In telephone fundraising, it’s simply asking the prospect to speak with you. A range of nuance is available to the fundraiser from the interrogative “Is now a good time?” to the declarative “I’d like to speak with you a few moments about XYZ Charity, if that’s okay…” giving the prospect the opportunity to opt out. It’s simple courtesy.

The telephone is an interruptive medium. Your call is either coming into the prospect’s home, office, even the automobile. You are interrupting their time, mind and focus. Barging through by telephone is like a door–to-door brush salesman ringing your bell, and the moment you open the door, sticking his foot in the crack and proceeding to make a pitch — perhaps even waving his latest dandy toilet brush in your face — saying, “It’ll make your bowl the tidiest and cleanest in town!” Rude!

What if the prospect chooses “opt out”? You can try to arrange a more convenient time he or she will “opt in.” If you can’t? Chances are you wouldn’t receive a gift anyway, even by sticking your foot in the door!

2) DON’T FAIL TO ASK FOR A SPECIFIC AMOUNT

This is one of the most difficult things for new fundraisers to overcome — a fear to steel one’s self to make a proposal with a dollar tag attached. The maxim “ask and you shall receive” is indeed apt.

How successful would a grants writer be in writing a proposal to a foundation that ended, “Well, anything your foundation can spare this year, we’ll appreciate!” Or, thinking in another, completely different vein, a young man asking a girl out for a date, shyly looking down as he shuffles his feet, “Uh, Shirley, maybe you’d like to go out with me sometime?” — as opposed to the more direct, “Shirley, there’s a great new pizza shop on Market Street with the best pizza in town. How would you like to come with me next Tuesday?”

Allow the prospect to focus on a number, a specific dollar proposal. If the prospect rejects that, it opens the door to a counterproposal, a lower amount. G = f(A) is an indelible formula for telephone fundraising, and for philanthropy in general: the number of gifts you receive is a direct function of the number of asks you make.