Marketing: March 2008 Archives

March 31, 2008

Nonprofit Finance Fraud: What's Behind It?

For any fundraiser, the idea that your hard-won grant and donation money might be eaten away by employee theft is, if not unthinkable, demoralizing at many levels. And, if discovered, it will make future fundraising a lot harder.

Dollar billBut if we're to believe a recent analysis in the Nonprofit and Voluntary Sector Quarterly (December 2007 issue), around 13% of the roughly $300 billion given to charity in 2006 was stolen by organization insiders. (I confess upfront, I didn't pay to read the actual report, but read an excellent analysis of it by Stephanie Strom in the March 29 issue of The New York Times).

My first reaction is disbelief -- which may be justified since, as Strom notes, they arrived at that figure by simply applying the same assumption to nonprofits as to government and for-profit organizations, namely that they lose 6% of revenue to fraud each year.

That's a pretty broad assumption. And I'd like to believe that nonprofit employees are "above" the rest, since most of them are working for a cause they believe in.

But the most disturbing part of the report may be the finding -- which does appear to have been nonprofit-specific -- that the typical thief was an employee, usually female, who earned less than $50,000 a year and had worked for the nonprofit at least three years. She wasn't going for million-dollar temptations, but took less than $40,000.

I'm projecting here, but doesn't that sound like someone who's frustrated by how little she's earning for a lot of hard work? Who perhaps doesn't even think of what she's doing as stealing, but just getting back a little of what she deserves?

If that's true, then this is a classic "no free lunch" illustration: Underpaying nonprofit employees will come back to hurt the group eventually. So my concluding pitch would be, in every grant proposal or other project budget, to try and give the hardworking employees a raise. Even a small amount can go a long way toward showing appreciation and preventing employee disgruntlement.

March 24, 2008

Direct Mail Fundraising: To Enclose or Not to Enclose?

I'm trying to get back to my self-appointed task of reading academic papers on fundraising so that you don't have to, and summarizing any of interest. So, here's the first, starting with the conclusions:

Those stickers, return address stamps, or other goodies you've been tucking into your direct mail enclosures? They might catch some people's eyes, but turn others off. And the colorful stories that we're all schooled to start off appeal letters with? They help only a little.

Now, for a few details.

The study was laid out in the Journal of Nonprofit & Public Sector Marketing's Fall 2007 edition (Volume 18), in an article called "Creating Effective Direct Mail Charitable Solicitations: The Effects of Enclosures and Different Appeals," by William D. Diamond and Easwar S. Iyer.

What the authors did was to send different versions of a wildlife-related appeal letters to different lists of donors. One list contained people who already donate to wildlife causes and another list contained people who donate to medical causes. Some letters started with a colorful vignette, and some included a sticker saying "Save the Buffalo."

Essentially, the sticker seems to have served as a clue to the readers about whether this was a cause they were interested in and should read any further. Many of the wildlife-donor types kept reading, while the medical-donor types tended to say, "Nope, not for me."

As for the story that opened some of the appeal letters, I wish we could have read it to judge for ourselves whether it should have raised the readers' interest significantly. But the authors' conclusion (which I'm paraphrasing hugely) seems pretty logical: That, for people already interested in a topic, hard information is also quite important, especially given that they're savvy consumers who've probably read a million of these stories.

There's just no getting around the fact that direct-mail recipients are, more and more, looking for an excuse to drop nonprofit appeal letters into the circular file. The study's authors also pulled together some telling statistics, namely that Americans receive around 14 billion direct-mail solicitations per year, and a substantial number of people receive over 1,000 solicitations per year. Gulp.

The bigger conclusion here seems to be that people are either going to donate to your cause or not, for reasons that have little to do with the appeal letter's contents. (Not a reason to do a bad letter, but nor is it a reason to sweat the small stuff.) I'm not ready to get on the "direct mail is dead" bandwagon -- it's obviously still a way to let donors know you're there, working hard -- but the stats also suggest that finding other ways to raise that awareness would be wise, too.