Many charities have seen their fundraising income plunge during the pandemic, especially those dependent on events, community activities, or anything to do with cash. The effects/stress on services and staff have been dramatic, and sadly, many charities have made many people redundant (or will do when furlough ends).
Meanwhile, charities that are dependent on government income, charging their beneficiaries, or total return investment income have probably hardly batted an eyelid. The source of income an organisation is dependent on will have a big impact on its success during the pandemic.
The challenge is that many charities have a structure which has left them vulnerable and inflexible to change - it’s called having a fundraising director. Fundraising directors are (very rarely) the person responsible for income maximisation in its broadest sense. There is no one person to co-ordinate and maximise income whatever the source: whether its earned income, retail, beneficiary income, investment income, government income, or fundraising income.
Back in the 1960s, Theodore Levitt wrote a famous article which said the American railroads suffered at the beginning of the 20th century and began a decades long decline because they never thought of themselves as being in the transport business, just the railroad business. They did not take action to mitigate the rise of the car. They did not ask themselves the question ‘what business are we in?’
The Covid pandemic has left charity structures with the same problem. Charity CEOs have thought what they needed on their senior leadership team was a fundraising director, when in fact the pandemic has shown what they needed was an income-generation director. Somebody who could promote and develop all the different sources of income. Most fundraising directors will not have the mandate, experience, or skills to look at building investment income, winning government contracts, or the pros and cons of increasing beneficiary income (see our recent report on this). In most organisations, this leaves income generation strategies fragmented and incoherent.
When you think about it, it is atypical to have a person on the top team responsible for just part of a discipline. Communications directors would normally have responsibility for all the organisation’s communications, even if they have specialists in different divisions. The same is true for finance and HR directors, they cover the whole organisation. Imagine a finance director saying they had no idea what was going on with the finances of a particular part of an organisation. But that is exactly what fundraising directors would typically have to do if asked about the strategy for income generation in anywhere but fundraising.
The Covid pandemic has shown how flat-footed that structure can be when fundraising is hit hard. Of course, the pandemic did not start the assault on fundraising, it merely followed up the body blows of GDPR and before that, the Olive Cooke affair. So now, just when charities need a top director who can make things happen to shift income into different areas, there isn’t anybody. The director of services is left looking at winning contracts or charging beneficiaries. The finance director will probably just plonk reserves into the welcoming hands of an investment manager, rather than ask how they could stimulate the greatest income overall for the organisation.
How do we get out of this self-inflicted structural hole?
First, we need to learn from those organisations who have a more flexible and resilient structure for income generation. How have those organisations with mixed sources of income coped with balancing and developing the different sources of income? We need to encourage sector bodies to update their mandates – the Institute of Income Generation rather than the Institute of Fundraising, or the Charity Finance and Income Generation group at its logical conclusion.
We need to develop a new breed of charity professionals who can straddle the different sources of income and have experience across a breadth of the income sources. No longer should a successful fundraising director have to just think about ‘taking on communications’ but they should also be able to look for experience in the other non-fundraising sources of income. The good news is that fundraising directors, being smart entrepreneurial people, are ideally placed to make this kind of shift. The sector and their organisations now need to encourage that type of career development if we are to see income maximised for the sector, especially as fundraising continues its (probably irreversible) decline.