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.
You touch on the bigger issue is the failure of lay trustees to appoint chief executives with sufficient commercial experience to realise that they need something more than a fundraising director to drive revenue and indeed something more than a web designer to drive tbd digitalisation of the charity. Fun times!
this is just excellent -
Thank you for this it is really helpful and has helped me clarify something that I have been pondering about the skills mix in my top team. We are a medium sized local charity with a Head of Income Gen who leads on donors, fundraising and comms. We are lucky that we do have a diverse range of income sources, contracts, sla's, charge and IG but our Head of IG does not work on contracts and tenders. As the CEO, with a background in commissioning I lead on this. However going forward I need to train my HofIG in this area. Very helpful blog, thank you so much!
Spot on Joe.
I chair a disability charity and as soon as we were locked-down last March our normal income streams dropped to zero. We approached the challenge in the same way we would have done if we were running a small business that suddenly lost its biggest customers. We understood and challenged our assumptions about our market, re-evaluated what we had (our full range of assets) and re-positioned ourselves to give us the best chance of success and learned new skills. There's never a guarantee, but simply throwing up our arms and claiming it wasn't fair was not an option.
Personally I have always believed that every Fundraising Director should be an Income Generation Director, and I'm sure that many already are.
Thanks for your blog
Thanks Joe, this is exactly the structure that Javed Khan introduced at Barnardo's, my boss Louise Parkes was the boss of retail, fundraising and grant led fundraising across the organisation. It seemed to make much more sense and Barnardo's have since started to give out grants to other smaller charities working with children and young people.
The nail has been firmly hit on the head. My experience has shown me that for the most part, too many of the trustees are happy just to keep chasing ever diminishing funding bodies with ever diminishing funds to go round, and only think in terms oflocal fund raising events. In my opinion, the raising of funds must be wider and more pofessional.
Thank you so much for this article. This has been an issue for some time in the cultural and heritage sector, where there can be diverging and sometimes conflicting objectives and strategy between philanthopy and commercial activity such as retail, catering, event hire and even membership. I do fundraising audits for museums that are in fact income audits and strategies.
Some of us have been doing this for 30 years! When I started the faith sector was seen as having one main source of income - giving from members. Whilst this is important (and remains so) it has been possible to broaden this to trading, grants, additional use of buildings, contracts and legacies. Investment income was not something that I looked at - return on investment calculations were crucial in project planning.
Now, almost safely retired, I am delighted that some one is thinking the same was as I did.
I like the thinking here but think it may be too narrow. It works from the assumption that the only vital resource a charity needs to fulfil it’s mission is income (so it can fund services, pay staff etc.). This is true to an extent but, as Jim Collins points out in his monograph, “Good To Great in the Social Sectors”, charities have many more resources to draw on that income. So perhaps the concept needs broadening to a Resource Director, overseeing earned income, fundraiser income, contract income, and volunteer support. That would provide a more integrated approach to obtaining and deploying a breadth or resources in pursuit of an organisation’s mission rather than obsessing about money first and only considering other resources as an afterthought.
Makes perfect sense, having a broader view of where Charity's income is generated is much more strategic. It will be interesting to see how this role develops over time, I do agree the time is now to rethink the role of Fundraising and discuss the opportunity for Income Generation.
Firstly, I think this is spot on and whilst some will find it a 'challenging' view, now is not the time to look inward, it's time to look outward, to the future...whatever that is! I'm amazed this hasn't attracted more comments here, or on LinkedIn.
Fundraising can have quite a narrow definition, and an even narrower appreciation among those who do not fully understand the function, or the science behind it.
In reality, Fundraising Directors are part Sales Director, part Marketing Director, part Commercial Director, part COO...the list could go on depending on the day of the week and the person you're talking to.
Fundraising Directors, and fundraising teams, have broad shoulders and thick skins. They also have a wide variety of skills and experience and 'income generation' is the name of the game, no matter its voluntary, contractual or publicly funded.
I've said for a while that 'fundraising' is often minimalised and marginalised by the warm, fuzzy way we talk about it, and its practitioners. Why is everyone 'lovely', 'wonderful' and 'fantastic'? Why are they not 'brilliant', 'entrepreneurial', 'successful' and 'ambitious'?
Time to turn the dial a bit...and 'income generation' gets my vote. Thanks for the post.
I find it says a lot abou the author's perspective that they conflate COVID-19 (something no-one chose) with the Olive Cooke affair and with GDPR, both of which are examples of where widespread bad practice in the sector caused issues (and hence were things the sector chose to lose out to).
This is a spot on blog and one that highlights pivoting away from traditional to a more business strategic thought space. Thank you