Help a Nonprofit Hit a Homerun: The Case for Unrestricted Donations

Heather used to display a baseball bat proudly in her office cubicle. She was hardly the sporting type, so I finally asked her about it.

She explained she’d been awarded the bat, along with a monetary bonus, by participating in a company program called “Homerun” that challenged back-office staff to demonstrate how a weakness in their department could lead to poor client service. Those who effectively proved the case could bring additional funds to their departments to shore up operations and, in so doing, improve the client experience.

It’s a trivial thing for me to remember some 20 years later, but I found the concept brilliant. The company, a gargantuan global conglomerate, was rewarding seemingly invisible employees in the bowels of the organization to demonstrate how they mattered to the overall mission of the company.

I thought about the baseball bat story when I heard a major nonprofit donor tell me, “I don’t give unrestricted funds. I want my donations to have impact and give directly to the mission. Don’t want my money wasted.” Unrestricted gifts, which do not specify a purpose, give the organization flexibility to pivot, directing funds where needed, be it programs, staffing or infrastructure. Restricted gifts, often in the form of an endowment, stipulate exactly how, when and for what a gift can be used. The term “unrestricted” may have a negative connotation to donors. It could suggest “uncontrolled” or “disorganized”, which is anything but in a well-run nonprofit. When donors disdain any thought of giving unrestricted gifts, they are essentially saying that while the mission is sound—inspiring even—they don’t trust leadership to make sound decisions to deliver the mission. For instance, there’s no question a food pantry relies on donations of food to survive. But like any institution—not-for-profit or for-profit—it needs staff, facilities, technology systems and devices, insurance, websites, marketing, and office supplies to name just a few mission delivery and administrative mechanisms to continue operations. In a crisis, it’s almost always these foundational and operational structures that are hardest hit.

“When donors disdain unrestricted gifts, they don’t trust nonprofit leadership to make sound decisions to deliver the mission.”

Nothing demands flexibility and pivoting more than a global crisis. How does one pay for critical staff to keep the mission alive, particularly when need has increased in unprecedented ways and volunteers are unavailable as they were under normal conditions? How does a nonprofit upgrade technology to deliver on the mission in a new virtual environment? These workforce and operational demands, often supported by unrestricted funds, have come into greater focus with many nonprofits facing an uncertain future. Nonprofits don’t have the luxury to reallocate restricted gifts, endowments and grants to relieve immediate crises without going through major hoops and difficult conversations to convince grantors and donors to relax restrictions, something they are very loathe to do.

So how does a nonprofit leader inspire passion in major donors to give unrestricted funds when the real need seems far removed from the front lines of the organization’s mission?

When nonprofit leaders can communicate how the organizational internal challenges tie directly to the mission and the community served, they create an opportunity to secure better donor engagement, stronger support, and a deeper understanding of the organization’s financial challenges. This could ultimately encourage bigger grants and gifts to allow the organization to be more financially resilient in the face of adversity.

“Communicating how internal challenges tie directly to the mission, encourages better donor engagement and stronger support.”

Achieving this demands a few conditions to work. First, the organization needs to adopt and accept a culture of transparency, in which staff are encouraged to voice challenges and leadership to demonstrate the willingness to act on those challenges—similar to “Homerun”. Secondly, the organization needs to understand what affects its ability to be financially resilient in the face of adversity.

Every nonprofit is unique in how it achieves financial resilience driven by the organization's mission, procedures and, to some extent, culture. Yet there are also many resilience factors nonprofits have in common, as we’ve found by conducting in-depth workshops with a wide array of nonprofits, large and small, from education to healthcare to faith-based. This work identified the following five Resilience Risk Factors.

Problems, errors, miscalculations, or inaccuracies in these factors are consistently cited by nonprofit leaders as having a direct impact on the organization’s ability to fulfill the mission. Nonprofit leaders that can effectively communicate to major donors, grantors and other stakeholders exactly how the five Resilience Risk Factors directly affect community impact can achieve the following:

  1. Show skeptical prospective donors they would not be throwing good money after bad
  2. Convince the board to release funds to support operational needs
  3. Persuade donors to give unrestricted funds beyond specific program gifts.

Here are some examples of connecting infrastructure risks to community impact:

  • Incompatible technology could limit how effectively a grassroots nonprofit reaches the community while in the field, working directly with those in need.
  • Antiquated systems could expose an organization to security breaches leading to loss of donor or client personal information ultimately bringing about community distrust.
  • Understaffing leads to human error and poor service further reducing mission impact.

All this may seem obvious, but we’ve found how infrequently leaders make the effort to connect how basic operational policies and procedures make a difference to the mission. This is clearly not only the case in the nonprofit world, but also the case in the for-profit world, where companies feel the need to reward employees and departments with budgets, bonuses, and bats for those determined to draw the connection.

In these demanding economic times, major donors and grantors married to the belief that gifts restricted to specific programs make the greatest impact to the mission should think again. Unrestricted gifts, which often fund nonprofits’ infrastructure and operational needs, are equally meaningful to the mission and are sometimes more likely to hit a homerun than direct program funding. Until donors get this, nonprofit leaders must show them the way.