chapter 4: major donors Flashcards
historical importance
- Philanthropists have traditionally played a key role in supporting arts institutions, particularly in the United States.
- European shift: With declining public subsidies, European arts institutions are increasingly looking at philanthropists and collectors for support, drawing inspiration from the British and American funding models.
definition
- Major donors: Individuals making significant financial or in-kind contributions (e.g., artworks).
- Motivations: Social recognition, desire to support cultural ideals, or naming opportunities (e.g., buildings named after donors).
Benefits of Major Donors:
- Long-term financial commitments: provide a dependable source of annual financing
- Flexibility: They can make their donations in some instances without the constraint of stringent giving guidelines or committee decisions.
- Networks: can be a crucial link to other funding sources because many of them have broad connections in the corporate, political and social spheres.
Negative effects
: in terms of internal governance. They can exert excessive pressure on decision-making and undermine strategic objectives, especially those on the board.
Donor Reliance:
- Arts institutions must balance the 80/20 rule (where 20% of donors contribute 80% of funds) to avoid over-reliance on a small group of benefactors.
- However, balance should be achieved: too small number of major supporters risk financial fragility when even only one stops future support. Many orgs have put themselves at risk by relying overwhelmingly on the generosity of a small group
- In the US, it’s common for 10% of donors to provide 90% of philanthropic funds
- Fundraisers should take polarization of donations into account when planning budgets and gift pyramids: in most successful fundraising initiatives, the largest two gifts represent 10-15% of the goal, while the top ten gifts are equivalent to 40% and the top 100 gifts are 90% of the amount raised.
- Donations are positively influenced by incentives (tax benefits).
Incentives:
- Major donations positively influenced by incentives (Ex: tax benefits)
- Major donors = wealthy people owning range of different assets (cash, real estate, retirement assets, insurance and securities)
o Hesitant about parting with possessions and protective of them => expect return on their gift-giving investment
o Can seek maximum amount of celebrity OR anonymous gift
o Often support variety of not-for-profits
- Major donors profile:
o Historically: over 50 years old, male, married, conservative, religious, on the verge of retirement, with history of involvement & giving, and possess mix of assets (family foundation, business or inherited wealth)
o Corporate executive, affluent widow, high- net self-made person and those with inherited money are typical major arts donors
o 2022: wider variety of backgrounds
Scholars have segmented major philanthropists into four different generational clusters:
Idealists: sets new objectives, seeks innovation and advancement, and frequently establishes the philosophical foundation for succeeding generations.
Reactives: recessive generation that responds pragmatically to being made the scapegoat for society’s problems.
Civics: dominating generation build social institutions, wins wars and overcomes social challenges.
Adaptives: civic generation successes who are refined and improved upon by the reactives.
Considering how they have expressed their philanthropy over the centuries, each of these clusters can be split into into generational sub-groups:
Lost Generation 1883-1900: reactive type. Gave fortunes to orgs or institutions that “raised” them (e.g. their local school system).
Gl Generation 1901-1924: civic type. Collectivist, supporting social institutions and challenges.
Silent Generation 1925-1942: adaptive type. Expected to leave the majority of their wealth to the next comers.
Boomer Generation 1942-1960: idealistic type. Attracts greatest attention of fundraisers members sensitive to possibility of giving moral capital to a grand moral movement
Generation X 1961-1980: reactive type.
Millennials from 1982: civic type, concerned with community donations.
the new philanthropists
Philanthropic sensitiveness expressed earlier than before
Wealthy donors from industries like tech and internet. Typically not inherited their wealth and have seen it increase since the pandemic
“New investors”: they think of philanthropy not as giving but rather as investing.
More global outlook, demand that orgs perform in accordance with their expectations, want to get more involved in the life of the institution.
Well-trained and highly educated and form tight friendships and networks.
When looking for philanthropic initiatives they search for opportunities to spread their energy and knowledge => want better not-for-profits in their communities and want to be involved in their work.
Middle-class upbringing: unprepared for sudden fortunes, don’t rely on family role models when giving.
o Counselling services and stewardship fundamental to shift their venture capitalist approach to social entrepreneurship + to soften potential discomfort and distrust
New philanthropy has some recurrent traits:
Size of gifts is substantial: result of new major donors’ commitment to rapid action, traditional giving methods may be too “slow” for them. They follow the same approach that has helped them in business, they use their donations strategically.
More focused on a cause rather than an org: result of pragmatic approach to giving
Look for values-driven orgs to support: orgs should clearly promote their values
Orgs should embrace their ideas and values: accepting money is often the equivalent of an endorsement.
Result-oriented: need feedback about the impact of their donations very fast. Orgs should be ready to modify their approaches and procedures, by internalizing or removing phases that may not seem crucial to these donors.
Tend to exercise authority/control and want to be an active part of program or org: want to be highly involved, offering them a position on the board, inviting them to join a committee advisory board or asking them to head a task force in the department that is responsible for the use of their gift.
4.2. Motivations for major gifts to arts organizations
The main drivers for individual participation in the arts include factors such as age, gender, education level and income. Donors may have hedonic and utilitarian expectations for their actions, that can relate to the expected value or utility of the donation. Donors’ personal habits and vision of the world can also have an impact on their level of motivation.
Social responsibility: sense of duty to contribute to the well-being of the community
Social norm: often perceived as an obligation, especially among the wealthy. Believe that if they stop, all society will suffer, which brings a sense of obligation and facilitates their continuous support
Empathy and social emulation: donors often give because they see others, especially friends or family, doing the same.
Personal interest: donors can decide to give for personal enjoyment because beauty and pleasure are stimulated by the arts; they consider that aesthetic preferences are a fundamental driver of cultural support.
4.2.1. Major donors’ motivational clusters and profiles
Orgs should develop strategies that make sense for each donor target.
Devout:
* Doing good is a moral obligation, often stemming from religious beliefs.
* Do not seek public recognition
* Strong faith in the organization they support
* No personal interests, passions or tastes influence them.
Communitarian:
* Doing good makes sense.
* Motivated by active community involvement, donate to help their communities prosper.
* Typically own local businesses and often sit on the boards and committees.
* Believe that institutions can be more effective in solving problems related to the community they serve than local government.
* Value public acknowledgment and influence within the institution
Dynast:
* Doing good is a family tradition.
* Belong to families that have been philanthropic for generations, perceive philanthropy as a family responsibility
* Value legacy-building and often take active roles in decision-making
Socialite:
* Doing good is fun.
* Enjoy serving good causes through social engagement and networking.
* Seek recognition within their social circles and involvement in high-profile social events.
Investor:
* Doing good is good business.
* View donations as investments, seeking value-driven institutions with a good business strategy and tax benefits available for donors.
* Apply a win-win strategy to satisfy a mutually beneficial interest
Altruist:
* Doing good feels right.
* Motivated by generosity and empathy, supporting urgent causes.
* Wish to remain anonymous, driven by a sense of duty to support society.
Repayer:
* Doing good in return.
* Often donate to org they have benefitted from.
* Feel a strong sense of obligation to give back
donor pyramid
foto.
Orgs rely on a multitude of small or first-time modest donors who populate the base of the pyramid, while at the top of the pyramid there is a small pool of major donors, whose large gifts provide most of the financial support.
Fundraisers should be in touch with major donors to keep/build a relationship: time-consuming because the needs, interests and expectations of major donors have to be addressed in detail. Personal solicitation is very important as this increases donors’ feelings of being personally involved in the life of the institution.
Major donors need consistent, personalized engagement rather than just occasional asks for donations.
Arts organizations must build relationships with these donors, including involving them as board members, event chairs, or ambassadors.
Five stages of major donor engagement
Identification and qualification of prospects:
* Gather info on potential major donors, focusing on their connection to org, capacity to give and their philanthropic interests and create a list of targets.
* Major donors require a highly customized approach (creating clusters of regular donors according to habits is not recommended for major donors).
* Orgs can gather better information about their donors if they rely on “warm” sources, such as the inner circles of existing major donors or the board.
* Built-in databases are a valuable source of data.
* Information about major donors and contacts are gathered in donor profile record shared and part of the org’s database.
* After collecting info, major gift officers can prioritize efforts and select targets in consultation with the chief development officer.
* Create own donor profile folder (list of prospects for which responsible)
* Gift officer portfolio (75 to 150 prospects) including major gift prospects in various stages of pipeline
Prospect cultivation:
* Officer identified target donors and decided to invest time and money in approaching them
* Involves ongoing engagement to build a relation.
* Can complement discovery visits (aim to collect + info about prospects and family) with provision of details about org’s activities, projects and programs
* Try to involve prospects as members of internal committees, taskforces or board to increase psychological identification and personal commitment of prospect with org and mission.
* Gift solicitation might take a long time: each donor portfolio can be completed with a move record that highlights the status of the cultivation process by recording target sizes of major gifts and the various actions that have been undertaken, together with the related outcomes.
* Key point of successful donor cultivation: regarding the ongoing conversation as a learning process, which clarifies what the institution can do for the donors and vice versa.
Gift solicitation:
* After 12-18 months, solicitation begins
* No golden rule about perfect time to ask. After conversations during cultivation successful and after ensuring the donors is aligned with the project’s mission. Some donors can anticipate proposal by directly asking to support but not always.
* Key factors that increase the likelihood of a ‘yes’ from a major donor: personal meetings, prep and plan for them, keep the plan in mind, without relinquishing its goals or simply accepting promises of future gifts. Successful fundraising is possible when the right person targets the right donor, proposing the right gift size to support the right project at the right time and in the right way.
* Even when the donor says no, understanding their concerns helps for future attempts. To understand how to change your approach, listen rather than talk. After ask, first who speaks will lose! Stay silent after ask
Recognition and acknowledgment after a successful solicitation:
* Prompt and sincere recognition is essential, indicate that the value of their contribution is recognized
* Addresse thank-you notes to major donors within 48 hours of receiving gift.
* Different ways of expressing gratitude: phone call or a formal letter from the CEO or naming support.
Stewardship: once a donation is received, maintain the relationship through regular communication and updates on how the gift is being used. This helps the donor engaged for future contributions. Regular program of communication
