Friends in Need

How charities maintain ties to financially strapped donors

In January, the Fort Worth Public Library Foundation took an unusual step: It decided to let a major

corporate benefactor off the hook for the unpaid remainder of a $100,000 pledge.

By a unanimous vote, the library’s fund-raising arm voted to let the benefactor, American Airlines, forgo a $20,000 installment payment remaining on its capital-campaign pledge. Betsy R. Pepper, the library foundation’s executive director, says the idea came from the board’s chairman, a corporate chief executive who was sympathetic to the financial stresses that American has faced since the terrorist attacks of 2001 walloped the airline industry.

The move to consider American’s pledge paid in full came after the airline informed the library foundation that it would be delaying its final installment due to its financial woes, Mrs. Pepper says. The vote was intended as a goodwill gesture, she says: “American Airlines has been an excellent corporate citizen. We wanted to say thank you.”

Marty Heires, an American Airlines spokesman, says the company, which has put all of its cash donations on hold, appreciated the action, though it does not yet know when it can resume its giving. It has stayed involved with the library foundation, however — it provided travel vouchers for the group to auction off during its spring fund-raising event last month, Mrs. Pepper says.

Many companies, foundations, and individuals that have seen their financial fortunes plummet in the current soured economy have had no choice but to cut back or even eliminate charitable giving. But while fund raisers may need to look elsewhere to bolster their bottom lines, experts say they also must try to stay connected with financially stressed donors.

No protocol governs how to handle relationships during a time of financial crisis, says Paulette V. Maehara, president of the Association of Fundraising Professionals, in Alexandria, Va. “What I say when I counsel people is to get back to the basics of thanking your donors enough,” she says, “making them understand you are flexible regarding payout schedules for gifts and that you are flexible and responsive to their needs.”

Staying in Touch

Keeping up a donor contact when there is little or no money to discuss can be challenging. Thomas W. Mesaros, who is chief executive officer of the Alford Group, a consulting firm for nonprofit organizations, and works in the company’s Seattle office, urges fund raisers to make a list of their most important donors. Then, he says, spend some time each day strategizing how to stay in contact with them — to update how their donations are being used or even to acknowledge a birthday or an anniversary.

Fund raisers can ask their contacts to meet over coffee to discuss the most recent campaign and then use that appointment to learn more about what is important to them. If visiting donors in their homes or offices, Mr. Mesaros says, fund raisers should observe the room’s contents to learn more about them.

“It’s not about asking for a gift all the time, it’s about learning about who they are,” he says, adding that it is important that fund raisers use in-person contact rather than relying solely on e-mail, although, he says, phone calls can provide a good compromise, allowing the two parties to grasp the nuances of each other’s conversation. “It’s a human dynamic,” he says. “People give money to people they know and causes they understand.”

Depending on the situation or just how troubled the company is, being understanding doesn’t necessarily mean refraining from asking for money. The only faux pas a fund raiser can make during difficult times is to ignore that times are bad, says Tim Seiler, director of the Fund Raising School at Indiana University at Indianapolis.

Avoiding Surprises

Of course, even in the best of times, a donor’s communication with its charitable beneficiaries can be awkward. Any kind of financial uncertainty — from job losses to lower profits to corporate mergers and acquisitions — can make it even more difficult. It is particularly important that there be no financial surprises during periods of transition for donors, says David Nasby, vice president of the General Mills Foundation, in Minneapolis, which went through an uncertain period when General Mills bought the Pillsbury Company in 2001.

Mr. Nasby says that donors need to be provided with solid financial data on their beneficiaries and information on the status of the programs they support. Talented fund raisers, he says, know to draw the line between adequately informed and overloaded. “Knowing what’s too much is part of the art.”

Joan Daly, administrator of the LuEsther T. Mertz Retinal Research Center at the Manhattan Eye, Ear, and Throat Hospital, in New York, seems to have a feel for that art. In 1999, one of the research center’s main supporters — Publishers Clearing House, in Port Washington, N.Y. — hit hard times. The research center, which had previously counted on a trust sponsored by the sweepstakes company for about half of its $1-million annual budget, saw the payout from the trust halved in 1999 and eliminated the next year.

Ms. Daly got busy making her organization as efficient as possible and expanding its pool of donors to fill in the holes. But she also found time to call the trust and inquire from time to time what was happening. And even in 2000, when the research center didn’t receive any money, she continued reporting the center’s activities to the trust.

Eventually, maintaining the relationship with the sweepstakes company paid off, literally — smaller payments from the trust resumed in 2001, she notes. Her advice for other organizations that work with financially strapped donors: “Keep up the lines of communication and don’t bad-mouth the people.”

Donors’ Perspective

Some donors are leery of discussing how fund raisers might best approach them in difficult times. One spokesman at a corporate foundation declined to talk on the record, citing a concern that any advice to charities would raise false hopes about potential donations.

But others suggest that nonprofit groups consider proposing creative ways in which companies could assist them beyond cash — such as providing product donations or encouraging their employees to volunteer.

For example, Safeco, an insurance company in Seattle, has seen its corporate-giving budget more than halved in recent years due to the difficult economy, says Rose Lincoln, Safeco’s director of community relations. In the wake of the cuts, Ms. Lincoln says, Safeco has sought to offer noncash assistance to charities. The company’s employees counsel YMCA’s and park districts about ways to increase neighborliness and create safer cities and towns. Such programs dovetail with the company’s business goals, as low-crime areas are desirable markets for insurance, she says.

Other donors say they appreciate it when beneficiaries graciously accept downshifts in giving. The Kmart Corporation, the discount retailer that filed for bankruptcy in January 2002 and emerged from it last month, has been unable to assist nonprofit groups with any cash contributions or with product donations from individual stores, says Wendy Kemp-Watkins, a community-relations specialist at Kmart, in Troy, Mich. Although Kmart does continue to offer some product donations from its national headquarters, she says, the change left the company’s employees in the difficult position of rejecting requests for help from local charities, which sometimes express displeasure at being turned down.

Some financially stressed donors continue to make donations, albeit smaller ones, and ones that require tougher choices about dividing up diminished resources. Such donors, though, have little patience for off-target appeals, says Ms. Lincoln, and thus careful research about the donor before making a fund-raising pitch is key. If a donor cannot or will not offer a gift, she says, fund raisers should accept the decision gracefully and back off. “If we very transparently say no for a financial reason, to do an end run to the CEO puts everyone in an awkward position,” she says. “It’s just bad form.”

Fund-raising experts say it is also important to remember that financial woes will be fleeting for many companies, foundations, and individuals. Years ago, Mr. Mesaros says, he worked as the executive director of a hospital foundation to which a board member’s company had promised a $50,000 gift for a capital campaign. One day, Mr. Mesaros got a call from the board member, who asked him to come and immediately pick up a check for half of the amount. Mr. Mesaros did so and soon after the company was in bankruptcy.

While the company was reorganizing, Mr. Mesaros kept the executive on the hospital board and kept talking to him, when appropriate, about why the promised gift was still important. Eighteen months later, he says, when the company emerged from bankruptcy, it made its second payment.

“You have to invest time in quality relationships,” he says. “It’s not rocket science, but it is work.”

Of course, many charitable groups that maintain positive ties to donors in need do so with altruistic motives and no expectation of payback — it just happens that good manners can also make good fiscal sense.

Stephen Bernstein, the chairman of the Fort Worth library foundation whose idea it was to forgive the final pledge installment from American Airlines, says he simply thought it was the compassionate thing to do. Mr. Bernstein, who is also the chief executive of the Plaza Medical Center of Ft. Worth, says he wasn’t looking for anything in return from the foundation’s gesture. He hopes the move will help American focus on its business so that the airline can overcome its current difficulties.

Says Mr. Bernstein, “You just can’t ask and ask and ask and never give anything back.”