Better Call Paul: Capital Campaigns Then and Now

What was the typical capital campaign like in 1990?

Paul:

Previously, capital campaigns previously were rarer. Fewer organizations were conducting capital campaigns and the time spread between capital campaigns for an organization were very sporadic. In the 1990s, the higher education sector started doing periodic capital campaigns perhaps every five years or so. Larger hospitals unless it was for construction, would be doing concentrated campaigns for hospital units on an ongoing basis.

Today, with the proliferation of nonprofits, and their needs for both construction and endowment, the capital campaign is much more frequent. Not too long ago, if you talked about a capital campaign, let's say at a social gathering, a few people would know what it was. Today, the term “capital campaign” is understood in most communities.

In addition, there are more comprehensive capital campaigns which include annual giving or endowment funding resulting in increased campaign goals. Universities were the pioneers for this, and they competed for having higher and higher dollar goals, resulting in goal inflation.

How has that changed in 2022?

Paul:

The frequency of capital campaigns has definitely increased. The capital campaign itself has changed as well. The key to success in the capital campaign is obtaining a few very large gifts to ensure reaching your goal. So, one of the changes with nonprofits having a large donor base is achieving a very high percentage of their goal from their internal donors complemented by foundation and corporation gifts. The result is the rest of the campaign including some mid-range gifts and the community engagement portion.

 Something else you mentioned in the last question was the ballooning amount of capital campaigns. Can you explain that?

Paul:

The typical small to mid-size community organization needing a new facility still conducts the sporadic capital campaigns. The dollar goals for most organizations are typically at the lower level of the scale based upon project specific needs.

As you escalate to larger regional and national organizations, such as major museums, educational campuses, healthcare, and larger institutions the goals are becoming larger and larger over time.

Also taking into consideration, the cost of construction as well, and increasing campaign goals resulting in more dollars to raise.  So you are now seeing comprehensive campaigns for community organizations, which increases dollar goals. The cost of $1,000,000 building in 2000 is $1.5M today increasing capital campaign goals alone. A $5M goal in 2000 would be approaching $9M today.

We are now in the technology age. What are your thoughts on campaign websites?

Paul:

We are in the technology age! As the last decade ended, the technology consisted of producing a video. The video would be taken to your donor prospects. And now there isn't so much need for the video as there is for a whole variety of different kind of messaging channels, via social media, and various other methods. One of the experiences, which is interesting to me, in terms of print is that printing costs for case statements has decreased maybe 60 to 75%. Video messages with the smart phone can be done very inexpensively. Printing a case statement, a while back could be $4,000 and today it is $600.

The whole sophistication of telling your story to different constituencies via different media is certainly part of the capital campaign process.

Many campaigns center on a capital project. How does a successful campaign impact an organization for the longer term beyond the building project? Getting back to the comprehensive campaign?

 Paul:

I've always been an advocate of staging the capital campaign as a building block for an organization’s overall development operation. I believe that's the case whether it is a university, that has a large development operation or a smaller social service agency that has one or two development staff. The principle is the same, lead gifts and major gifts typically come from donors that have an existing relationship with the organization. For the development office, there is always the dilemma of “How many prospects can we get in front of; what resources do we have to do that; and who are the people that we should be in front of?”

Larger organizations with multiple development staff can raise funds from a whole variety of individuals at different levels at the same time. The donor information is gathered through this process allowing these organizations to have a bigger pool of prospects. Prospects are then moved up the ladder in a process called “Moves Management.” This entire process allows larger organizations to cultivate relationships with donors for the appropriate projects.

However, community organizations with a small development staff do not have the capacity to get in front of all their donors and manage giving capacity expectations. There becomes a need to fill the gap between funding and budget expenses for annual giving, which is certainly a full-time job. Unfortunately, this forces the development staff of smaller organizations to do a variety of tasks to raise funds, typically not having the time or resources to visit with people and ask for large scale gifts.

OK, so back to the building block concept, for the smaller organization, their database is going to be full of annual donors, the occasional larger gift from a few donors and consistent donors year to year. For these organizations, the capital campaign becomes what I refer to as a “conquest campaign.” An organization is not only escalating the gifts from existing donors but needs to attract new donors that have never donated before. In addition to foundations and corporations, the individual donors need to be asked for a larger gift not previously asked for before. In doing this, a successful capital campaign has now escalated to a higher level of giving.

Now that there are more campaigns, do you feel the need for fundraising consultants has decreased or increased in the last five to 10 years?

Paul:

Historically, as I mentioned previously, the capital campaign was a real exception. Consequently, the time frame between one capital campaign and another within an organization simply meant that there were not staff or board members involved in the previous campaign efforts. Therefore, the level of expertise to conduct a capital campaign was minimal. Today a successful development team goes out and asks for larger gifts outside of the campaign framework and consequently has sizable donor prospects. Throughout the country, there's been a proliferation of foundations and with ever increasing assets. As the number of foundations have increased, their assets have risen as well with the improving stock market. Consequently, depending on the community and the reach of the organization, a nonprofit can do a capital campaign solely with what I would call institutional donors. I think that is the case for many organizations. That's a huge difference. This is true especially in Omaha

As a consequence, the issue with depending on institutional donors is that an organization is really not developing the individual donor base. The benefit of the individual donor base by constantly moving those donors up the ladder to become major gift donors, large capital campaign donors and eventually planned gift donors. This is what organizations are missing by having 90% of their capital campaign gifts come from institutional donors.

We've talked about then and now, but what about in the future?

 Paul:

Well, first of all, there's more and more capital campaigns that individual donors are being requested to support. That’s true with the institutional donors. There's much more competition for the funding that's available. So, there's some pushback from donors with questions such as: “Why are there so many capital campaigns or are all these capital campaigns needed?” One truism I have developed from the very beginning of my career is that the more person is asked to donate, the more they begin to say no, and we may be at that tipping point with the capital campaign.

My premise for that goes back to earlier times when there were direct mail operations, people were getting more and more letters in the mail and decided that they just couldn't support all these organizations, and they started to say “no” such as in any community where there are what you might call targets, companies, or individuals that everyone is aware of, the more likely they are asked for gifts, the more likely they are to say no. And so that premise is now filtering down from the donor class to the middle-class and consequently, there may be a redefining of what organizations can ask of their community donors and institutional donors.

Another footnote is that institutional donors, generally in the past, had an open perspective as to what they would donate to, but now many foundations and corporations are realigning their giving program and we were seeing more focused giving, as opposed to giving to everything.

The future is bright for philanthropy, but the nuances are changing and as always, the better you know your donors, the better you will be in raising funds.

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