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From the President's Office, December 2006

Dear Friend:

We end this year full of gratitude to so many people and organizations for helping to make this the best year in GuideStar's history.

  • Thanks to our many nonprofit partners for sharing our commitment to transparency and accountability.
  • Thanks to our many users, not only for using us but also for giving us advice on how we can improve.
  • Thanks to our customers for their business and their encouragement to build new tools and services.
  • Thanks to the many foundations and corporations that supported our service.
  • Thanks to our volunteer board of directors for their long hours of work and their constant good counsel.
  • And finally, thanks to everyone who participated in GuideStar's fifth annual nonprofit economic survey. We appreciate the time you took to tell us about your organizations' experiences during the first nine months of 2006.
You can read more about the survey in this Newsletter. The information you shared with us helps my colleagues and me answer a question we hear often during the giving season: "How are nonprofits doing this year?" That question in turn opens the door to discussions of the sector's complexities and the challenges that nonprofits face. It's a tremendous opportunity to increase donor understanding beyond the simplistic use of program ratios and, we hope, to inspire increased giving.

The survey also reinforced for me yet again our sector's importance to our society. The vast majority—72 percent—of participants said that demand for their organizations' services grew during the first nine months of this year compared to the first nine months of 2005. This is the fourth year in a row in which the survey reported greater demand. Four years of increasing demand—what better evidence of the role that nonprofits play in people's lives? What better evidence of the need to support those organizations' work?

I know that I don't need to convince you of the contributions that nonprofits make. So let me close by noting that all of us at GuideStar wish you every success as 2006 draws to an end and by offering our congratulations for all you do on behalf of our fellow citizens.

Happy holidays,

Bob Ottenhoff
President and CEO

Newsletter Readers as Donors: November Question of the Month Results

Last month's Newsletter included an article profiling on-line donors ("The Young and the Generous: A Study of $100 Million in On-line Giving"). That piece inspired the November Question of the Month: "What's your donor profile—what characterizes you as a donor?" Here's what our totally unscientific survey found:

The Power Team, Part III: The CAO

Where the duty of the nonprofit chief executive officer (CEO) is to provide the vision and forum for others in the organization to excel, the chief advancement/development officer (CAO) is expected to lead an internal team that must develop strong relationships and loyalty among its constituents. The ultimate purpose of that relationship is to inspire the constituents to give to the institution. Corporations, foundations, individuals, and other relevant groups have to be cultivated and led to the "gift decision" by the advancement team.

More Money, More Demand: Results of the 2006 GuideStar Nonprofit Economic Survey

For the third year in a row, the majority of participants in GuideStar's nonprofit economic survey reported that contributions to their organizations had either increased or stayed about the same as contributions during the previous year. For the fourth consecutive year, a substantial majority also said that demand for their organizations' services had grown.

Contribution Levels

Asked, "Did total contributions to your organization increase, decrease, or stay about the same during the first nine months of this year compared to the first nine months of 2005?" half of more than 3,700 respondents stated that contributions had increased. Another 27 percent said that contributions had stayed the same. Only 19 percent reported that contributions had decreased.

These numbers represent a dramatic change from the results of GuideStar's first nonprofit economic survey, conducted in November 2002. At that time, nearly half (48 percent) of 2,600-plus participants said that contributions during the first 10 months of 2002 had decreased compared to contributions during the first 10 months of 2001:

Change in Contributions

GuideStar Survey Contributions Decreased Contributions Stayed about the Same Contributions Increased Don't Know
October 2006 19% 27% 50% 4%
October 2005 22% 26% 49% 3%
October 2004 23% 24% 50% 3%
October 2003 35% 22% 39% 4%
November 2002 48% 22% 28% 3%

The results of this year's survey were remarkably similar for all regions of the country and for nonprofits working in all subject areas. Respondents from large nonprofits (annual expenditures of $500,000 or more) were most likely to report increased contributions.

More Demand

Reports of increased demand were even more consistent. Asked, "Did demand for your organization's services increase, decrease, or stay about the same during the first nine months of this year compared to the first nine months of 2005?" 72 percent of participants stated that demand had grown. This is the fourth consecutive year in which at least 70 percent of participants reported increased demand:

Change in Demand

GuideStar Survey Demand Decreased Demand Stayed about the Same Demand Increased Don't Know
October 2006 4% 23% 72% 2%
October 2005 5% 24% 70% 2%
October 2004 5% 23% 71% 2%
October 2003 6% 22% 70% 2%


A majority (52 percent) of grantmakers reported that the grants awarded by their organizations increased during the first nine months of the year compared to the first nine months of 2005. These results continue a steady trend upward:

Change in Amounts Awarded

GuideStar Survey Amounts Awarded Decreased Amounts Awarded Stayed about the Same Amounts Awarded Increased Don't Know
October 2006 14% 32% 52% 3%
October 2005 13% 38% 47% 2%
October 2004 19% 33% 45% 2%
October 2003 32% 35% 32% 2%
November 2002 40% 28% 18% 15%

Some 51 percent of grantmakers reported that applications to their organizations for funding had increased during the first nine months of this year compared to the first nine months of 2005. For three out of the last four years, at least half of grantmakers have reported an increase in the number of grant applications:

Change in Number of Grant Applications

GuideStar Survey Applications Decreased Applications Stayed about the Same Applications Increased Don't Know
October 2006 7% 37% 51% 5%
October 2005 8% 42% 45% 5%
October 2004 5% 39% 51% 6%
October 2003 9% 36% 50% 6%

About the Survey

GuideStar e-mailed 44,926 messages inviting GuideStar Newsletter subscribers associated with public charities and private foundations to participate in the survey; 3,820, or 8.5 percent, of these individuals took the survey on-line between October 9 and 23, 2006. Some 99 percent of these participants were associated with nonprofit organizations, and at least 1,371 organizations were represented in the survey.

Read the full survey report

Suzanne E. Coffman, December 2006
© 2006, Philanthropic Research, Inc. (GuideStar)

Suzanne Coffman is GuideStar's director of communications and editor of the Newsletter.

The 2006 Giving Season and the Pension Protection Act of 2006

Note: The following discussion is provided for informational purposes only and is not intended to serve as legal or tax advice. For specific information about the provisions of the Pension Protection Act of 2006 affecting charitable deductions, consult your tax adviser or attorney.

Getting ready to make your end-of-year gifts to charity? You may want to do some research first—the Pension Protection Act of 2006 contained several provisions affecting charitable deductions. Some went into effect this year; others will go into effect in 2007.

Here are brief summaries of the changes that might affect the average taxpayer. Consult your tax adviser or attorney for more details.

  • Contributions Made Directly from IRAs
    In 2006 and 2007, if you are age 70½ or older and have an Individual Retirement Account, you can donate up to $100,000 each year from your IRA to charity. The distribution will not be taxed as income as long as: the charity is eligible to receive tax-deductible contributions, the charity is not a section 509(a)(3) supporting organization, and the withdrawal goes directly to the charity. You do not need to itemize your taxes to take advantage of this provision; if you do itemize, however, you cannot also take the contribution as a deduction.

  • Used Clothing or Household Items
    Used clothing or household items donated after August 17, 2006, must be in "good" condition or better to be deductible. An exception is a gift worth more than $500, which can be of lesser quality but which must be documented with a "qualified appraisal" included with your tax return. For information on determining the fair market value of your donations, see the Salvation Army's on-line guide, or visit your local Goodwill or other charity thrift store.

  • Gifts of Art, Collectibles, and Valuables
    There are new rules for deducting "fractional gifts," i.e., shares of an artwork, collectible, or other valuable, made after August 17, 2006.

  • Start Collecting Those Receipts—for Everything
    Beginning January 1, 2007, you must have a "bank record" or receipt for all monetary contributions you deduct. No more deducting that dollar you put in the kettle or collection plate.
Other provisions affect deductions for conservation easements, conservation contributions and rehabilitation tax credits, façade easements, contributions of vacant land in historical districts, and contributions of exempt use property. Consult your tax adviser or attorney for more information.

Suzanne E. Coffman, December 2006
© 2006, Philanthropic Research, Inc. (GuideStar)

Suzanne Coffman is GuideStar's director of communications and editor of the Newsletter.

Innovation at Work: Helping Nonprofits Raise the Bar on Ingenuity

Innovation is a big buzzword in business today, having been described as the key ingredient that will keep the United States ahead of its overseas competition. But innovation is vital to success in the nonprofit world as well. Organizations that use innovation to propel themselves forward are leading others in the quest for funding and other resources. They are learning, however, that to infuse innovative thinking into a culture requires thinking strategically, rather than tactically. This strategic approach requires more than just encouragement and open-mindedness. It requires commitment to systems and processes that can create new solutions to old challenges.

Many successful nonprofits have built momentum based on innovative strides. Catholic Charities formed a partnership with Catholic Health Association to "deliver innovative services that improve the lives of individuals, families and communities." The Ford Foundation, founded in 1936, defines itself today as "a resource for innovative people and institutions worldwide." The United Way has set out to "find innovative solutions to transportation needs through partnerships with businesses, nonprofits and public agencies." For these nonprofit leaders, innovation is a core strategy for the growth of their organizations.

Some organizations claim to be innovative but fail to do it well. Others are clueless about where to begin. Although most leaders agree they would like their organizations to be more innovative in problem solving, they may fall short on having a plan to achieve that goal. But if innovation is in fact the new road to growth, companies will need to know how either to enhance innovation in the workplace or at the very least to get out of the way when it happens.

Defining innovation is an important first step. Can you name one way that your organization encourages innovative thinking? Has management taught or used a process that supports innovation in the company?

Nonprofit Ingenuity

If you aren't sure what innovation really "looks like," it might be helpful to examine some real-life examples that have earned recognition from others. A New York City-based nonprofit, DonorsChoose, invented a way to provide students across the country with resources often lacking in public schools. At the DonorsChoose Web site, teachers submitted project proposals for materials or experiences their students needed to learn. These ideas then became classroom projects when individuals who read them on-line choose to fund them. DonorsChoose received the 2005 Nonprofit Innovation Award, which included a $1 million grant.

In 2004, Real Alternatives measured the counseling outcomes of more than 16,000 women served annually through pregnancy support centers, social service agencies, adoption agencies, and maternity homes throughout Pennsylvania. This "first-of-its-kind" statewide automated program earned Real Alternatives the Fifth Annual Nonprofit Innovation Award 2004, sponsored by the Central Pennsylvania Business Journal. Associate publisher Peter B. Burke praised Real Alternatives for the "level of originality, effectiveness, and measurability of the innovation used in your daily activity."

Another nonprofit, NPower Seattle, created its own innovation award to recognize creative and non-traditional uses of technology. The 2005 winner of this award, Densho: The Japanese American Legacy Project, challenged assumptions about how information gets collected and created new ways to use technology to interview and gather stories from Japanese Americans who were incarcerated during World War II.

In each of these examples, organizations were rewarded for taking unconventional approaches to social improvement and for focusing on the benefits of challenging assumptions about how we gather information. They clearly demonstrated that innovation isn't just for big business. Nonprofits of all sizes are solving problems in ways that were never dreamed of. In short, they have raised the bar for nonprofit ingenuity.

Beyond Ideas and Barriers

Bringing innovation into the workplace is not an easy task. It takes more than, as some people believe, sitting around and wait for big ideas to happen. Everyone struggles to overcome blocks and barriers. For example, what if you work within a group that is very hierarchical, top down? Your coworkers may be afraid to embrace an idea that hasn't been suggested by the higher-ups.

Innovation takes an open-minded culture. But not all workplaces offer an environment to challenge the status quo. There may be concerns, for example, about a substantial investment in an approach that has always been used to solve a particular problem. People become comfortable with, and most often unaware of, continuously using the same problem-solving techniques.

Years ago, Albert Einstein defined insanity as "doing the same thing over and over again and expecting a different outcome." To change the way you think about problem solving requires a paradigm shift. If you seek to encourage innovation, expect resistance. The step between individual creativity and organizational innovation often looks more like a leap. That's where simple problem-solving tactics end and an innovation strategy begins.

One proven method to address a challenge in your organization is to learn and follow an innovation process. Start with something simple by taking on a small issue in your organization. Put together a diverse team and create a clearly defined problem statement to be sure everyone understands your goal.

Innovation: A Five-Step Approach

Here's a process your organization can use to identify new solutions to old challenges.

Step One: Gather Information. The team will need to spend time and devote attention to gathering relevant data on the project. Asking the right questions, such as who makes up the marketplace and what do they want, will lead research in the right direction.

For example, teams will want to read such important information as reports, journals, and meeting notes. They will need to look at the environment surrounding the projects and note useful insights they observe. They will present their information offering a general view of their whole findings.

Step Two: Observe the Real Situation. Step two is all about looking. The team needs to act like anthropologists and not only observe the process or system they are about to change but document findings with notes, photos, and even videos. Beware of making assumptions that will sabotage the effectiveness of good observation techniques.

In this step, teams will observe what confuses and perplexes an end user. They will need to review their information carefully, perhaps often, to catch important details. Videotapes will need to be watched multiple times. The teams can expect to begin to see common areas of concern emerging within their project research.

Step Three: Develop New Concepts. If you approach brainstorming as a "no-brainer," your team will probably come up with the same old same old. Employing solid brainstorming techniques will help generate many more solutions with greater originality. The team leader needs to be well versed in a variety of approaches to get the process off the ground.

In this step the team is applying divergent thinking techniques to a wide breath of ideas, some of them even bizarre and impractical. Concepts within ideas will be substituted, combined, modified, adapted, magnified, minimized, eliminated, and rearranged. In the end, the team will have flipchart pages on the wall full of drawings of ideas, from which they will now begin the process of choosing three or four possible ideas.

Step Four: Convergent Thinking. Take all your big-picture ideas and start converging them into real application. Here's where the rubber hits the road, when you take your best innovations out for a test drive. Ask yourselves tough questions: How can we improve? What questions are not being asked? Is the focus in the right place? Timing is critical. If this step is done too early in the process, good ideas don't have time to reach fruition. If this is done too late, a practical application may have lost its chance to emerge.

Contrary to the big-picture brainstorming of the previous phase, the team will now work closely to bring together several viable prototypes, using drawings, computers, or whatever building materials are most appropriate. They will both criticize and defend their prototypes. They may go back to step three for another quick look at ideas.

Step Five: Implementation. In this step the team will focus on their three or four best ideas and start to introduce a critical evaluation of the forces both for and against implementation of these ideas. They will identify the blocks and barriers to success and how to overcome these barriers.

Without the right implementation plan, the best innovation will sit in a file drawer collecting dust. Ask: Who will lose if this innovation is accepted? Who will win? What are the organizational impediments to this action plan's success? What is the organizational readiness? The final report should include a timetable for trials, tests, and perhaps an initial market analysis.

Innovation can be a learnable, trackable process that is exciting, enlightening, and FUN! And remember, you don't have to be a Fortune 500 company to have great success. Take an innovative leap into the 21st century—who knows what you will find!

Rachel Fine, Blue Grotto, Inc.
© 2006, Blue Grotto, Inc.

Rachel Fine is the creative director of Blue Grotto, Inc., which helps organizations think innovatively about celebrating milestones. Her expertise in innovation has led her to Singapore, where she has worked as a consultant to the Department of Defense.

Understanding the Motivations of Major Donors, Part I: The Most Important Things to Know

Excerpt from the second edition of Over Goal! What You Must Know to Excel at Fundraising Today

Motivated major donors. We want them. We need them. We strive to keep them. And yet, we find ourselves too often frustrated because we don't have them, still need them, or, worse, we've lost them.

Much has been written about major donor motivation. Sweeping generalizations profile the most likely major donors and so we find, in our communities, that we're all turning to the same people because they fit the profile.

Lists for feasibility studies for capital campaigns contain the same names, year after year. In the back of performing arts programs, in annual reports and newsletters from social service organizations, and in the publications of independent schools and colleges, we see the same names. Over-solicited, these "most likely to be major donors" members of our communities become increasingly resistant as donor fatigue sets in.

So, what's the answer? If the profile of the major-rated "Everydonor" is so proven, yet so exhausted, where do we turn to find the new major donor—one who will be so sparked by the mission and impact of our organization that she will make (and renew) a significant investment?