United Way’s CEO on Shifting a Century-Old Business Model
In the 1950s the United Auto Workers negotiated a plan that allowed employees at the big carmakers to donate money directly from their paychecks to the local precursors of United Way. For most of the organization’s history, it had no direct relationship with its donors. That has changed. Payroll deductions still play an important role, but United Way is moving to technology-driven engagement that allows individual donors to become more closely involved with the mission.
In partnership with Salesforce, it has created a platform on which donors have their own home pages; there they can track all the gifts they’ve made and all the volunteer hours they’ve committed to causes and find content or policy news or volunteer opportunities relevant to their interests. It has found that individuals who engage with it online give more and continue giving from year to year. Today some 25,000 people have each given more than $10,000 to United Way; more than 600 have given $1 million; and 35 have given $10 million or more.
As the leader of a nonprofit, I ask people for money as a big part of my job—and I love doing it. Making the ask isn’t as hard as you might think. The most effective leaders I’ve seen in any setting—business, government, nonprofit—are driven by purpose, mission, and the sense that their work is making the world a better place. If you approach donors from that standpoint, you’re really just having a conversation about mission and purpose and then asking them to join you. You simply have to blurt out the number and not worry about how many zeros it has at the end. The most I have ever asked an individual to give is $250 million. That particular person said no, but I’m pretty sure he has made a generous bequest to us in his will. What’s striking about these big donation asks is that for most of its history, United Way had no direct relationship with its donors. In fact, in most instances we didn’t even know their names.
The 1990s were the high-water mark for payroll deductions as a source of funds.
Our organizational roots go back to the 1880s, in Colorado. Industrialization was under way, and people were moving from rural areas into the city. In small towns there’s a sense of community, which creates an economic safety net—people know one another, so they help those in need. Urban areas have less sense of community, so as people moved to cities, they lost the safety net. Local business leaders wanted to do something to help, so they created a way to pool employee contributions, which were then distributed to local charities. In the 1950s the United Auto Workers negotiated a plan that allowed employees at the big carmakers to donate money directly from their paychecks, and over the next few decades most of our donations came from payroll deductions. Back then, the local fundraising entities were known by various names, including Crusade of Mercy, United Fund, and Community Chest. In 1970, to better organize and brand these efforts, we became known as United Way.
I joined United Way in 1981, straight out of college, as a management trainee in the Winston-Salem, North Carolina, office. At the time, a company’s donations would arrive in a big envelope. It would contain some cash, some personal checks, and a summary sheet stating that, for example, 1,200 employees had agreed to payroll deductions, which would total however many dollars every other week. Companies didn’t tell us who the individual donors were, because they were concerned about preserving people’s privacy.
Over the past few years we’ve worked to change that model—to transform from a primarily business-to-business model of fundraising (in which we work mostly with employers) to a B2B2C model in which we create a more direct relationship with individual donors. Payroll deductions still play an important role, but we’re moving to a technology-driven engagement platform. This new model increases our interactions with donors and allows them to become more closely involved in our mission.
This shift has been in the making since the early 1990s. United Way suffered a scandal involving the longtime CEO, who was convicted in 1995 of fraud and conspiracy and sentenced to federal prison. Much of the decade was spent recovering from that by revamping our governance and operations, writing a new code of ethics, and tightening up our brand management. During that process our donor model was starting to change. We began seeking out individuals who could make larger gifts. The 1990s were the high-water mark for payroll deductions as our largest source of funds; ever since then individual donors have become a bigger part of the mix. Today more than 25,000 people have each given more than $10,000 to United Way; more than 600 have given $1 million; and 35 have given $10 million or more.
Even as direct donations from individuals grew more important, we tried to increase our engagement with donors from inside our employer-partners. In the mid-1990s I was the head of fundraising and marketing for our Atlanta organization. We decided to send our biggest companies—Coca-Cola, Home Depot, and Georgia-Pacific—surveys to help us better understand the wishes and interests of employees who were donating via payroll deduction. Among the many questions we asked was “What do you think the most important social issues are in Atlanta?” We received 186,000 responses. We ranked the responses and reported them back to everyone. It was a simple interaction, and we still didn’t have donors’ personal information, but every metric we measured—giving, volunteering, public opinion—went up. It was very clear that to be more successful, we had to find ways to get people more involved. They don’t want to just give a check. They want to help with strategy, they want to be advocates, and they want to know what’s happening with their money.
I became the CEO of United Way America in 2002, and a few years later I led our merger with United Way International. By then we had converted United Way from a federation of local charities to a franchise model. The local franchisees bring in donations, and the worldwide organization receives a percentage of revenue. We promote the brand, provide infrastructure, and guide the strategy. Over the past decade a key piece of that strategy has been a digital transformation.
An important moment in the evolution of our digital strategy took place about six years ago. I was at the World Economic Forum in Davos on a panel with Marc Benioff, the CEO of Salesforce. We were talking about how organizations can more deeply engage customers and other stakeholders. He told a story about Starbucks that stuck with me. In 2008 Howard Schultz returned to Starbucks as CEO, after being out of that role for eight years. The company had lost touch with consumers, and Schultz was determined to fix that. The first thing he did was create an app that asked customers how they thought the coffeehouses could be improved. The company consolidated the top 10 responses and put them to a consumer vote. Then it implemented the top five fixes. The process engaged customers in the turnaround and helped restore revenue growth. That anecdote reinforced for me the idea that if you want people to be involved, you can’t just ask them for money—you have to really engage them. Digital technology is the best way to do that at scale.
Since Brian Gallagher became United Way’s CEO, overall contributions have ebbed and flowed, owing to the lingering effects of the Great Recession. But the organization has become less dependent on employee and corporate contributions and has created stronger relationships with individual donors.
Since Brian Gallagher became United Way’s CEO, overall contributions have ebbed and flowed, owing to the lingering effects of the Great Recession. But the organization has become less dependent on employee and corporate contributions and has created stronger relationships with individual donors.
By 2015 we had created a digital services operating group inside our organization. We worked with 11 of our local United Ways and created a website where donors could establish fun, interactive online profiles. That allowed us to curate content we thought would interest them—such as relevant articles or volunteer activities and opportunities. We were able to put together a donor database of more than one million people, who together represented more than half a billion dollars in giving.
Then we began measuring behaviors. We found that donors who engaged with us online—just like those who’d taken the paper surveys 20 years earlier—gave more and continued giving from year to year. The local organizations that joined the online effort increased average annual giving per donor by 6.5%. Through digital advertising we gained more than 70,000 new leads on donors. Shifting to online interactions also reduced costs: Participating local United Ways saw their marketing costs go down by more than $1 million.
In 2017 I saw Marc Benioff at Davos again. We talked about the potential of digital tools to help organizations like United Way engage with donors. Salesforce’s expertise in customer relationship management software, which collects information about individual relationships to make interactions between people easier, addressed this need. Marc said that his company was already working on an app that would do much of what we hoped to do. Originally we imagined this as a vendor relationship, whereby United Way would pay Salesforce for its efforts, but we quickly agreed that it should be a partnership: We would work with the company to create a platform that could be used across nonprofits. United Way doesn’t want to get into the technology business, so we needed a partner. Salesforce was perfect, because its software is already known and used by many of our corporate partners. By the end of 2017 we had signed up several companies to pilot the system, including Anheuser-Busch.
United Way Headquarters, Alexandria, Virginia, May 21, 2018
It works like this: When you log in, you see your individual home page, with your profile and photo. It tracks all the gifts you’ve made and all the volunteer hours you’ve committed to causes. It shows content chosen by you, United Way, or your company. The platform, called Salesforce Philanthropy Cloud, uses Salesforce’s Einstein artificial intelligence functionality, so the more you use it, the smarter it gets. If your behavior within the platform suggests that you’re especially interested in breast cancer awareness, or early childhood education, or low-income housing, the platform will begin highlighting content or policy news or volunteer opportunities relevant to that cause. One of the advantages of working with a company like Salesforce is that it has the resources to update the platform every three months, so the functionality keeps getting better. And even though people create their initial profiles in the workplace, they keep the same ones if they change companies or decide to work for themselves. That’s crucial in an economy where people are changing jobs more frequently.
Our new approach has some risks. One of them is that it allows donors to earmark their money for certain causes. For most of its history United Way took in donations and then distributed them to community organizations as local leaders saw fit. So although we can raise a lot more money under this system, we have less control over how it’s spent. But the risk that donors will shift to fund causes directly has always existed. Since I became CEO, I’ve said that our mission isn’t to raise funds but to create social change. To do that, we need to create content and educate people about the policies we’re targeting—and the data shows that we’re succeeding. Over the past decade our focal issues have included health, education, and financial stability for every person in every community, and there’s a lot of evidence that our work has made a difference.
Ask people what they care about. Engage with them. Then ask them to give.
Another risk is the inertia in a 130-year-old organization. We need to show success fast to get more adoption of digital by local United Ways. We expect that once more of them are using the system and doing well with it, even more will sign on. That’s one of the benefits of a franchise system: When one member experiences success, others want to follow. The downside of a franchise system when you’re trying to drive transformations is that they often fail because organizations give up on them too soon. So you have to be careful to build and maintain momentum.
We’ve continued to pilot the program in 2018, and the results are very good. In general, when people stop donating to United Way, it’s not because they decided to do so; it’s because they changed employers or we lost track of them and stopped asking. The digital strategy reduces instances of that, lowering churn rates and helping us recapture lapsed donors.
We’re especially encouraged when we benchmark our approach against that of other nonprofits. Two examples are Greenpeace and AARP. Not very many years ago, Greenpeace was best known for protesting at World Trade Organization events. It has shifted toward a direct-to-consumer advocacy model, creating an ecosystem that helps individuals find ways to make their voices heard. We’ve adopted some of that thinking. We also admire how AARP has shifted its model, establishing commercial relationships that create real value for its members. That helps it gain the revenue it needs to exert influence on policy matters important to its members. AARP moved from a pure service mentality—What can we do for our members?—to a model built on commercial partnerships.
The global economy is changing. More people now live outside their country of birth than ever before, and migration is increasing. The Baby Boomers who led the expansion of the United Way brand are retiring, and the Millennials replacing them have different relationships with their employers. Meanwhile, digital technology is blowing apart business models.
As that happens, we need new ways to bring people together and build community. This isn’t rocket science. It’s a 21st-century version of what I did with paper surveys so long ago. Ask people what they care about. Engage with them. Share information they are interested in. Then ask them to give—and there’s a good chance they will.
Brian Gallagher is the President and CEO of United Way Worldwide.
United Way’s CEO on Shifting a Century-Old Business Model
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