Mega gifts for non-profit organizations make boards stand up, take notice, and enact changes. But isn’t this the case of any financial windfall, whether it be personal or business related? In an article by Stephenson et al (2011) that talk of exploring the implications of mega-gifts, Stephenson discusses whether mega-gifts should be considered a crisis that non-profits can plan for, or deal with, similar to other crises. I would argue that one can never truly appreciate the life changes that result in a large sum of money being presented to an individual or organization. However, it is the way a nonprofit board deals with those changes that reflects the stability and efficiency of the board.
I know if I won a lottery with $175 million today, I would not consider that a crisis in my life. Others may say that it is a crisis without the negative connotation, and I would likely allow them that belief. But when one wins the lottery, they are often judged by how they handle the new found wealth and, at least temporarily, the fame. An individual who immediately buys a new car, house, yacht, quits work and begins dwindling down their empire quickly would be labeled careless and irresponsible. I would hope I would not fall into that category. Like many people, I do imagine how my different (and easier, in a financial perspective) my life would be if I were to win a large jackpot. Yes, an all-inclusive trip to some beautiful resort in the Caribbean would likely need to occur quickly after I received the first check; however, I like to think that I would also immediately hire a good financial advisor. That I wouldn’t quit my job or put a contract down on a 5,000 square foot house for which I have no need. I would pay off all my debt and then sit down and look at how I want my lifestyle to change. That would be the responsible way to become a millionaire overnight.
Is a nonprofit that comes into a large endowment or gift any different? I’m sure every CEO and Board Chair of a nonprofit organization, especially a small nonprofit, loves to imagine what life would be like with a large influx of money. But just like I described above, you can handle that in two different ways. For nonprofits, the careless way would look like this: immediately hire a bunch of staff, begin programs that are not well thought out, move into a bigger office space, and buy all new equipment and “tools of the trade”. In other words, you don’t plan for how you’re going to spend your money. Even more specifically, you don’t plan for how you can use that money to sustain a new “lifestyle” without having to largely increase your fundraising or income, but just by using interest or a set annual amount off of the gift. Nonprofits that would be successful handling mega gifts should treat them responsibly. They need to recognize that this may be the only time in the history of the organization that it will ever receive a gift of this amount.
Stephenson et al (2011) uses the Modern Poetry Associations mega gift of $175 million from Ruth Lily as an example of how a mega gift can effect a small nonprofit. I believe that one of the things Stephenson does in this article is to effectively demonstrate exactly how a large mega gift should be handled by the nonprofit. The Modern Poetry Association demonstrated thoughtfulness and responsibility in handling the gift. They hired financial advisors, they did not expand the business overnight, they adjusted their strategic plan to include new ways to accomplish the goal of the Modern Poetry Association, and they did it systematically and slowly. They were good stewards of the money they received and worked hard to make sure that they continued to work towards the mission of their nonprofit.
Mega gifts do not have to be insurmountable crises that cause an organization to shorten their life span or experience significant mission drift in the wake of their windfall. Just as would be recommended to an individual who wins the lottery, nonprofit boards should plan for their future with the gift amount and spend the money deliberately. As you would expect an individual who is careless with their jackpot to quickly have no money left over, or to be filing bankruptcy because they cannot support the new lifestyle they have become accustomed to, you would expect a nonprofit organization to fail the same way if they are reckless with a mega gift.
Stephenson, Jr., Max O., March H. Schnitzer, and Veronica M. Arroyave. "Nonprofit Governance, Management, and Organizational Learning: Exploring Implications of One "Mega Gift"." The American Review of Public Administration (2008): 43-59. Web. 16 May 2011