Essay: Establishing a non-profit : organisational architecture

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  • Establishing a non-profit : organisational architecture
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Introduction

This capstone project presentation is Landon Padgett Memorial Fund (The Fund) – a 501(c)(3) nonprofit organization established in memory of Landon Padgett who died on September 17, 2016. The problem presented herein is this researcher’s lack of knowledge and experience in starting this kind of organization. It’s just the kind of problem for which applied research provides immediate benefits. To that end, the proceeding presents the findings of research that informed the design and implementation off the organization. It shows how data from benchmarking comparable organizations advised the structure of organization’s first program offering, Landon Padgett Memorial Scholarships, and how trends affecting nonprofits helped with organizational decisions. This research also informed objectives and strategies in the strategic roadmap; a comprehensive, executable plan that sets forth a long-range direction for the organization.
Research and Design

This researcher, Landon’s husband, remembers that not long after Landon started work at Children’s Healthcare of Atlanta, one of his new born patients passed away. He was understandably devastated. That night, I listened to him question whether he had the capacity to watch another baby die. It’s a question many would ask and a reality most couldn’t face. But Landon, like many nurses, found a way to understand his role in the lives of these young ones. I watched as his distress turned into a renewed commitment to the profession that had called him. From the depths of confusion and doubt, Landon found a way to turn grief into action.

That example of strength formed the basis for this organization. While hiking in Rocky Mountain National Park in September 2017, this researcher pondered a question I’d carried with me from Atlanta to Denver. “How can I preserve and carry on Landon’s legacy?”. The answer to that question came to me that day. The core of his legacy was his commitment to helping and serving others. So, I proposed to Landon’s family and friends that we create a lasting legacy on his behalf. They all agreed. So, we set out to establish a memorial organization on the belief that Landon’s goodwill can transcend life and have an impact for years to come. And, they agreed that awarding scholarships in Landon’s name would be a great place to start.

Once we’d decided to create the organization, we all had a lot to learn. Fortunately, this researcher was firmly entrenched by then in University College’s Leadership and Organization’s program (Philanthropic Leadership specialization) taking two courses – Building 21st Century Organizations and Fundamentals of Fundraising. The latter, especially, helped me understand the fundraising lifecycle (identification, cultivation, solicitation and stewardship) as it relates to nonprofits. With each week’s lesson, I trained my thoughts on how to apply the knowledge I was gaining to the organization I wanted to start. But there was still the problem of not understanding the nonprofit sector, broadly, and how to establish a nonprofit, specifically. This was a real-world problem that needed a solution. This researcher sought that solution through research. Research that could be applied immediately and practically. I wanted the organization to be 501(c)(3), but needed to explore other options before making that recommendation to Landon’s family and friends. And, I needed to understand the environment in which the organization would function and to explore similar organizations. From these needs, three questions guided the research that followed:

1. What alternatives exist to establishing a 501(c)(3)?
2. How are similar organizations operated and managed?
3. What are some key trends affecting nonprofits?
Alternatives to Starting a 501(c)(3)

The desire to establish a nonprofit comes from a deep-seeded motivation to do good. But, starting a nonprofit and then managing the organization can be a long, sometimes difficult, task. So, before making the decision to create an independent, 501(c)(3) organization, this researcher explored some alternatives. They included donor advised funds, community foundation sponsorship, unincorporated nonprofit associations and giving circles. There are pros and cons to each of the following alternatives. Understanding them, though, was important before committing to building a Board, developing bylaws, creating organization policies and building the financial and other infrastructure components.

Donor-Advised Fund

A donor-advised fund is a kind of fund, usually operated by a sponsoring organization, into which cash and other assets are deposited and from which charitable contributions are made. This kind of fund is usually managed by a large financial services organization. These for-profit organizations, though, charge fees for services rendered. Not surprisingly, this reduces the impact of donor gifts. One of the early goals discussed for this new organization was to have 100 percent of donor gifts support programs and services. A donor-advised fund would make this difficult, if not impossible.

Community Foundation Sponsorship

Sponsorship is an alternative for those looking to allow for tax-deductible donations without shouldering the legal and financial responsibilities of operating as an independent organization. This kind of fiscal sponsorship allows organizations to start taking donations faster while focusing on mission rather than building an organization from scratch. One example this researcher explored is Rose Community Foundation. This sponsoring organization, however, would not allow our organization to choose scholarship recipients. We could only provide input into the final awardees. This was unacceptable to Landon’s family and friends. And, Rose Community Foundation service fees and fund minimums were prohibitive in ways similar to a donor-advised fund.

Unincorporated Nonprofit Association

An unincorporated nonprofit association is a group of people who come together to fulfill a mission without seeking tax-exempt, nonprofit status from the Internal Revenue Service. This option was considered by this researcher, because it would allow the organization to begin to fulfill the mission without waiting for approval for 501(c)(3) designation from the IRS. However, this option was not pursued, because it would not allow our donors to take a charitable gift deduction on their taxes. It also has the potential to de-legitimize the organization in the eyes of prospective donors.

Giving Circle

In a giving circle, individuals put their money and resources together in a pooled fund. This fund usually supports one or more organizations or projects that allow the group to realize their philanthropic objectives. While forming in this way does have a greater impact than individuals giving separately, it has the potential to limit the organization’s ability to raise funds and develop its own programs and services.

This researcher compiled and presented this information to Landon’s family and friends. In the end, we agreed to pursue the 501(c)(3) tax-exempt designation. Organizing in this way allows our donors to claim a year-end tax-deduction and the organization to claim sales tax-exemption. The nonprofit corporation status also allows the organization to function in perpetuity separate from the individual(s) who manage the organization. This could be hugely beneficial if the time comes that all founding members wish to relinquish responsibilities to others. Finally, 501(c)(3) designation allows the organization to one day seek grants and other funding from foundations. While that is not likely in the short-term, it is part of the organization’s long-term strategy.
With Landon’s family and friends in agreement to organize the organization as a 501(c)(3) nonprofit, this researcher turned his attention to finding organizations structured similarly to what we were considering for our organization.

Organizational Benchmarking

In his book Organizational Theory and Design, Richard Daft defines benchmarking as the “process of persistently measuring products, services, and practices against tough competitors recognized as industry leaders” (319). While there are not necessarily industry leaders among comparable organizations, the process of benchmarking these organizations does provide some key benefits. First, it gives insights into how other organizations are achieving their missions. “No two nonprofits are the same—every organization is shaped by its unique history, mission, size, goals, and community—but the sector shares…commonality” (BDO, 2018). These commonalities provide a good foundation on which to build an understanding of the nonprofit sector. Secondly, the process of benchmarking presents a unique learning opportunity. How are similar organizations communicating with donors? How are they fundraising? What are their criteria for awarding scholarships? How many scholarships and in what amounts do they award each year? The results of benchmarking provide answers to these and many other questions.

For the purpose of this capstone project, only secondary research into comparable organizations was conducted for the benchmarking project. This researcher was not in contact with any representatives from these organizations. Only publicly available information from the organizations’ websites, social media platforms, IRS.gov and Guidestar was used. Before embarking on this benchmarking project, however, I identified some key areas of commonality I was looking for in similar organizations.

• Memorial Fund – These kinds of organizations are established to honor the life and memory of a loved one; often by family members who (like this researcher) have little experience in starting a nonprofit. Sharing this commonality provides the best-case comparison for how these organizations function and the programs and services they provide.

• Scholarships – As our organization was conceived as a scholarship-granting organization, the awarding of scholarships is a key common-denominator factor. Though, comparable organizations could also provide additional programs.

• Fundraising – Similar organizations to be researched must rely on donors and fundraising as the primary source of funding for their scholarship fund.

• Governing Body – Comparable organizations must be governed by a Board who focus on the organization’s mission, strategy and goals.

• Independent – Comparable organizations should not be housed under a sponsoring organization such as a community foundation (i.e. The Denver Foundation). Rather, they should be run independently.

Key Findings

Twenty-one memorial scholarship nonprofits based in the United States were identified for the benchmarking research (Appendix A). Information about their scholarship programs were compiled around geography, fundraising activities and kind and numbers of scholarships.

• Geography – Seventy-two percent of the organizations award at least one local scholarship. This researcher defines a local scholarship as one given to a student from a specific high school or city or to a student attending a specific college or university. Twenty-eight percent of organizations award regional scholarships; those to students from multiple cities, states or regions of the country. And, nineteen percent give at least one national scholarship.

• Fundraising – Eighty percent of benchmarked organizations accept donations through their website while one organization accepted personal checks only. Sports tournaments were preferred by 42 percent of the organizations with golf being the most popular at 66 percent of tournament-fundraising organizations. Other popular fundraising types include annual dinners, 5K run/walks and online stores.

• Scholarships – For those organizations that include specific information about their scholarships on their websites and social media platforms, each awards ten or fewer scholarships annually in amounts between $1,000 – $5,000. Of these, only three organizations award renewable scholarships – those in which a previous awardee is eligible to apply for additional funding. And, three organizations award scholarships based on their fundraising efforts for the year.

These raw numbers provided valuable insights into the organizations’ structure and scholarship programs. Looking further into the data, this researcher identified some key-takeaways as well. Scholarships that were awarded to or from specific schools were directly related to the person for whom the memorial fund was established. The Zach Jones Memorial Fund scholarship, for example, is awarded annually to a graduating senior from Atascocita High School – Zach’s alma mater. The interests, skills and qualities of the memorialized were also reflected in scholarship candidate qualifications. The Tyler Philips Memorial Scholarship, for example, is awarded to students studying Agriculture or Produce. These were two areas of interest and study for Tyler himself.

This researcher inferred from these examples the importance for these organizations to honor the deceased by awarding scholarships to those with whom there are shared interests. And, six of the twenty-one benchmarked organizations provide financial support beyond scholarships. They support organizations with shared values as the memorialized such as music, literacy and sports programs.

This researcher also gathered valuable insights from information that was not presented by some organizations. Many did not list on their websites or promotional materials when their scholarship application opens. It appears that their applications are available on their websites year-round. Though, that could not be independently verified. And, nearly half of the organizations did not provide details on number and amounts of scholarships awarded annually.

All of this information was used to help inform some of the organizational design and operational decisions made by our organization. As was knowledge gained from looking at key trends affecting nonprofits today.

Nonprofit Trends

One of the great responsibilities of nonprofit leaders is visioning; the process of imagining all the ways the world can be changed by their organization and the ability to translate that image into goals, plans and problem solving. This long-term view is informed by knowledge and experience as well as an understanding of external forces that have the potential to put pressure on the organization. Analyzing these pressures, also known as trends, helps nonprofit leaders anticipate small changes and prepare for tectonic shifts.
Broad trends influencing the nonprofit sector include technology, marketing/communications and the economy. Technology’s rapidly changing pace requires nonprofit leaders to be flexible and agile to keep pace with changing donor tastes and preferences. These technological changes then influence how nonprofits market and communicate their message to donors. And economic forces heavily influence the level at which donors limit or upgrade their giving. Innovations in fundraising, though, may be most important to nonprofit sustainability and viability.
Technology
The impact of technology on the nonprofit sector cannot be understated; especially as it relates to individual giving and information sharing. Nonprofits must employ technology to have the greatest possible impact in a sector notorious for limited resources. Consider the following trends:
• The rise of social networks and the increasingly inter-connectedness of prospective and current donors affords nonprofit organizations an opportunity to reach a large number of people with a single, effective and impactful communication.
• Internet-user viewing habits reveal a trend toward consuming video rather than written content and a preference for mobile technologies over traditional desktop units.
• The use of Google and Facebook ads to target groups with specific internet-use characteristics helps in the identification of prospective donors.
• Crowdfunding (raising funds from a large number of people) and peer-to-peer fundraising (leveraging supports to raise funds on behalf of the organization) are two emerging technology trends in individual giving that must be considered as part of any fundraising plan.
Understanding these technology trends and applying them to the organization’s communication strategy can help the organization tell stories that are interesting and compelling and multiply the organization’s reach in ways no other medium can.
Marketing
Clearly, technology trends play an important role in marketing and communication for nonprofits organizations. But other marketing trends look to have a big influence as well:
• Partnerships that nonprofits make with similar organization and with for-profit corporations can help these organizations reach potential donors without adding too much pressure to resources that are already stretched thin.
• Direct mail acquisition and cultivation continues to decline, so nonprofits must move past this marketing mode to digital campaigns aimed at identifying and retaining donors.
• As marketing becomes more prevalent and pervasive, nonprofits risk their messages getting lost in the white noise. So, they must find a way to personalize content that connects with donors in a deeply personal way.
Responding to marketing trends can certainly be a challenge as an organization moves to mobile and video content. But, by knowing donors, segmenting them into appropriate categories and telling a visual story tailored to the donor, the organization can create a personalized experience that engages the donor and increases the likelihood that they will become loyal donors.
Economy
“Fewer Americans are making room in their budgets for charity, and nonprofits are increasingly relying on the affluent for support. Only 24 percent of taxpayers reported on their tax returns that they made a charitable gift in 2015…[a] decade earlier that figure routinely reached 30 or 31 percent” (Lindsay, 2017). And now, with the Tax Cuts and Jobs of 2017, most taxpayers will not itemize deductions; instead opting for the newly-doubled standard deduction. This means most Americans will no longer recognize a tax benefit for donations to charitable organizations. And while many donors will continue to give for philanthropic reasons, a study conducted by Indiana University predicts donations to nonprofits to decrease by around $13 billion in 2018. (Peterson Sullivan Accounting, 2018). Some estimates put this number as high as $20 billion (Tax Policy, 2017).
Another important change in giving is noticed in the debt-saddled Millennial generation. Many are living paycheck to paycheck with little, if any, savings. So, instead of giving money to nonprofits as their parents or grandparents would have, they are choosing instead to give their time (Picchi, 2014). This could have far-reaching implications as Baby Boomers shift wealth via inheritances to this younger generation. Will they shift their philanthropic ways of giving when they receive this money? Or, will they continue to give their time rather than their money? The answer could continue to impact the bottom line of the entire nonprofit sector.
Innovation
With reductions in charitable giving, it may be time for nonprofits to challenge the traditional model of fundraising. Their reliance on government funding and individual giving may not be sustainable in the long term. “With over 1.4 million active nonprofits in the United States, competing for fewer and fewer dollars, organizations must seek new funding sources” (Stecker 2014). Social entrepreneurship could provide a model by which nonprofits can insulate themselves from donor frugality and fewer government dollars.
Social entrepreneurship is the “use of start-up companies and other entrepreneurs to develop, fund and implement solutions to social, cultural or environmental issues…typically attempt[ing] to further broad social, cultural and environmental goals often associated with the voluntary sector” (Wikipedia 2018). In essence, social entrepreneurship is the application or hybridization of the for-profit model to nonprofit endeavors. Social enterprises are defined by their clear social objectives, profits that are invested to benefit the public (not distributed to shareholders) and by creating economic by providing services and/or goods that address society’s needs. It’s all about creating additional revenue streams for nonprofits to achieve a more sustainable business model. Examples include selling merchandised branded with the organization’s logo or creating a fee-for-service approach. So, rather than rely on individual giving, corporate sponsorships or government grants, nonprofits could achieve their mission through revenue-generation. The goal, ultimately, is to become self-sufficient through profit rather than donations.
For our organization, there are opportunities in thinking creatively about how to be sustainable in the years to come. While the organization is not likely to be a solely profit-driven enterprise, a hybrid social enterprise (one which combines philanthropy and profit) may be possible.
In establishing our new organization, its leaders must understand and appreciate all these trends to be “armed with information useful for decision making and planning for the future” (Nonprofit 2018). These trends will profoundly shape the environment in which the organization will function. So, regularly gathering and analyzing trend information must be the cornerstone of all successful planning. In fact, the preceding research informed not just the design of the organization, but the strategic roadmap presented later in this paper. It also played a critical role in what we named the organization.
Naming the Organization

One of the first decisions this researcher, in consultation with Landon’s family and friends, had to make was one of the most important. What would we name the organization? We knew we wanted Landon’s name in the organization’s name. For predisposed and prospective donors, name recognition would be critical to our success. We wanted it to be descriptive and easy for people to remember. Knowing we wanted to award scholarships, we thought about including the word “scholarship” in the organization name. We also considered using Landon’s first name only; The Landon Project, for example. What to name our organization became clear to us, though, after reviewing the organization names from the benchmarking research – Landon Padgett Memorial Fund. We chose the word “fund” to reflect that our pool of donor gifts could be used for many purposes; not just scholarships. It gives the organization room to expand and evolve with our donor community and meet needs we many not recognize today. Deciding on the name was a big decision for this informal group of Landon’s family and friends. It was also the catalyst for organizing this group into a formal governing body.
Board of Trustees

For most nonprofits, board members should bring at least these two critical components to the organization: affluence and influence. Affluence is related to one’s ability to bring their personal wealth to the organization. Influence is one’s ability to bring others to the organization. Basically, board members should be selected based on their ability to give money and attract new donors.
When building a board for Landon Padgett Memorial Fund, however, personal connection to Landon was more important in the recruitment process than personal wealth, especially. Results of the benchmarking study showed that comparable memorial organizations filled their Boards with family and friends. Selecting Landon’s family and friends to serve on the Board of Landon Padgett Memorial Fund provided a couple benefits. First, they are more likely than others to be intimately connected to the organization’s mission. Secondly, they would be invaluable in connecting to our pool of predisposed donors – those who knew and loved Landon. And as an added benefit, this group of family and friends would bring some valuable expertise to the organization; law, public relations, marketing and leadership development among others.
This researcher met with each prospective board member to discuss joining the Board and shared with each of them what to expect from Board participation. All but one agreed to fill a seat on the Board.
As an all-volunteer organization in start-up mode, this researcher knew The Fund’s Board would have to be a “working” board. That is, they would need to do some of the work to ensure we could achieve our mission and create a sustainable organization. While this had been my hope, the reality with such an unexperienced Board was much different. This researcher hopes to remedy this deficiency through board and leadership development strategies included in the strategic roadmap.
Applying the Research

The information gathered from this researcher’s examination of alternative organizing structures, similar organization and nonprofit trends informed more than just the decision to organize as a 501(c)(3) nonprofit corporation, to adopt the name Landon Padgett Memorial Fund and to fill Board seats primarily with Landon’s family and friends. In designing our scholarship program, we followed the lead of many of the benchmarked organizations. We’ve decided to award multiple non-renewable $2,000 local scholarships to seniors graduating from Landon’s high school alma mater. We are currently in discussions to partner with the National Flag Football League of Atlanta to host a flag-football tournament to raise additional scholarship funds.
From the nonprofit trends research, we made some important organizational decisions as well. As with the National Flag Football Leagues of Atlanta, we have and will continue to partner with nonprofits (Children’s Healthcare of Atlanta) and for-profits (CrossFit Chamblee) to share our mission with a larger audience. We are focused on digital, rather than direct mail, campaigns to attract and retain donors. We are leveraging social networks to make fundraisers of our donors. The peer-to-peer use of Facebook birthday fundraisers has already raised nearly $500 with at least a dozen more donors planning to use this feature in this fiscal year, alone. We are limiting words and prioritizing visuals to engage followers across all print and digital media platforms. And, we’re using Facebooks ads to strategically message social media posts to targeted audiences. Our plan to add an online store speaks to our appreciation that we must diversity our sources of fundraising to sustain the organization long-term.
Each of these examples demonstrate the immediate application of this researcher’s findings in the design of the organization, the implementation of its first program and its plans for the future. But, perhaps the best example of how this researcher practically applied the research is demonstrated in a benefit held on our behalf in November 2018. This partnership which relied on a highly-visual, digital marketing campaign and which leveraged peer-to-peer social media connections provides a model on which Landon Padgett Memorial Fund can shape future partnerships for organizational success.
CrossFit Chamblee of Atlanta Benefit

Even before officially launching the Landon Padgett Memorial Fund, Steve Walker, owner of CrossFit Chamblee contacted this researcher with an extraordinary offer. CrossFit Chamblee, just outside Atlanta, Georgia, was a very special place for Landon. He was both an athlete and coach there. So, we were especially honored and excited when CrossFit Chamblee offered to host a benefit on our behalf. That event, the 1st Annual LANDON benefit for Landon Padgett Memorial Fund was held on November 3, 2018. The benefit included a workout of the day, food and drinks and a raffle that included prizes from more than 30 businesses and individuals. Online donations accepted before the event, combined with t-shirt and raffle ticket sales brought in just over $8,000 – a demonstration of the power of community and the immense love for Landon that exists in the CrossFit community.
This event benefitted the organization in a number of ways. Financially, money raised from the event will fund scholarships in Landon’s name in 2019. Operationally, it allowed The Fund to test our financial, communications and donor management infrastructure. Mostly, though, since CrossFit Chamblee planned and managed the event, we were mostly hands-off. All the Board had to do was show up, connect with guests and share with them information about The Fund. We expect in subsequent years that we will take a more active role in planning the event in hopes of increasing donations and growing our donor community. This benefit event also formed the fundraising foundation on which a three-year strategic roadmap was drafted.
Strategic Roadmap

Every organization needs to know where it’s going to ensure it has the resources it will take to get there. To date Landon Padgett Memorial Fund has functioned well with little formal planning or direction. The bulk of the organization’s work, though, lies ahead. So, the purpose of the strategic roadmap (Appendix B) is to offer a long-range direction for the organization. It is a comprehensive, living document that will stay with the organization over time and will be modified as the organization grows. The proposed objectives and strategies described have not yet been approved by the Board of Trustees. They are the suggestions of this researcher only. Once reviewed, amended and approved by the Board, this roadmap will guide the organization’s efforts over the next three fiscal years (FY20 – FY22). Along with a proposed budget (revenues and expenses), this roadmap provides objectives and strategies in five key areas:
1. Programs
2. Development & Fundraising
3. Marketing & Communications
4. Board Development
5. Leadership Development
In the months following the approval of this strategic roadmap, The Board of Trustees and Executive Director will develop goals and metrics to ensure we are meeting our objectives in a timely, effective and efficient manner.
For this researcher, the strategic roadmap represents the culmination of everything he’s learned in the Organizational Leadership program (strategic planning, fundraising, social media, leadership, board development and finance for nonprofits). This roadmap is a demonstration of knowledge gained and this researcher’s ability to apply that knowledge to a real-world organization. And, many of the strategies represent areas of further research and exploration for this researcher.
Conclusion
Landon Padgett Memorial Fund was established to honor and recognize the extraordinary life of James Landon Padgett. He was a kind and courageous man who met life’s opportunities and challenges with quiet determination; cultivating relationships with friends, colleagues, patients and their families along the way. Throughout his short life, Landon remained fiercely compassionate, trustworthy and loyal to the people closest to him. And in return, these relationships sustained him until his untimely death.
There are lessons in how Landon lived his life; in how he valued relationships. These lessons, if understood and applied correctly, can guide the organization in cultivating and sustaining donor relationships. Bringing people to the organization, keeping them engaged and letting them live their philanthropy through the organization is all about acting with integrity, treating people with respect and allowing donors to be heard. Landon knew this instinctively. Now, to cement his legacy, Landon Padgett Memorial Fund must act accordingly.
To this researcher, it seems kindness and compassion are in relatively short supply these days. I’ve learned, though, that they often live in quiet places. In the humble deeds of people like Landon. Those who give from a place of love. This researcher thinks that’s worth celebrating. So, with Landon Padgett Memorial fund, we celebrate. We celebrate Landon. We celebrate his life and legacy. And, we look to a future where, with our donors, we will help dreams take flight.

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