Donors v. Clients: Overcoming the Tradeoffs

Measuring performance can be even harder in the non-profit sector, where satisfying the non-paying clients (e.g., poor children in Honduras) and the paying clients (e.g., rich donors in Houston) are often very separate challenges. This dynamic is complicated by the fact that survival depends more on serving donors with excellence than on wowing the kids with outstanding service. Their likelihood to recommend your services to other poor children is not economically relevant, at least in the most direct sense.   

Most non-profit organizations are not designed to serve both client segments well. One usually trumps the other in the organizational hierarchy, and either donors get neglected or the team under-delivers on advancing its mission.  Many Executive Directors end up embodying this tension. They got into this business to save the children, and now they’re spending most of their time eating Event Chicken and making conversation with eccentric oil executives.  In this scenario,  the mission often loses. Impact is undermined by the distraction of leaders who can’t fully leverage their talent to improve service delivery “on the ground.” 

The tension reminds of your research, Frances, on how difficult it is in the for-profit world to serve distinct customer segments with one service model. Tiffany’s is my favorite example. The difference between Tiffany’s mass-market customers and its traditional blue-blooded segment is wreaking havoc on company operations, and that’s got nothing on the gap between clients and donors in most non-profit organizations. Rural Honduras is a long way from C-suites and charity balls.

Trying to serve vastly different customers with one set of systems is widespread in the non-profit sector, a practice accepted as a cost of doing business with other people’s money. But it may be possible to overcome some of the tension by creating distinct service models for clients and donors. These models would coexist under one organizational umbrella, but each model’s resources – including its human resources – would be aggressively customized to the needs of one segment. There are hints of this structure in many organizations, where the fundraising team is often compensated differently, but there may be advantages in pushing the design towards its logical conclusion. At the very least, it might help coax a few Executive Directors I know back off the ledge.

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