CFOs and CDOs should recognize the different demands of their jobs and the likelihood that they will have different orientations and personalities, and to see these as complementary strengths rather than as a reason for conflict.
During my career as a senior development officer, I worked with nine chief financial officers. Some were difficult relationships, and some were among the healthiest and most productive professional partnerships I’ve ever known. In the course of writing this article, I had the opportunity to interview several highly accomplished chief financial officers, each with more than 20 years of experience working with CDOs, together with the Director of Rice University’s Center for Philanthropy and Nonprofit Leadership and creator of the Development and Finance Symposium. Content from a recent webinar that I developed in collaboration with Susan Feagin and Robert Kasdin from Columbia University also contributed to this article.
What about the CFO and the CFO’s team does today’s CDO most need to know?
- CFOs are responsible for sound financial management and planning. A few CFOs may believe that it is their job to say “no” to anyone who wants to spend money, including the CDO, but the majority of CFOs want to do everything possible to build the financial strength of their organizations, including investing appropriately in development. It is important for CDOs to view CFOs as potential partners, rather than as roadblocks, for a productive working relationship to blossom.
- CDOs and CFOs look at numbers in very different ways. In fact, they are PAID to look at numbers in different ways. Too often they come into conflict because they don’t plan for this, but rather find themselves in meetings with other senior administrators or board members presenting numbers that do not appear to reconcile, potentially putting one or the other on the defensive. Such conflict is easily avoided, with proper planning in advance of presentations. The differences in how CFOs and CDOs count and report fundraising are not new, but they are more challenging today, given greatly increased pressures on presidents and boards related to fundraising. This increases the potential for conflict between CDOs and CFOs.
- For example: a president and board may feel pressure to count, for campaign purposes, a large gift that will not be paid in full for ten years. Leaders including the CEO and CDO, as well as the donor, will want to put the focus on the big number, and the CFO will feel like a killjoy when reminding everyone that funds will not be available to build the building or support the program until several years in the future. An effective CDO-CFO partnership results in proper celebration of the gift accompanied by clear communication that sets appropriate expectations on the part of all.
- Some gifts—this is often true with capital projects—may require immediate expense and require borrowing in the period between pledge and payment of gifts. Much better for the CFO and CDO to be on the same page about overall financial impact of a gift well before a gift is accepted.
- CFOs are responsible for organizational compliance with rules and regulations, and they are in a position to keep CDOs and their teams out of trouble!
- The roles of CDO and CFO typically draw people with different personality types, which likely would make them unsuited for success in the other role. In the words of one CFO, “my development colleague and I could probably put our organization out of business in no time flat if we switched jobs!” It is important for CFOs and CDOs to recognize the different demands of their jobs and the likelihood that they will have different orientations and personalities, and to see these as complementary strengths rather than as a reason for conflict.
- Research completed by Rice University’s Center for Philanthropy and Nonprofit Leadership reveals that CFOs and CDOs are not on the same page in pursuing financial objectives. This can be alleviated to a large degree by CDOs and their teams becoming better versed in the language of finance, and CFOs and their teams becoming better versed in the language of development. Some of the most successful organizations have regular presentations by leaders of each area to teams in the other area.
What can the CFO and CFO’s team offer to today’s CDO, with respect to strengthening the:
- identification of potential donors
- CFOs keep up on major financial transactions in their communities and may see things that would be of interest to CDOs, such as the sale of a company or of a major piece of real estate.
- CFOs can assist in expanding corporate relationships to include philanthropy.
- interest, belief, and confidence of potential donors
- CFOs can make major contributions in this area. Donors are only getting more savvy and showing more interest in the financial health, stability, and plans of the organizations they support.
- CFOs can meet with donors, or can help prepare development officers for meetings with donors, providing information that builds donor confidence in an organization’s overall finances or in the plans associated with a particular project or gift.
- CFOs can help explain the way a donor’s endowment will be invested and spent, putting this in the context of overall endowment performance and policies.
- CFOs can ensure that donor intent is being met and that resources are safeguarded in terms of future value and buying power; they can provide information to development officers or donors that demonstrate proper stewardship.
- CFOs can provide training to the development staff on organizational financial objectives, metrics, history, projections, and so on. The more CFOs know about donor interests related to these questions, the better training they can provide.
- engagement and involvement of potential donors
- CFOs can help engage donors with an expertise in finance, investment, and strategic planning who want to make contributions of time, talent, and skill.
- success of fundraising solicitations
- CFOs can provide data that strengthen gift proposals—overall finances, endowment performance, investment strategies, or financial plans specific to a program or project, for example.
- CFOs can partner with development officers or other institutional leaders in cultivation or solicitation meetings, answering donor questions and boosting donor confidence in financial health and planning.
- belief and confidence of organizational leaders in the CDO and the development program
- CFOs can bolster confidence of board members, CEOs, and others, particularly if they are able to show that they are working closely with their CDO partners on budgets, structuring of gifts, and measurement of performance. They will be asked, so much better that they can answer truthfully and accurately about knowledge of and confidence in CDO plans!
- Many consultants report a breakdown in the CFO-CDO relationship that inevitably creates a downward spiral in confidence. These two are extremely important financial officers, and finances are a major focus for board members and CEOs. There is no room for the CFO talking down the CDO or vice versa—CFOs and CDOs must work out disagreements privately and keep lines of communication open.
- When reporting to board committees, especially finance and development, CFOs and CDOs should make a point of supporting each other—mentioning the strength of the other’s plans and assistance, and underscoring their collaboration and coordination particularly around financial reports and planning.
- infrastructure, staff, and volunteers required to manage the business of fundraising
- CFOs often are in a position to offer expertise on managing staff, creating effective business policies and processes, and developing useful metrics and reports.
- CFOs can help all development staff members understand the language of finance, improving communication with board members and other volunteers and donors who live and work in the world of finance.
- Development is one of the few revenue centers (as opposed to cost centers) in nonprofit organizations. But every dollar spent on development is not spent on education, or artistic presentation, or health care delivery, or provision of other services at the core of the organization’s mission. CFOs and CDOs with strong partnerships create the right balance between investment in mission, and investment in fundraising programs that create enhanced revenue streams for enhanced future investment in mission. They need to be accountable to each other and accept up front the different internal and external pressures operating upon each of them.
- CFOs can help CDOs demonstrate return on investment that builds confidence of other organizational leaders in the level of investment being made, and being planned, in development.
- CFOs often have responsibility for human resources and other administrative areas. They can help CDOs ensure that personnel and program costs are equitable when appropriate and also help CDOs advocate for exceptional allocations when required. For example, CFOs who understand and buy in to staffing plans are much more likely to support compensation packages that may be unusual for an organization but are necessary in the highly competitive fundraising market. Planning ahead, and together, may remove barriers early and raise the likelihood of creative solutions.
- culture of philanthropy, including a widespread appreciation for the impact of philanthropy on the organization
- CFOs whose CDOs take the time to engage them in conversations about philanthropy and who are open about the challenges and extraordinary opportunities involved in working with philanthropists are much better equipped to assist in building a culture that embraces philanthropy, rather than sees it as a necessary evil.
- CFOs can provide information that demonstrates the difference gifts make, including the impact of unrestricted giving.
- CFOs can help make sure that finance staff members are trained in the language of fundraising, improving communication with the development staff.
- In the words of one CFO, “Philanthropy is about building relationships from the bottom up. Every interaction our organization has with a donor and everything we do in each department affects philanthropy, because our actions affect relationships. CFOs need to see that relationships with donors are multi-faceted and that our work can have a positive or negative impact on those relationships. CDOs need to help us make positive contributions, keeping us in the loop as much as appropriate and feasible.”
What does the CFO most need from the CDO?
- The most obvious piece is accurate information—on gifts, pledges, projections, and donor expectations.
- Related but not so obvious is honest assessment on fundraising potential in various categories: unrestricted, restricted to endowment, restricted to budget-relieving uses, restricted to non-budget-relieving uses, and gifts that may require additional expenses beyond those covered by the gift. It is particularly important that CDOs speak up when they believe that a fundraising goal associated with a particular project is not realistic, either because of lack of sufficient donor capacity, or lack of likely donor interest, or both.
- Acknowledgment that a $1 million gift paid in cash today is different from a $1 million gift paid in cash over ten years, and both are different from a $1 million bequest intention: CFOs want to join everyone in celebrating the generosity of all three donors, but they need CDOs to recognize the varied impact of different gifts on the operating budget and on the balance sheet.
- For example, a major gift officer with a salary of $100,000 who closes a $1 million outright unrestricted gift to operating has helped the organization net hundreds of thousands of dollars that hit the bottom line. The same major gift officer paid $100,000 who closes a $1 million gift to endowment results in a $100,000 hit to the bottom line, as endowment income will come into the operating budget in later years, and only at 4 or 5%. These are both great gifts, and they may be wonderful returns on the investment made in development, but they have a very different impact on the bottom line. It is critically important that both short and long-term impact of fundraising efforts is within planned parameters and understood by all organizational leaders, including and especially the CFO and CDO.
- Some gifts cost money, in that they require the organization to reallocate operating dollars in unanticipated ways to cover costs not fully covered by the gift. CFOs need their CDO colleagues to bring them into the planning for such gifts early in the process.
- CFOs need CDOs and development staff members to understand, and to help donors whenever possible to understand, that restricted and unrestricted gifts have very different implications and impact, not only on the bottom line, but also on the organization’s overall ability to respond to a significant financial challenge or opportunity.
- CFOs recognize that nonprofit success is measured to a significant degree by fundraising results. This includes measurement of the CEO and the whole administrative team, not just the CDO. CFOs want to be part of a winning team. But they are also measured on sound financial planning, and sound financial planning requires sound fundraising planning, which includes clarity around different types of revenue and their relation to present value. CFOs rely on CDO partnership in financial planning.
- CFOs need CDOs to say they don’t know when they don’t know the answer to a financial or legal question that arises in the context of a gift discussion. It is much easier to deal with a financial or legal complication up front than after a gift is nearly closed or closed.
- CFOs also need honesty around risk. They understand that philanthropic projections contain risk: no one can know for certain how donors will respond to solicitations. They therefore must be willing to take more risk, but their CDOs can help by giving as accurate an assessment as possible about risk associated with various projections.
Success in the CDO-CFO partnership requires:
- empathy: an ability and willingness to understand and appreciate each other’s perspectives;
- commitment to expecting the best from each other and from each other’s teams; begin with the assumption that both CFOs and CDOs have the same ultimate goal: optimizing the fulfillment of their organizations’ missions;
- give and take in regular open and frank discussion, in person and not just by email;
- relentless accountability on the part of the CDO—recognize that additional investments in development are accompanied by additional expectations;
- a desire to participate in building a strong culture of philanthropy on the part of both CDO and CFO; and
- trust, respect, and a sense of humor.
Ron Schiller, Founding Partner of the Aspen Leadership Group, interviewed the following individuals in connection with this article:
David Creamer, Vice President for Finance and Business Services and Treasurer, Miami University of Ohio
Jennifer B. Elliot, Senior Vice President, Aspen Music Festival and School
Susan Feagin, Special Advisor to the President, Columbia University
Robert Kasdin, Senior Executive Vice President, Columbia University
Thomas D. May, Chief Financial Officer, Boston Symphony Orchestra
Angela Seaworth, Director, Center for Philanthropy and Nonprofit Leadership, Rice University