The changing economic environment requires all stakeholders -- staff, members, boards, clients and partners -- to understand the source of funding for an institution’s work.
Each year, every employee in our office is required to certify that his work is aligned with the source paying his salary. As is typical at research universities, any employee whose salary is partially paid by a grant must certify that he is working on that project and at what percentage.
None of the other not-for-profits and congregations where I have worked required such certification. The advantage of the certification system is that it focuses the employee’s attention on the source of funding. Every employee is prompted to wonder about the priorities of the funder and how this project furthers the funder’s aims. Nothing in a workplace focuses attention as much as discussing a person’s salary.
But the system has its challenges. Because funding is most often directed to a specific project, it can be difficult for employees to know how the project connects to the larger purposes of either the funder or the employer. The certification process can create a division of loyalties.
The mindset of “following the money” challenges all employees to examine the economics of their work. In my previous jobs, more than a few employees believed that they should be paid to do what they wanted to do. Because many felt a call from God on their lives, they assumed that the purpose of the organization and whoever funded it was to provide a platform to do their individual work. When this worked well, the employee was highly motivated. When tension in the priorities developed, the employees often expressed confusion and even betrayal.
Once upon a time, donors gave to support organizations and trusted that the organization would do whatever possible to accomplish the mission. But the decline of the United Way and the increase of Kickstarter campaigns signal the degree to which many donors expect to direct money to specific projects and demonstrable outcomes. The pressure is on for organizations to have transparent budgets that allow donors to see exactly what each project costs.
In the late 1980s, I served on the budget development committee for my denomination. I learned that sales from the denomination’s publishing house subsidized many of the youth, children’s and educational ministry consultants and conferences that my congregation enjoyed. When my church bought a Sunday school book, it was paying for that book as well as many other services. Before serving on the committee, I had had no idea about the true cost of consultants or conferences.
Back in those days, it had not yet occurred to my church that it had any choice in Sunday school literature. When we began to shop on the open market, we discovered that other literature was cheaper. Once hundreds of churches began to make that move, the funding for all those conference and consultations disappeared. Those that survived had to charge sharply higher fees. The virtuous cycle that provided services to congregations collapsed into an a la carte system with every service separately funded.
In “On Faith,” Steven Dilla argues that congregations and related institutions have the opportunity to receive more money if we understand the changes in charitable giving. He says that 85 percent of every dollar given to charity in the United States has the potential to go to churches. But our share of the charity pie is decreasing, according to the Lilly Family School of Philanthropy at Indiana University. Dilla argues that churches need a new model for giving that is much more transparent to allow more alignment between donor intent and the actual work.
A dramatic example of what happens as revenue sources shift is documented by the The Brookings Institution in an essay on the decline of journalism in the United States. Robert Kaiser shows that the advertising revenue of all of America’s newspapers fell from $63.5 billion in 2000 to about $23 billion in 2013 and continues to fall. Google’s advertising revenue has grown from $70 million in 2001 to $50.6 billion in 2013. Kaiser points out that the Washington Post had a chance to acquire a substantial stake in Google in 1998, but passed on the opportunity.
Sources of funding are particularly important these days in higher education. As a university employee in a tuition-dependent school, I am mindful that any cost borne by the school is paid by students. When developing a budget request to my boss, I wonder, “Why should students borrow money to pay for this proposal?”
Addressing the changing economic environment requires participation by everyone involved -- staff, members, boards, clients and partners. A good place to start the conversation is to ask about where the money comes from. Developing practices that require everyone to understand the source of funding might help.