Solve the Donor-Advised Fund Squeeze

Category: Lee Kuntz

Solve the Donor-Advised Fund Squeeze

October 19, 2022 | 2:07 pm

Donor-advised funds are a big growth area for foundations. More donors are contributing to these accounts at their favorite foundation than ever before. Yet these funds provide little margin to pay for the services they require. Foundations are squeezed between low margins and high service requirements as the number of funds climbs.

Some foundations address this challenge through maximizing each donation opportunity. Some are looking internally. These foundations are decreasing the labor and cost to serve donor-advised funds while delivering better and faster results to their contributors.

What is a Donor-Advised Fund?

When a donor contributes to a donor-advised fund at a public charity, that person is generally eligible to take an immediate tax deduction. Then those funds are invested for tax-free growth, and the giver can recommend grants to virtually any IRS-qualified public charity. Donor-advised funds are the fastest-growing charitable giving vehicle in the United States, because they are one of the easiest and most tax-advantageous ways to give.

The Squeeze

Public charities, mainly foundations, receive minimal fees for the work they do to manage donor-advised funds. Yet these funds require substantial services, including investment management, grant payment, and grantee due diligence. For many foundations, the labor and cost of performing these tasks approaches or is greater than the fees they receive for these accounts. As these funds continue to proliferate, some foundations find that managing them siphons significant time away from fulfilling their essential purpose.

The Solution

Some of these foundations are turning to advanced process improvement to decrease their labor and costs as they support their donor-advised funds. Once they get trained on the tools that are working for community foundations, these proactive leaders are redesigning process to recapture work time while delivering consistently good service to donors.

For example, one community foundation used process implement training and coaching to go from 75 to 39 steps in completing donor-advised grants. Once the new steps were implemented, their average processing time dropped from 50 minutes to only 25 minutes. With the savings of time, the foundation is able to deliver grants more predictably and efficiently—to the delight of donors and the nonprofits that receive those grants. In addition, the recaptured work time is now being used to address other community needs.

Build Capacity through Advanced Process Improvement

Foundation leaders are savvy. They constantly tinker to improve how back-office work is done. But the donor-advised grant squeeze may require more than a few tweaks in process. It may require making an investment in advanced process improvement.

Contact Lee Kuntz to learn how to address this squeeze through redesigning processes. Several community foundations have built their process knowledge and redesigned their donor-advised fund processes to recapture thousands of hours and deliver better and faster results. You can too!

Achieve Process Improvement Results: Start at the End

October 19, 2022 | 2:05 pm

Have you been part of a process improvement project that required an investment of hours upon hours over months or even years? Was a process improvement effort stopped because the team could not agree upon which improvement ideas to implement? Or an improvement initiative that made things worse instead of better?

With results like these, no wonder leaders hesitate to authorize process improvement initiatives. Yet some leaders are achieving impressive results from redesigning processes. They cut the work time to serve their customers in half, recapturing and repurposing thousands of hours. At the same time, they deliver better outcomes to their communities, boards, and partners.

These diametrically opposed outcomes beg the question: What creates the big difference in results?

What is Process Improvement?

The difference in results stems, in part, from the varying working definitions of process improvement. One website defines process improvement as “a systematic approach that can be used to make incremental and breakthrough improvements in processes.” While this approach sounds promising, it falls short of bringing transformational change.

A process redesign project that focuses only on improving how work is done will not significantly improve outcomes despite taking many hours of staff time. For example, one team shared that they worked on an improvement project for eighteen months. They met for two hours every month and talked about a host of cutting-edge ideas. Yet the team could not come together behind any idea they were willing to try. After they had invested more than 400 work hours generating ideas without implementing any of them, people started dropping out of the project. Then the CEO identified a new initiative and the team switched its focus to that priority.

Start at the End

I view process improvement more holistically. I see it as a tool to improve outcomes in a broader sense. It can be leveraged to enhance quality, customer experience, accuracy, compliance, or any other key process outcome. When leaders start by identifying the specific outcome(s) that must be improved, they make it possible to achieve impactful process improvement results.

Recently, a chief operations/administration officer (COO) became aware that her organization was incurring significant late-payment penalties. Phone calls about the late payments from both internal managers and external partners were eating up her team’s time, and the organization’s financial resources were being squandered on paying the penalties.

The COO talked with her team about what she saw and then initiated a process redesign project with the specific goal of getting payments out on time. She leveraged my team’s process improvement training and mentoring to help the team better understand what was actually happening. Once her team saw that they could solve the pain they were experiencing, they eagerly stepped forward to be on the redesign team. This team used their new process improvement knowledge to reduce the payment process from 110 steps to 60 steps. Now they are implementing these new ideas and have shortened the time to get payments out. They will no longer be plagued with collection phone calls and can reinvest their time in helping the organization fulfill its key objectives.

Achieving process improvement results starts with identifying the needed outcome(s) first. After all, would you start a road trip without picking a destination? With no destination, you may end up in Alaska, rather than California. Or on the side of the road, out of provisions for the journey. Only through setting a clear destination can your team succeed in achieving the improvement they need.

Focus Delivers Process Improvement Results

As a coach and a trainer, I have opportunities to influence leaders as they seek to achieve process improvement results. Therefore, I first ask which outcomes need to be improved.

When leaders focus on improving specific process outcomes, they foster employee engagement and leadership support. Starting with a particularly painful outcome is a great first step. For example, a director of donor relations received calls from three donors who said they received someone else’s gift acknowledgement letter. After awkward apologies were made and the letters were corrected, the director called me to learn how she could quickly address this situation so it would never happen again. I coached her and the team through a four-hour rapid process improvement event. I encouraged the group to kept one essential outcome in mind: Gift acknowledgements must be sent out to the correct donor every time.

Being clear about the goal helped galvanize the team to take action and be laser-focused in their redesign work. This focus shortened the time needed for the improvement work, as there were no side trips that consumed valuable team time and energy.

Your Next Process Improvement Results Project

When your team needs to attain a given process outcome and is missing the mark, think process improvement. Whether your issue is an unhappy customer, overwhelmed employees, or a board demanding answers, start by identifying the specific outcomes needed. Communicating with employees about the missed mark and committing to resolve it can begin your journey to achieve impressive results.

Some organizations have built their process management skills and routinely fix inadequate outcomes successfully and quickly. You can, too. Contact me, Lee Kuntz, to talk through how your team can undertake rapid improvement that achieves process improvement results and promotes organizational success. Achieve Process Improvement Results: Start at the End

Contact Lee today to discuss your challenge.