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Sunday, 30 March 2014 22:00

Public Transparency: Nonprofits turn to ‘earnings call’ model to discuss financial, operational performance

Written by  Jane C. Simons and Joe Boomgaard
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Goodwill Industries of Southwest Michigan President and CEO John Dillworth contends that it’s difficult to compare the impact that a nonprofit has in the community with the financial performance of a public company — and capture that nuance and engage with local stakeholders in a conference call setting. Goodwill Industries of Southwest Michigan President and CEO John Dillworth contends that it’s difficult to compare the impact that a nonprofit has in the community with the financial performance of a public company — and capture that nuance and engage with local stakeholders in a conference call setting. COURTESY PHOTO

Nonprofit organizations and public corporations have more in common than it might appear.

Both types of companies are responsible to key stakeholders and they have an obligation to be open about their financial and operational performance. However, the two sectors have often used different methods of sharing that information and engaging with their shareholders.

But taking a page from the public company quarterly earnings call, some nonprofit organizations are now turning to “impact calls” to keep their donors and stakeholders informed about their fiscal health and their strategic direction.

In February, GuideStar USA Inc. held its first ever “impact call” in an effort to be more transparent about its operations to its own network of donors, users and supporters. The Washington, D.C.-based nonprofit publishes the financial reports of nearly 2 million U.S. nonprofit organizations.

More than 480 people logged on to the call to hear GuideStar’s 2013 financial results, its upcoming goals and impact on the nonprofit sector. The call also highlighted increases in its website visits and social media followers.

“From the standpoint of how they are communicating with their stakeholders, I think this is a great idea,” said Diana Sieger, president of the Grand Rapids Community Foundation, which had three staff members listen in on the call. “I think that being as transparent as possible is important.”

That said, the conference call idea would likely work better for national nonprofit organizations that have far-flung constituencies, unlike the close group of stakeholders that a community-based nonprofit has, Sieger said.

“I would hope that local organizations would have a closer relationship with their stakeholders than a conference call,” she said.

Keith Hopkins, founder of Hopkins Fundraising and Consulting LLC in Ada, agreed with Sieger.

“GuideStar is doing what many nonprofits in West Michigan have been doing for years. That is, meeting with donors regularly to report on how charitable gifts have been used for positive community impacts,” Hopkins said. “Most campaigns have a ‘report back’ function at the end of the fundraising to let donors know that goals have been accomplished and anticipated community benefits have been achieved.”

In addition, Hopkins said that in West Michigan, the nonprofit donor base is geographically close and regular communication via face-to-face meetings, both individual and through group sessions, allow for effective communication around meeting goals, achieving benchmarks and improving the community.

Before resorting to the impact call, GuideStar provided its board with a financial report that it posted annually on its website, according to reports. The call was simply an effort by the organization “to be walking the walk” about information sharing and transparency, GuideStar President Jacob Harold told the Washington Post.

“We don’t want to be hypocrites,” he said.

But a quarterly or annual conference call is far from the only way for a business — whether for-profit or nonprofit — to communicate with stakeholders. For nonprofits, there may be more beneficial and easier ways to share data, sources said.

In particular, that’s because a quarterly investor style of call can be costly to set up, webcast and host, not to mention it can drain management’s time in preparing for the event, said Jessica VanSolkema, director of financial communications for Lambert, Edwards & Associates Inc., a Grand Rapids-based investor relations and public relations firm. The firm helps around 20 public companies in communicating with Wall Street, industry analysts and investors.

“In our view, the conference calls are not necessarily the most cost-effective way for an entity to communicate with their constituents,” VanSolkema said. “Probably in this age of social media, there’s a more cost-effective or free information sharing tool such as Facebook or Twitter or YouTube. There’s lots of other ways they can share this information.”

One often overlooked avenue for organizations to disseminate important information is via their own websites that already reach the audience they want to communicate with, she added.

“For a nonprofit, I don’t think that [a conference call with stakeholders] would make good sense,” VanSolkema said.

John Dillworth, president and CEO of Goodwill Industries of Southwest Michigan, echoed those sentiments. There’s a different set of circumstances for nonprofit organizations that just don’t fit with the format of a quarterly conference call for a public company, he said.

“It’s about dollars and cents,” Dillworth said of the public company calls, noting that nonprofits are measured by the people they impact. “People aren’t widgets, so it’s not a one-size-fits-all situation. One nonprofit could serve 30,000 people in a year and another could have served 300. It may be in the depth of services they offer. There is the danger of people getting used to statistics that can be manipulated.”

Both Sieger and VanSolkema said there is value for nonprofits in sharing as much information as possible with their audiences. Transparency about an organization’s financial and operational performance is paramount, they said.

“As part of their overall communications strategy, I do think they could take a page from public companies and think about the issues … like management accountability, providing transparency, focusing attention on the organization’s strategic direction and placing their results in the context of trends,” VanSolkema said. “I do like the idea of sharing results and stories and telling people in a larger context what they’re trying to accomplish and did they hit the mark or did they not hit the mark.”

It’s that kind of honesty and transparency that donors are demanding these days, Sieger said.

“In order to make real change or make a good direction on a particular issue, frankly, that means taking risks. That may mean not cutting it at some point and coming back and saying, ‘That didn’t work. Let’s try this,’” she said. “I think that being as transparent as possible is important.”

Dillworth said he thinks people give to organizations they believe in and he wonders if an earnings-style call would be any more impactful than receiving an annual report in the mail or seeing information disseminated on television, radio or in a blog format. He said he really thinks the GuideStar call was more or less another form of marketing.

“Successful businesses and nonprofits will have a structure, they understand customers and address the need,” Dillworth said. “I believe GuideStar is the best place to go to look for organizations to donate to. They don’t rely on just nonprofits to supply the information.

Any good organization is going to understand that.”

He agreed with Hopkins that an organization such as a small soup kitchen might find it more effective to host in-person meetings.

Hopkins said he thinks it’s “great” that GuideStar and others are promoting accountability for nonprofits. He said donors expect and deserve regular reporting on how their charitable funds have been used.

“I don’t know if how you communicate is as important as when you communicate. There’s no downside as long as a nonprofit is transparent about how they’re using donors’ dollars,” Hopkins said. “What’s unique about GuideStar is that they’re taking a corporate model (i.e., an investor call) and applying it to their nonprofit. This is a good idea — and especially applicable to national nonprofit entities.”

VanSolkema of Lambert Edwards said she’d encourage nonprofits to really understand the needs of their audience so they can tailor their messages and delivery to reach as many of the targeted people as possible. They should also follow the example of good public company communications practices and have executives talk about their strategy and vision for the future to the scope that it’s possible, she said.

It’s important to be honest and open about what happened, VanSolkema added.

“To the extent that you can share what you’re allowed to share and be transparent, I don’t think that’s a bad thing, but they can provide it in a context that makes sense for people looking at it,” she said.

 

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