Fundraising in an Inflationary Environment
- Mar 31, 2023
- Candice Meth
Will Fowler, SVP of the Michael J. Fox Foundation for Parkinson’s Research, joins the EisnerAmper team for a Solution Session covering some of the challenges facing nonprofits in an inflationary environment. Additionally, leaders will learn how to partner with other organizations to strengthen key missions.
Candice Meth:Hello, my name is Candice Meth. I'm a partner with EisnerAmper and the National Leader of EisnerAmper's Not-for-Profit Services Practice. Joining me today is Will Fowler, the Chief Financial Officer of Michael J. Fox Foundation for Parkinson's research. Will oversees both finance and operations, is actively involved in the strategic planning as well as technology and the accounting. Thank you so much for joining me today.
Will Fowler:It's my pleasure. Thanks for having me.
Would you mind just giving us a little bit of a background and history of the foundation?
WF:Absolutely. Well, the Michael J. Fox Foundation for Parkinson's Research is the largest nonprofit funder of Parkinson's research in the world. Our mission is to find a cure for Parkinson's disease through an aggressively funded research agenda and the development of new therapies to help people living with Parkinson's today. We were founded by a patient, Michael J. Fox, and patient centricity is at the core of everything that we do. To date, we've funded about 1.5 billion dollars of Parkinson's research, and last year it was over 300 million dollars that we pumped into the Parkinson's research community.
Wow, that's incredible. And prior to joining the foundation, you were the VP of operations at Sesame Workplace. So talk to me about what drew you to wanting to work at the foundation.
Well, Sesame Workshop is also nonprofit. It's the producer of Sesame Street, the kids' TV show. And it's a great organization. When I saw the opportunity at the Michael J. Fox Foundation, there were two things that really jumped out at me that were very exciting about the Fox Foundation.
The first is that the Fox Foundation has a mandate to do what's called de-risking of scientific research. There's a inherent assumption in there, that what that means is that we take on the risky research with the idea of de-risking it and then making it available for more conventional funding methods, including taxpayer dollars from the NIH. So from the foundation of the organization, there's a high risk tolerance. I think that's really exciting for a non-profit.
I think the second thing that was very interesting for the Fox Foundation is we operate hand to mouth by design. That's a strange thing for the CFO to save, but that is a principle of the Fox Foundation. We raise the money and we get it out into research as quickly as we possibly can. We don't carry any endowment. We do not have excess reserves. We do a number of things to make sure that we have adequate cash reserves. It's all around the idea that when we find a cure that we will close. We will go out of business. We will be able to pay out all of our grants. We're not going to leave out anyone out in the cold, but we will pay out all our grants and close, and Parkinson's will be a thing of the past.
I think that's a very exciting place to live. It's also an operational challenge for my team because what it means is that we have to have a lot of sophisticated systems in place to be able to coordinate between the fundraisers and expectations of what's coming in, turn that revenue into research very quickly, and get it back out the door, and coordinate with the research team to be able to forward fund research projects that are waiting. You don't want to have them wait too long, but you can't fund them before the money's available, and that's a very interesting situation to work in.
CM:It's funny that you mentioned this because when we started working together, when EisnerAmper became the accountants for the foundation, we were told that you all are excited to work with us and you look forward to firing us. And we still to this day will never be more excited to lose a client than if we part ways, because you have found a cure for Parkinson's.
WF:That's right. Only fire if we go out of business.
CM:Exactly right. So we are, we're on board with that mission. We're thrilled. One of the things that you mentioned earlier is having a really engaged board and how personal this is to so many of your board members. Can you talk to me about how important it is to have an active board and how that leads to the better governance of the foundation?
WF:Philanthropy is a very personal decision, and especially for large gifts and people who are personally involved, it's a very intimate interaction, and I think that's something that is a real opportunity for an organization. When you have a board members, when you have a board, and our board is an example of this, we rely heavily on them for their guidance and their insights. They are donors, yes, but they're also people that we turn to say, "Hey, we're thinking about this challenge. Hey, there are five opportunities out here. Which ones do you think are the most important? Here's what we think. What do you think?" And having that kind of level of interaction I think is absolutely crucial. It does mean that there needs to be a real relationship and an ongoing involvement from the board and the management team, and that's something that's desired. And I think it's something that when it exists, it's a very healthy and powerful thing.
CM:If we were to look at a three year horizon, what do you think is the biggest opportunity for the foundation?
WF:I think that a lot of times opportunities and risks go in pairs, and so the biggest opportunity is also always the biggest risk for us. When I think about it, our biggest opportunity is that I think success begets success. The organization has grown a lot. I think that we're proving that we're able to operate at a higher capacity, and have the capacity to process really large gifts and put them to work very effectively, very quickly.
I think that the risk that's a corollary with that is mission creep. And that's something that we're very aware of, and we spend a lot of time talking about the purity of mission, making sure that we're prioritizing the research and making sure that that's an area of focus, while at the same time recognizing that's not all we can do. There are other things that we need to be able to do to improve, to develop new therapies and improve quality of life. And so there's a fine line between doing more and mission creep, and that's something to navigate and be very intentional about.
CM:With a foundation that was founded in 2000, there's been tremendous growth over the years. Can you take me through some of the growth and the way that you've scaled the foundation?
WF:Well, growth has never been the goal of the foundation, but having more impact is. And being a bigger organization allows us to have more impact. And when I think about the growth of the foundation, I think there's a couple of things that have motivated that, which is really exciting.
We have a de-risking philosophy, and the idea of de-risking means that we're going to take some of these ideas, figure out whether they're going to work, and then hopefully hand some of that off to bigger funders. That means that we are always looking for research proposals. And so in those research proposals, some of the things that we do in our research community that's different from other nonprofits is first, our grant proposals themselves are relatively short, meaning it's easy for a researcher to put in a research proposal. Second, our research team, our scientists themselves evaluate and can award grants, have the authority to award grants. A lot of organizations require board approval to issue a grant. That is not the mandate. Our board says, "Don't wait for us, get that money out the door." And third, the finance team, we pay quickly. We try to get that money in the hands of researchers as quickly as possible.
One of the things that does is it starts a virtuous cycle, which I think we've benefited from, because by getting that money out into the field, it attracts other researchers from adjacent fields or other people who are interested in PD. They say, "Oh, look, there's some opportunities for research funding here in Parkinson's." And so we get more proposals. Having more proposals means we have more ideas to pitch to funders. So now our fundraising team has new ideas. That allows us to raise more money. Having more money allows us to fund more research. And the cycle continues. And I think 20 years in, we've still see a lot of benefits from that cycle. And I think that's really what is underneath some of the growth of the foundation.
CM:And I want to pick up on something you said, because you mentioned an aggressively funded research objective. So talk to me about how the pandemic impacted that and what impact the pandemic had on the operations in general.
WF:The pandemic three years in, it's almost hard to remember how scary it was in March of 2020. And I'm not even talking about the world and the pandemic itself. I'm talking about as a leader of a business, we get reports every day about how much revenue came in, and fundraising revenue, and gift size, and donor reports, we get those every day. I have never seen consecutive days of $0 until March, 2020. And there would be day after day where that report said zero, no money came in. That is frightening. That's unprecedented.
And so in the foundation, like most organizations, we took some immediate steps. We had a hiring freeze. We cut unnecessary non-essential expenses. But we also had a very early on had a conversation about identifying and prioritizing the research that needed to be funded so that we didn't lose years of progress. We fund bio repositories that have live tissue. We fund a variety of labs that are maintaining samples and things that we need to keep alive and make sure keeps going. And so we pushed funding to those to make sure that they were able to continue operating.
Then the next thing that we did is we looked at all of our grants and we offered no cost extensions to all of our grant recipients. And no cost extension basically means don't worry about the deadline. You need another six months, you need another year, automatic no cost extensions to relieve any of that deadline pressure from them.
And then the third thing that we did is reach out to a lot of our grant recipients and asked, "What kind of impact are you seeing and what kind of help do you need?" Because at the end of the day, keeping that research community alive and vibrant is what will lead to a cure for Parkinson's disease.
CM:Absolutely. Flexibility was key and continues to be key in this environment. When you take a look at maybe a startup nonprofit, one that's trying to grow capacity, do you have suggestions as to what they could do to try to scale to a larger size and be successful
WF:For a new nonprofit, I don't know that I'm qualified to give advice, but I have some observations on things that I think are characteristics of the Fox Foundation that I think are replicable. I would say that the first piece observation I have is that a founder of a nonprofit or the leadership team of a nonprofit should think entrepreneurs, not non-profit. The leading description should be entrepreneur. And what I really mean there is innovator. Come up with new ideas.
Now, there's this story about when the Fox Foundation was founded in the very first board meeting, Michael J. Fox was there, and the founding team, many of whom were large donors, which meant that they had the capacity. And so they themselves were successful business people and leaders. And so they're sitting in this room and Michael opens the meeting and he says, "Okay, I can't tell you how intimidated I am to be in this room with such successful people and so grateful for you being here. I'm going to ask you to do something that's completely against all of your talents." And he said, "I'm going to ask you to help us go out of business." We're back to that theme. That's been a through line since the beginning of the foundation. That's a different mindset. And it's a different mindset when you start to think, we're not here to build an organization. We're here to fund research to cure PD. So that's point one, think like an entrepreneur, do something different, be innovative, recognize the status quo, but be willing to deviate.
I think the second piece of advice that I would have for a nonprofit is to think about how you're building trust. Everything you're doing should be building trust with your donors, and with your board members, and with the community. Follow through on your obligations. Act with integrity. Do the right thing the right way, and things will grow and you'll be successful. That is what sets the organization up for long-term success, regardless of whether it's a nonprofit, or a public company, or whatever.
And then the third piece I think is the idea matters. The idea matters a lot and the cause. It needs to be compelling and it needs to be powerful. I think it also needs to be simple. This is something that I hear over and over and over about the Michael J. Fox Foundation. People say, it's so powerful, and it's so motivating ,and it's so inspiring that the purity of motive, the purity of purpose. We're here to cure Parkinson's disease, raise money, fund research. That's what we do. And I think that that kind of north star, that guiding idea has propelled the growth of the organization. And I think that's very replicable for other organizations as well.
CM:Absolutely. And I love when you say about building trust with donors. Because it's about trust, it's about transparency. If you were to put yourself in the shoes of the donors, what do you think they should look for when they're contemplating a significant gift to a foundation or a charity?
WF:So my insider view on that, when I think about donors and especially major gifts, I think there's two pieces that jump out at me. The first is, someone considering a major gift and six or seven figure gift, a really big gift to a non-profit, they should meet the management team. That sounds obvious, but a lot of times it's kind of surprising that that's not always obvious. They're dealing with a development officer and they're dealing with someone who's stewarding them, and that's great. And those people are well informed and they're hardworking. They love the mission too. But if you're really thinking about a large gift, ask to meet the management team. And when you do, be tough, ask tough questions, understand the differences.
A nonprofit is a different capital structure than other organizations. And so if you're used to working in a private sector, or a public company, or whatever, understand that our motivations are different mainly that we're trying to spend all the money. That's a fundamental difference. We don't have any dividends to distribute. We need to operate and get money out the door and spend it. So understand and appreciate the differences, but ask the tough questions. Ask about the philosophy and the management and the organizational capacity.
I think the second piece of advice is probably even more important, which is to be bold, give big. I think it's important to concentrate your philanthropy, concentrate your philanthropy. There's this old saying that wealth is made in concentration and protected in diversification, and I think that's actually true in impact as well. The big problems of this world are not time neutral. They are today. And if you have the means, and the will, and the desire to fix them, spend it, spend that money. I think DAFs and structures like that are important and they provide important structures and they're very useful. But that's not where the impact is happening. The impact is happening with operating charities and operating organizations that are making impact. So spend the money. I have a bias.
CM:Fair enough, but it's so important to really move the needle on fulfilling the mission. And so those gifts make all the difference. I completely hear you. One of the other things that unfortunately I think the foundation has to contemplate is this inflationary environment. So take me through what you all are thinking about and things you've put in place to try to combat the inflation.
WF:Inflation is real, and we see it everywhere. In fact, just a couple weeks ago we had a brown bag for our staff talking about inflation, that I got to host along with some other members of the finance team. And I thought maybe a few people would show up. Half the company showed up for this thing. It's on everyone's mind.
When we think about inflation and the possible economic uncertainty and recession, the corollaries, the things that go along with that, I think that the Fox Foundation, we are seeing an effect of it. We're seeing the most pressing effects is in wage pressures. And that's true for a lot of places. A lot of our grant recipients, a large proportion of our grants goes to wages for researchers and scientists. And so as wages go up, the cost of those grants go up, and the grant dollar doesn't go as far as it used to. And so we do see that. And so we see larger requests for grants I think as a direct result of inflation.
I think one of the things that we're doing about inflation, and one of the things we're doing about the potential for recession, a lot of it is around better information and improved efficient real-time monitoring systems within our organization, especially around things like finances, operating principles, technology, our research grants portfolio, our fundraising, predictive analyses and things like that, so that we have a better idea of what's coming in, what's going out.
Like I said earlier, we live hand to mouth by design. In good times that's good, because it means we can always do more, and we can be nimble, and we can be agile. In bad times, it means we might have to do less. But that agility and the mechanisms that we've built for agility, I think still help and help us flex up. They also help us flex down.
And then the final thing that I think we're doing is continued scenario planning and benchmarking to make sure that some of the assumptions we make about our business 20 years in are still true. We run lean on purpose, again with the idea that we are not looking to build a huge organization. We're looking to fund research and get the money out the door. So we think we run lean, we think we have a lot of things in place to make sure that we have adequate liquidity. And it's good to just sit down and say, okay, do we? Yes, okay. Yes, we're safe. Yes, we feel comfortable with these six principles that we have, or whatever.
CM:Great. And one of the things that I think the pandemic brought about was a true inflection point for the exempt sector in terms of the need to invest in technology to work remotely, to better secure a lot of donor information. Talk about what role technology plays in the foundation and maybe some changes you've made recently.
WF:Boy, it's changed everything. It really has. It's not an overstatement to say that the pandemic was an inflection point that ushered in a new era. I would say that the three things that are most obvious that are different and that we rely on technology.
The first is virtual events. Virtual events were kind of a occasional thing that you would see pre pandemic. Now it's everywhere. Even our live events have a virtual component a lot of the times. And so that, had to have a virtual event, you need a technology stack. And to have a good virtual event, you need to have a technology stack that's integrated with the other parts of your organization so that a donor who's participating in your virtual 5K race also is being able to see other events in their area, and is plugged into other people who are participating in supporting Parkinson's research in their area. And that takes a pretty sophisticated technical backend.
I would say the second thing is the workforce itself. Again, this is something that most organizations are seeing, I think. But since the pandemic, almost a third of our workforce is remote. I go into the office once or twice a week. I used to go in five days a week. I don't need to go in five days a week. Even when I do go in the office, probably a significant portion of my time is spent on meetings with people who are not in the office. And I think that ushers in a fundamentally new way of working. Again, it relies on technology, but it also changes the mindset. It changes the relationship between employers and employees. It shifts the priorities for things like culture building, but the fact on the ground for us are we have a hybrid workforce and it's only getting more that way.
And then I think the third piece with technology, and this is more a factor of growth than because of the pandemic I think. As an organization grows, I think it takes a lot of intentionality on the part of leadership to make sure that you're intentionally reaping economies of scale. Because as the organization grows, it's possible to just hire two people to do what one did before. And then before you know it, you have 10 people doing what one did before. And suddenly your administrative costs have ballooned, or your overhead has grown disproportionately. And so I think one of the things that we've benefited from the Fox Foundation is ongoing conversations about how we control that, and how we can use technology to leverage some of those economies, and achieve some of those economies of scale in a way that we wouldn't if we weren't growing quite as quickly.
CM:Great. And I'm going to ask you a question that I know is maybe outside of your comfort zone, but I'd be remiss if I didn't ask. How close are we to a cure?
WF:I will say from what I see, the pipeline, the therapies pipeline has never been bigger. And it's never been a more robust pipeline. And what I'll also say is that one of our core values is optimism. That comes directly from Michael. One of our core values as an organization is optimism. And I'll tell you, there's not a single person at the Michael J. Fox Foundation who does not believe that a cure exists and will be found.
CM:Amazing. One of the things that you mentioned earlier is having a really engaged board and how personal this is to so many of your board members. Can you talk to me about how important it is to have an active board and how that leads to the better governance of the foundation?
WF:Philanthropy is a very personal decision, and especially for large gifts and people who are personally involved, it's a very intimate interaction. And I think that's something that is a real opportunity for an organization. When you have a board members, when you have a board, and our board is an example of this, we rely heavily on them for their guidance and their insights. They are donors, yes, but they're also people that we turn to say, "Hey, we're thinking about this challenge. Hey, there are five opportunities out here. Which ones do you think are the most important? Here's what we think. What do you think?" And having that kind of level of interaction I think is absolutely crucial. It does mean that there needs to be a real relationship and an ongoing involvement from the board and the management team, and that's something that's desired. And I think it's something that when it exists, it's a very healthy and powerful thing.
CM:If we were to look at a three year horizon, what do you think is the biggest opportunity for the foundation?
WF:I think that a lot of times opportunities and risks go in pairs, and so the biggest opportunity is also always the biggest risk for us when I think about it. Our biggest opportunity is that I think success begets success. The organization has grown a lot. I think that we're proving that we're able to operate at a higher capacity and have the capacity to process really large gifts and put them to work very effectively, very quickly. I think that the risk that's a corollary with that is mission creep. And that's something that we're very aware of. And we spend a lot of time talking about the purity of mission, making sure that we're prioritizing the research and making sure that that's an area of focus, while at the same time recognizing that's not all we can do. There are other things that we need to be able to do to improve, to develop new therapies and improve quality of life. And so there's a fine line between doing more and mission creep, and that's something to navigate and be very intentional about.
CM:Well, thank you so much for participating today. It's been a joy to talk to you. And I look forward to seeing what the foundation does next.
WF:Well, thank you for this opportunity.
Transcribed by Rev.com
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Candice Meth is the National Leader for the firm’s Not-for-Profit Services Practice, and a member of the firm's Executive Committee with experience in oversight of the audits of the financial statements and employee benefit plans of various types of not-for-profit entities.
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