The Mr. Spock Prize

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My friend Randy Samelson at Counsel & Capital is funding a prize for the best annual report designed for Randy and other “left-brain” donors. I am calling it the Mr. Spock Prize, and I thought some friends might be interested in applying for the prize as well as my response to Randy’s generous initiative.

Dear Randy,

Thank you for sending me your proposal to sponsor a $50,000 prize for the nonprofit or church that produces the best annual report for “left-brain donors.” As you probably know, while printed annual reports represent a significant expense for nonprofits (and there are even prizes for print design and graphics), they remain unread by most donors. I have seen stacks of unread annual reports on the desks of foundation staff.

In fact, in 2009 the Salvation Army learned that half of the 28,000 printed annual reports they distributed were thrown away unread. The organization’s response to go completely digital won them a prize. Charity:water also won a prize for the “best donation generator annual report” by replacing a typical annual report with everything donors needed to know on one web page with live content.

I am saying this to point out that people are waking up to the fact that annual reports are not all that valuable to the average donor, but they don’t know what to do yet. This is a great opportunity for you as you design the prize.

Prizes generally fall into two broad categories: Recognition for prior achievement (like the Academy Awards) or incentive-based prizes for stimulating innovation, problem solving and change (like the Ansari X-Prize which was given to the first team to build and launch a reusable spacecraft that could carry three adults to an altitude of 100 kilometers twice in two weeks).

It is important to decide which you want to reward – the best of what is current or to stimulate change. The recognition approach can become a beauty contest with the winner being subject to the judgment and tastes of a few people – regardless of the stated criteria. The incentive-based approach can have organizations doing backflips to come up with a solution that fits the criteria. For example, $100 million was spent by teams to win the $10 million X-Prize. Which do you choose?

First, it’s important to understand that only a small minority of people are making decisions based on the financial and statistical information contained in annual reports. The Hewlett Foundation found that while 85 percent of donors say that a charity’s performance is very important, only 35 percent conduct research on giving and just 2 percent give based on a group’s relative performance. For most organizations, the development department produces the report which is why much of the information you value is tucked away in the back or not there at all.

If you give a prize for something that very few donors and organizations value, then your universe of candidates shrinks dramatically. Is there something you can do that will not only reward the format and content but will encourage change in the organization?

Second, what can the prize do in addition to rewarding $50,000? You have the opportunity to spotlight not only an organization that might in turn generate more donations or more attention to the cause, but you can also raise the visibility of the importance of how organizations think about their work and how they communicate that to donors. Other donors may begin to say, “I never thought about that but I now think that is something I would like to know.”

For instance, your proposal asks an organization to share both its successes and failures. You also ask the organization to describe its most daunting obstacle or most likely opportunity. That is a perspective not typically shared in an annual report – or if it is it gets lost in the pictures and stories of people served. Practically, a nonprofit cannot answer every question or address every single interest you have, but if they see the benefit and other donors do as well, then the importance of this way of thinking and communicating will likely increase.

The value of the Baldridge Award for Excellence was it not only codified the principles of quality management in clear and accessible language, it also provided a different framework for executive leadership to assess its progress toward new goals. It was more than an award for excellence. It redefined the term itself, and I suspect your end goal is similar. You do not want merely to encourage better annual reports. You want to change the way the game is played.

My best guess is most organizations will continue to write annual reports in the way that appeals to and satisfies the interest of their current and potential donors. For many, it will be more work than it is worth to make these changes and think about annual reports differently. For others, it might make sense to include your format almost as an insert for left-brain donors while keeping the basic content – printed or digital – the same. But, for a few, you may catch them at a moment when they are not only open to changing something as generic as an annual report but the criteria and the challenge will stimulate them to use it as an opportunity to approach their mission in unexpected ways. For that you will both be grateful.

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    Paul Penley
    Reply

    Changing the standard annual report is essential. Counsel & Capital’s required “Elements of an Effective Annual Report” make no mention of reporting outcomes–long-term progress from a baseline or benchmark for those you serve. Organizing clearly your activities, expenses, program goals and people is better than producing an unclear report, but ministries should care less about how busy they are (spending program dollars to do more annual activities) and more about how much that matters in 5 years (lasting outcomes). Telling powerful stories that personalize the mission is essential. Reporting clear outcomes tells you if those stories are the exception or the rule.

  • Avatar
    Randy Samelson
    Reply

    Dear Fred,

    I learned something important from your post. I learned how woefully inadequate my communication to you was about the prize. Even more importantly, if my communication was that poor to you (a friend who knows me) how inadequate must it be to others receiving the information. So thank you!

    Let me respond to some of your comments so that (a) you understand my goal better and thus if you are so inclined, enable you to challenge me further and (b) I will be prepared to more accurately convey the message in the future. So here goes:

    1. “…best annual report designed for Randy and other “left-brain” donors.”

    Response:

    The design is not for me. I am capable of making or not making donations based upon verbal or written information ministries produce in their normal course of activity. Further, the annual report we propose is principally organized to benefit the ministry (not donors) and do so in two ways.

    First, to encourage ministries to be clear about their focus. Most ministries try to do too many things, chase the latest fad, or experience mission drift. If the ministry is focused, the report will help them make it clear to their audience and thereby distinguish themselves from many ministries.

    Second, to encourage the CEO to once a year write a transparent and meaningful letter. This will help donors (a) “get to know” the leader they probably have never met and (b) clarify his/her thinking in ways that often occurs only through the discipline of writing and (c) encourage a culture of appreciation for and to donors.

    The bottom line is, the annual report we envision is principally different in two ways – encouraging or clarifying a ministry’s focus and encouraging the CEO to annually write a “real” and meaningful letter.

    One more thought as to the letter. Most ministry CEO’s extol the importance of the written word of God. You think writing is important enough that you produce a weekly blog. Nevertheless, in spite of how important donors are, most ministry CEO’s do not write an annual letter. Of those that do, most are about three paragraphs in which they say nothing (“fluff”) or last year was somewhere between great to really really great (“puff”).

    Inadvertently, what the ministry CEO’s are saying to their donors is they are not important enough for me to take the time to write you something meaningful. What a shame. What a missed opportunity.

    2. “…printed annual reports represent a significant expense for nonprofits.”

    Response:

    The annual reports do not have to be printed.

    3. “…annual reports…remain unread by most donors.”

    Response:

    Totally agree. But, why? I believe the answer is because there is nothing in it other than “fluff” and “puff”.

    4. “…prior achievement or incentive-based prizes for stimulating innovation, problem solving and change…”

    Response:

    We think annual reports represent a major missed opportunity. We are interested in stimulating change.

    5. “First, it’s important to understand that only a small minority of people are making decisions based on the financial and statistical information contained in annual reports.”

    Response:

    I agree. The changes we are encouraging (a) a real letter written by the CEO once a year and (b) clearly communicating the existence of focus has nothing to do with financial or statistical information.

    6. “For most organizations, the development department produces the annual report which is why must of the information you value is tucked away in the back or not there at all.”

    Response:

    We are not focused on what is in the back (because for the minority of ministries that do produce an annual report) the information in the back is generally adequate.

    7. “If you give a prize for something that very few donors and organizations value, then your universe of candidates shrinks dramatically.”

    Response:

    Donors don’t value annual reports because they typically are “fluff” and “puff” and do not address their needs. Ministries don’t value annual reports because ministries don’t value donors – or don’t value them enough to change their habits/traditions. Ministries are good at communicating before a gift, often not as good thereafter.

    8. “Is there something you can do that will not only reward the format and content but will encourage change in the organization?”

    Response:

    See Response #1.

    9. “…your proposal asks an organization to share both its successes and failure. You also ask the organization to describe its most daunting obstacle or most likely opportunity. That is a perspective not typically shared in an annual report…”

    Response:

    I believe the CEO in his/her annual letter should share successes and failures. Ministries are generally good about trumpeting their successes and hiding their failures or struggles. Everybody has struggles or failures. Does it really build confidence with anybody when ministries only talk about their successes?

    10. “Practically, a nonprofit cannot answer every question or address every single interest you have…”

    Response:

    Fred, really? Every question? Every interest? Our encouragement is that a CEO will write a letter once a year and that it not be filled with only about how great everything is. Tell people something that didn’t go right or that you are struggling with. Be real.

    11. “I suspect your end goal is similar. You do not want merely to encourage better annual reports. You want to change the way the game is played.”

    Response:

    Our goal is to encourage more ministries to produce annual reports and better ones. Annual reports that include a “real” letter and evidence that the ministry is and values focus. In our opinion, this will help ministries be more focused and effective and engender more donor confidence and support.

    12. “My best guess is most organizations will continue to write annual reports in the way that appeal to and satisfies the interest of their current and potential donors.”

    Response:

    My best guess is that most ministries will continue to do what they have been doing. They will do so because of habit or because it is easy. My best guess is their annual reports will continue to not include a real letter from the CEO, will not be read, will not appeal to, or satisfy the interests of their current and potential donors. My best guess is they will miss an opportunity to build a bridge of confidence to donors.

    Fred, you are a good person. I miss your Dad.

    Your Grateful Friend,

    Randy

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