Donor recognition is a staple in nonprofit fundraising. It can be a prompt thank you letter for a contribution, recognition at a gala or other event, or even naming a room, hall, or building after a donor in recognition of their contribution.
Donor recognition can also have its pitfalls. If the thank you letter is late or nonexistent, the donor may very well be dissatisfied and no longer contribute. It is important to thank donors for their gifts, no matter the amount. This is called donor “stewardship” and can also include thank you telephone calls, personal notes, or even social occasions such as recognizing birthdays, lunches, or dinners.
Where some organizations have experienced some trouble is in larger gifts and recognition through naming a room, theater, building, or organization. According to the Association of Fundraising Professionals, it is important to set forth expectations regarding naming in a written agreement. Otherwise, some organizations have found that failure to maintain a bench or theater seat in perpetuity can result in problems with donors, heirs, or other family members. In addition, the cost of ongoing maintenance may become prohibitive.
One fairly well-known case illustrates what can happen. The New York Philharmonic built a concert venue that was known as Philharmonic Hall. It was troubled by problems with acoustics for years. In 1976, the hall was refurbished and renamed the Avery Fisher Hall because of a $10.5 Million gift from the audio equipment pioneer. However, acoustic problems persisted. The Philharmonic Orchestra threatened to leave because of the bad acoustics. Then it was David Geffen to the rescue with a $100 Million gift in 2015 and the announcement that the hall would be known as the David Geffen Hall. The Fisher family objected and eventually settled for $15 Million and other inducements. The Geffen gift stipulates that it shall be known as Geffen Hall in perpetuity. Eventually, it cost a total of $600 Million to refurbish and re-construct the Hall which re-opened in 2022.
Before embarking on a program to solicit donations with naming rights, the nonprofit should plan, create necessary policies, determine how gifts are recognized, and discuss terms and responsibilities with the donor. Other considerations should include provisions regarding potential “bad behavior” by the donor, such as criminal activity and convictions or other activity that could harm the nonprofit’s reputation.
Donor recognition through naming rights can be a wonderful way to build deeper relationships with donors, inspire others to give, and develop new avenues for discussing major gifts with potential donors. It just takes some planning and a clear understanding of the terms and conditions by both donors and nonprofits.
Jack Newby, founder of JackinPS Enterprises, is a consultant to nonprofit organizations throughout the Coachella Valley. With more than 25 years in nonprofit management and fund development, Jack can work with your nonprofit organization to develop strategic plans, grant writing and management, fund development plans, and more. For more information, visit www.jackinps.net.
This article is meant as a general overview and does not constitute legal advice. Be sure to consult with an attorney with nonprofit experience and knowledge and understanding of your organization.
