NPQ Editor-in-Chief Ruth McCambridge recently interviewed Blackbaud President and CEO Marc Chardon. Chardon has led Blackbaud since 2005 but has been “in computers” since 1984, first at Digital Equipment and then at Microsoft. During Chardon’s tenure, Blackbaud has grown from a company with $167 million in revenue to a nearly half billion-dollar company.

Ruth McCambridge: Marc, I was interested to see you saying that you thought that giving was going to be a little stagnant next year or at least not growing a whole heck of a lot because I think that fundraisers and fundraising consultants generally tend to err in the other direction—putting a very bright face on things. So, to hear somebody saying that they don’t think that it’s going to be a great year is unusual. Could you talk about what went into your making that statement at this point?

Marc Chardon: My degree is in economics, so that is the lens through which I look at the economic system here and at giving over the past 40 plus years. With that lens, you find that giving has been about two percent of GDP all along. It varies around that mean but it has a tendency to revert to the mean.

And so people get nervous about the reinstatement of the Pease amendment, for example, limiting the value of Schedule A deductions for high income people, but it was only three years ago that it was taken away. It was enacted in 1991 and then the limits were removed in 2010; neither caused an inflection point in charitable giving. So, I think that people’s concerns about the tax implications of the Pease amendment being reinstated are probably somewhat overstated.

On the other hand, I think people’s concerns about the impact of a moderately stagnant economy are probably understated. If you take a look at the economic results of the stock market in the presidential cycles, year one after a presidential election is almost always the worst of the four-year period. So you’re likely to see a relatively bad year for the stock market overall. If you have a challenging stock year then major giving is harder and you’ll see people who are saying major gifts are drying up. People are worried about $10,000 gifts and up. You see an economy in which they did reinstate some of the benefits relative to housing so the average person’s sense of wealth, which is based on housing values, is likely to be moderately stable. So, that’s stable, not great.

I don’t think anybody is saying that the housing market is completely recovered and that’s what most low/middle to middle income people think of as their net value—is their house under water or not? And then you see the employment tax situation changing so that people are going to see 50 or 100 bucks less in their paychecks. That’s the foundation for the person who gives $25, $50, or $100. So if you look at all of those things together, [I] don’t see any areas [for] rejoicing in the underlying economic fundamentals that make me believe that the things that actually drive divergence from the two percent mean are going to be on an upswing. I think of them as more on a downswing.

McCambridge: But despite that, it seems like you have a lot of enthusiasm—a lot of excitement—for things that could be accomplished by the sector or could be more fully embodied in the sector over the next year or so. Can you talk a little bit about that?

Chardon: Sure. The first thing that put me on to thinking about this was the result from the economic downturn in 2008 to 2010. What we saw was that the percentage of our customers who cease operations in any given year did not increase and yet there was an overall increase in nonprofits going out of business. I’d love to be able to say, well, because they used Blackbaud software, they didn’t expire but the economist in me says it’s probably not the answer. My hypothesis at that time and that we’ve worked on since then is that the answer is that people who care enough to have really good tools for keeping track of and for stewarding their supporters are more likely to thrive and to differentially do well in a downturn.

I think that [in] the last downturn, people started by saying, “Well, I can’t afford to acquire new donors,” but those people realized partway through that if you don’t acquire any new donors, you slowly die. This time around, there are enough people who lived through the last one who understand that it means that you have to invest judiciously in building stewardship abilities and identifying ways of connecting to people who might care about your cause.

The cool thing is that these modern tools, the social and mobile tools, are coming enough of age—that you can identify people in ways that you couldn’t do five and ten years ago. And so the ability to have cost-effective contact with new people in a social network—as opposed to randomly blasting 100,000 e-mails or 100,000 pieces of mail out to a list—coupled with better and better tools for getting a really intimate connection to the people who support your cause is enormously exciting. I think we’re going to see an even stronger flight to quality, and by “quality,” I mean nonprofits that actually build an ongoing dialogue and relationship with their supporters and have a plan for sustainability and share that story.

But there are no short cuts. This requires new commitment because when fundraising is easy, you don’t have to actually make hard choices. And, you don’t have to focus on the essential of who you are and the value you create in the world. If we, as a nation, are going to do well given what we depend on the nonprofit sector to do, we need the nonprofit sector to step up in terms of focus, in terms of concentration, and in terms of the ability to engage, because the next generation cares about engagement.

McCambridge: Absolutely. I heard you mention something about the need to nurture a 360 degree relationship with supporters. Can you talk a little bit about what exactly you mean by that?

Chardon: I think there are really two main pillars to that. There’s the one pillar that’s on the nonprofit side, which says basically that if you don’t know all the ways that you touch a supporter, you will spam them, not to put too fine a point on it. And the closer your supporter is to your cause, the more lists they’re on and the more different individuals try to…reach out to them. It culminates, typically, in your board member saying, “Why did I get a $25 dollar annual appeal three days after I gave $25,000?”

But a 360 degree view means that you can actually see all the ways that your supporter contacts you but also the ways in which your support relates to your brand out in their network. That’s the second pillar. The first pillar is [whether] you know how you relate to your supporter and the second is [whether] you have ways of either providing tools or providing your brand to your supporters so that they can actually engage in a Web 2.0 relationship.

The Web 1.0 experience is created by the organization. Web 2.0 is created by the individual. Well, we haven’t moved to Web 2.0 fast in the nonprofit sector. For example, individual fundraising events, putting badges on your websites, allowing people to build their own understanding and relationship with your brand—those are all Web 2.0 constructs which are now immanently doable for nonprofits of very moderate size. That’s what I mean by 360. It’s really both of those things. It’s the side that faces you as a non-profit, and also the side where your supporter faces the outside world in the name of your brand.

McCambridge: If you could advise people to do two or three things over the next three months that would get them set for a future that really is, to some extent, unbounded…?

Chardon: I’d start with what I call the power of ask, as distinguished from “the ask.” I think nonprofits in a downturn have a tendency to get more strident and to proclaim disaster and that’s the thing that scares donors away. I would encourage the nonprofit to go and identify their four or five different supporter types or profiles and go and have all their board members or their volunteers give people a call and just simply say, “What is it that we do well?” How did you get engaged in our cause?

Just talk story. That does two things. The first is it actually rebuilds the connection because it reminds your donor why they care about you. But, it’s just so amazingly refreshing to the donor to have someone ask what he or she thinks about the relationship that it’s actually a pretty good thing. So I would advise nonprofits try to find out what the story is in key segments. How did people get brought to your cause? And then I’d try to abstract a couple of things out of that intelligence. The first is I’d try to identify where…new supporters came from. How did they get attracted to your cause? [Then] you can use modern social networks and social media to reach new people.

The second thing is that I’d be focused on identifying what people want to see you do more of, because people will pay for things that they want you to do more of. So you’re trying to create intimacy by using the power of ask and then you’re trying to turn it into identifying how the network can bring new people to your cause inexpensively and how you can identify things that, if you could offer them…people would support more of. And I didn’t say, of course, the number one thing is you buy Blackbaud software to do all of that because, actually, most of that stuff could be done with a spreadsheet and 3×5 cards in your pocket if you’re a small nonprofit and in a good supporter database if you’re larger.

McCambridge: Yeah, and we’re not really just talking about donors, I assume. We’re talking more generally.

Chardon: That’s right. I’m talking about supporters because they can be influencers. They can be advocates. They can be people who volunteer. That’s why I [discussed] the different audiences or the different segments of your supporter; it’s not just the donor.

McCambridge: Okay, and how about the idea of creating community among your supporters? Where does that fit in?

Chardon: Well, it fits in in terms of how you’re going to relate to supporters in the millennial generation when they become new primary donors. I mean, that is the future. If you look at the way that the generations have related to charities, my parent’s generation—born during the Depression and called the silent generation—gave because it made you a good person. My generation—the baby boom generation—gives because we want to see specific impact. But my daughter’s generation doesn’t act that way. They give because it provides meaning and meaning is just as much about their network as the cause.

So, this question of how do you project your brand or how can you entrust your brand to individuals to create community around themselves in the name of your brand, that’s exactly what I’m talking about. And, frankly, if I knew the answer to how that will be done in 10 years, I’d be building that right now. I think that there are a lot of different experiences out there that are going in that direction. But, it can be, “How do you create tools for a group suffering from a specific disease to provide support circles to each other?”

Web 1.0 events are, “We provide you the tool, we tell you the day, we set the course, you show up as the team captain and you bring your money.” Web 2.0 is, “Oh, how cool, you want to go and work on a house in the Dominican Republic where we are, and you want to create your own event in the local auditorium and the a cappella group is going to come sing and you want to sell some tickets? How can I help you brand that in such a way that it’s going to create a collaboration?” That’s really the shift from Web 1.0 to Web 2.0.

When I was talking about Web 2.0 earlier, [it’s] this ability to create your own social experience and to project a brand through that. That’s what it’s about. But, you know what? This is the year where I think this is going to start to actually get traction because up until now it hasn’t. There have been a lot of tests but none of them have actually taken off other than a specific audience in one specific nonprofit. I think we’re going to see more of that starting now.

McCambridge: Well, this is certainly thought provoking. Let’s see how our readers respond to the challenges you lay out.