A Survey of Smaller Community Foundations: How They Meet Their Information Technology Needs. Barrington Partners

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1 A Survey f Smaller Cmmunity Fundatins: Hw They Meet Their Infrmatin Technlgy Needs Pr e pa r e d b y Barringtn Partners

2 A SURVEY OF SMALLER COMMUNITY FOUNDATIONS: HOW THEY MEET THEIR INFORMATION TECHNOLOGY NEEDS As a parallel effrt t the review f integrated slutins 1, the Cmmunity Fundatins Leadership Team asked us t lk at hw smaller cmmunity fundatins (i.e., with less than $20M in assets) meet their infrmatin technlgy needs, either with ff-the-shelf (OTS) sftware packages (like Excel and QuickBks) r with an integrated slutin. They wanted us t see if we culd identify a rad map t help fundatins better understand the issues t cnsider in mving t an integrated slutin. Jim Bickel f the Cleveland Fundatin generusly prvided us with sme raw data frm a 2007 study f technlgy slutins used by nearly 200 cmmunity fundatins, 100 f which held assets f less than $25 millin. That study fund that almst half thse fundatins used OTS slutins, a quarter used ne integrated slutin (FIMS), a fifth used a variety f vended slutins (mst nt easily identified), and the balance used n technlgy slutin at all (ne cmmunity fundatin we interviewed described this as the shebx system ). APPROACH Because this effrt was nt intended t evaluate any specific technlgy slutin, we prpsed an infrmal, mre anecdtal apprach t data gathering: With the assistance f the Technlgy Actin Team, we wuld assemble a target grup f 12 smaller fundatins, with a mix f OTS users and integrated slutin users. Craft a shrt questinnaire/interview utline that examines the fllwing issues: Backgrund f the fundatin Functinal advantages and limitatins f the sftware used Technical resurces (if any) required fr set-up, peratin, maintenance Triggers that might (r did) cause a migratin t an integrated slutin Any ff-the-shelf sftware used fr discrete functins (e.g., CRM) Suggestins in hindsight frm the integrated slutin user Cnduct interviews with the target grup and dcument ur findings. Summarize the results int tw grups: The OTS users and the challenges and cnsideratins they face The integrated slutin users and their experiences f the prcess thrugh cnversin and as users. 1 Review f Integrated Sftware Systems fr Cmmunity Fundatins, Octber 2009 Barringtn Partners Octber 2009 Page 2

3 PROCESS Initial suggestins f the fundatins t target were made by members f the Technlgy Actin Team (TAT), and ther fundatins were identified frm the Cuncil s cmmunity fundatins lcatr n their website. As a result, five states (Clrad, Ohi, Califrnia, Massachusetts and Michigan) are represented. We cnducted cnversatins with 12 cmmunity fundatins, all with <$20 millin in assets under management (the smallest was $1.5M, the largest $20M). We wanted t ensure that we talked bth with fundatins wh use OTS sftware and with thse wh use an integrated slutin. Seven f the fundatins included here use an integrated slutin, and five use a variety f OTS packages; tw OTS users als use Raisers Edge t btain specific functinality. Each cnversatin tk apprximately an hur. In sme instances we had shrt fllw-up calls t clarify r amplify specific pints f infrmatin. We placed ur 12 respndents int tw grupings, thse primarily using OTS packages, and thse using an integrated slutin as their primary technlgy. The central findings frm these grupings are described in the tw tables belw. FINDINGS FOR USERS OF OFF-THE-SHELF SOFTWARE Table A belw describes ur findings fr the five fundatins using OTS slutins. Respndents cnsistently cited the same tw principal reasns fr using OTS packages. Lw ttal cst f wnership Ease f use The principal shrtcmings were bradly cnsistent: Lack f data integratin: it s time and attentin cnsuming t exprt/imprt data acrss Excel, QuickBks, Access and ther OTS packages. Challenges t data integrity: even when yu get the OTS applicatins t talk t each ther, they may still miss sme details f the message (fr example, an Excel spreadsheet may arrive at slightly different balances than QuickBks des). Lack f crucial data, especially arund dnr management. Mst respndents addressed this prblem by implementing an additinal OTS applicatin better suited t handle dnr data (ACT, GiftWrks, Raisers Edge) r grwing their wn (using Micrsft Access). These steps imprved their dnr management functins, but created additinal challenges in interfacing with the ther OTS packages being used. Lack f internal cntrls: lder versins f QuickBks allw users t backdate entries and make unauthrized mves between funds (mre recent versins have strnger internal cntrls). Cmplex calculatins and reprts (distributin f fees and earnings, fr example) are mre accurately and cnsistently prduced by integrated slutins. Reprting is challenging when dealing with the limits inherent in these packages and made even mre s when dealing with mre than ne OTS applicatin. Barringtn Partners Octber 2009 Page 3

4 Table A Barringtn Partners Octber 2009 Page 4

5 FINDINGS FOR USERS OF INTEGRATED SOLUTIONS Table B belw summarizes ur cnversatins with the seven respndents using an integrated slutin. These cnversatins were unifrmly candid, and respndents made a number f subjective cmments (bth psitive and negative) abut the integrated slutin they use. We believe thse cmments can be useful t readers f this reprt, and they are presented in that light; they d nt, hwever represent ur bjective evaluatin f the specific slutins. These respndents had all faced the same challenges that current OTS users described abve. As their rganizatin grew, OTS sftware made peratins mre and mre difficult. Tipping pints. We asked these seven fundatins t describe what tipping pints their rganizatins had reached that mtivated them t cnsider an integrated slutin. While cmmunity fundatins are unique (and thus will have differing issues and pints at which they cnsider an integrated slutin), there was a cnsensus in several respnses: Ttal number f funds: cited repeatedly as a key driver. Several respndents indicated that managing mre than 20 funds had been their tipping pint (ne respndent said the wrk had grwn nerus, anther that it had begun t pinch ). One respndent said that managing anything ver 50 funds wuld cause real pain Dnr advised funds: fundatins that fcused particularly n attracting dnr advised funds cited heavy demands fr crrespndence and reprting, bth f which were difficult t autmate using OTS packages. Fundatins with fewer than 10 such funds did nt reprt them as a tipping pint. Ttal dllars under management: ne respndent felt the tipping pint had been arund $2.5 millin. Anther believed that $6 millin r mre wuld cmpel mst rganizatins t cnsider integrated slutins (they nted they had dne s at $4.5 millin, which is als the current size f the smallest integrated slutin user we talked with). Ttal dnrs: as their dnr base grew abve , several fundatins had mre acutely felt the need fr an integrated slutin, while ne respndent cnsidered 500 dnrs as a reasnable tipping pint. Number f grant applicatins: ne respndent reprted that when they began prcessing mre than 50 grant applicatins annually the crrespnding challenges pinted t an integrated slutin. Federal grants mnies: the same respndent fund that accepting federal grant dllars brught with it sufficient additinal reprting requirements that an integrated slutin made mre sense. Barringtn Partners Octber 2009 Page 5

6 Table B Barringtn Partners Octber 2009 Page 6

7 Experiences. We wanted t knw the respndents experiences after making the decisin t migrate t an integrated slutin. Had it addressed the challenges they had been facing using OTS sftware? Accunting: fundatins whse challenges had revlved arund accunting and financial reprting fund significant satisfactin in the functinality affrded by their integrated slutin. Cnsistency and accuracy f data was frequently cited as a key imprvement, alng with increased cnfidence n the part f bards and dnrs in the financial infrmatin they nw receive. One fundatin said they wished they had spent greater resurces t ensure the riginal setup f their chart f accunts better reflected hw they d their wrk, nting that it tk them a year t crrect the situatin. Data: fr thse respndents wh had been mst impacted by the challenges f integrating data acrss tw r mre OTS platfrms, the end t duble entry (with attendant cntrl and recnciliatin prblems) was a welcme imprvement. They als fund that an integrated database facilitated reprting, althugh sme fund the canned reprts less useful than they had hped. Dnr management: we fund a variety f respnses arund this issue. Several respndents reprted being fairly satisfied with this functinality in their integrated slutin, with ne citing its excellent dnr database feature. One respndent, hwever, fund it unsatisfactry ( like putting a size 11 ft int a size 7 she ) and elected t implement the dnr mdule f a different integrated slutin. Cntext: T give cntext t the abve cmments we asked the users f integrated slutins if, in the wake f their subsequent experiences, there was anything they might have dne differently. In large part, the respnse was, N, nt really. What, if any, were the dwnsides t having dne s? Cmplexity: respndents repeatedly stressed hw much mre difficult it was t learn the integrated slutin cmpared with their OTS slutin; they als nted hw challenging it was t find specific features (althugh when they did discver what they were lking fr they were regularly satisfied with it). A cmmn refrain was that their integrated slutin was user unfriendly and nt intuitive. This experience brught three new, interrelated challenges. (1) New users must get significant training befre they re able t functin effectively; (2) training is perceived as expensive and nt particularly effective; (3) small shps find it wrrisme t rely n a single expert user, but t cstly t crss-train additinal users. One fundatin had migrated frm ne integrated slutin t anther in part because they deemed the replacement easier t use and mre affrdable. Cst: Tw fundatins btained their integrated slutin with grants frm crprate philanthrpies. Several thers wh had funded their wn purchase fund the ttal cst f wnership (TCO) was expensive and nt gd value fr mney. Tw factrs cited as impacting csts were the need fr mre extensive (and nging) training than anticipated and the charges incurred fr custmizatins. Vendr supprt: Several fundatins cited difficulties in getting adequate vendr supprt, especially regarding respnse time and training. Specifically, that their vendr s respnse was slw, and frequently needed multiple attempts t find the persn wh culd slve the prblem. They cited a lack f clear training materials frm the vendr. Barringtn Partners Octber 2009 Page 7

8 ADDITIONAL OBSERVATIONS One fundatin said that they might nw lk mre clsely at alternative slutins, while several thers believed there wasn t really ne available. One fundatin suggested that they wuld engage mre heavily in clear cmmunicatins at an early stage with the vendr s technical staff, and ne recmmended establishing mre detailed requirements t avid errrs and misunderstandings when setting up the initial chart f accunts. It was als suggested that a fundatin lking at migrating t an integrated slutin wrk t set their wn rganizatin s expectatins (especially arund cmplexity, cst and vendr supprt) t be in line with the experiences f ther cmmunity fundatins. Respndents ffered several suggestins fr extending the usefulness f OTS sftware as tipping pints are reached: Seek ut advanced training, whether nline r at lcal cmmunity clleges, t better leverage existing functinality (say, in Excel) that may nt yet be tapped. Cnsider hiring an utside accunting resurce wh is already expert in the relevant OTS prgram(s) t streamline charts f accunts r cnstruct mre cmplex spreadsheets that can pstpne the need fr a full-featured integrated slutin. Cnsider hiring a lcal IT resurce wh can help standardize and imprve data exchanges between tw r mre OTS prgrams. Investigate whether adding a single mdule f an integrated slutin can furnish sufficient functinality t pstpne the need fr an entire integrated slutin. We learned frm Salesfrce.cm that, as part f their crprate philanthrpic strategy and apprach, they give t any qualified nn-prfit rganizatin the first 10 seats f their nline, hsted CRM slutin. We did nt evaluate this ffer. Observatins acrss the tw grups: Bth grups described the help they had received when they had reached ut t ther cmmunity fundatins t find slutins t cmmn experiences, r frm thse that had already traveled the rad planned. In additin t peer cntacts they cited AdNet listserve as a useful way t find cntacts. The variety f cmmunity fundatins in lcale, histry, fcus, apprach, dnrs and prgrams makes it difficult t describe a specific rad map t fllw that will fit all. Instead we have attempted in this research t ffer sme pinters t fllw. The tipping pints suggested by ur respndents lay ut sme f the parameters an rganizatin shuld keep in mind as they assess their wn situatin. Acknwledgements We want t thank the Cuncil n Fundatins Cmmunity Fundatins Leadership Team and their Technlgy Actin Team fr recgnizing the specific challenges facing smaller cmmunity fundatins in making technlgy wrk fr them. We especially thank the cmmunity fundatins wh respnded t ur interview requests; they are t remain annymus, but we are grateful fr their participatin and their candr. Barringtn Partners Octber 2009 Page 8