Is Swiss foundation law up to date?

The most important information for NGOs on possible adjustments in Swiss foundation law

On 30 January, the Center for Foundation Law of the University of Zurich held the 5th Zurich Foundation Law Day. At this well-attended event, representatives from academia and practice discussed the developments and challenges of the current legal environment for foundations as well as possible upcoming reforms in foundation law, inheritance law, supervisory law, regulation, transparency and compliance.

Why is Swiss foundation law important for NGOs?

Swiss foundation law is important for NGOs from two perspectives: On the one hand, the legal form of a foundation is a popular legal form for operational organizations, alongside the association. In particular, changes in supervisory law, licensing procedures and regulations have a direct impact on these NGOs.

On the other hand, changes in legislation may have an influence on the allocation strategy of grant-making foundations, which is important for resource development and fundraising for all NGOs.

Some facts and figures

There are currently over 13,000 charitable foundations in Switzerland with a capital of around 100 billion Swiss francs. 59% of these foundations are grant-making foundations. Last year 349 new foundations were established. At the same time, 216 foundations were liquidated. On the one hand, this means that the foundation landscape is renewing itself more and more, and that a foundation may even close down if its continued existence no longer makes sense. On the other hand, the number of foundations is growing, which means that the sector is in an ongoing process of renewal. In French-speaking Switzerland there were again a particularly large number of new foundations; Prof. Georg von Schnurbein of CEPS at the University of Basel speaks of a foundation boom in this part of the country.

Possible adjustments from 2021

Possible changes in foundation law will be discussed and decided under the Luginbühl parliamentary initiative until the autumn session 2021 of Parliament.

In order to increase the transparency of the non-profit sector in Switzerland, the initiative proposes to establish a national register for non-profit organisations (foundations and associations). The criticism is that there are already national and cantonal registers of foundations, and that a further register may mean additional administrative work for the organisations. However, the tenor is nevertheless positive: Such a register - if the relevant data is clearly recorded and made available - holds many opportunities. In addition to increasing transparency about which charitable foundations exist, what they do and what assets and funding values they hold, it shows potential donors which organisations (foundations and associations) are really tax-exempt and helps NGOs to make their fundraising more effective.

The current Foundation Law states (Art. 84.2) "The supervisory authority shall ensure that the assets of the Foundation are used in accordance with its purposes". In practice, this has led to different interpretations and practices with regard to the mandate of the foundation supervisory authority, depending on the location, with a tendency for the supervisory authority to control rather than supervise foundations. The preliminary draft for the new Foundation Act of the Legal Commission of the Council of States does not envisage any adaptation in this respect. On the other hand, Prof. Dr. Dominique Jakob of the University of Zurich suggests that the authority and responsibility of the Foundation Board be more clearly defined: Art. 84.2 "The supervisory authority must ensure that the management and administration of the foundation are in accordance with the law and the statutes. It observes the principles of legal supervision, subsidiarity and proportionality"..

This raises questions regarding the liability and compensation of members of the board of trustees and executive board. In Switzerland, there is a need for around 70,000 foundation board members and 600,000 board members in non-profit associations. Up to now, organisations that compensate their board members are threatened with the loss of tax exemption. Foundation board members are also liable for the organisation with their private assets. It is therefore becoming increasingly difficult to find people who bring the necessary versatile professional know-how to foundation and association boards.

This starting position is a major hurdle for non-profit organisations: The management and strategic leadership of a non-profit organization is highly complex and the moral responsibility for donated funds is by no means less, if not greater, than the handling of funds in the profit sector - non-profit organizations have obligations to both donors and recipients, as well as to society. It is therefore incomprehensible how non-profit organisations can adequately fulfil these tasks without being allowed to use part of their funds to professionally staff their strategic management.

The possibility of compensating board members would be desirable for the professionalisation of all non-profit organisations.

However, this also means that grant-giving foundations should increasingly co-finance the costs of compensating board members at their recipient organisations, together with other basic costs. Only with strong roots can NGOs achieve a sustainable impact!

Further reading on the topic (in German and French only)

https://ceps.unibas.ch/fr/ceps-news/news/nouvelle-plateforme-internet-du-ceps-avec-des-statistiques-sur-le-secteur-des-fondations-suisses/

https://www.swissfoundations.ch/aktuell/initiative-luginbuehl-naechste-runde/

https://thephilanthropist.ch/stiftungen-eignen-sich-nicht-fur-steuerhinterziehung/?v=d5d4745c6378

https://blog.stiftungschweiz.ch/braucht-die-schweiz-eine-reform-ihres-stiftungsrechts//braucht-die-schweiz-eine-reform-ihres-stiftungsrechts/

Get to know your organisation’s best fundraising consultants – your donors!

The Swissfundraising workshop, January 22, 2020, on donor surveys and interviews, led by Tom Neukirchen from Foundgiver Social Marketing, focused primarily on direct marketing and mailing campaign fundraising. And there are valuable take-aways for institutional fundraising, as well.

Blurry images on the wall…

One of the main challenges NGOs face in fundraising was aptly compared with Plato’s allegory of the cave: NGOs usually operate with a lot of indirect information, analysing data generated through direct marketing or through general surveys conducted by survey institutions. For grant-giving foundations they rely on information in the press, tips and data from other NGOs or on what can be found on the web, which is often not specific enough.

Interaction with donors is generally a one-way communication: NGOs keep sending calls for donations, supported by information on their organisation and work. But how often do they get feedback, apart from the calls of those who are annoyed by receiving mailings? Even with institutional donors the communication is quite one-sided: Grant agreements describe in detail, when and how grantees need to report back to the donor – and rarely include anything about how the donor is going to share information about the level of satisfaction on project implementation, interaction or developments at their end. Fundraising effectiveness is measured primarily based on monetary return, and the reasons why a donor gives or stops giving often remain blurry.

Your donors are your best fundraising consultants

In order to develop a strategic approach to resource development, it is important to know your donors – they are the best fundraising consultants for you. Donor surveys and interviews, therefore, can help NGOs to become better in their fundraising and public communication.

The good news is: donors are generally interested to be heard and to contribute with their views and knowledge. They value the acknowledgement, when the organisation they support is interested in them and in their opinion.

Tom Neukirchen shared some impressive numbers from surveys conducted by numerous organisations he has been working with: Donors who had been inactive for some time responded with a rate of 0.3-0.7%. That might seem very low, but if among 1000 addresses you have 3-7 people with the potential to be reactivated as donors, that’s at least something. More importantly: Following up with those who take the time to reply promises to yield important information on why donors are leaving and what could be improved.

The full potential of surveys gets clear, when looking at the other donor categories: Among regular active small donors between 4 and 12% replied to the surveys, and among high donors the return rate was even higher: between 10 and 34%! The information provided by these individuals allows the organisation to continue the conversation with them based on their specific interest. And it opens a path to upgrade their contributions.

Donor surveys and interviews

A donor survey should be a stand-alone campaign and not mixed with fundraising campaigns. It can be distributed and collected on paper or online. It should contain 10-30 questions with a mix of open and closed questions, and it should not take more than 10 minutes to respond to. The questions need to be specific and adapted to the different kinds of donors, so that it can be used to upgrade each one from one level of support to the next.

After some general questions on the donor’s understanding of the organisation and its work, assessment of the donor service, criticism and wishes, questions on the specific following sections could be elaborated: Communication, engagement, personal information and specific questions relevant for your organisation.

The opportunity should be used, especially in the high donor segment, to include the question, whether they are interested in a personal in-depth interview. This yields another highly valuable opportunity to increase the relation with these donors.

An important point to be considered is to make sure that everyone in the organisation is part in developing the survey, including the content and the implementation plan. The time needed for such a project depends on the donor base. On average the following timeframe should be considered: 6 weeks for preparations, 6 weeks for responses and reports, as well as 6 weeks for the follow-up. It is crucial to be able to respond to wishes, questions and criticism received through the survey in a time-sensitive manner.

A very surprising fact: it is generally possible to cover the costs of such a campaign by including a general payment slip in the mailing or a donate-button in the online survey. In addition to that, the organisations received valuable information on the preferences of their donors: suggestions for channels of communication, their preferred projects and programmes, and their preferred way of donating.

And other ways to involve institutional donors

It is certainly worthwhile to make the effort and “crawl out of the cave” in order to get a better understanding of the market by creating ways to hear our donors. Surveys and interviews are an excellent means to do this.

I also recommend involving institutional donors in various other ways: Apart from the obvious invitations to events and conferences, consider, for example, consulting them for evaluating your strategy or in the process of developing a new one. The idea is not to create a donor-driven, but a donor-conscious strategy. By involving institutional donors through surveys, interviews or strategy workshops, you not only strengthen the donor’s interest and understanding of your work but benefit from new ideas that help you think out of the box. At the same time, you gain valuable insight on your donors’ views and functioning. By establishing increased two-way communications trustful partnerships can be built. They are the prerequisite for NGOs to be able to openly discuss and raise true understanding of important issues that many donors cringe at, for example the meaning and importance of full cost funding or long-term support.

Beatrice Schulter is passionate about organisational development and change management. As Founder and Director of Roots to Rise, she works to strengthen the organisational roots of NGOs/CSOs by facilitating change processes, the development of strategies, and supporting governance strengthening. Connect with Beatrice on LinkedIn and Twitter.

To change or not to change - that is not the question

Take-aways and more from the cinfo 2019 Immersion Day “Shaping the organisation of the future”

Change cannot happen from within the hamster-wheel

The cinfo Immersion Day on “Shaping the organisation of the future” was a truly inspiring event. There was plenty of exchange of experience and ideas, organised in a fun and playful way that mobilised participants’ innovative potential.

The various knowledge management methods used during the day are practical take-aways to create moments for creativity and innovation in the working context. Pavel Kraus reflected on this in his piece here.

Consciously creating such space and time for jointly spinning new ideas is a key element for change and innovation, because change cannot happen from within the hamster-wheel.

The question is not if, but why

Innovative ideas will emerge from play and brainstorming, but it takes more to actually make it materialise in a meaningful way. There are two aspects that I find important to underline, especially with regard to innovation in international development and human rights cooperation: Innovation is not a purpose in itself, lest it risks becoming clownish activism. And innovation is not primarily a question of technology.

Innovation and technical transformation are – just as organisational development in general – means to getting things done more easily in a changing environment with its new challenges and opportunities or helping us to fulfil the purpose of our work in a more efficient and effective way.

The question is not if, but how

The question on how to shape the organisation of the future brings us to discuss – apart from practical tips that can help us get going – much deeper issues: the actual point of organising, the effects, potentials and limits of rules, roles, structures and processes in relation to the people implied. Let me take you through some thoughts around that – thoughts that are not exhaustive and hopefully invite to further discussion…

The essence of organisation

What exactly do we mean with “organisation of the future”? Is there really any substantive difference in the essence of organisations throughout time? And if yes, where is the core of this difference?

The meaning of an organisation does not lie in rules, structures or processes, neither in technology, but in the orientation towards a meaningful goal that provides reason for cooperation, as well as in the understanding of human beings and how they operate in their environment.

It is thus the changing environment and changing understanding of what it means to be human that define the optimal organisation for a given purpose, in a given environment and with the individuals involved.

People organise with others, in order to fulfil a certain need or purpose. That is the initial, as well as ultimate driver of organisation. Naturally, people would like to achieve their purpose with the least amount of effort and highest comfort, and least resources. They therefore define rules and processes providing them with the best setting for effectively fulfilling this mission. And as the environment and people change, goals change, and rules and processes need adaptation.

Chicken or egg

As in all evolutionary processes, it is impossible to pin down the origin and initial driver of change: is it the change of rules and structures that change the behaviour of individuals and ultimately culture, and the idea that people have of themselves and others? Or is it the other way around: changed perceptions make people adapt rules and structures, in order for them to better correspond to the goals, purpose and identity that people and groups of people have.

In the end it is a matter of belief about the ultimate nature of the universe itself, a fascinating discussion to continue over a glass of wine, for sure, but not very handy for leaders, managers or board members confronted with having to take decisions regarding change in their organisation right now. Or is it?

It is a key issue to understand for successful innovation and change, that there are different people within an organisation and among partners, some of whom are eager to change, and will move forward quickly, while others need clear rules and structures. Both kinds of people and those somewhere in-between make up your organisation and leaders are challenged to shape change-processes in a way that takes them all along: Enable participation and co-creation of common goals, while supporting the creation of adequate organisational structures and processes along the way.

Technology as driver or means for change

Technology is an opportunity for organisations to do what they want to do more easily. But it can also be seen as a driver: The fact that emerging technology and an ever-faster changing environment have been speeding up the need for ongoing adaptation is great luck: it renders it less likely that an organisation freezes and becomes an entity entirely focused on itself and the power relations within. There is a high risk that at one point such a frozen organisation is not capable to deal constructively with the necessity to change and will either collapse over the inability to adapt or eventually undergo painful change processes.

I come to the conclusion that in order to do justice to a changing environment together with changing potentials of people, the organisation of the future needs to be quite different to the one in the past. The essence of this difference lies in the understanding and approaches to leadership.

The nature of and requirements towards leadership

Interestingly, there were no fundamental changes in the organisational structures and hierarchies of the case studies presented and discussed during the cinfo Innovation Day. It seems that formal commitment to innovation and to ensure participation at different levels by boards and senior management is much more pivotal and effective than structural changes. And it is much more efficient and potentially sustainable, than innovation led (only) from a lower hierarchy position: In the examples presented it was due to the tireless work and internal advocacy over a long period of time by the initiators of innovation – and eventually the conviction of someone with decision taking power – that change was successful.

The key requirement towards leadership of the organisation of the future is to facilitate co-creation, create joint ownership of purpose and goals, while at the same time to take responsibility and lead on ensuring, that everyone pulls towards these goals. It requires a diligent balance between participatory leadership and management. While management provides clarity and efficiency and with it a certain comfort, leadership provides effectiveness by inspiring and guiding the organisational mind towards the common goal.

This leadership is therefore responsible to create meaningful space and time for the whole crew to spin new ideas and jointly adapt or change the direction of the organisation. The hierarchy – senior management and boards - remains responsible to formally take the decision, which of these potentially many new ideas are to be pursued and which not, and to lead everyone to work towards the goals decided upon. Within such a co-created frame of what and how, management can be kept lean, because goals are clear, and approaches can be co-created in largely self-organised teams. What management needs to do is be informed how things develop and identify if things are going in a different direction or if there are major changes in the context, requiring this participatory process to enter a new cycle.

An absolutely crucial aspect of “creating space for change and innovation” in the responsibility of senior management and boards is to ensure the availability of adequate resources. Change requires time and money. If an organisation is to be capable of adaptation, innovation and change, this needs to be reflected in long- and short-term planning. Every NGO should routinely include a budget for change and innovation. And in order to make this budget available, senior leadership and board members need to strengthen their advocacy towards donors, so they understand the importance and value of organisational development and change.