Pledge Redemption – The Final Step to a Successful Capital Campaign

Whew! The campaign is finally over! We surpassed our goal in pledges and all we have to do now is sit back, watch the money come flowing in and plan the groundbreaking, right? Wrong.

After a successful capital campaign, there is generally a slow down in activity as campaign efforts are not confined to asking, following-up and closing. In reality, these are only the beginning points for the campaign. The most important aspect of any capital campaign is the successful redemption of pledges.

After the intensity of the fundraising portion of a capital campaign, it is customary for an organization to want to pull back the effort put into the campaign – by both staff and volunteers. Donors, staff and volunteers have typically made extraordinary commitments of time and resources to make the campaign a success.

In my experience, it is customary to receive approximately 10% of the funds when you secure the pledge, with about 30% of the fund being collected by the end of the active solicitation period (assuming 18-months of active solicitation with a five-year pledge payment period). Redeeming the remaining balance of 70% of the pledge depends upon a successful Continuation Phase or Pledge Redemption Phase.

The redemption of pledges depends on successful monthly, quarterly, semi-annual and annual remittances, which is directly influenced by several factors including:

• The progress of the project for which the funds were raised;
• Designing an effective pledge redemption plan;
• Implementing the pledge redemption plan under the leadership of the organization’s President/Chief Executive, the financial officer, and a volunteer-led Continuation or Pledge Redemption committee;
• Careful monitoring; and,
• Diligent follow-up on late pledge payments.

The Continuation or Pledge Redemption Committee is a group formed at the end of the active campaign to function throughout the pledge payment period. Usually about five to eight people are selected for the committee. I recommend recruiting volunteers who worked on the campaign – naturally, the most successful campaign workers merit first consideration because of the importance of the committee’s work. It is important to keep in mind that the nature of this work requires tactful and courteous people who can perform the delicate task of reminding delinquent donors of their commitment in a friendly, pleasant and completely private manner.

The Committee represents the organization throughout the pledge redemption period. I suggest the Committee meet once a month to receive and review a report of pledge payment progress provided by the organization’s financial officer. The report should include the aggregate of all monies received to date, the amount received during the most recent report period and a listing of all delinquent pledges.

Besides this monitoring function, Committee functions include communicating with donors who have fallen behind in their payments in an effort to revive regular payments or arrange a new payment schedule, and communicating the progress of pledge redemption with the organization’s donors.

Successful pledge redemption in any philanthropic program is dependent on two basic principles:

1. Donors get their statements on time, and
2. Early detection of pledges that are falling in arrears.

It is important that the organization ensure that “Statement of Account” (not “bills”) notices are sent promptly within the first two or three days of each month. Such dependable action will foster a habitual behavior in donors, and you will routinely see payments as scheduled. It is recommended to designate a single telephone line or extension as a “Donor Hot Line” for donors to call with questions or changes during the statement-payment-posting cycle. Donors should get the same person at the pledge redemption office every time they call and receive prompt and courteous treatment. Follow-up written confirmation of these calls should also be prompt and detail the specific action taken. It is my experience that these recommendations will help ensure that donors pay on time, pay off their pledges and, often, send in additional funds.

Most organizations have some type of fundraising software that will facilitate the pledge redemption, posting and recording. This significantly reduces the time and manpower required to service the donor base. I also recommend placing a public relations piece periodically in the statements of all donors which details their account activity to date, updates them on the campaign and funds collected to date, explains progress with the project (case), and thanks them for their continued commitment. Records of these correspondences can usually be linked to each individual’s account within the software system thus building a more informed prospect evaluation record for future solicitation.

With regard to pledge accounts falling into arrears, it is best to think of it as the same with the detection of a major illness—the sooner recognized, the better the chances for recuperation. As a rule, all delinquent accounts should be discussed by the Continuation Committee before any action is taken. There may be personal or family problems that someone is aware of, and you would not want to make incorrect assumptions as to why the account is in arrears. Donor accounts should be monitored for delinquency on the following basis:

• Monthly – missed 3 consecutive months’ payments
• Quarterly – missed 2 consecutive quarters’ payments
• Semi-annually – missed 2 consecutive semi-annual payments
• Annually – 90 days after the anniversary of the pledge

It has been my experience that the group of donors to monitor most carefully is the monthly donors. Within this group, pay particular attention to monthly donors who paid little or no cash down at the time of their gift.

On the trigger dates noted above, accounts considered “at risk” (but not yet delinquent) should receive a letter expressing concern. If no response is received within 60 days of sending that letter, another more urgent letter should be sent requesting an appointment to discuss their pledge.

On an annual basis, the Finance Office should revise pledge expectations and write-off delinquent accounts, after confirming such action with the development or fundraising office.

Special attention should be paid to pledges of $25,000 and above. Donors of $25,000 or more who fall in arrears should be investigated more closely and followed-up with personally. A friendly phone call or note from the President/ Executive Director of the organization or a member of the Committee will often make the difference with a significant donor. Gifts of this size or larger need to be treated specially, as the loss of one six-figure pledge can have a significant negative impact on the outcome of the project. Donors of $100,000 or more should not receive the typical statement, but rather a special statement with a message from the Campaign Co-Chairs or Honorary Co-Chairs.

Typically organizations with effective pledge redemption plans can expect to collect 90%-95% of the amount pledged (or even higher, if they are very careful) throughout the pledge payment period. This will happen only with diligent and businesslike follow-up, careful monitoring of accounts and, of course, fulfillment of the needs as presented in the campaign case to which the donors gave in trust.

It is also important to recognize that each donor is now an investor in the future of the organization. An important element of effective pledge redemption is to recognize this and to implement a comprehensive plan for continued donor cultivation. While the consistent distribution of statements to donors is the beginning of good redemption, it is not, by itself, sufficient to your needs. The “Statement of Account” alone will not facilitate redemption. To redeem the highest percentage of pledges, it will be necessary to consistently communicate with donors regarding the progress, activities and benefits provided by campaign.

Effective cultivation is achieved when effort is properly focused on select groups of donors. I advise breaking down your donor base into groups for selective cultivation. For example:

• $100,000+
• $25,000 – $99,999
• $10,000 – $24,999
• $5,000 – $9,999
• $1,000 – $4,999
• All other donors
• All other Major Gift Prospects

While it may not be possible or even desirable to maintain the high degree of drama present during the solicitation phase of a campaign, good cultivation of donors begins with good communications. Carefully prepared announcements focusing on the campaign case, progress to date and other relevant developments will be an effective way to keep in communication with donors and prospects. The development and marketing office should publish and distribute regular announcements and releases to members, the public and the media.

Pledge redemption, like most things, is a function of the “Six P’s”: Proper Prior Preparation Prevents Poor Performance. For effective pledge redemption, prepare a comprehensive continuation plan, recruit motivated volunteers, carefully monitor progress and communicate.

---