Author: Len Moisan

What Exactly is Leadership?

Often leadership creates images of the charismatic CEO, expounding a vision to industry analysts or a charismatic coach giving an inspirational talk that turns a halftime deficit into victory or a fundraising presentation that secures a major gift.

A recent Google search on Leadership revealed over 800 million sites with multiple applications of the clearly overused word, “Leadership.” Yet, despite its many applications, the consensus appears to be that leadership is not only about, “what” is accomplished, but also about “how” it’s accomplished. That “how” happens through relationships, the characteristics of which we’ll describe in the next few blogs. Today we’ll begin with two important ones:

Influential and Dynamic More Than Positional and Controlling

As I read some titles and selected articles, I wondered, “Why is leadership so broadly defined?” After a bit more reading, I concluded, that many people confuse leadership with headship, job titles or responsibilities. However, true leadership is not positional, and its dynamics are far more complex than presiding on top of an organization or using people to get things done. Many organizational heads (including Syria’s Assad) get things accomplished through power, but that doesn’t make them leaders. Leaders use power and influence strategically to create or strengthen relationships and motivate individuals to achieve common purposes. Those purposes are about the needs of organizations, leaders and those being led.

James MacGregor Burns on Leadership

 In 1978, James MacGregor Burns described leadership in even simpler terms in his definitive (Pulitzer Prize winning) book on the subject. In Leadership, he argues that the term is best understood as a relationship between leaders and followers. Inherent in that relationship is power and how one uses power in working with the people, purposes and resources determines whether that person is leading or power wielding. To this point, Burns comments, “To control things – tools, mineral resources, money is an act of power, not leadership things have no motives. Power wielders may treat people as things. Leaders may not. All leaders are power holders, but not all power holders are leaders.” Leaders, then, don’t use power to control people or make them serve only the leader’s purposes. Instead, they influence followers to act on purposes that both leaders and followers have in common.

Developmental More Than Dictatorial

It’s interesting that the inability to engage people productively is often blamed on laziness. This logic follows that managers need only to dictate what should be done and punish those lazy people who don’t comply. While “laziness” could be a factor, often the lack of productivity is due to the manager’s inability to teach and develop people effectively. According to Dr. Mel Levine, a learning expert, developmental pediatrician and college professor, laziness is a myth. He explains that neurodevelopmental dysfunctions may cause what he calls “output failures”, but he argues convincingly that none of these failures is due to laziness. He commented, “We’re all born with a drive to produce, and we have within us the resources to bear fruit from early childhood on through our adult years, we want to show what we can do. We gain energy and feel good about ourselves whenever our personal output wins the approval, the acceptance, the respect of (others).

Assuming Dr. Levine’s observations are correct, what he says has significant implications for leaders. Though we may be born with the drive and resources to produce, these traits need cultivation and nurturance for individuals to learn how to produce. The learning “how” is the job of leaders. They teach by explaining, modeling, measuring and allowing followers to succeed and fail. Essentially they develop people by creating a culture of teaching and learning, where it’s safe to ask questions and take risks. Of course, talent is crucial for any organization (as well as in nonprofit fundraising), but unless leaders develop talent they are bound to be less productive.

by Len Moisan

7 Reasons Churches Fail in Fundraising…Part II

Last week we began a series on 7 reasons churches fail at fundraising, and what to do about it. Specifically we mentioned:

1. The pastor and church leadership who establish unrealistic goals, and have nothing to back those goals beyond needs or wants.

As fundraising consultants, we recommend that churches begin the campaign process with a planning study to help determine both the capacity and the will of church members to achieve the goal. Conducting such a study also helps church leaders determine exactly what a reasonable goal is. 

2. Churches that are not teachable because the leaders believe they are experts in every area.

To address this we recommended that churches not only hire outside counsel to help them with the campaign, but also listen to that counsel. A good consultant can save you time and energy and help you increase donations as a result of their experience.

Now today, we’ll look at a few more reasons that churches fail in fundraising and what churches can do about it.

3. The church leadership approaches the campaign casually and they lack a comprehensive campaign plan.

Often churches will start a campaign by simply announcing it, talking about the projects and then having people make their commitments one Sunday. Others might be a bit more sophisticated, so they decide to visit with each church family asking them for a specific amount. However, neither method involves much of a plan nor does it work as effectively as it might. In a church, the best way to maximize results is to have volunteers working a comprehensive plan with a master schedule, communications strategies, deadlines, and more.

 In the campaigns we facilitate, there are several operational committees that we personally meet with at least twice (sometimes more) to explain their responsibilities, provide training and give them advice. Each of these committees has specific activity schedules, instructions, deadlines and prototypes for their work This committee work tends to build ownership, consensus and enthusiasm over time, and that usually translates into higher giving and motivates church members. When a church lacks this, campaign success becomes a lot more questionable.

4. The Pastor has a hard time giving up control and empowering others to act.

One of the primary elements of successful campaigns is the involvement of church members. When we structure campaigns we have several committees of people involved. In fact, rather than have a few people do a lot of things, we have a lot of people doing a few things. This tends to build ownership and enthusiasm and stimulate giving. However, if the pastor isn’t willing to let go of the reigns and allow people to lead in some key areas, then the campaign isn’t as likely to succeed.

5. The Pastor is reluctant to get involved and ask others for help.

The pastor may not be the only leader, but the pastor should be the primary leader. At the start and throughout the time of the campaign, the Pastor must be out front, identifying and helping recruit key committee chairs and talking about the importance of the campaign.

In addition, while the vast majority of members won’t be asked for specific amounts, there are a few lead gift prospects with whom the Pastor should visit at some point about making a major gift. Campaign leadership can accompany the Pastor, but the Pastor needs to be involved.

Without the Pastor’s involvement in some of these key activities, it’s not likely that the campaign will be successful. In fact, people shouldn’t have to ask, “where is the pastor,” or “where is the pastor on this campaign?” That should be obvious from the start!

by Len Moisan

7 Reasons Churches Fail in Fundraising - Part I

Throughout my career, I’ve heard many stories of churches setting out to raise lofty goals, only to come up short. Unfortunately, once the horses are out of the barn you can’t close the door and bring them back.

The same is true for capital campaigns. Once they’re launched and completed, the church is done with capital fundraising for 3-5 years. That’s why it is important to do the campaign right the first time. The following are a few key reasons we’ve seen church campaigns fail with some tips on how to avoid these pitfalls:

1. The pastor and/or leadership who establish unrealistic goals, and have nothing to back those goals beyond needs or wants – Campaign success is usually the result of a combination of capacity and will. Does the church have the capacity and the will to achieve the goal? In our church campaign consulting, we’ve seen many churches that have enough people with enough capacity to well-exceed the goal. The problem is that their people don’t have the will.

The Feasibility / Planning Study is Key

That’s why it’s important to conduct a planning/feasibility study with the congregation to determine what the church can reasonably expect to raise. Most consultants say that you should be able to raise between 1 and 3 times your annual budget.

First, there’s no real standard supporting that claim. We’ve had a church struggle getting to one time its offerings. Yet, we’ve also had a church achieve 20 times its offerings. But there were logical reasons for both results, and knowing that in advance allowed us to help them set reasonable goals.

The first church was full of young people with toddlers. They were generous, but they lacked financial capacity. By contrast, the latter church had people with excellent capacity. They just needed a process to sway their will.

Set Realistic Goals

Goals should certainly be established according to need, but it is important that they also be realistic. In both cases, our study process allowed us to help set realistic goals and achieve success.

2. Churches that are not teachable because the leaders believe they are experts in every area. We had a church approach us about helping them. They had 4,000 families and were building a new church for $12 million. All of these variables indicated that they were in a good position to have a successful campaign effort, but they needed help.

 The church spent over $700,000 for architectural fees, but they were reluctant to pay our fee, which was only about 10% of the architectural fees.

The elders decided they could organize the campaign, raise the money and save the expense of consulting fees. Despite the fact that we have a stellar 20-year track record of helping church clients raise about 155% of goal, they moved out on their own and wound up raising less than $2 million.

In another case we had a young church hire us, pay us but fail to implement several crucial strategies on which we advised them. Evidently, the pastor and two of the elders didn’t think these strategies were important, so they neglected to implement them.

When You Hire a Company, Listen to Them

Even though we spent considerable time organizing and training around these strategies, the leaders just didn’t think they were essential. As a result, this turned out to be the first church we worked with in over 20 years that failed to achieve its goal. The point is that fundraising consultants do this every day. When you hire a company and pay them to help you, it makes sense to listen to them.

Next week we will continue our series on 7 Reasons Churches Fail in Fundraising.

by Len Moisan

The Most Effective Form of Fundraising - Part 3

In the last two blogs we’ve discussed the most effective form of fundraising, face-to-face solicitations. Specifically, first we compared faced-to-face visits with other forms of fundraising, and showed how the productivity of this method is far superior to any other form. Then last week we covered several steps that include:

• Setting the appointment
• Opening the call by making a personal connection
• Telling the story with a sense of passion
• Explaining the need
• Sharing the vision
• Asking for advice
• Asking for a specific amount or above
• Asking and then being quiet

Now today I’ll cover a few final points.

Determining Targeted Amounts

In solicitation visits it’s much more effective to provide a targeted amount than it is simply to ask a person to give. But how do you establish those amounts? Simply stated, as fundraising consultants we recommend that our clients conduct a wealth screening of their databases. It provides information like real estate holdings, political contributions, estimated net worth, giving capacity and much more.

Of course, because people have high giving capacities doesn’t guarantee they’ll give generously. That’s why we also consider giving levels to an individual organization and other anecdotal information.

For example, the wealth screening may indicate that a person has a $10 million giving capacity, but they have given only small amounts to you. Clearly, they’re not likely to give you a major gift right away. In fact, it usually requires substantial cultivation, but the wealth screening tells you where to put your cultivation efforts.

Handling Objections

In the actual meeting after you make the request, the individual/s may have questions or offer objections. We actually try to anticipate at least some of the objections and then cover those in our orientation and training sessions. We also give volunteers a fact sheet with information that covers many of the questions they may receive.

However, it’s impossible to anticipate all questions or possible objections, so when that happens we simply suggest volunteers respond by saying, “That’s a good question and I don’t know the answer. Let me get back to you.” Finally, in our capital campaign consulting we also recommend to the extent possible that a staff person and a volunteer make the calls together. That way if questions emerge the staff person can usually address them.

Following Up Appropriately

Often people need time to consider your request and discuss it privately. In that case I don’t recommend leaving behind a pledge card. If and when you do, you are opening the door for them to send it back, usually for an amount that is far less than the original ask amount.

That’s why we recommend that volunteers settle on a follow-up time. Also, the follow up doesn’t have to be in person. Telephone is fine, although a personal visit is a very effective follow-up strategy. That said, people are busy, so phone follow-up is quite acceptable.

We also recommend that follow-up be completed within two weeks of the original visit. If it’s a call, we ask how they are coming along with their decision. If they still haven’t decided, we ask if there are any questions or any more information they might need. Then we recommend that the volunteer tell them they will follow up in a couple more weeks. If after two more weeks they still haven’t made a decision, more than likely they have decided but just don’t want to tell you.

Finally, major gifts take a lot of work but they’re well worth the effort. For organizations that have big plans and a big vision, clearly face-to-face solicitations are the way to go!

by Len Moisan

The Most Effective Form of Fundraising - Part 2

In our last blog we established that by far face-to-face fundraising yielded the best results. We also established that many organizations and their boards are reluctant to engage this way because it’s uncomfortable. Still, there are some techniques that can reduce anxiety and enhance success.

You Have to Set Up an Appointment

Now you might think this is a given, but you’d be surprised at how frequently busy people fail to get around to it. In our capital campaign consulting we remind staff and volunteers that the biggest barrier to a successful visit is not making the call to set up the appointment in the first place. We suggest clients set aside time to make calls and to avoid conducting business on the telephone. Simply ask for a 20-30 minute meeting.

Make a Personal Connection

After the appointment is set and the meeting date is here, it is a good idea to begin the meeting by making a connection. A good way to do that is to talk about family, friends or associates that you may have in common.

Personal connections are important, but eventually you need to transition the conversation to the organization you are representing. Here’s where collateral materials with fact sheets can help. Talk about some of those facts and how the organization is making a difference.

Tell the Story of the Organization with a Sense of Passion and Commitment

Sometimes that includes a personal account of how you or a family member has been served. Either way they should learn why you’re involved, who is served, what happens, where and how it happens and why it’s important.

Explain the Need

If you do a good job telling the story, the need should flow from it. For example, you may be doing great work, but you are also limited in some way. It might mean that you need more space or equipment to serve more people or serve people more effectively. Whatever the need is you have to make it clear and to the point.

Share the Vision

The conversation can’t be just about need. You also have to talk about what will happen as a result of filling this need and why it matters.

Ask for advice

During a campaign when I was a vice president, the president of our university told me something that stuck with me. He explained that when he first became president he used to ask for money and he got a lot of advice. However, as he progressed he started asking for advice and he got a lot more money. When people give advice they tend to become a lot more vested in the conversation, and that often leads to a gift.

Ask for a Specific Amount or Above

People need targets. Here’s where a gift table can help. Some people would rather point to a number than say the number, which is fine. “I’d like you to consider making a commitment at this level (point to it on the gift table) or above.” Again, we don’t want to limit anyone’s giving. Asking this way typically yields 5 or 6 gifts above targeted levels. However, first donors must have an idea of the level you’re asking them to consider.

Ask and Then Be Quiet

As fundraising consultants we advise clients that although this strategy takes discipline, it works. Sales people tell me that once the offer is on the table, the next person who speaks is at a decided disadvantage. This is certainly true in fundraising. When you’re asking, don’t try to let the donor off the hook; a little pressure works. Simply put your request out there and then discipline yourself to wait for a response.

Next week we’ll discuss how to how to handle objections, determine targeted amounts, initiate follow up and more.

by Len Moisan

The Most Productive Form of Fundraising

I can’t tell you how many times I’ve heard negative comments about fundraising. “I hate fundraising; I just really don’t like asking for money; fundraising makes me uncomfortable.”

Of course, very few people who say these things have actually been involved in a well-planned fundraising campaign. In the coming weeks we’ll try to provide some basics of fundraising and also try to deal with some common fears.

However, even before we get into, “techniques” I want to address a fundamental question. Though it’s most important to success, it is often is neglected. Simply stated, which method yields the best results?

Why Face-To-Face Asks are Superior

Many nonprofit organizations and boards prefer events, direct mail or even telephone solicitations over making direct face-to-face asks. Despite the fact that the aforementioned methods are costly, labor intensive and less productive, nonprofits and their volunteers continue to rely on them. Therefore, I thought we’d begin our series by looking at each method.

Direct Mail and Phone-a-thon Fundraising

In direct mail good response rates are typically 1%-3%, and 8-9% for house renewals. Phone-a-thons are more effective if people answer. In fact, a Showcase of Fundraising Innovation/Inspiration (Sofii) report cites a 38% response rate for telephone upgrade campaigns (vs. 4% in direct mail upgrades).

However, that doesn’t consider what it costs. In fact, direct mail is the most costly and least effective method of fundraising. Now I’m not suggesting that you drop it. On the contrary, direct mail also helps acquire new donors, renew or upgrade old ones, enhance brand recognition and increase visibility. It also can tell stories that demonstrate how you’re helping others, but it does have limitations.

Special Events Fundraising

Golf tournaments, auctions and galas can help, but you have to watch costs. While professionals suggest that they shouldn’t exceed 30%, in our capital campaign consulting we’ve seen them reach as high as 70%. And this doesn’t consider the labor-intensive nature of events. Still events raise organizational visibility and bring new people to the table.

Of course, well-balanced development programs include all of these methods and more.

Face-to-Face Fundraising

The operative word here is balanced. Often nonprofits employ plenty of the previous methods, but they neglect the most productive form of fundraising and that is face-to-face solicitations.

As fundraising consultants we often quote the statistic that 70% of the time a peer visits a peer this way, the answer is “yes”. Of course, it may not be at the same level you ask, but it’s usually “yes” at some level. Also, gifts are much larger in face-to-face visits than in any other form of fundraising.

Why People Fear Face-to-Face Visits

Fears generally come from one of 3 concerns. I’m afraid they’ll say “no”; I’m afraid they’ll get mad; or I’m afraid I’ll make a mistake. So what are the answers?

First, the reality is that 70% of the time the answer is “yes” and not “no”.

Second, in over 30 years of fundraising, I’ve only had one person get mad, and he later apologized. People are sometimes flattered, but they hardly ever get mad. In the one case where it did happen to me, I responded, “I’m not asking for myself. I’m asking for the kids who are being housed, fed and cared for here.

Third, no one is perfect. Whenever you initiate something new, you’re bound to make mistakes. In fact, Michael Jordan said that during his career he missed over 9,000 shots, lost 300 games and he’d been called on 26 times to make the final shot in a game and missed. Jordan noted that he failed over and over again and that’s why he succeeded.

Fundraising is the same; you simply get better with practice. In future blogs we’ll talk about some effective techniques for asking.

by Len Moisan

The Greatest Leader of All Time (Part 2)

Last week we talked about the characteristics that make Jesus the greatest leader of all time. Specifically we mentioned that:

1. Jesus attracted and inspired others by casting a compelling vision and taking impressive actions.
2. Jesus believed in the potential of followers and He developed them, regardless of their backgrounds.
3. Jesus served His followers and
4. Jesus met crisis head on.

Now today I want to continue talking about characteristics that made Jesus a strong and successful leader.

5. Jesus was humble yet committed to the cause – In Philippians Paul challenges us to have the same mind that Jesus, the very equal of God, had. Of course, Paul tells us that Jesus was humble and He:

• Did not use His status with God, His divinity, for His own advantage.
• Instead He humbly became a man and a servant to others.
• He also humbly became obedient to the Father’s plan even to the point of death.

Lessons from Good to Great

In Good to Great (GTG) Jim Collins noted that the leaders of all (GTG) companies had what he called personal humility combined with an unwavering commitment to the mission.

This demonstrates a leadership commitment to achieving the mission and vision without it being about the leader. Jesus was not a self-promoter but a kingdom promoter. His leadership was about the mission and vision and not about Himself.

6. Jesus demonstrated His commitment to the mission, vision and people He led. In fact, so committed was Jesus to those things that He was willing to go to the cross and die for them.

In other words, Jesus walked the talk and proved His authenticity. How many leaders are willing to demonstrate anywhere near that level of commitment? Simply stated, when leaders walk the talk it inspires and moves people.

Jesus clearly demonstrated His commitment, not only in dying but also by keeping the promise that He’d be raised from the dead. It inspired others to follow. Consider that all of the apostles carried forward the mission and vision (the message of the Gospel) to others.  As a result, church growth exploded and all but one died for the cause.

7. Jesus built a team and then collaborated and empowered them to act. No doubt, before His death many people followed Jesus and were the beneficiaries of His leadership. However, He built a comparatively small inner circle (12) of collaborators that He mentored, empowered and encouraged to act.

For example, when the apostles brought Him the problem of feeding 5,000 people, Jesus told them they should give them something to eat. Even though they had no idea of how to do that, Jesus was preparing them to take action in faith on their own.

Similarly, in Mark 6: 7, Jesus sent His disciples out two-by-two to tell others about the kingdom, and He also gave them power and authority. Then, in John 14 He promises that they will do greater works than He has done. Finally, in Matthew 28 He encouraged them to go and make disciples of all nations baptizing and teaching them.

While working with clients as a fundraising consultant, I have often heard complaints that while people are given a job to do, they’re not given authority or they’re not empowered to do the job without gaining permission every step of the way.

By contrast, Jesus wasn’t afraid for His followers to achieve. In fact, He wanted and even encouraged them to achieve so the Gospel (His vision) would accomplish the mission of preaching and making disciples of the whole world. And He empowered them and gave them authority to do that very thing.

In modeling these characteristics of Jesus, followers of Christ can make a major step forward in becoming inspiring and productive leaders.

by Len Moisan

The Greatest Leader of All Time

Who are the greatest leaders of all time? The Internet is replete with articles on the subject. In fact, a Google search yielded 22,400,000 sites. Not that I searched all of those sites, but the consensus among the ones I have read is that Jesus tops the list.

There are some essential characteristics that clearly set Jesus apart from other leaders, and I believe they all have to do with His power. In fact, so powerful was the work of Jesus during His lifetime that all of His disciples continued to preach His message, and all but one were martyred for the cause.

The Gospel continues to be preached today and continues to transform millions of lives for the better each year. So what was it about Jesus’ leadership that made Him so effective? Consider these characteristics:

1. Jesus attracted and inspired others by casting a compelling vision and taking impressive actions. Consider that He came to preach freedom from the bondage of sin with an abundant life in the kingdom of God. For believers this vision offered peace, hope and fulfillment both in this life and in the next.

He also backed up His words with action. We see Jesus feed 5,000 people miraculously and then says to His disciples, “I am the bread of life. Whoever comes to me will never go hungry.”

Later Jesus raises Lazarus from the dead and then says, “I am the resurrection and the life. The one who believes in me will live, even though they die; and whoever lives by believing in me will never die.”

To inspire others to follow, leaders must articulate a vision of what they believe individuals and organizations can become. Yet, they must also take visible action to back that vision, so people know they mean what they say.

2. Jesus believed in the potential of His followers and He developed them, regardless of their backgrounds. Andrew and Peter were rough fishermen, Matthew was a despised tax collector, Bartholomew was wealthy and of royal blood, Paul was a Jewish scholar. Jesus saw the potential in all of them.

 Despite their diverse backgrounds Jesus understood their potential and He taught them all to lead. Long after He ascended into heaven these followers preached, taught and cooperated in building on the work that Jesus started.

3. Jesus served His followers. At the Last Supper Jesus washed the feet of His disciples. He also fed them, healed them, taught them and ultimately died for them. He modeled a life of service that He wanted them to follow.

4. Jesus met crisis head on. He didn’t wilt or back off in the face of trouble. In fact, at times He even created crisis. He called the Pharisees hypocrites and a brood of vipers. When Peter tried to dissuade Him from going to Jerusalem, Jesus rebuked him directly.

Then, shortly after His triumphal entry, he overturned the tables of the moneychangers. After that, in the middle of a fight in the Garden, He didn’t run or hide. He rebuked Peter who had cut off someone’s ear and then He healed the ear. In crisis after crisis, Jesus never backed down. Instead, He intervened with words and actions that were both bold and wise.

Leaders are charged with a stewardship responsibility for organizations and their assets (which include its people). Delaying or even refusing to deal with crisis, puts the health of the organization in jeopardy and only delays the inevitable.

We’ll explore more about the leadership of Jesus in the next blog, but suffice it to say that His work on earth has clearly been powerful and enduring.

In addition to today’s post on leadership, we have helpful content on capital campaign consulting, nonprofit fundraising, strategic planning and more on our website at www.covenantgrouponline.com.

by Len Moisan

Covenants, Contracts and Leadership

So how then, should we regard the contract vs. covenant discussion? Contractual expectations are clearly common in most organizations, so we can’t really shun the concept.Yet, it’s important also to realize that an overemphasis on contracts can sometimes detract from the good faith and spirit of trust that are central to building healthy and productive relationships. When contracts become overly legalistic, trust and cooperation can quickly evaporate and potential and productivity are diminished.

I saw a firsthand example of this when a nonprofit client of ours recently went through a national search for a CEO. After several rounds of interviews, one candidate emerged as the clear choice. Both the candidate and the Board members were excited about the potential, as each of the parties assumed the best intentions of the other. They simply had to work out the details of the agreement.

After lengthy discussions the contract was just about finalized. The candidate then chose to have his lawyer review the agreement further. He came back with several additional demands that extended the negotiations and required more concessions by the organization. When that happened the trust, good faith and goodwill began to fade. Even though he had clearly been the most qualified candidate, as the negotiations dragged on, the Board and staff began to question whether or not they could trust this candidate and decided to reopen the search. Eventually, they found another CEO who was almost as qualified but much less demanding.

Unfortunately, the first candidate missed the opportunity to work with a great group of people because he simply could not bring himself to trust them. The “basis of good faith” that we discussed in last week’s blog was missing. As a result, he lost credibility with the group because they suspected he was greedy and interested only in himself. On both sides trust and good will diminished, which caused irreparable damage. Without trust there can be no covenant.

In short, the dynamics, characteristics and results of contracts are quite different than those of covenants. However, since contractual relationships are so pervasive in our culture, covenants and contracts must coexist productively. Understanding and then using those cultural differences appropriately (contractual vs. covenantal) is really a difficult balancing act that requires unique leadership skills. Yet, being able to pull this off is at the heart of what helps leaders succeed.

However, before we even consider the differences between covenants and contracts, it’s important to understand that while contracts speak more to tasks and practices covenants speak more to relationships. Neither one is mutually exclusive. You just can’t build organizational relationships without also attending to individual practices and the tasks of productivity and profitability.

Therefore, the choice to create either a contractual or covenantal culture is evidenced in every day practice. If that practice prioritizes results through policy, rules, terms, tasks, competition, schedules and productivity over people then the culture is clearly a contractual one. By contrast, if that practice values results through people who are treated as trusted partners and team members then the culture is more covenantal.

That said, understanding the tendencies and differences of covenants and contracts helps leaders to enhance productivity and make informed decisions about how to lead. Too often would-be leaders hope to achieve the benefits of a covenant, but they do so within a contractual framework with contractual expectations and they fail. This matrix is intended to illustrate the differences between the two concepts and equip leaders to use them both effectively.

In addition to today’s post on covenants vs. contracts, we have helpful content on capital campaign consulting, nonprofit fundraising and church leadership consulting. Check out our website for blogs on these and other topics.

by Len Moisan

Covenants and Contracts are They Different?

A Covenant is Not a Contract

Webster’s notes that a contract is “an agreement between two or more people to do something, a formal agreement enforceable by law.” Legal experts tell us that contracts involve an offer, acceptance, a promise to perform, a promise to pay for performance (what experts call consideration) and a time period by which performance must be completed. Terms and conditions in a contract dictate the details of both performance and consideration. What I find interesting is that the same dictionary defines a covenant as a form of a contract. Webster’s says it is, “a binding and solemn agreement to do or keep from doing a specified thing, a compact, a formal contract.”

I believe the definitions are similar because we’ve lost the language of covenant in our society. There are lots of reasons for this, but suffice it to say that covenants are quite different than contracts. They’re far more complex and demand more interpersonal commitment but they also promise more benefits than a contract does.

Contractual Limitations

By illustrating differences here, I’m not suggesting that contracts are inherently bad. On the contrary, contracts are an integral part of business in companies and nonprofits. However, considering the frequency of their use, it’s important to understand contractual limitations. First, they encourage people to negotiate terms based on their own self-interest. Consequently, as the contract is fulfilled, each party tends to evaluate value in the relationship based primarily on the performance of the other party. Second, if one party believes his or her self-interest is not being served, then that constitutes justification for either breaking or renegotiating the contract. Finally, a relationship defined solely in contractual terms can and often does breed mistrust, commodification of relationships and commitment only to self.

As we’ve seen in case after case, when trust is missing in relationships, contracts quickly deteriorate. In fact, most lawyers freely admit that for a contract to work, it has to be supported by an underlying basis of “good faith.” That “good faith” is really the foundation of a covenant.

In contrast to a heavily contractual environment that commodifies and mistrusts people, covenants assume good faith on the part of everyone involved. This is not to suggest that leaders should be naïve in their relationships. Certainly, at times there will be individuals who don’t operate in good faith, and it’s necessary to deal with those “bad faith” people appropriately. That said, it’s important to note that a few people dealing in bad faith, doesn’t justify being guarded with everyone.

Trust is the Key

However, dealing in good faith requires a certain amount of trust. For relationships to work that trust must be embraced by everyone. There simply can be no good faith and therefore no covenant if there is no trust. Consider the results of a marriage in which the partners don’t trust each other. It’s bound to set up anger, frustration, jealousy and eventually a breakup. While we understand the results of mistrust in marriage, many people lack that same understanding in a contract-laden business or nonprofit environment.

Thus, while contracts are binding legal agreements, covenants are binding and committed relationships. Contracts are bound by law, and covenants are bound by the character, values, and mutual goals of the people involved. I believe the failure of our society to differentiate between the two concepts contributes heavily to our leadership crisis. True, in some ways covenants are far more demanding on relationships than contracts, but they are also far more flexible, powerful and productive than contracts. In fact, as fundraising consultants, we encourage our clients to strive for covenant relationships with donors.

So what does this all look like in daily life? That’s what we’ll discuss next week.

by Len Moisan