The Difference Between Short and Long Term "Investments" (and not in the stock market)
When is the return on investment (ROI) misconstrued? When one views it in too short of a time frame.
I have a client that I'm working with regarding their strategic initiatives. They need help in developing a series of synthesized conversations with internal leaders about their individual department/area needs. It's a manpower issue and they need an outsider to drive that process. After some great conversations, they're graciously asking me to be that assistance. And I'm honored.
After giving them the quote of how much it would cost, (it's not that much), the internal non-philanthropic leadership asked the question, “exactly how much will we raise for this effort?” The head of philanthropy called me in great frustration. The comment that he made was that they don't understand that there's no way to make a direct connection in such a short time frame regarding a ROI. And that he was disappointed.
This is a perfect example of where philanthropy needs to be viewed, in particular with the right changes to process, as a long-term investment. And that long term investments normally pay off much better than viewing things through an incredibly short lens.
And by viewing it as a long-term rather than a short-term commitment, it can offer several strategic advantages:
Stability and Growth: Long-term investments typically provide a stable foundation for sustained growth. By focusing on long-term objectives, internal leaders and donors can support an organization’s gradual expansion and scalability without the pressures of delivering immediate results. This approach often aligns with strategic investments in infrastructure, talent, and innovation, which can take years to mature but potentially yield substantial returns.
Risk Mitigation: Short-term investments can be volatile and susceptible to great fluctuations. In contrast, long-term investments tend to be less affected by short-term conditions and economic cycles. This temporal spread of risk helps avoid the pitfalls of reactionary decision-making based on short-lived trends or downturns.
Compounding Benefits: Long-term investments benefit from the power of compounding, where the reinvestment of philanthropy (more meaningful relationships) generates additional earnings over time. This effect is particularly significant in organizations where incremental gains can be reinvested to fuel further growth, thereby potentially increasing the investment's value exponentially.
Strategic Partnerships: Donors who commit for the long haul are more likely to be viewed as stable partners by leadership. This can facilitate deeper strategic alignments and collaborations, leading to more significant influence in decisions and access to insider insights, which can further secure the investment’s growth.
Market Position and Brand Development: Long-term commitments allow an organization to invest in building its brand and market position without the pressure to cut corners for quick “wins.” Sustained efforts in marketing, customer service, and quality assurance can help a business establish a reputable, durable brand, enhancing customer loyalty and long-term stability.
Attracting Talent: Organizations perceived as stable and committed to long-term goals are more attractive to high-quality talent. Employees are generally more willing to invest their careers in a company that offers long-term security and growth prospects, which in turn can drive the organization’s success.
Long-term investments offer stability, risk mitigation, and the potential for significant returns through compounding benefits, strategic partnerships, brand development, and talent attraction. These factors collectively contribute to a robust strategy that can outperform short-term, speculative ventures. And that sounds like a way for a nonprofit to succeed over the long-haul.
