Podcast: Kent Stroman on Your CFO and Your Development Director Cooperating

Season 2, Episode 71

In this episode, guest speaker Kent Stroman speaks with Andrea Kihlstedt about how to get your development and finance staff on the same page even if they aren’t talking the same language.

Listen Now:

Andrea Kihlstedt:
Imagine if your CFO came storming into your office waving the most recent campaign report, telling you that the numbers just aren’t right. Or even worse, if your board chair calls concerned about the same problem. Well, in today’s podcast, we’re going to give you some eye popping clarity about building a healthy relationship between development and yes, finance.

Hi, there. I’m Andrea Kihlstedt, your host for this episode. And I’m here with my favorite numbers guy, Kent Stroman. Hi, Kent.

Kent Stroman:
Good morning, Andrea. Thanks for inviting me into the room.

Andrea Kihlstedt:
Oh, it’s such a pleasure to have you here.

Kent is a Senior Advisor for Capital Campaign Pro. But when his guard is down, he’ll admit to having been an accountant, so he understands finances and numbers. He also understands development. Add to that Kent’s remarkable ability to make complicated topics seems simple, and we’ve got the perfect guest for today’s topic.

Why Development and Finance Can’t Seem to Get Along

Now, Kent, let’s just start out with the basics here. Why do development and finance have such a darn hard time getting along?

Kent Stroman:
It’s funny, as you gave that opening scenario, it was just all too real to me and actually having been on both sides of that equation. But why do we have a hard time understanding each other? One of the things is language. And if you think about it, there’s some very specific language that goes with the fundraising side of the house. And in our realm, it’s familiar, it’s “everybody understands.” Right?

The same thing is true in the accounting field, accounting and finance. You’ve got this thing that’s called GAP, G-A-A-P, generally accepted accounting principles. Well, it’s generally accepted in the accounting field and it’s a total foreign language everywhere else, right?

Andrea Kihlstedt:
Right.

Kent Stroman:
So I think language is a problem. Another is that there tends to be a focus in the finance office, a focus more on expense, and our solution is controlling expenses. And yet, in fundraising, where’s our focus? It’s on revenue. And our magic is increasing revenue, right? And so, they are the same coin, but they’re the opposite sides.

And another thing I didn’t realize originally is that in the finance office, there really is kind of built-in focus on transactions. And in fundraising, if we’re going to be our most effective, it’s not about transactions — it’s about [building] relationships.

And then, the last thing that came to my mind when you asked that question is there really are two kinds of budgets. So we have the operational year-in, year-out budget, and so many times in a major fundraising campaign, especially a capital campaign, we’re reaching way past the operating budget and bridging operations and the capital budget.

So it’s like everything is different, and so it’s easy to either misunderstand or actually become engaged in conflict.

Andrea Kihlstedt:
Right. Yeah.

The CFO and Development Director Don’t Spend Much Time Together

It’s also interesting, Kent, that I’m not sure that the development guy or gal or the finance guy or gal actually spend much time together, that they probably are in separate offices and they probably really don’t have many opportunities to come together to talk about what they do, why they do it, how it works. Is that your experience?

Kent Stroman:
Yeah, I think that’s fair. And so, you mentioned my background. I refer to myself as recovering accountant, a former CPA. And my background before consulting was in higher education. And yes, the finance and development office came together in the president’s cabinet, but it was probably not for the purpose of understanding each other’s world as much as kind of giving overall organizational leadership. And so, when you say it’s foreign territory, I think you’re spot on.

Andrea Kihlstedt:
Yeah, it’s interesting. I know for myself, I’m not a numbers person. I pride myself on not being a numbers person, actually.

Kent Stroman:
Yeah. I know.

Andrea Kihlstedt:
And when somebody shows me a budget or a spreadsheet, I tend to kind of shrink back from them. But when somebody shows me a campaign report saying how much money has been pledged and sort of above the line and below the line, and whether how much of it has been pledged in bequests, for example, or bequest intentions, all these things that are somewhat foggy or soft around the edges, I can only imagine that it would make a finance person sort of throw up their hands in despair when I’m counting all these, what to them look like wafty numbers.

Kent Stroman:
Yeah, exactly. Well, and that’s back to the whole thing about language. Counting rules are fairly well described and rigid in the accounting world, and you can’t just decide to change the definition, right? Well, one of the things that in fundraising, especially in campaigns, one of the things we really lead with is our gift credit policies.

And so, for purposes of our fundraising goal, what counts and what doesn’t count? And again, we get to make up our own definitions, hopefully not in a vacuum, right?

But actually, I think that’s a great opportunity to bring the finance director and the fundraising director together around these policies that we’re going to use for us, for here, for now, for this campaign, and then use some real scenarios. And that’s one of those ways where I think we get on the page by developing some common ground.

Andrea Kihlstedt:
Right, right. And then, of course, it gets sticky when the finance people have to do an audit or something like that, have to go through an audit, have to say, “Well, what are we going to count?” And if we have an audited report that goes to the board, the numbers are going to look quite different from the numbers that the campaign director is reporting on.

Preventing Internal Conflict Over Budgeting Discrepencies

So how do we handle that? What do we say to the board chair when they say, “Ah! The finance people say we’ve raised $1.2 million And you say we’ve raised $3.4. Where’s the discrepancy here?”

Kent Stroman:
Yeah, again, that’s such a great question. And one of the things that I never like to see, and that is internal conflict in front of the board, right?

Andrea Kihlstedt:
Right.

Kent Stroman:
And I’m suggesting that we need to hide it, but if I’m the Vice President for Development going into a board meeting, I want to go in unified with the CFO so that we can say something like this:

“In today’s reports, we’ll be reporting numbers from two different perspectives. And these numbers are reconciled internally, even though in the finance report you’re going to see one number, because it’s one set of definitions. In the fundraising report, you’re going to see a different number that’s a result of different definitions. If there’s any question about the reconciliation between those two, we’re happy to sit down with you together and resolve that.”

And when it comes to the audit report, again, that’s very well specified in terms of what goes into that, what counts, and how it counts. Ultimately, there is no difference that won’t ultimately be reconciled. But two things that are primarily different, one is timing, and that is there are some ways in our fundraising report that we’re including gift expectations. It may be called a pledge or a letter of intent, but that’s something that has not yet been received. Okay?

Andrea Kihlstedt:
Right.

Kent Stroman:
So we’re counting that for fundraising purposes. But on the financial side, unless it is a legally enforceable contract, it’s not going to show up on the financial statement. Those are different and it’s okay.

Turning Confusing into Confidence

The other thing, which is really a big difference, is in the finance world, we always are working on this 12-month, a very rigid 12 months, of our fiscal year. There’s rarely a campaign that’s confined within one fiscal year, right? And so, it may involve 2, 3, 4, even 5, who knows, longer fiscal periods.

Andrea Kihlstedt:
Right.

Kent Stroman:
And so, it’s not just a 12-month framework. When we show up together unified, we acknowledge the differences. We acknowledge that the fact that they are different doesn’t make one greater than or less than the other. And when we make ourselves available to connect the dots that may seem disconnected or may seem missing, it gives an opportunity to turn confusion really into confidence.

Andrea Kihlstedt:
Yeah, that’s so interesting, Kent. And it really, as you describe it, it does help for me clarify where the issues come from.

A Conversation Between Development and Finance During a Campaign

I’d like to talk a little about when in a campaign planning process you might want to start a conversation between development and finance, or between development, the board chair, and finance, or who should be involved in that conversation to get the kind of communication and coordination going, or at least understanding. And when would you think to do that in a campaign?

Kent Stroman:
Yeah. Well, first of all, I think there’s a lot of insight in your question there. And I always say the earlier, the better. The capital campaign, even though we’re talking about the raising of money, there’s a lot of spending of money that goes with that, right?

And so, I think from the very beginning, if we talk about what the plans and purposes are with the designs, cost projections and so forth inevitably are going to come from the finance office. The spending of money, whether it’s for the consulting, whether it’s for the collateral, materials, the design, the architecture, all that, it is going to have immediate impact. And finance office always wants to know, “When are we going to get some money to cover this?”

Andrea Kihlstedt:
Right.

Kent Stroman:
It’s a very important question. So again, I think the earlier that we can sit down together, and actually one of the thoughts that I had is I think anytime we can sit down with each other and with sincerity, ask this question, “How can I serve you?” It dramatically changes the fabric of that relationship.

Andrea Kihlstedt:
Yeah. That’s right, yeah.

Kent Stroman:
And so, as we go into a capital campaign and we recognize our differences, we recognize what we’re unified around, and that’s the mission, right? That’ we’re both there to serve the mission, and then we say:

“How can I and my office, how can we serve you in this other role, in this other office, so that together we can accomplish greater things than ever on behalf of the organization?”

Andrea Kihlstedt:
Right, right. That’s such a wonderful frame of mind. A “how can I serve you?” frame of mind. Instead of saying, “Kent, those numbers don’t match up with my numbers,” maybe say, “Kent, how can I help you in your role as Chief Financial Officer?”

Kent Stroman:
Yeah.

Andrea Kihlstedt:
“How can I help you understand what we’re doing? And how can you help me, so that you validate my numbers within the context of the campaign?” Right? “What can we do to create communication so that we work well together in this?”

Kent Stroman:
Yes.

After the Feasibility Study: A Good Time to Start the Conversation

Andrea Kihlstedt:
It strikes me that most boards have both development committees and finance committees. And it might be interesting also to get the heads of those committees together so that they, too, understand, the board members understand where the rubs are likely to happen or where numbers might feel disconnected but aren’t really.

Kent Stroman:
Yes. Yeah.

Andrea Kihlstedt:
So perhaps once a campaign maybe gets through the feasibility study and is ready actually to move into campaign mode, might that be a good time to start pulling these people together?

Kent Stroman:
Yes. And the idea of a brief joint meeting between the finance and development committees of the board create opportunity just to get a glimpse inside each other’s world.

Andrea Kihlstedt:
Right. No, it’s so interesting how it’s so easy to have things fall apart.

Kent Stroman:
Yes.

Andrea Kihlstedt:
And it takes such thought to get things to work together. It’s not difficult, it just takes an awareness and a willingness, as you say, to ask the other party what you can do to help make their lives and their work be smoother.

Kent Stroman:
Right.

Andrea Kihlstedt:
That’s just so powerfully important. I can think of several areas of conflict in my work and life that if I only thought of that, it would help a lot, right? “How can I serve you? How can I help make this better?” Right?

Kent Stroman:
Yeah.

Andrea Kihlstedt:
It would change the tone for moving forward, it would.

Kent’s Own Experience Highlights This Point

Kent Stroman:
Yeah. As we visit today, Andrea, it reminds me of my first formal foray into fundraising, and it was prompted not by strategy, but despair. So the university, they were in the wrap-up phase of a major campaign, and they were so desperate that they were looking for volunteers who would go out and make donor calls.

And there was a part of the country that was familiar to me and I was willing to do it. So, not knowing really what I was doing, I raised my hand, right? And so, as Chief Fiscal Officer, I got sent on a fundraising circuit. Well, what that did was it placed me in that other world.

Andrea Kihlstedt:
Right.

Kent Stroman:
And all of a sudden, in real time, with real people, with real questions, real concerns, real ambitions, I got to hear that. And it’s just like a donor call. So that was another thing I was thinking about, is look for an appropriate way. As the development officer, look for an appropriate way to hand-pick the CFO to go on a donor call.

Andrea Kihlstedt:
Oh, how interesting.

Kent Stroman:
And they may never want to do it a second time. You may not want him to do it a second time. But there’s just something about that firsthand experience. I just think there’s no substitute for it.

Andrea Kihlstedt:
Right. Yeah, that’s a really interesting idea that we get to understand one another’s worlds a little if we step into them for a moment, and are invited to participate in that way. There’s nothing like talking to a donor who says, “Well, I’d really like to make a big gift, but I can’t make it in one year. I’ll have to spread it out over time. Is that okay?” Well, the chief financial officer is thinking, “How do I make… This isn’t going to work out right.”

Kent Stroman:
Exactly.

Andrea Kihlstedt:
No, I think that’s a really fascinating idea.

3 Things a Development Director Can Do to Coordinate with Finance

Kent, this has been illuminating, as I knew it would be. I wonder for those of us who like things to be simple and clear, and you know that’s where my brain goes.

Kent Stroman:
Yes.

Andrea Kihlstedt:
If you were to pick out three really simple things someone might do, a development director heading into a campaign might do, to pave the way for a better relationship with finance, what would you suggest?

Kent Stroman:
Okay. Yeah, a good question.

1. Reframe the Interaction from Competition to Cooperation

And the first thing that comes to my mind, I think really, is just to reframe the whole interaction and replace competition with cooperation. We’re both there for a purpose. It’s advancing the mission of the organization, and it’s not a win-lose thing between these two offices. So how can we collaborate together versus how do we compete? So that’s one.

2. Consider the Unpleasant Alternative

The other one, and this is simple and it’s probably kind of universal, but that’s to consider the alternative. So we can work together and present a unified voice, a unified face. And it’s easy for us to say, “Well, it’s too hard. It’s too complicated. I’ll have to compromise, whatever.” I say, “Okay. Well, consider the alternative. Do we really want to sow confusion and discontent?”

So I think a lot of times if we just consider what happens if we don’t collaborate, what happens if we don’t cooperate, that can be helpful.

3. Use “We” Language Instead of “You” and “Me”

And then, the third thing that occurs to me, and that’s to use “we” language. “What are we seeking to accomplish? How can we better serve the mission? What common ground can we lead from?” And so, if we can use “we” instead of “you” and “me,” that’s kind of like when it’s “you” and “me,” it tends to be kind of a pointing of fingers.

Andrea Kihlstedt:
Right, right.

Kent Stroman:
But when it’s “we,” it’s an open hand. It’s an invitation.

Andrea Kihlstedt:
Yes.

Kent Stroman:
So anyhow, those are some things which I think service well, both preparing for a campaign, in the midst of a campaign, following a campaign, and in life in general.

Andrea Kihlstedt:
In life in general, boy is that ever wonderful advice, Kent. Thank you so much. I so appreciate you sharing your wisdom with me today and with you who are listening to this podcast. Maybe you’re driving in your car, sort of railing at your chief finance officer, and maybe we’ve calmed you down and said, “Listen, here. You’re all on the same team here.”

Wrapping Up

I’d like to just end with my thought that chances are the chief financial officer, when they see a campaign coming down the road, is not going to say, “Hey, we better get together to talk about this because we’re going to have problems.” That’s not likely to be where this conversation is going to begin. It has to begin, I think, in development, because development is likely to understand and see the problems that are going to come about. So don’t wait for your chief financial officer to come running into your office waving the figures that don’t add up, that don’t match, right?

Instead, reach out to them, to finance people early and say:

• “Let’s have a conversation. Let’s be sure that we are on the same page.”
• “How can I help you understand what we are going to do?”
• “How can you help me do things in a way that it both works for the campaign and will work for development?”

And if you, the development person, take charge of that, I think you can get ahead of the problem before it begins. And if you don’t, I promise you there is going to be a problem.

So Kent, it’s always a pleasure to do things with you. I thank you. I hope you will join us again.

Kent Stroman:
Well, you’re welcome, Andrea, and I’d love to.

Andrea Kihlstedt:
Thanks for being with us today. My partner, Amy and I look forward to being together again and bringing you another rousing episode of All About Capital Campaigns.

Don’t forget that if your organization is considering a capital campaign, we’d love to hear from you. Simply go to capitalcampaignpro.com and sign up for a free strategy session to tell us about your plans. We’d be eager to hear from you.