Fundraising the SMART Way E-Book

Ellen Bristol

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: The AFP/Wiley Fund Development Series
• Sprache: Englisch

Seitenzahl: 411

Veröffentlichungsjahr: 2014

Beschreibung

Strategic planning and tactical fundraising can maximize income and minimize costs

Fundraising is the lifeblood of the nonprofit, and, successful or otherwise, determines the organization's ability to provide for the group it serves. Every organization attempts to lower overhead while increasing donations, but this often proves to be impossible within existing frameworks. Effective fundraising - increasing donations while engaging more donors and lowering costs - requires a sound strategy that turns major roadblocks into minor hurdles that are easily overcome. It's not about trying harder, it's about working smarter.

Fundraising the SMART Way provides the groundwork for a complete revamp of organizational fundraising systems. Author Ellen Bristol applies twenty years of corporate sales experience and eighteen years in fund development consultation to the problem of inefficient fundraising. Bristol turns her extensive sales expertise toward the perspective of "selling" an organization to potential donors, increasing the donor pool, and lowering the cost of fundraising. The book details the questions every nonprofit should be asking to maximize the effectiveness of fundraising efforts, and encourages systematic strategy development by zeroing in on key factors such as:

• Organizational goals, strengths, and weaknesses
• Donor actions and motivations
• Workload management and results QA
• Opportunity evaluation and organizational action

The book outlines clear, concrete, actionable steps that can be immediately implemented to escalate income growth. Effective fundraising is sustainable, consistent, and on-target. It must exceed current need and expand to fill future need. Fundraising the SMART Way represents a true breakthrough in that it lays a foundation for true systemic overhaul, and can be the catalyst for the growth of any nonprofit.

Leseprobe

CONTENTS

Cover

Series Page

Title Page

Copyright

Dedication

Preface

Acknowledgments

Introduction: Why We Need a Fundraising Revolution

Part I: Which Funders Are “Right” for You?

Chapter 1: The Context for Fund Development

What Should It Cost to Achieve Your Mission?

Analyzing the True Cost of Your Mission

Your Opportunity Risk Factor: The Real Value of Your Time

What Makes Your Best Funders “Best”?

Your Unique Value Proposition: The Value in Value-Added

What We Covered

What You Can Do

Chapter 2: Funder Selection Strategies

Why Your Best Funders Support You

The Exchange of Value

Applying the Exchange of Value

What We Covered

What You Can Do

Chapter 3: Building Your SMART Way Prospect Scorecard

Nine Scorecard Principles

Crafting Scorecard Statements

Scoring the Prospect

Scorecard as Management Control

What We Covered

What You Can Do

Chapter 4: The Scorecard as a Management Control Device

Using the Scorecard to Manage the Fundraising Process

Validating the Scorecard

The Suggested Probing Questions

Developing Your Questions

Field-Test the Scorecard

The Control Part

What We Covered

What You Can Do

Part II: Defining the Fund Development Process

Chapter 5: The Fund Development Pipeline

Pipeline Basics

The SMART Way Pipeline Revolution

Process Management for Nonprofits: A Primer

Moves Management versus the SMART Way

Eliminate Process Boundaries or Add Them?

Development Drivers

What We Covered

What You Can Do

Chapter 6: Setting Performance Targets

Everything You Ever Wanted to Know about Continuous Improvement

Assigning Targets

Good Targets, Bad Targets

Move Zero Targets

Performance Targets and the SMART Way Scorecard

Targets for Development Drivers

What We Covered

What You Can Do

Part III: Implementing Fundraising the Smart Way

Chapter 7: Reporting and Leading for Better Results

Leadership 101

First, There is a Mountain…

“Vertical” versus “Horizontal” Reporting

SMART Way Reports

Enlightened Leadership Practices

Tracking Donor Move Targets

Reading the Story the Numbers Tell You

What We Covered

What You Can Do

Chapter 8: The Breakthrough: Continuous Improvement

The Plan-Do-Check-Act Cycle

Root-Cause Analysis Done Right

What We Covered

What You Can Do

Chapter 9: Applying SMART Way Methods to Mass-Market Fundraising

Selling to Major Accounts versus Transactional Selling

The Majors versus the Minors

To Find Donors, Stop Looking

Mass-Market and Target-Market Fundraising

SMART Way Management Controls

What We Covered

What You Can Do

Chapter 10: Radical Thinking about the Fundraising Revolution

Fundraising and the Russian Revolution

Adopting the Mind-set of Potential

Revolutionizing the Way We Manage Performance

Implications for Information Technology

Implications for the Governing Board

Parting Remarks

About the Author

About the Companion Website

Index

End User License Agreement

List of Tables

Table 1.1

Table 2.1

Table 2.2

Table 2.3

Table 2.4

Table 6.1

Table 7.1

List of Illustrations

Exhibit 1.1

Exhibit 2.1

Exhibit 3.1

Exhibit 3.2

Exhibit 3.3

Exhibit 3.4

Exhibit 3.5

Exhibit 3.6

Exhibit 6.1

Exhibit 6.2

Exhibit 6.3

Exhibit 7.1

Exhibit 8.1

Exhibit 8.2

Exhibit 8.3

Exhibit 8.4

Exhibit 9.1

Guide

Cover

Table of Contents

Preface

Introduction

Part 1

Chapter 1

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Series Page

The AFP Fund Development Series is intended to provide fund development professionals and volunteers, including board members (and others interested in the nonprofit sector), with top-quality publications that help advance philanthropy as voluntary action for the public good. Our goal is to provide practical, timely guidance and information on fundraising, charitable giving, and related subjects. The Association of Fundraising Professionals (AFP) and Wiley each bring to this innovative collaboration unique and important resources that result in a whole greater than the sum of its parts. For information on other books in the series, please visit:

http://www.afpnet.org

Fundraising the SMART Way™

Predictable, Consistent Income Growth for Your Charity

Ellen Bristol

Cover image: © iStockphoto/grafikeray

Cover design: Wiley

Copyright © 2014 by Ellen Bristol. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Selling the SMART Way is a registered trademark of Bristol Strategy Group. Fundraising the SMART Way, a variant of Selling the SMART Way, is a common-law trademark of the same company.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

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ISBN 978-1-118-64018-0 (Hardcover)

ISBN 978-1-118-64033-3 (ePDF)

ISBN 978-1-118-64024-1 (ePub)

Dedication

This book is dedicated to Riley, Cade, and Aaron, the next, next generation.

Preface

In this book, I propose that we revisit the way fundraising is managed, not the way fundraising is done. There's a big difference. The way fundraising, or any other business function, is managed is what leads to high levels of productivity and sustainability. Managing a business function, including fundraising, means identifying the results desired from the fundraising effort, establishing performance targets and indicators, developing methods of doing it that are effective and in keeping with the organization's corporate values, and holding the “do-ers” accountable.

The way fundraising is done, on the other hand, describes the tactical activities of the fundraising staff, be they employees, contractors, or volunteers. Many fine fundraising professionals have raised their tactical skills to the level of art. We all know outstanding practitioners who specialize in grant-seeking, major gift work, capital campaigns, corporate relations, special events, and the list goes on. If there are, in fact, so many high performers out there in the fundraising discipline, how come fundraising remains the problem child of the nonprofit sector?

I contend that the nonprofit sector as a whole would enjoy more sustainable levels of income if the management of all that talent and art were to become more sophisticated, adopting some of the practices that support performance excellence in the for-profit sector. In fact, many nonprofit organizations, such as those in the fields of healthcare and healthcare research, practice extremely sophisticated management when it comes to service delivery and related programs. Many of them are required to do so by their certifying authorities. But as far as I can tell from the data and observation, it's the rare development shop that is managed strategically, with a stated intention to improve productivity.

By contrast, fundraising is largely tactical. If you're lucky enough to staff your development shop with senior superstars who already have relationships with the community's most willing philanthropists, it might not seem as if rigorous management methods are terribly important. But if your nonprofit is more typical—with a budget of less than $10 million—it's more likely that you spend your share of sleepless nights worrying about how you're going to do better this year than you did last, afford to hire more experienced staff, upgrade your facilities, build capacity to serve more clients, or any of the other thousand-and-one issues that you'd like to handle, but aren't able to afford.

The only way to get out of this spiral, in my opinion, is to improve the management of the development shop. Sure, you might get an incremental bump by adopting some cool new tactics, or throwing another event. But such tricks aren't sustainable. If you rely only on tactics, it's pretty tough to figure out what's working or not working. In that case, all you can do is repeat the things you think might be working for you, or experiment with new tactical ideas. Your big event works? Throw another event. Nonprofit X uses online giving? Put up a PayPal page on your website. How well is it working? Well, it depends…

The problem of how to improve fundraising results doesn't start with tactics, however. Its origins lie way upstream in the organization's mission, and in the way its leaders interpret that mission. When it comes to defining the organization's mission, I really like the way John Carver, developer of the Policy Governance® model, breaks it down. He says that a well-defined mission shows the results the organization intends to achieve, describes the recipients of those results, and states what it should cost to achieve those results. To my way of thinking, working out what it should cost to achieve the organization's desired results is the springboard for fundraising success.

This doesn't mean that leadership has to do the work of fundraising. In spite of popular opinion, I think that having the board involved too intimately in fundraising activities can be counterproductive. Leadership should be involved in articulating desired outcomes, defining performance indicators and success targets, and thinking strategically about the agency's role in the community. Clarity about the “what”—“What do we wish to accomplish?”—leads to clarity about the “how”—“How do we know we're accomplishing it?” That's a very big job indeed, one that's better suited to the high-level “volunteers” who serve on the governing board than the role of philanthropic solicitor,

My experience with nonprofit organizations, especially the smaller ones (which make up the majority of nonprofits), is that they never address the “what it should cost” part of Carver's equation. It's more common for them to proceed on the unspoken assumption of, “Let's raise as much as we can and then figure out how to use it.”

By contrast, if you and I were to set up a business and seek external investors, those investors would want to know how much money we planned to spend on hiring and compensating qualified executives and staff, and scrutinizing the way we planned to identify the market for our products, establishing reliable go-to-market strategies, and selling the heck out of our products and services. They would demand to know how we planned to plow sales income back into the business to build additional capacity. At the end, of course, they'd want to know how their investments would pay off to satisfy their personal interests.

Every part of this description applies to the not-for-profit sector, even the very last sentence. Nonprofits get virtually all their income from external investors, with the modest exception of earned income. Those “investors” or philanthropists should also want to know how the organization recruits top-notch talent, identifies the market for its programs, has effective strategies to become well known, and can raise enough income to sustain current operations and build capacity. They too want to know how their investments will pay off, but in terms of mission achievement rather than the creation of personal wealth.

I have always contended that acquiring income is the single most strategic function in any business, regardless of sector. Now that there are reliable ways to assess the effectiveness and efficiency—the productivity—of the fundraising function, let's use them. That's what this book is all about.

Acknowledgments

Above all, let me thank the Publishing Advisory Committee of the Association of Fundraising Professionals (AFP), especially its chair Steven Miller of Cornerstones Virginia, for selecting my book proposal and recommending it to the wonderful people at John Wiley & Sons. Your endorsement and validation mean more than I can ever say.

There are a few other people I'd like to acknowledge, and the first is Mrs. Douglas, my eighth-grade English teacher, who taught me how to create outlines. Even though I was a mediocre student, I really got into the outlining thing; it made so much sense! Mrs. Douglas, in whatever heaven you currently reside, you had no idea you were infecting me with a yen to master formal process management, so this thanks is long overdue.

Susan Galler, president of The Galler Group, a highly accomplished strategic planner, major-gift expert, and executive coach for nonprofit CEO's, had an enormous impact on this work. Susan heard about the sales version of the SMART Way model and immediately pursued me to repurpose it for the nonprofit sector, for which I owe her undying gratitude. Among many other things, she taught me to “speak nonprofit” fluently.

Terrie Temkin, PhD, governance expert and principal of Core Strategies for Nonprofits, paved the way by encouraging me to deepen my involvement in the nonprofit sector and introduced me to AFP, among other organizations. She also urged me to write as much and as often as possible. Terrie, you were right; it does get easier.

On a more personal note, my friend and sometime business partner Dr. Rebecca Staton-Reinstein made sure I stuck to it. My husband Mike Perillard kept me sane and tolerated me when I wasn't. My brother Mike Bristol, a Shakespeare scholar who's written a few books himself, provided terrific insights about writing book-length works. Mike Antonelli, the third Mike, gave great entrepreneurial advice and encouragement. Pat Dobbs and Dell Harmsen were the cheering section. My grandchildren Riley and Cade Ellis and grandnephew Aaron Bristol provided surprising support every time they forced me away from the computer to play with them instead. This workaholic salutes you; you've got your priorities straight.

Finally, a debt of gratitude goes to the many nonprofit executives and fundraising professionals I've worked with over the years. You put forth such great effort, often with too little reward, to serve the greater good. I hope that this book and the methodology it describes will ease your burden and support your efforts.

Introduction: Why We Need a Fundraising Revolution

Revolutions take place when there's a disconnect between those doing the governing and those who are governed. If that disconnect becomes intolerable, revolution may ensue. They are usually a bloody mess; both sides are convinced of the rightness of their cause and will fight, literally to the death, to prove it. While we may certainly agree that the American, French, and Russian revolutions, to name a few, have brought about desirable changes, we also have to acknowledge that they came at grave cost to lives and property. Just ask Marie Antoinette how she felt about it.

I wrote this book to reveal the need for a revolution in the discipline of fundraising and how to bring it about. Those governing the work—including the governing board and the organization's senior management—are not well connected to those doing the work of fundraising, whom I'll call “the governed.” Evidence of this disconnect is obvious. Fundraising results are lousy, in general, and they're not getting a whole lot better. Pound per pound, nonprofits bring in considerably less money than their for-profit counterparts do, even when the organizations are of similar size, makeup, and even area of focus. Nonprofits often enjoy levels of market awareness and general admiration that many for-profit businesses would kill for. So why are they willing to tolerate such anemic flows of income when they could do so much better?

On the whole, I would argue, the entire nonprofit sector suffers from our collective difficulty with measuring, managing, and improving fundraising through the use of certain business disciplines and management controls considered mission-critical by successful commercial companies. Too bad those disciplines seem to have bypassed the nonprofit sector overall. Here are a few insights.

While Giving USA's research report of 2013 shows modest increases in most philanthropic categories (individual and major gifts, grants, and corporate support) ranging from 3.5 percent to 4.4 percent, total giving as a percentage of gross domestic product (GDP) was flat from 2010 to 2012, at 2 percent. In fact, the peak year for giving to charity was 2006, during the U.S. housing bubble, when it rose to a grand total of about 2.25 percent.

The 2012 Survey Report from the Fundraising Effectiveness Project, a collaboration between the Urban Institute and the Association of Fundraising Professionals (AFP) shows that “every $100 gained in 2011 was offset by $100 in gift attrition,” and “every 100 donors gained in 2011 was offset by 107 in lost donors through attrition.”

And I was stopped dead in my tracks by the June 19, 2013, GuideStar Blog on the “overhead myth” where several leading authorities in our field expose the weakness of using low overhead as a reliable indicator of an agency's performance. How many decades has it taken to figure out that the amount paid out in overhead has little to do with the agency's ability to achieve its mission or produce any results at all? If anything, low overhead is often a marker of poor performance, signaling that leadership has not invested properly in improvements.

When I first started my consulting practice in 1995, I was motivated to address the challenges that face people who raise money for a living (which includes corporate salespeople). It seemed to me that we were asking fundraising professionals and salespeople alike to do an extremely difficult job without a map or compass. We were asking them to navigate through an otherwise trackless wilderness to find those elusive prospects from whom they just might be able to extract money, and keep those people happy enough to continue funding us into the future. Our primary metrics were, and still are, based on how much we raised and not much else. If we raised or sold enough, we kept our jobs. And often the reward for such “good behavior” was for the boss to raise our targets for next year.

It's time to stop asking our development officers to work without a net. We need to give them the backing, guidelines, meaningful methods, and other forms of management support that will help them and their agencies thrive, regardless of the state of the economy, the competition, or the latest cool new gadget or online giving craze. I want us to be able to manage fundraising using reliable strategic ways to control the controllable and work with, or around, the uncontrollable.

The fundraising revolution is all about the way leaders lead and managers manage the income-acquiring function of their enterprises in order to produce optimal, sustainable results at manageable costs. This revolution will help us produce consistent, predictable income growth from fundraising, or at least reveal why we're not achieving such growth. We need this revolution because the tools that should clarify what's actually happening, point the way to needed changes, and improve development-shop accountability are largely missing in action. Think about it: raising money is probably the most strategic thing you can do to achieve your mission and fulfill your vision, but it's managed, often, as a tactical afterthought.

When we talk about the fundraising “discipline,” we tend to concentrate on campaign concepts, rely on trailing indicators—mainly income—and make knee-jerk decisions when results fall below desired levels. We don't spend a lot of time talking about what might have gone on “upstream” to affect results observed “downstream.” We tend to throw more tactics, usually out of context, at the fundraising problem, such as holding more special events rather than digging into the data to see where we might have gone wrong, and then making informed decisions about how to rectify the situation. Or we play hot potato with fundraising, where the staff thinks it's the board's job, the board thinks it's the staff's job, and it ends up being nobody's job.

Regrettably, the data suggest that we actually do a lot of things that are counterproductive. Rather than relying on a standard benchmark for qualifying donor prospects, we wing it. Rather than setting targets for donor retention, we simply tell the staff it's a good idea but don't provide many tools to make sure retention actually happens. And don't get me started on the fantastic data we could be collecting—but probably aren't—from our web sites, e-newsletters, and social media, all of which could help us figure out what our donors actually want from us. Instead, we manage fundraising like we manage the weather. We complain about it.

No one can manage the weather. But we can manage fundraising, as long as we adopt some concepts that may seem revolutionary. We can equip the development staff with the benefits of performance management, tools that have driven immense levels of productivity and innovation in the for-profit sector, starting as long ago as the late 1940s, after World War II. These concepts have revolutionized businesses as diverse as major auto manufacturers and small accounting firms, retail operations, and medical device manufacturers. In the world of the charitable organization, the methods and disciplines of performance management applied to fundraising are still unfamiliar or unknown. Why shouldn't the charitable sector benefit from them too? All we need to do is to adopt them, making some modifications appropriate to our industry.

Fundraising the SMART Way™

This book is about revolutionizing the fundraising function through the classic elements and disciplines of performance or, as it's often called, process management. Originally referred to as Total Quality Management (TQM), this methodology and its numerous offspring such as Six Sigma and Lean have brought about enormously improved productivity and innovation in all sorts of industries, including the ways we lead and manage improvement itself. Our methodology, Fundraising the SMART Way™, based on the classic disciplines of performance management, provides the management controls so sorely needed to acquire and sustain funding in a significantly more rational, objective, and productive manner. These techniques don't merely fix problems; they also open the door to innovation.

Fundraising the SMART Way is a formal methodology, containing the guidelines, benchmarks, reporting methods, performance metrics, analytics, and business intelligence needed to produce a particular outcome, namely continuous improvement of fundraising results. We define the acronym SMART this way:

S

trategic

M

easurable

Donor-

A

ction focused (Yes, we know “donor-action focused” starts with a D, but we figured nobody could pronounce “SMDRT.”)

R

ealistic

T

ime defined

A cautionary note: If you're reading this book to pick up tips and tricks about improving your events, making the “ask” to a new major donor, or running a capital campaign, then you've come to the wrong place. What you're going to learn about instead is how to wrap your organizational arms and minds around the persistently stormy nature of the fund-development climate, and how to prevent tsunamis, hurricanes, and tornados in favor of balmy breezes and warm climes, a fund development world where what you want to happen, happens.

How It Works

Since this book is not a mystery novel, we're going to give away the ending right here. The SMART Way™ model establishes two critical components that tend to be ignored, overlooked, or undervalued. When you can document and quantify these two components, capture data against them, and then cross-reference the data, you will be far more capable of maintaining high levels of productivity, management control, visibility, and accountability for all engaged in the fundraising effort, including peer solicitors and even donors themselves. Here are the two magic components:

Component 1: The Ideal-Funder Profile,

a benchmark for each category of funder (donor, grant maker, corporate giver) that lists factual, quantitative characteristics of your ideal funder; qualitative or values-based characteristics, and the danger signs that suggest that some donors, assuming you were to win them over, might cost more than they are worth, in terms of a return on the investment of your time and effort. A complex benchmark of this nature provides clear guidelines about which donors justify the most investment of time and effort, and which do not. In the SMART Way model, we call such profiles

Scorecards.

Component 2: The Donor Moves,

milestones that locate the gift/grant opportunity in the pipeline based on the donor's

giving

process, rather than your team's “getting” process. Virtually all gifts and grants evolve through a short, predictable, unvarying series of milestones that provide effective performance indicators, both leading and trailing.

Each of these components makes for effective metrics. The Scorecard produces a rank (A, B, C, or D) that describes the prospect's potential for long-term value. Donor Moves are numbered sequentially, from 0 to 8. Once you cross-reference these two metrics, it's easy to see the health or productivity of the fundraising process. It's possible (actually it's pretty easy) to figure out which donor prospects and opportunities justify attention at all, which justify the attention of the executive director of board chair, which ones need to be nudged in the right direction, and which ones need to be left alone, at least for now.

Okay, this sounds fairly straightforward, right? And it is. However, defining the components and then putting them together to form your fundraising toolkit requires a little rethinking about fundraising, and some work.

Before we jump into the solution, let's review the data revealing the need for our fundraising revolution.

Results from the Leaky Bucket Study

Over the years, we've worked with hundreds of nonprofit development teams, trying to figure out what's really going on out there in fundraising land. Something must be happening; otherwise, why would there be so many articles, books, training programs, and software applications for fundraising? But there's also a huge amount of “water-cooler” conversations, general gossip, and endless postings and repostings about the frustrations of fundraising. Sometimes these conversations are positive, reporting on new initiatives, insightful research, and the like. But just as often, the reverse is true. We've seen more cries for help than we can even count: “Help! We lost money at our event!” “Help! Our grant money ran out!” “Help! We had to lay off our staff!” Not to mention the thousands of requests for ideas on how to run events, choose software, or make the proverbial ask, a term I deplore.

We have yet to meet any nonprofit executives, development officers, or board members who haven't said, at least once, that they're worried about fundraising and not sure what to try next to improve results. Unfortunately, panic often sets in, producing some fairly unsustainable concepts.

Raising money continues to be a stone in the collective shoe of the nonprofit sector. Since we're long-time lovers of research data, we wondered if there was any real evidence that fundraising was tough to manage, or if the impressions we were getting were merely symptomatic of the all-too-human desire to grouse and complain. So we snooped around, asked a lot of questions, and launched a survey, which we will discuss more later on. What we've discovered so far shows that it's common to run fundraising in an ad hoc, unplanned manner, without paying much attention to such strategic issues as donor-selection criteria, ways to identify the various stages of the cultivation process, and effective methods for handling things when fundraising falls below desired levels. In short, there is a disease lurking behind these symptoms.

Does this mean that fundraising professionals don't know their jobs? No. The outcomes we've just described are not the fault of the grant writer, major-gift officer, corporate relations team or direct-mail guru. They're not even the “fault” of the executive director or the governing board. They are organizational problems, and as such they require organizational solutions. They require the institution of appropriate management controls to maintain desirable performance. Such controls have become SOP (standard operating procedure) in many for-profit disciplines, including manufacturing, logistics and distribution. Even the field of corporate sales, another income-creating discipline that's notoriously difficult to manage, has jumped on the bandwagon, at least since the late 1990s. In the nonprofit world, there are plenty of management controls in such areas as client service delivery, at least those imposed by the reporting requirements of grant makers. Almost every significant grant comes with requirements, sometimes excruciating, to report on outcomes and other forms of evidence. But in the fundraising department, such controls tend to be unknown, distrusted, or ignored—which is a real shame.

Effective management controls could help nonprofit organizations of all shapes and sizes run their fundraising efforts at continuously improving levels of productivity, which means that gift income goes up, while costs and time go down. Since productivity measures both efficiency and effectiveness, it's hard to think of a better time than right now to bring such controls to the development shop. As the economy morphs from a miserable past into an unappetizing future, there's no time like the present to ensure that the nonprofit dollar can go absolutely as far as possible, including the investments needed to bring in those gifts, grants, and sponsorships. To achieve superior levels of productivity in a fundraising organization requires more than hard work. In fact, sometimes “hard work”—late hours, sweating out major grant applications, managing multiple events, worrying about how to optimize online giving—may actually stand in the way of true productivity.

Important!

Working “hard” is not the same as working “smart.” It takes effective methods, metrics, benchmarks, guidelines, and reporting methods to work smart.

Statistics from the Leaky Bucket Assessment

We launched our Leaky Bucket Assessment for Effective Fundraising back in 2011. We designed it to help us figure out whether all that anecdotal evidence had any basis in fact. After a while, when you've heard the same hundred anecdotes from a hundred executives at a hundred agencies from all sectors, sizes, and locations, you start to wonder: are all these people just tired and cranky, or is there really a problem out there? So far, the Leaky Bucket Assessment suggests that there really—really—is a problem out there. Several problems, in fact. Fortunately, these are problems that can be resolved. But they also suggest that some nonprofits that were decimated or hurt by the recession of 2008 might well have survived, or at least limped through, if they had employed some of the basic business disciplines that our assessment evaluates. In keeping with the heavily scientific design of the assessment, we scored each participant at one of four levels:

Leaking Like a Sieve!

Call the Productivity Helpline!

Time for Preventive Productivity Maintenance!

Watertight!

To date, a mere 4 percent have come in at the Watertight Level.

Even though the Leaky Bucket study was conceived as an informal tool, the scores we are seeing for the individual statements in the assessment are surprising and sobering. Here they are:

Qualifying prospects:

Thirteen percent have no criteria for qualifying prospects; they just try as hard as they can.

Sixty-five percent say they have “preferences” for selecting prospects but no documented criteria.

Fifteen percent say they qualify prospects based only on wealth profile and giving history or on granting guidelines.

Only 7 percent say they use a benchmark describing wealth profile, giving history, and charitable motivations.

Acquiring new funders:

Twenty-two percent have no standards or targets for new-donor acquisition.

Forty-three percent state that they have “preferences” for acquisition but no documented targets.

Twenty-two percent say that they have targets for amount of new income.

Only 13 percent say that they seek a targeted amount of new income from a targeted number of new funding sources.

Retaining current funders:

Fifteen percent have no standards or targets for donor retention.

Fifty-eight percent say that they are “encouraged” to retain donors but don't measure retention rates.

Eighteen percent say that they pay attention to the amount of money retained from current donors.

Only 9 percent say that they maintain targets for amount of money retained and numbers of funding sources retained from year to year.

Upgrading (up-selling and cross-selling) donors:

Twenty-six percent have no standard practices for upgrading their funders.

Fifty-three percent say that they are “encouraged” to do so, but nothing is documented.

Sixteen percent say that they have targets for upgrading funders.

Only 5 percent say that they have documented targets for upgrading their funders,

plus

they run specific campaigns to do so.

Standards for funding diversification:

Seven percent report only one or very few funding sources.

Twenty-four percent report that almost all funding comes from a single category such as grants.

Fifty-one percent report that they obtain funding from a variety of sources, but funding is still not well balanced.

Only 18 percent report that they believe their funding to be well balanced and diversified.

Staff resources for fundraising:

Twenty-five percent say that the executive director does all the fundraising (and everything else).

Thirty-three percent say that they have one staff member or contractor for fundraising, in addition to the executive director.

Sixteen percent say that they have two or more people, plus the executive director and help from the board.

Twenty-six percent say that they have a director of development with a staff, plus help from the executive director and the board.

How fundraising is measured:

Only 60 percent report that they measure total income against a target.

Fifty-one percent report that they measure income by category (gifts, grants, corporate support) against a target.

Sixteen percent measure number of visits with donor prospects, against a target.

Twenty-four percent measure the number of grant applications and/or donor proposals produced, against a target.

Twelve percent chose “none of the above,” which means they are not measuring anything—or they measure stuff we didn't think about.

What's in the fundraising “toolkit”:

Only 48 percent say that they have a documented strategic plan with specific objectives for fundraising.

Only 26 percent report that they use documented donor profiles.

Only 56 percent say that they use donor management software, or at least a spreadsheet

Only 26 percent state that they have an up-to-date, documented case for support.

Twenty-two percent said “none of the above.”

Responding to undesirable fundraising performance:

Fourteen percent chose the option “fire the development director.”

Fifty-three percent chose “produce more events.”

Fifty-one percent chose “pursue more grant applications.”

Twenty-six percent chose “train staff, board, and peer solicitors.”

Eighteen percent chose “improve, update the case for support.”

Twenty percent chose “none of the above.”

Though the Leaky Bucket study is relatively small, these numbers are suggestive indeed. For one thing, taken as a whole, they suggest that many nonprofits rely on hope and prayer, rather than a documented, measurable set of key performance indicators, so their development efforts rely on working harder, not smarter. Without such measurement, efforts to improve results are hit or miss, tactical solutions that might have worked for another agency in another sector at another time.

The lack of such business disciplines allows counterproductive tactics—the “tin-cup” mentality, which says “help us because we need the money”—to creep in and take the organization in one direction only: downward.

Important!

The less you can measure fundraising performance, the worse it gets.

The Four Laws of Performance Management

Performance management is the science of defining the business disciplines, rules, guidelines, metrics, benchmarks, and reporting methods that drive specific, desired business outcomes, then using these tools to achieve desired results. One of the earliest performance management models was Total Quality Management (TQM), introduced by Dr. W. Edwards Deming back in the late 1940s, after World War II. Eventually, TQM evolved into an alphabet soup of management methodologies, including Six Sigma, Lean, Information Technology Infrastructure Library (ITIL), and the like. While these productivity models first addressed “hard” business functions such as manufacturing and distribution, in more recent years they have evolved to address the “softer” functions, including career advancement, team building, customer-service delivery, and so on. In the for-profit world, the very last business discipline to embrace these models has been that of corporate sales, which is still, at time of writing, on the rising curve of adoption. In other words, it's no longer a shockingly new concept, but it still has a ways to go before most sales teams use it.

The discipline of philanthropic fundraising is still behind the adoption curve when compared to corporate sales. In the development shop, there is plenty of room for improvement, as demonstrated by the Leaky Bucket results. In fact, when we roll up all the results from the Leaky Bucket study, we see that the overall scores place our participants in the following four categories of “leakiness” (see Exhibit I.1).

Exhibit I.1 Results of the Leaky Bucket Study, as of October 31, 2013

Source: Bristol Strategy Group

Performance management has become so popular, not to mention complex, that you could get a PhD in it if you wanted to. But you don't really need the advanced degree. Just learn these four laws and you can be a performance management superstar:

Law 1: You can't manage it if you can't measure it.

The alternative to this law is “you can't improve it if you can't measure it.” You can't improve your fundraising results if you can't measure them.

Law 2: What you measure is what you get.

If you measure phone calls, you'll get lots of phone calls. Are you in the business of making phone calls or the business of raising charitable income?

Law 3: You can't figure out much by using a single measurement.

You wouldn't build a house if the only measurement you had was for the bathroom window. You can't figure out much about your fundraising performance if you're only looking at how much money you dragged in.

Law 4: If the only thing you measure happens after the process is complete, then you haven't learned anything about the process.

If you're only looking at how much you dragged in, you don't know how many no's it takes to get to yes. You don't know how long it takes the typical major gift to evolve through the cultivation process. You don't know where your opportunity pipeline encounters a predictable delay or how many opportunities convert from “nice to meet you” to “give me a proposal.” And there are lots of other things you probably don't know.

Managing performance effectively is not only a management skill, it's an organizational mind-set, and it's a great one to cultivate. If your institution delivers medical care, early-childhood education, or community development, it's likely that you're already managing service-delivery performance. Outcomes measurements are a common requirement among funders and certifying bodies in these fields. You, your funders, and your clients rely on your ability to establish and maintain high standards of quality based on industry benchmarks.

Fundraising has been late to this particular party.

Important!

Inexact measurement of the right things is more meaningful than exacting measurement of the wrong things.

In fundraising, it's common to report on activities (how many people attended the gala, how many grant applications were submitted, how many phone numbers were dialed) because they are relatively easy to count and track. But it's not so common to report on results. Activities—phone calls made, postcards delivered, e-mails opened, links clicked—are so easy to measure that your technology is already doing it for you. But if you're only counting up the number of activities, you might not really be making much headway.

However, if we can figure out which results to measure and how to measure them, then we will be more likely to measure the right things, things that actually give insight into the health of the fundraising process. Results—the outcomes of activity—are highly diagnostic and rewarding to measure, even if they tell you you're flunking Fundraising 101.

Once you've selected the right results to measure, you'll also need to measure some key activities. Emphasis is on the word some. Keep track only of diagnostic activities, those that provide meaningful insights into needed improvement. For example, if your organization has 10 major donors who each give at least $25,000 per year and you're determined to retain them at that level, then a useful activity to measure might be “schedule one annual planning session per year with every major donor.”

Evidence, in the form of data collected from those famous metrics, reveals the level of effectiveness of your fundraising efforts. If you're on target, that's great; figure out what to do to stay there. If you're off track, figure out how to get back on.

And you're not the only one who wants the evidence. Funders of all sorts and sizes want, need, and often demand proof that their money is producing desired results, especially when the economy is weak. One way to improve fundraising results is to embrace the guidelines, metrics, benchmarks, reporting tools, and other methodological elements of effective performance management.

Target: Consistent, Predictable Income Growth

Guess what keeps executive directors and board chairs awake at night. It's not simply the need for more money; it's not knowing if they're going to bring in the level income they need. If income is neither predictable nor consistent, bad things happen. We'll never forget the founding board chair who admitted, at the organization's 20th annual board retreat, that the agency had never been able to predict whether they would make budget or not. It's no surprise that the agency lost both its development director and its CEO in the same year.

Sometimes being sure that income is consistent and predictable is even more important than knowing that it's growing, especially during a weak economy. However, as shown in the Leaky Bucket results, it's not uncommon for nonprofit organizations to capture few (if any) meaningful metrics that demonstrate the level of consistency or predictability. Lack of insight increases levels of anxiety and may even make fundraising results look worse than they actually are.

Without accurate and timely reports based on key performance indicators, we hear demands for better results; we observe long anecdotal reports describing each opportunity one at a time; we endorse events without knowing if they'll bring in more than they cost; we launch marketing campaigns and then fail to follow up on the leads they produced. While it's certainly desirable to see results improve, it's best to have evidence that shows if results are actually improving, declining, or staying flat, at which times and under what conditions. Reliable evidence takes the worry out of fundraising and converts negative conversations into positive ones.

Let's compare philanthropic fundraising to corporate sales. For the most part, the corporate sales team is expected to produce a predictable amount of income every week, month, or accounting period. While the sales team's income targets may vary a bit from month to month to accommodate seasonality or special campaigns, salespeople learn early in their careers that they are expected to deliver their assigned results week after week, month after month, year after year. It's their ability to deliver consistently that gives them job security. Salespeople whose numbers fluctuate wildly may find themselves seeking career challenges elsewhere. Although corporate executives hate it when major events like expos and conferences fail to produce good leads, they're a lot more concerned about meeting forecast consistently. Corporate sales organizations are able to function this way because their metrics, guidelines, benchmarks, reporting methods, and even compensation practices have been designed specifically to produce such results.

It's impossible to overstate the importance of consistency and predictability in managing fundraising performance. If your measurements and reporting methods don't demonstrate how well or poorly your development team produces consistent, predictable income, then you risk wasting scarce, precious resources of time, energy, and money. Whether income is improving, flat, declining, or fluctuating wildly, you're a lot better off if you know what's going on.

Effective Fundraising as Competitive Advantage

If all this seems like fuss and bother over something you “can't” manage anyway (like the weather), you are wrong. Effective fundraising produces significant competitive advantages.

211 Broward is a midsize agency in Florida, providing 24/7 phone support for crisis prevention and information and referrals to health and human services providers. Its CEO, Sheila Smith, was one of the first Leaky Bucket participants to score her agency at the Watertight level. We visited with Sheila because we were so impressed with her scores and discovered that:

She has sufficient time and energy to plan for the future, consider innovations, and build capacity effectively.

Her board of directors focuses its time and attention on major strategic issues—including peer solicitation—and demonstrates confidence in her ability to manage the agency effectively.

Her programming and administrative staff receive competitive pay and benefits, with room for advancement.

She maintains a small but sophisticated development team that gets appropriate support, time for training, and useful supportive technology.

In short, this organization has invested appropriately to manage fundraising for predictability and consistency. It's a great organization; people love their jobs, and the community benefits from their work. The fact that they're able to raise money on a consistent and predictable basis has freed the entire agency—and its governing board—to focus on service delivery and innovation.

What strikes me most about Sheila's experience is the strategic impact of effective fundraising. In my experience, nonprofit types often talk about fundraising as if it were a necessary evil, a distasteful act that has to be endured, like certain bodily functions. As I developed the Leaky Bucket Assessment, I expected that Watertight agencies would simply experience a lack of complaints about fundraising. Instead, it seems they have the leisure to concentrate on mission achievement and innovation, instead of worrying about paying the rent.