Check out this fun session here. We covered a number of nuanced situations that affect our ability to handle data more securely. Those little computers people carry around in their pockets–with access to, more or less, the entirety of human knowledge via tools like Google–create some unexpected issues. Breaches and data sharing complicate matters. It’s a fast-moving world we are trying to control, and this session pin-pointed a few tricks to put in place.
$1 Billion Reasons You Can’t Always Get What You Want.
$1 billion–it sounds like a lot, doesn’t it? But, we have a problem: fundraising technology demand (in the form of fundraisers’ expectations) is much greater than fundraising technology supply (in the form of vendor offerings). Put another way, our industry’s annual $1 billion fundraising technology budget doesn’t get us what we want.
Cannon Estimates our Industry Spends Around $1 Billion a Year on Tech, Which Isn’t Enough.
This demand derives from consumer experience. On our way to work, we all have computers in our pockets and access to billions of dollars of free technology, software and online experiences from the likes of Facebook, Amazon, and Google. Then, we clock in, boot up, and, voila…1997 is delivered by our 6-year old computers. We suffer from what I call the iPhone problem: we want work resources based on our consumer experiences, but these are far too expensive to replicate given our fundraising technology market and budgets. It’s relative deprivation at a high, costly level. It results in wasteful workarounds, decentralized data and systems, and dissatisfied end users. And, in the end, these things keep us from raising more money.
Why are we in this predicament? The short answer is there is not enough incentive to supply great fundraising technology that matches consumers’ expectations. Why don’t we have enough incentive? That part is a little more complicated. One might charge (as I did in February) that our industry is hamstrung by narrow thinking around investment. Another might suggest that, while the industry appears quite large, it is unsophisticated and relatively immature. A third might notice that our industry isn’t really large enough as a market sector to warrant the kinds of innovation our colleague-consumers would like.
All of these observations inform the infographic above, which depicts the problem: we are typically a $300 billion industry per annum that can only spend about $1 billion on technology each year. When we consider how much fundraising is done without the benefit of technology (referred to here as “plate and gate” efforts that reflect more grassroots, manual efforts prevalent in certain religious organizations and new and smaller nonprofits), then calculate what we get to spend, then determine where we get to spend it, the market just isn’t that big because our budgets are so small. Note that even a very strong 2014 is likely to bump up available dollars by around $250 million…$1.25 billion is better but still not enough.
Of course, there are some exceptions. Leading software providers do their best and it is, frankly, often good enough. I’ve helped organizations leverage nearly every fundraising system and they are all passable. These systems collect addresses, store gifts, provide institutional memory, and support programs. Are they efficient and user friendly? Not particularly. Are their add-ons, such as reporting tools and online functionality, what we’d like? Not usually. But, behavior and poor user adoption are often bigger problems than the technology itself.
The issue is not with the core functionality supplied by the market; these tools do what is “necessary”. However, they tend not to deliver on what we define as “neat”. What’s “neat” is shaped by what Apple, Google, and a bunch of other billion dollar corporations bring to the market. It feels like we are destined to have a large gap between demand and supply.
While it’s unlikely you will be able to re-direct the market’s “Invisible Hand”, there are three steps that can help:
Manage expectations. You need to persuade your users that you don’t get to invest like a Silicon Valley start-up, so the tools are a little less nifty. But, they still (should!) work. Convince team members that what you have supports their programs or make commitments to better align what you have with current needs.
Illustrate value. Where you see a gap in programs or productivity because of a lack of functionality, quantify the real and opportunity costs. Are donors failing to complete online transactions because of poorly designed forms? Are reports re-worked in Excel at the cost of hundreds of hours a year that could be focused on new donations? Show how the gap deserves to be filled with better technology.
Do-It-Yourself. Out-of-the-box solutions will solve some needs, but not all. You may need to partner with specialists and experts to address an opportunity that vanilla systems can’t handle. The market for innovative solutions in between and beyond core systems functions may be in reach, but the same vendor that delivered the vanilla solution may not be able to deliver the customizations you need.
Our industry is trapped in a Catch-22: to get funds, we need appropriate technology, but we can’t get the technology we need without these funds. Or, more simply: $1 billion isn’t enough. The fact remains that many of us will have to make the most of what the market has to offer. Those of you with means and vision to implement more custom solutions will likely need to create your own solution when expectations are high and ROI is clear.
Productivity is vitally important to nonprofits but none of us in the social sector are able to spend enough time, energy, and…well…dollars on being productive. Instead, for decades, we have been more focused on efficiency at the expense of effectiveness and impact. We stuff envelopes at night to save money, then lose overworked staff for a 5% pay increase at a nonprofit in town. Our boards embrace online innovation but funding is often on a shoestring budget. Some great studies and presentations have highlighted some of the drivers for this. After years studying this dilemma, I submit that the over-reliance on and misapplication of the “cost per dollar raised” (CP$R) metric is the clearest example of this problem. While we want to raise more, we penalize ourselves if we invest too much.
The industry needs to change and here are three critical concerns with CP$R and its sometimes negative effect our industry:
Growth: Fundraising is a long-term endeavor. Expanding fundraising results takes time, consistent marketing and messaging, and investment. The current industry emphasis on CP$R diminishes the ability to weather a tough year, offset a big gift’s impact in year-over-year evaluation, or properly fund our efforts. Organizations whose strategies rightly focus on major and principal giving are particularly vulnerable to scrutiny over CP$R issues depending on the timing of a big, strategically cultivated gift.
Staffing: The professionalization of fundraising is changing the math on what is reasonable for budgets. Most nonprofits will spend about 65% of their operational fundraising budget on staff and benefits. Low CP$R targets, though, mean that we may not have enough to invest once/if we get the right people on place as this mix relies heavily on the typically market-depressed salary bases provided to fundraising professionals. We might secure top talent committed to our missions, but instead we seem to experience a costly turnover rate and stunt our fundraising efforts in the process.
Infrastructure: I’ve written about the “iPhone” problem–that is, people’s expectations for work-related technology and processes are shaped by their consumer experiences using tools and apps designed by the world’s biggest companies. The result is “relative deprivation”; we want from our fundraising tools what we get from our consumer products. Unfortunately, collectively, our industry simply doesn’t generate enough demand for vendors to supply tools that match our consumer experiences. Imagine if we were empowered to demand better tools that could be shown to increase our bottomline, even if we would sometimes eclipse the currently-too-low CP$R thresholds. Imagine if we could invest an extra $0.01-per-$1.00 raised or so each year as an industry. That would be a great start.
Our industry’s efficiency mantra can be overwhelming. Funders’ expectations to deliver more with less are difficult to manage. The nature of fundraising efforts, while akin to sales, is different in its non-transactional nature. Nonprofits are directed to invest less than for-profits. And, our industry’s focus on CP$R is a root cause of our challenges.
Alternatives and Additions
While CP$R is a common measure of nonprofit evaluation, there are important alternatives to CP$R. These can be taken in conjunction with costs to present a more balanced, nuanced evaluation of the effectiveness of a nonprofit.
Raised per Full Time Employee/Equivalent (FTE). I’ve written at length about the value of measuring “Dollars Raised per FTE.” It is a surrogate for CP$R in some ways, but it gets at a better way to position productivity and effectiveness. Study after study shows that nonprofits raising $1 million per FTE in fundraising are performing in the top quartile. Would you rather raise more by adding more people, or save money at the risk of losing people?
Net Gain: Imagine this scenario—you can net $10 million or $20 million in a year, but the former costs you $2 million and the latter costs you $10 million. $20 million beats $10 million, right? Not if it costs “too much” to generate. We need to be able to choose the latter but our industry, through charity watchdogs and other traditions, rewards spending less even if you provide less to your cause. There is a balance needed here. Different organization types at different stages of growth, staffing, and infrastructure require a nuanced evaluation.
Impact of Dollars Raised: Recent innovations by groups like GiveWell reinforce the value in looking at what was accomplished because of the funding generated by fundraising. Can more kids experience an open MRI that donors’ contributions helped fund? Can a community see a decline in diabetes because of charitably funded education efforts? These are organization-specific so don’t lend themselves to a nice, simple number, but the current reliance on CP$R too often results in overly simplistic evaluations.
Moving forward with new measures will take guts. We need to push back against the myopic focus on annual CP$R. We need to seek investment in infrastructure and technology in line with expectations of those who sit on our boards. We need to fervently battle to retain talented staff by properly funding roles. We need to clearly define the terms of the debate so definitions like “raised” retain their fundraising meaning and are not reduced to more simplistic notions defined on a general ledger. And, most importantly, we need a message that reminds our constituents of the old adage that “you get what you pay for.” More net funds for our amazing missions is more meaningful in the long run than delivering less, but more efficiently. Because our missions are so important, adopting a more effective set of evaluation tools is vitally important.
Have you succeeded in altering the focus toward productivity and away from CP$R? If so, share your story.
This year’s CASE Gift and Records Conference is underway and there is a lot happening in this space. Gone are the days of rote typing. Paper files aren’t going away yet, but digital imaging is on the move. Here are three great takeaways so far:
Outsourcing is the new black. While it’s not for everyone, it’s on everyone’s mind.
Metrics can work for the back office. Having data gets your team some skin in the game (and can help improve outcomes).
Perception and exception management remains a core challenge. If we can control the anecdotal distractions, we can better serve our donors.
Have a look here to see the prezi I presented on what’s next for the industry. Happy fundraising!
P.S. For those at the session, click here for a listing of charity registration firms.
Jennifer Liu-Cooper and I had a chance to present some ideas on becoming more persuasive in the office place. Have a look here and let us know what you think.
The BBCON conference brings together professionals from across the globe to discuss how to leverage technology (and related processes) to support our vital missions. Within each fundraising team, integrating functions and increasing results requires thoughtful collaboration and shared understanding. Technology, communication and training, and organizational culture issues must be aligned to help the team spin like a top.
Click here for the presentation materials from the forum. And, good luck with your efforts to integrate processes and perceptions.
Different groups perceive fundraising operations differently, and this greatly affects advancement services.
How do I know this? While it’s an intuitive aspect of fundraising operations work, the data are pretty clear. I completed a study in the last few weeks. The survey is an extension of work I conducted for An Executive’s Guide to Fundraising Operations, which explored how differently fundraising executives and operations professionals perceive their data, reporting, technology, and processes. Here is a summary of those 2011 responses. These show that, on average, operations professionals are more confident in their work than their bosses.
Cannon’s study shows the executives aren’t as confident in their operations as those doing the work.
My July 2013 study focused on understanding how those with and without a “portfolio of prospects” perceived their organization’s operations and their inclusion of operations in their work. A group of 334 respondents (two-thirds of which maintain a prospect portfolio) shared their perceptions.
The results mirror the responses from 2011. In general, those with a portfolio of prospects were less satisfied with their operations than those without a portfolio (typically, operations professionals) were confident in their services.
The most interesting contrast in the 2013 study was not simply a difference in confidence (as above), but just how much more confident operations professionals were in their services and their inclusion in strategic planning compared to the satisfaction of their colleagues with prospect portfolios. That is, operations professionals are fooling themselves a bit and, conversely, those with prospect portfolios are likely being a bit harsh. You will also notice much less satisfaction in technology and reporting tools among gift officers than operations professionals. (Click here to find the detailed study.)
Cannon’s 2013 study shows that frontline and operations professionals have much different perceptions.
So, what do we make of this? Both groups need to take a walk in the others’ shoes. Operations are probably better than gift officers think and could be improved more than operations professionals would like to believe. Communication is essential, too. We need to work on managing expectations, while delivering as solid an operations environment as our resources, hard work, and good thinking allow.
There are more recommended next steps about dealing with this new data in the report. Click here to read more.
This is my favorite quote on the year: “You succumb to survivorship bias because you are innately terrible with statistics.” The “you” here is the Royal “You”. The author is Dave McRaney. And this gem of a statement is shorthand for saying that most folks could improve how they evaluate situations and make decisions, if they could only apply a more analytic and open lens when thinking. Or, another way to put this is that by only looking at success, one cannot make an informed decision about how to avoid failure. At this is the danger of suvivorship bias.
What strikes me about this post (in addition to simply how much I learned while reading the post), is that in fundraising, most of us suffer from survivorship bias in our decisions:
Staffing: we value those who stayed, when perhaps we lost even better people. I often suspect some succeed over time due to others’ departures more than their own merits.
Productivity: we value those generate funds, when perhaps we lost even better opportunities (or solicitors). I am not asked very often to benchmark poor performers.
Customer Service: we value anecdotal, one-off feedback, when perhaps we don’t actually hear from the vast majority of satisfied or disappointed donors. I am always seeking actually survey data on satisfaction rather than the “last week we had a call from angry donor” variety (which, while seemingly plentiful, is actually a fraction of a fraction of the potential population).
If the notion of survivorship bias is new to you or you’re due for an intellectual re-boot, read this post. And, don’t think the irony is lost on me that the Internet (and social media, really) is essentially a function of survivorship bias. That is, I only saw this insighthful post and that cute cat meme seen by everyone on the planet this week because 10,000 like it never made it to my Twitter feed. If you have other and better suvivorship ideas, please share.
Have you read Daniel Pink’s “To Sell is Human”? It is a great, quick read about the sociology, psychology, and mechanics of selling (defined by Pink as persuasion, rather than pure sales, per se).
The book (check it out here) presents some terrific tactics for increasing effectiveness of moving others. This book is especially valuable for gift officers and others who are learning how to best engage people. Happy reading and would love your thoughts on how you’ve been most effective at persuading people to move toward your cause.
