Don’t Mistake FTEs for Expertise

Headcount, salaries, and FTEs are very much in the news for our industry. Pay levels for executives are being scrutinized. Team sizes are being questioned.

Many hands makes light work
Many hands makes light work

The notion of doing “more with less” is never one I’ve embraced, although most organizations have plenty of opportunity for incremental improvements from their existing team. In my years of consulting, I have found that team members are coach-able, social sector infrastructure is underfunded, and, therefore, organizations need to leverage the team they have.

The caveat, though, is that we shouldn’t mistake FTEs for expertise. That is, “more with more” may not be the case. This message has stuck with me in many ways. I’ve had employees who were more productive and effective in a few hours than some were all week. I’ve seen clients hire firms to “throw bodies at the problem” only to find that inexperienced (even if book-smart) contractors often make easily avoidable mistakes.

Of course, we don’t always have the luxury of an experienced crew. In our industry, where turnover is rampant and investment is too low, there are a few things to consider:

  1. Retain, retain, retain. Where you have a great person in place, reward and retain them. You’ve likely seen someone refer to “one year of experience, ten time” to refer to a professional that hasn’t really learned much year-over-year, generally because of job hopping. If you have a great team member, assume they will be poached and do something about it.
  2. Grow with impact in mind. A careful plan to add team members based on the impact and results that position will drive is essential. I completed a project for a large academic medical center that doubled their team size, but more importantly had a training, retention, and career development plan designed to keep and promote the best people. The reality is that fundraisers, in particular, need a few years to optimize their productivity, so build a plan that accommodates that reality.
  3. Don’t assume more people and hours equal productivity. Hiring a big firm to “do everything” will increase the hours available, yet the impact of those hours may be much less productive than you desire. Before assuming the “bigger equals better”, determine if your optimism will match the reality of the situation.
  4. Be smart with your “B” students. I’m a proponent of top performers and going the extra mile to retain them; my clients too often lose top performers for the cost of a 10% raise. Your next tier of performers needs special attention, too. Because they may be less desirable to executive search professionals, you have a chance to retain them and coach them into high levels of impact. Have a “stay plan” for folks designed to get them to want to be on the team as long as they remain a good performer.

Just adding lots of FTEs is not a great plan. When budget and approval are available, it can seem like a bonanza, requiring immediate plans to load up on people or engage a contractor. Do so cautiously. Put expertise (and retention of expert team members) first in those plans. True up salaries for long-standing employees whose results have been proven. Then, with retention concerns allayed, get yourself the most talented and experienced people possible, one FTE at a time.

 

4 Indicators that Caging is Right/Wrong for You

Gift processing is the core of fundraising operations. The steps to carefully and quickly

From Cannon's An Executive Guide to Fundraising Operations
From Cannon’s An Executive Guide to Fundraising Operations

handle our donors’ contributions are at the heart of our business processes, databases, reports, and technology. Some of us in the industry have been seeing an interesting shift in this core business process: the rise of caging. It is an important alternative for you to consider.

As an alternative to in-house gift processing, caging outsources gift intake, batching, entry, and receipting. The approach is not new, particularly among high-volume, low-average gift processing outfits supporting cause and cure organizations. The new shift has been among those universities and healthcare organizations that see an opportunity to streamline operations while improving outcomes. Additionally, the technology available for scanning, remote entry, and data import has improved so rapidly, off-site entry is surprisingly simple to implement.

But, is it right for you? Perhaps. Consider these four indicators:

  1. High-volume, low-average gifts. Caging companies create economies of scale, so some volume is needed to make this approach profitable. Once you’re in the 5-figure transaction range, it may be worth a look. As you approach and fall into the 6-figure transaction range, you owe it to your organization to evaluate these options.
  2. Donor and donation make-up. The business processes designed by caging companies are efficient. However, a majority of your donors need to frequently use reply envelopes and standard devices to make the process scaleable. It’s even more important that you consider what your donors might think if they mail off a gift to a PO Box in another state (imagine a Sooner sending a gift to processed in the Longhorn state!).
  3. Complexity of the front-of-the-line. This issue is counter-intuitive. The more complex your important gifts and pledges are at the front of the line, the more sense it makes to establish a caging approach. Such a practice will remove the tendency to “plow through the pile” of work that can drain a processing team and distract them from the truly important items in the pile. Instead, a caging company can siphon off the small donations and allow the team to focus on what matters most.
  4. Desire to strengthen strategic analysis. Finally, if you want your gift processing team to move form “entry” to “analysis”, you should consider a move to caging. When the mundane, day-to-day entry grind is assuaged by a caging partner, your professionals can start to analysis gifts more thoroughly. The resulting increases in prospecting, analytics, and stewardship will be significant.

Caging isn’t for every institution. However, it is an increasingly viable alternative to the typical, in-house approach. Having helped organizations evaluate and then implement the approach, I can attest to the value of this model and the likelihood its application will increase in the years to come.

N=1 isn’t a compelling case against increased funding for fundraising

Takes money to make moneyDid you happen to read the Washington Post’s article on the demise of the nonprofit Invisible Children, best known for its Kony 2012 campaign? (Check it out here) The authors posit that this single case illustrates the dangers of increasing fundraising expenses.

Not really, of course (for both the article and the facts of the nonprofit world). The article is more nuanced. Social change and policy organizations are complicated, especially those operating in Africa. For this N=1 (Invisible Children), a few significant forces (which had little to do with a surplus-based funding approach) tore the organization apart.

This single case may be an example of how a nonprofit can fail, but there is little evidence presented and no broader applicability of this piece about whether a more market-oriented funding strategy is appropriate. The article, for example, fails to mention that nonprofits tend to spend 65% or so of their budget on staff and–spoiler alert–poorly paid people don’t stick around long and often cost about a year’s salary to replace.

The loosely argued closing of the Post piece suggests that nonprofits have benefactors and not investors (which most major donors I know would challenge). As are result, nonprofits must operate on a shoe string, cow to risks over opportunities, and generally hope that their meager existence can marginally impact those benefiting from their mission. This notion is much more dangerous than better funding nonprofit operations.

It is dangerous to create an argument on an N=1 scenario. Just as the article indicates the IC may not have been quite as impactful as their messaging suggested, this piece relies too much on its own limited perspective to suggest that IC proves the dangers of better funding nonprofits. Instead, this “overhead” myth leads to the “starvation cycle” which leads to lean and under-experienced staffing which leads to more nonprofit failures than fundraising experts would care to count.

Do you have a suggestion to help the nonprofit sector build its case for better investment? I have a few tricks (for a later post) and welcome any other ideas.

Should your organization consider a merger?

America is home to around 1.4 million nonprofits. That’s probably about 700,000 too Merger and Acquisition Cartoonmany.

There are too many nonprofits competing too inefficiently for too few charitable dollars. It’s the inefficiency piece that’s the heart of the problem. The cases for support for the myriad nonprofit organizations are inspiring, wonderful, and important. Americans are more generous than any other country’s citizens. But, really, just how many nonprofits do we need in the U.S.? (Bloggers note: the successful attainment of nonprofits’ missions is my vocation. No one wants nonprofits to succeed more than I do!)

An analysis of giving in the U.S. since the 70’s show shows that charity accounts for about 2% of annual GDP…every year…despite the near 100% growth in the number of nonprofits in the last decade (compared to 35% growth in GDP in the last decade). More nonprofit organizations do not appear to result in proportionately more charitable giving.

What does increase giving? Impact reporting to donors about the value of their gifts. Better organized volunteer, staff, and peer-to-peer fundraising efforts. Marketing, branding, and the public’s trust around the efficacy of a particular nonprofit. These are the hallmarks of more sophisticated and more seasoned nonprofits. In most cases, a new nonprofit is simply seeking market share from a very similar nonprofit in their area. Sometimes, new causes require attention. Occasionally, new technology demands new nonprofits to leverage them.  But, the market is saturated.

This might seem blunt. It is. And, it should be. The public good impacted by nonprofits is invaluable but has been stagnant. So, what should be done?

An underexplored option is to apply mergers and acquisitions so effective at generating value in the for-profit sector.  The Stanford Social Innovation Review presents a powerful case for this strategy. Will, say,  Brown merge with MIT? I’d say that’s pretty unlikely. Should very small dog and cat rescue operations in, say, St. Louis, merge? Yes. Do it today. Share resources and operational infrastructure.  Grow volunteer bases. Address the “founder-itis” that plagues many new nonprofits. And, most importantly, better serve the core of your mission.

The turmoil from a merger can be difficult. Staffing overlaps and other redundancies may result in painful restructuring and job loss. But, we not running a charity here. That is, business principles apply. Your organization’s mission will be better served by being more effectively delivered to constituents and more strategically presented to donors. There surely is a place for up-start, lean-and-mean nonprofits, but donors know that they get what they pay for.

As you plan for 2015, think about whether you’re having the biggest impact possible given the potential opportunity to merge with other similar organizations. It would be a big resolution, of course, but the benefits to your constituents might be worth it.

Taking Notice: Google’s Giving Efforts around Ebola

Man…that was slick. Did anyone else see how Google dropped in a “donate now” header with a $2-for-$1 match? If not, try it. Go to google.com and you’ll see this:

Google's slick new header for giving.
Google’s slick new header for giving.

Click on the “donate now” button and you’ll see a super easy-to-use form. All of this is great. Unless you start to realize that this means your online giving page(s) and functionality will be compared to Google’s. That’s tough because it’s not a fair fight (you don’t have thousands of developers building your tools for you, do you?). But, you’re going to need to deal with this.

If you use Google Wallet, this is a one-click gift form. If not, you bump to Network for Good and it's a little clunkier.
If you use Google Wallet, this is a one-click gift form. If not, you bump to Network for Good and it’s a little clunkier.

Every dollar given to Google is likely from donors’ disposable income, which is finite. If your organization doesn’t get out in front of efforts like this, you’ll be more likely to hear “I already gave…”.

So, take this as a clarion call. If you want your donors’ experiences with your online giving to compare to their consumer experiences, you likely need to adapt.

As the holidays approach, be sure that you are ready and that your online giving tools are spruced up and ready to go. Google is ready if you’re not.

Focus on Funding Fundraising

During the St. Louis Planned Giving Council meetings, we spent some time discussing the challenges (and, as some call it, strangle hold) that cost-per-dollar-raised measures place on great fundraising. The “overhead myth” approach aligns nicely with the notion that we are under-investing in our fundraising efforts. We emphasize efficiency over effectiveness and often miss out altogether on the notion of impact and net gains.

We can start to change this. Of course, some donors would like us to do more with less. However, donors that are focused on the long-term impact of their giving understand the value of investing in broad gains, much of which requires patience.

Have a look at this Prezi on the topic: Funding Fundraising Ideas from Chris Cannon.  And, let me know what messages, metrics, and strategies are helping your team invest more and more strategically.

 

Prospecting, Analytics and Data for Gift Planning

The St. Louis Planned Giving Council was a terrific setting to discuss changes (and continuations) in prospect development. The group discussed what’s the same, what’s new, what’s working and what’s on the horizon.

You can find my presentation on the topic here: SLPGC – Prospecting Discussion, November 2014.

Best of luck with your fundraising initiatives as year end approaches.