MAXIMIZING EFFICIENCIES… OR MAKING THE CASE FOR DEVELOPMENT?

1. MAXIMIZING EFFICIENCIES…OR MAKING THE CASE FOR DEVELOPMENT? ASJMC Development Workshop August 8, 2009 Cathy McGrath Marts & Lundy

4. Staffing Not filling vacancies caused by attrition Freeze on filling vacancies Furloughs Salary freezes Pay cuts Reorganization of operation leading to staff cuts Subcontracting Reducing retirement plans Changing health plan providers Program Centralizing back office work Less travel/entertainment Less professional development/conferences (bring training inside) Postponing computer maintenance/replacement Less advertising/marketing Scaling back events Seeking underwriting from alumni for events Ensuring that events are multi-purpose Suggested Budget Cuts

5. 5. Gift Pyramids Today Tomorrow? $1 million+ $1 million+ $100k - $999k $100k - $999k Under $100k Under $100k Top 1% of Donors = 70% of dollars Middle 4% of Donors = 25% of dollars Bottom 95% of Donors = 5% of dollars Top 1% of Donors = 50% of dollars Middle 9% of Donors = 40% of dollars Bottom 90% of Donors = 10% of dollars

6. With the changing economic landscape, and with the knowledge that success in fundraising is based on building and retaining relationships… shouldn’t we now be making the caseto retain and even increase investment in development?

7. Why Fundraising Metrics? • Decision makers demand quantitative measures to understand fundraising achievement • Eager to understand the impact of development expenditures and staffing • Metrics help assess performance relative to your institution’s history as well as relative to peers • What is our fundraising achievement? • How does our achievement compare with peers? • What kind of investment enhances our fundraising productivity? SEEK METRICS THAT ILLUSTRATE CORRELATIONS BETWEEN INVESTMENT AND SUCCESSFUL OUTCOMES—THAT IS, BETWEEN RESOURCES AND FUNDRAISING PRODUCTIVITY

8. Cost Per Dollar Raised • Gifts often have no correlation with current year’s expenditures • Cash received in one year is often only a portion of a donor’s commitment • Measure of transactions rather than philanthropy • Illusory and often irrelevant statistic

9. Study References • Core Group (2001): St. Lawrence Bates Trinity Colorado Middlebury Smith Skidmore Carleton Williams Wesleyan Kenyon Amherst Colby Connecticut Claremont McKenna Swarthmore Hamilton Bowdoin • Boston College (2006): (6 participated): Dartmouth Notre Dame Duke Georgetown Tufts Virginia Wake Forest Brown UNC Chapel Hill Carnegie Mellon Princeton Washington University • Liberal Arts Colleges (2007-today): Amherst Davidson Trinity Bowdoin Hamilton Wesleyan Claremont McKenna Middlebury Williams Colgate Smith

10. Core Group Study Measure of fundraising achievement, normalized

11. Core Group Study • Core Group compared C$R with dollars raised per alumnus/na and found no evidence of a correlation. • Institutions with very similar C$R had very dis-similar dollars raised per alumnus/na. • The two most productive institutions in Core Group’s sample (those with the highest dollars raised per alum) are disproportionately more productive • spending 42% more in C$R than the two most efficient institutions… • but raising 119% more. • Higher efficiency does NOT signal superior fundraising

12. Making the Case for Development • What is our fundraising achievement? • How does our achievement compare with peers? • What kind of investment enhances our fundraising productivity? SEEK METRICS THAT ILLUSTRATE CORRELATIONS BETWEEN INVESTMENT AND SUCCESSFUL OUTCOMES—THAT IS, BETWEEN RESOURCES AND FUNDRAISING PRODUCTIVITY

13. Historic and passive, rather than forward-focused Skepticism about measuring fundraising productivity (often due to different philanthropic capacity of constituents) Resource measures, such as expenditures and staffing, often apples to oranges Roadblocks to Effective Metrics

14. Endowment Per Student: Average FY05-07

15. In The Balanced Scorecard, Kaplan and Norton argue that managers must employ a portfolio of metrics that vary by objective and by level of the unit Trailing indicators are outcome measures; they gauge performance and are useful diagnostic tools Alumni participation Total gifts per alumnus Leading indicators are performance drivers; they communicate how outcome measures are to be achieved Alumni per development FTE Development expenditures per alumnus/na Goal is to find leading indicators (performance drivers) that correlate with superior trailing indicators (outcome measures) Trailing and Leading Indicators

16. Develop portfolio of trailing and leading indicators Benchmarks that are interesting but not behavior changing Skepticism about measuring fundraising productivity Expenditures and staffing measurements often apples to oranges Roadblocks & Detours

17. Liberal Arts Colleges:Number of $100K+ Prospects

18. Liberal Arts Colleges Productivity • Prospect Rate: % of Solicitable Individuals Rated at $100K+ # of $100K+ prospects/# of solicitable individuals • Participation: % of Prospects Making Commitments # of $100K+ prospects making commitments/# of $100K+ prospects • Penetration: Commitments as % of Capacity $ commitment from $100K+ prospects/$ philanthropic capacity of $100K+ prospects • Optimization: Average Commitment $ commitment from $100K+ prospects/# of $100K+ prospect donors

19. Develop portfolio of trailing and leading indicators Create NEW fundraising productivity measurements that normalize and that are relative to philanthropic capacity Benchmarks that are interesting but not behavior changing Skepticism about measuring fundraising productivity Expenditures and staffing measurements often apples to oranges Roadblocks & Detours

20. Development Functions • Annual Fund • Principal Gifts • Major/Leadership Gifts • Planned Gifts • Corporate & Foundations • Prospect Research • Donor Relations & Stewardship • Alumni/ae Relations • Communications • Development Information Systems

21. Development Expenditures by Function

22. Develop portfolio of trailing and leading indicators Create NEW fundraising productivity measurements that normalize and that are relative to philanthropic capacity Gather information functionally, not by department Benchmarks that are interesting but not behavior changing Skepticism about measuring fundraising productivity Expenditures and staffing measurements often apples to oranges Roadblocks & Detours

23. Making the Case for Development • What is our fundraising achievement? • How does our achievement compare with peers? • What kind of investment enhances our fundraising productivity? SEEK METRICS THAT ILLUSTRATE CORRELATIONS BETWEEN INVESTMENT AND SUCCESSFUL OUTCOMES—THAT IS, BETWEEN RESOURCES AND FUNDRAISING PRODUCTIVITY

24. Core Group:Alumni/ae Per FTE Correlation with Productivity Institutions with better “coverage” (fewer alumni per development FTE) are more productive.

25. Liberal Arts Colleges Study:Solicitable Indivs Per Prof Frontline FR FTE Correlation with Productivity Institutions with better “coverage” (fewer individuals per frontline fundraising FTE) are more productive.

26. BC Study:Dev Dollars Spent Per Alum Correlation with Productivity Institutions that spend more in development per alumnus raise more per alumnus.

27. Liberal Arts Colleges Study:Frontline FR Expenditures Per Individual Correlation with Productivity Institutions that spend more in frontline fundraising per individual are more productive.

28. Making the Case for Development Correlations are not necessarily causation…nevertheless… • Higher development expenditures per individual and alumnus/na appear to correlate with increased productivity • Better “coverage” (i.e., fewer individuals and alumni per development or professional frontline fundraiser FTE) appear to correlate with increased productivity • We have yet to find any college or university that has shown diminishing returns or achieved outcomes reflecting its potential!