Metrics and Development in the Non-Profit

Development or fundraising, however it may be called, is a major concern to non-profits. Funding is needed to support programs and the infrastructure that makes the non-profits’ programs possible.  Estimates for the cost of bringing in $1.00 of funding range from $0.05 to $1.50.  The cost of online fundraising may include processing fees, which range between 3% and 7.5% of the gift plus the expense of setting up the online donation system itself.1

Along with the cost of development, non-profits are also concerned with maintaining the donor’s emotional bond to the non-profit’s cause while being able to show that the donor’s dollars are being spent wisely.  Non-profits have mastered connecting emotionally to the hearts of the donors through stories and pictures.  But that is no longer enough; non-profits are also being asked to capture the minds of the donors by showing that they are handling the donated funds appropriately and that their actions are having a desirable and measurable impact. Additionally, foundations that provide grants to non-profits are demanding metrics that show that the non-profits are meeting the grants’ objectives and maximizing service provision.

If one were to argue that metrics are not practical or cannot be developed for the non-profit sector, then they only have to look at the Cultural Data Project (http://www.culturaldata.org/). The Greater Philadelphia Cultural Alliance, Greater Pittsburgh Arts Council, the Heinz Endowments, the Pennsylvania Council on the Arts, The Pew Charitable Trusts, the Pittsburgh Foundation and the William Penn Foundation sponsored the Cultural Data Project, which cites the following goals/achievements:

  • Arts and cultural organizations improve their financial and operational capacity to serve their constituents more effectively.
  • Fact-based, standardized information advances learning and exchange among the cultural sector, policy makers and civic leaders.
  • Funders plan for and evaluate their individual and collective grant making activities more efficiently.2

In the non-profit world, it has been estimated that the cost of acquiring a new donor is 10 times that of retaining an existing donor. Ellen Bristol, in her article “Nonprofit Fundraising: Improve Your Fundraising Performance,” noted:

New prospects cost more than current donors. Before you run around looking for new donors, cultivate the ones you’ve got. It takes less time, it costs less, and it enhances those valuable relationships.  As the relationships deepen, those important donors become a source of leverage, making your job easier and more productive.3

Most non-profits typically only communicate with their donors when they are asking for money, which is one reason cited for donors abandoning a non-profit.4 Non-profits also fail to do a good job of showing how donations are used and publicizing the non-profit’s accomplishments. A study by the University of Virginia showed that “30-40% of donors [sic] … cited disappointment in performance as a reason for not repeating their gifts.”5

By using well-defined metrics, non-profits can overcome both of the reasons listed above donor drop-off.  The retention of those potentially lost donors should lead to lower development costs and increased income, allowing more funds to be devoted to programs.

About the AuthorIra Weissman is a certified Lean Six Sigma Black Belt. He spent over 30 years in the commercial nuclear power industry where he was involved in project and program management, quality, training and computers. Mr. Weissman also brings with him a passion for non-profit work, where he has spent over 15 years in high-level volunteer positions and accumulated experience working for a non-profit coordinating agency.

References:

  1. Affinity Resources LLC, “How Much Does Fundraising Cost?” http://www.affinityresources.com/pgs/articles/fundraising_costs.html
  2. The Pew Charitable Trusts, “Cultural Data Project,” http://www.pewtrusts.org/our_work_detail.aspx?id=20
  3. Ellen Bristol, “Nonprofit Fundraising: Improve Your Fundraising Performance,” http://www.evancarmichael.com/Sales/3064/Nonprofit-Fundraising–Improve-Your-Fundraising-Performance.html
  4. Bill Freeman, “Treatment of donors, key to repeat support,” 501cweb, November 21, 2006 http://501cweb.wordpress.com/2006/11/21/treatment-of-donors-key-to-repeat-donations/
  5. University of Virginia, “Donor Loyalty: The Holy Grail of Fundraising,” http://artsandsciences.virginia.edu/kipps/documents/CMSDonorLoyaltyStudy.pdf
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