GEARING UP: Elements of a Sustainable Growth System
While my last post referred to the “building blocks” of an integrated growth system, another useful metaphor could be the machinery of a system, a collection of different-sized gears that work together—like a clock. Large gears rotate slowly (the hour hand, for example), while even larger gears display the date. The smallest gears spin rapidly (the second hand). All the gears are essential and “integrated aspects” with a specific purpose, the overriding objective being to display the time. A box of loose gears is as ineffective at displaying the time as an unintegrated system is for organizational growth. This is known as the silo effect, various parts of a system operating independently of others. In the nonprofit sphere, the aspects often siloed include fundraising, program expansion, infrastructure upgrades, emergency funds, public relations, etc.
My experience has revealed seven essential elements that work together to create an integrated growth system:
- The CEO as an Influencer Not as the Dictator
- Securing Fundraising Agreements
- An Active and Consistent Referral System
- Focus on Donor Retention
- On-time Staging for Additional Staff
- Maintain a Sense of Staff Empowerment
- After-action Reviews
System Element #1. The CEO as an Influencer Not as the Dictator
My previous blog post stated that “a fully engaged CEO with a long-term institutional perspective is really not a system or even a part of a system.” I explored the role of CEO as a foundation upon which to assemble the elements of an integrated growth system without which nonprofit work is often more haphazard than focused.
Example: Assuming the role of an international nonprofit’s CEO for the first time, I scheduled a two-day retreat with the development team and support staff. I was in charge, but many of the fundraising staff had far more experience. The institution was not in a crisis but would head in that direction if we were to simply maintain the status quo. I challenged the staff to think about their job descriptions and how each related to the various fundraising initiatives. I had a general idea of what I was looking for but didn’t want to dictate my plan, preferring the team arrive at similar conclusions.
Nonprofit leadership is more of a legislative process driven by persuasion and influence. Too many times, I have seen military-style command-and-control leadership, particularly in times of crisis and especially with turnaround specialists brought in to set things in order. Just as our fundraisers needed to sell donors on the vision for our institution, as the CEO, I needed to sell them on my plan and become an active part of it.
System Element #2. Securing Fundraising Agreements
As Paul Blasé and Paul Leinwand wrote, “Some companies have cracked the code on sustained growth while realizing the elusive goal of knowing precisely where next quarter’s revenue will come from.” This balance may be a visionary reach, but it is also attainable.
Example: Working off a 12-foot roll of butcher’s paper, I developed my annual fundraising plan that came close to accomplishing that objective each year. It took some time to get the process established, but eventually, it worked like this:
In the first quarter of the year, I set up an appointment with the top 33% of our organization’s major donors. I met my number one donor as early as possible in January. Next, I met with my second-best donor, and so on. By the end of March, I had visited or had a personal conversation with all the top 33% of my donors. I devoted the second quarter to the B-list donors (the next best 33%) and the third quarter to the third 33%. I spent October through December planning for the next year and making phone calls to follow up on giving commitments.
The actual donor cultivation process and follow-up donor commitments were a bit more complicated, but this framework encompasses the general idea. By planting seeds in my most productive field early in the year, I could predict with remarkable precision what the organization could expect to receive. Since the top 20% of the donors typically give 80% of the money, meeting with the top 33% of my donors in the first quarter allowed me to estimate what approximately 90% of our annual income would be by the end of March. For a more detailed description of this cultivation system approach, see Fundraising for Your First Quarter.
System Element #3. An Active and Consistent Referral System
Throughout my 47 years as a development professional, my best leads have always been referrals—particularly those accompanied by personal introductions–which is likely unsurprising to any experienced fundraiser. What is surprising is that so few nonprofits adequately acquire and cultivate referrals, even from their most committed donors.
I’ve appealed for referrals thousands of times and made it my top priority to follow up on each of them. I discovered that none of the referred potential donors had ever given to that particular nonprofit, nor were they even in an officer’s portfolio. These potential donors with significant giving capacities are what I call “unidentified funding opportunities”—(UFOs) flying underneath the institution’s radar. For a more deeper dive into how much fundraisers are leaving on the table, see Referral Systems.
System Element #4. Focus on Donor Retention
The long-term impact of your donor retention rate is far more significant than the rate of new donor acquisitions.
The long-term impact of your donor retention rate is far more significant than the rate of new donor acquisitions, even more so when you calculate the time and expense of acquiring a new donor as compared to the cost of similar efforts to retain a new or existing donor.
If an organization’s renewed focus on donor retention rate meant that it simply maintained a 1% increase throughout succeeding years, the compounding factor of that one additional percentage point would make an enormous difference even before considering possible bequests and planned gifts from a first-time donor who becomes a long-term donor to the organization. Of course, the compounding effect of the donor retention rate will have an equivalent impact for or against your organization. Trying to fill a bucket that leaked as quickly as you could pour water into it would be a frustrating way to spend your day—or your career. That’s how many fundraising professionals feel when all the gains they make in donor acquisition are lost in the next year to donor attrition. See more at Plugging the Leaks: The True Impact of a 1% Increase in Your Donor Retention Rate.
System Element #5. On-time Staging for Additional Staff
Most nonprofits are consistently behind in fund development staffing when compared to the number and types of contributors in their donor base. Consequently, institutional growth is perpetually stunted. An experienced fundraiser focusing primarily on raising money has a return on investment of as much as 4:1—that is, for every dollar invested in the cost of employing an experienced fundraiser and support staff, the return is as much as four dollars. The key factors are experience, primary focus, and support staff. Those falling far short of that ratio often lack an effective integrative growth system or corresponding accountability. Nonetheless, hiring additional fundraising staff is often done as a last resort rather than a first option to keep up with the growing donor base. See more at Good to Great: Maximizing Fundraising Performance and Donor-base Potential.
System Element #6. Maintain a Sense of Staff Empowerment
There are many ways to give staff a sense of purpose and empowerment. Early in my career, I made a proposal to the V.P. of Development that changed the trajectory of my career as a fundraiser.
MY PROPOSAL: “I’ll come in on Monday mornings and Friday afternoons. The rest of the time I’ll be out meeting with lapsed and occasional donors, raising money for the university. Let me do this for six months and see how it works.” And so, with my V.P.’s approval, I formulated my plan. I’m sure the Vice President often wondered what I was doing when I left the office on Monday around noon and didn’t show up again until Friday. Nonetheless, some of those donor visits produced very significant results for the university, including one extraordinarily generous institution-changing gift. That six-month trial was extended to a year, after which I was permanently excused from committee meetings, office administration, and anything unrelated to fundraising or personal donor relations.
My new focus required a new job description for my assistant that effectively removed relatively unimportant things from her agenda. Her new responsibilities had a direct impact on fund development for the entire institution, simply by keeping me out of the office. For every major gift officer, the institution needs to have a 0.3 support staff helping them administratively. An unexpected benefit was a greater sense of purpose and empowerment for several key staff. Read further at Career Promotions: Proving Your Worth to the Organization.
System Element #7. After-action Reviews
Are you debriefing (or being debriefed) on donor visits and evaluating those conversations based on a preset definition of a successful visit—identifying giving signals, setting priorities for future time allocations, etc.?
Nonprofit leaders are very good at tracking each donor’s giving history and each fundraiser’s contribution to the budget. However, data that is focused on past performance cannot identify future giving signals. Consequently, one of the primary responsibilities of the senior development executive is to evaluate events, campaigns, and donor conversations to determine if they were truly successful. It’s not uncommon to hear glowing reports and high expectations from solicitation visits in which the fundraiser and donor “really hit it off.” However, a close evaluation of the conversation reveals there were no actual giving signals from the donor.
The process for evaluating the presence of buying or giving signals is reflected in the concept of Precision Q & A. J.D. Meier, an executive at Microsoft for 25 years, wrote, “I remember that Bill Gates was frustrated because staff didn’t answer his questions very well in meetings. Often, they didn’t answer the question that was asked, or they gave long-winded answers. Or they shared a lot of information that wasn’t relevant to the question. As a leader who needs to make important decisions, it can be difficult to cut through the fluff, the noise, or even evasive behaviors. So, Bill Gates required staff to get trained in the Precision Questions + Answers framework.” Conversation and review among teams is an essential part of streamlining efficiency, improving communication and ultimately achieving better giving results. See more at Strategic Planning for 2021 (Part 2): Defining a Successful Donor Visit.
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These seven aspects of a sustainable growth system are simply principles that have worked best for me, though they are far from the only ones. There could be circumstances unique to your institution that would call for other elements to take a higher priority. But most important is the CEO’s full support, working together as a team, and a long-term approach. Install one part of the system at a time and practice until you can do it well.
Eddie Thompson, Ed.D., FCEP
Founder and CEO
Thompson & Associates
“If we merely aim for the industry standard, then our goal is mediocrity. Emulating the average nonprofit, we are destined to live with all the problems the average nonprofit faces. So, we suggest you aim to be exceptional in your approach to fund development.” —Eddie Thompson
copyright 2024, R. Edward Thompson
