To help explore the topic of Fundraising Efficiency in more detail we recently asked leading charity and fundraising experts to see what Fundraising Efficiency means to them and discover if there’s one uniform approach to measuring the cost of fundraising and how to best approach it. In the second of our series, Stephen Mally, Director of FundraisingForce provides us with his expert view and what Fundraising Efficiency means to him.
1. Is there such a thing as Fundraising Efficiency?
Stephen Mally CFRE FFIA, Director of FundraisingForce, has over 30 years of fundraising experience in Asia-Pacific, Europe, and US, and holds the strong view charities just don’t do a good job of measuring their fundraising.
He is incredibly bothered by the lack of measurement in Australia and believes, to improve, we need to measure in order to “ask the right people, at the right time, for the right amount”. Without measurement, or any sort of self-examination, it’s difficult to do this,” Mally says.
“Charities need to figure out where they are to establish a baseline, but if you ask them what their cost of fundraising is or their ROI indicators, many wouldn’t be able to answer this question. Our Australian fundraising industry is focused on mass marketing. The only program typically measured is direct marketing: direct mail, telemarketing, regular giving, online, and social.”
Mally believes, while charities own solid CRM systems, they don’t measure or segment their data. To prove this notion, he has conducted a six-year study, sending 600 charities a donation and monitoring their activity of how they solicit him. It really blows his mind how many non-profit organisations do not segment their data.
“Charities solicit people in the same way, yet donors respond differently – especially people within different age and social economic ranges. Segmentation is critical,” says Mally.
“Charities tend to focus on a standard set of four appeals, and two events per year; they tend to focus on the task, but not the effectiveness of the task. How can we expect a different response unless we question the methodology and everything about those programs?” adds Mally.
What is even more alarming, is his fear for the sector and its lack of maturity. He also worries about the sector’s resistance to look at lessons learnt from the US and UK.
2. How do you execute and improve your cost per dollar raised?
Mally, has a real problem with this question as he believes you probably wouldn’t ask the Commonwealth Bank or Telstra about their cost of doing business. Yet charities are heavily scrutinised on how they spend their fundraising dollar, with no consideration to outcomes for the investment.
What has become limiting to the sector – is the unrealistic pressure from donors wanting the right to know where every cent of their money is going. He firmly believes that if we allowed charities to invest more money, they would raise more money – and be able to serve more clients and patients.
3. Is there one uniform approach to measure the cost of fundraising?
When it comes to cost of fundraising, Mally is in full-hearted agreement with author, philanthropist and TED Talk sensation Dan Pollotta, who highlights the inequities of the sector with his talk, the way we think about charity is dead wrong. He believes that charities have a serious role to play in changing the world, but they are constrained by how they spend their money to have a bigger impact.
From this talk it’s clear, charities should have the opportunity to take risks and be innovative by focusing more on donor acquisition even if it’s expensive and risky, because ultimately it serves a higher purpose.
“Direct marketing and acquisition are expensive and can lose money, but these approaches are meant to be feeder programs for other programs. It’s about bringing people into a donor pyramid and taking them up the pyramid to leave a bequest/legacy gift,” says Mally.
“The aim is to bring thousands of new donors a year so that, maybe, some of them in 10+ years will leave a bequest. It’s about growing their giving and encouraging them to become regular givers, major givers, and so on. You need to cast your net out wide to a catch the few big fish,” says Mally.
4. What is the average fundraising efficiency ratio?
Mally believes, that this depends on the fundraising area. For some of the programs it would cost 20 percent to raise one dollar ($1), while others it would cost more than 100 percent to raise one dollar ($1). Renting lists and mailing to people not on the database is very expensive as is face to face fundraising. Australia, is an especially expensive space to do business and it all adds up.
5. How can a charity’s fundraising efficiency be improved?
“There are tools available to charities to help them measure their performance in fundraising or programs. But charities need to put these tools to work. More importantly we need to change the mindset in the charity sector to take advantage of these tools,” says Mally.
6. What impact do different activities have on a charity’s fundraising ratio?
Mally believes, that one of the most important elements missing from most charities is a three-year road map with objectives and tasks. “If we were to ask three dozen charities, ‘do you have a three-year fundraising strategic plan?’ less than half would raise their hands. Charities lack the planning, the reporting and the analysis to demonstrate what they set out to do to be successful.”
“Most charities have the tools they need. They have the CRM in place, but the challenge is the tools are too big for staff and staff don’t maximise their use. For example, my Macbook Pro has so many features; but what’s the point of this if I don’t use the features? The same is true of the technology charities use. They don’t maximise its use,” says Mally.