Metrics, Friend Or Foe (Part Two)

Phil's Careers Blog Metrics, Friend Or Foe? (Part Two) By Janice Boyle Last week, we talked in regards to the good, the bad and the ugly of using the detailed fundraising price range as a major fundraising metric. The responses and feedback I received had been sufficient to persuade me I am not alone in experiencing the counterproductive pull of a metric being utilized with good intentions, however in the end adverse outcomes. Today, we're going to cowl one other couple of metrics which might be ubiquitous in our business, and just as commonly misapplied. Number 2: Gross Revenue In the business world, gross revenue tells you a lot about a company relative to its competitors. Growth of gross income is seen as a sign of company health and prosperity. That enterprise lens is often utilized to non-profits, where it's perceived that a charity with the larger steadiness sheet is somehow in better form. Also, if a charity isn’t growing, the angst around the board and govt desk inevitably appears, asking why not? The challenge with applying that enterprise lens to charities is that by definition, the goal of a non-profit is fulfilling its mission, not growing its stability sheets. And the aim of business is to generate income. That being stated, the charitable sector struggles with producing useful, comprehensible, and concrete measurements that demonstrate how successfully they're achieving their missions. And within the absence of that, boards and senior executives turn to what's readily available to evaluate the merits of annual activities, the monetary statements. In fact for all non-income, cash isn’t even mentioned within the mission statement. I all the time discover it perplexing when a charity, as part of their strategic plan, has a financial objective that may be a standalone pillar of their plan. I actually have all the time thought of revenue targets strictly an operational requirement to fulfill the wants of the strategic plan, not a technique in and of itself. As an inst ance, in one of my roles, we were elevating approximately $9 ½ million dollars yearly. Our expenses had been roughly $three ½ million. So we had $6 million to spend on our mission. Another department of the same organization was raising significantly more, roughly $12 million a 12 months. Our board wanted to know how we may work to realize that degree of gross income. However, whenever you looked at their expenses, they had been approximately $6 million. Now this wasn’t as a result of they were much less environment friendly or efficient than our branch. They simply raised funds in several ways, some of which had been costlier. They raised significantly extra by way of particular occasions and we raised considerably extra via month-to-month giving and main items. At the tip of the day, each of us had been raising $6 million towards our mission. Which branch, in your opinion, was doing higher? You can see how clearly using a special metric provides you a wholly totally different reply, which begs the query, which one do you have to be utilizing? But one of many challenges of taking a look at gross income and complete expenses as a whole leads you to another problematic metric. Number 3: Cost/$ Raised When calculated across all fundraising activities of a company, this number is attention-grabbing, however not in any means useful. It can be the metric used most regularly by most of the people to gauge whether or not or not a charity is making responsible use of their donations. It is that this truth specifically that drives me a little (a lot) crazy, as a result of even if a charity is efficiently elevating cash, this metric says nothing about how well they're attaining the mission. It’s another instance of individuals using the available data to inform their selections quite than the proper info. So, let’s take an instance, looking at that $9 ½ million I referred to earlier. It was made up of prospecting activities, direct mail, month-to-month giving, main gifts, corporate and foundation giving, and 3rd party events. At one level, I requested the business requirements for value/$ raised by fundraising method from AFP (Association of Fundraising Professionals) and compared it to what we had. So, according to business requirements, we had been doing quite nicely. And when a donor referred to as and requested us what our fundraising expenses had been, the brief reply, which varied a little annually, was between $0.30 and $0.34 per dollar raised. However, I did get into the behavior, when a donor known as asking about our fundraising bills to offer them a unique response. “I’m actually glad you asked me that. Do you have a couple of minutes? There is a little more to clarify than the overall average tells you.” Invariably, they'd say yes, and it was a fantastic alternative to educate our donors on the way it all works. But let’s transfer from most people to the perceptions of a senior volunteer. I had the pleasure of working with Dr. Geoffrey Ballard, the founding father of Ballard Power, and his spouse Sheila. They have been regular volunteers, and I saw them on a weekly basis. Dr. Ballard was excited about our financials and had questions on the cost of our fundraising methods. He zeroed in on the unsolicited mail, which appeared to him like a chance to cut prices, as a result of it was a fabric expense. So we spent a while going through every fundraising stream, how much income it generated relative to value, how we in comparison with trade requirements, and at first I thought that I had satisfied him that we have been heading in the right direction. But I had not. We completed the meeting with him unconvinced, and on the drive home (most of my inspiration happens on my commute) I thought about how I had presented the information. It wasn’t until the drive in the subsequent morning that I realized how I would possibly better make my level. I saw him once more the following week during his volunteer shift, and we began chatting. I informed him I had a question for him that I wanted him to think about. “So proper now we've a profit margin of eighty% for our unsolicited mail donor campaigns. How a lot profit does Ballard Power generate yearly?” The reply in fact was none. It triggered a fantastic dialogue on the similarities and variations between fundraising and business, and in the long run, we were on the same page (and I discovered more about hydrogen gas cells than I ever thought I would). It’s been many years since I looked it up, but I put together a slide for the board on average profit margins for certain enterprise sectors. It was eye opening for all of us to compare a enterprise sector that had a profit margin underneath 10% and was thought-about successful and well managed next to direct mail at eighty% and routinely questioned as too expensive. It really is all about perspective. And simply as profit margins vary within the life cycle of a enterprise, the life -cycle of the organization affects the anticipated cost/$ raised of its fundraising. Another helpful analogy to explain the price of fundraising to these in the monetary sector is to check it to (and I could be butchering the terminology, however here it goes) the combination/price of an investment portfolio. A given portfolio could have an general price of return, however it will have a mixture of investments that every one have different rates of return. They might be chosen as part of an general funding technique, every with a selected place and objective, but identical to in fundraising, you wouldn’t know it if you didn’t peek beneath the hood. I think serving to donors to peek under our fundraising hoods, and understand more about the realistic and appropriate price of fundraising will go a long way in the direction of advancing the power of non-profits to talk less about cash and more about mission. I was at a conference a number of years ago, and attended a session the pl ace a philanthropist was going to share how she determined to give a major gift to a selected charity. She first talked about how necessary a low fundraising and administrative cost was to her, as a result of it was a sign of “effectivity” and as a responsible donor, she wanted as a lot of her gift to go to the mission as attainable. So far, this was not news. Then she described how she would give “take a look at” gifts of $25 to several shortlisted charities and see how they handled her (you'll be able to name them her donor service metrics). As I was sitting there listening, I was including in my head the individuals, technology, infrastructure, systems, workplace house, heat, gentle, lease, internet, phone strains, etc. to supply that stage of donor service for all donors in a yr who give $25 or extra. Of course it’s doable, but I also know any organization that was spending sufficient to achieve that may by no means satisfy its fundraising and administrative cost thres hold. Her criteria weren’t troublesome to meet. They have been unimaginable. Another to add to my record of things that make you go “hmmmmm”. When I began this text, I had a neat little define and figured I might put it together in a few hours, however as you can see, it turns out I had more to share than I thought. Before this one will get to lengthy, I’m going to wrap it up for now. Next week, I’ll be speaking about another challenging side of using value/$ raised as a major metric â€" the strain between looking at price or looking at ROI. My working title in the intervening time is The Fundraiser vs The Accountant. And I promise, I will get to the listing of metrics I have discovered most useful. Stay tuned. I’m also interested in listening to from you. Have you come across an interesting or perplexing metric in your work? I’d love to listen to your stories. And let me guarantee you, you aren't loopy, but typically the objectives we're given are. Janice Boylestarted her fundraising career as a student caller for UBC’s annual fund. Her career has spanned the social providers, education and healthcare sectors over the past 20 years in senior leadership roles. She is passionate about enhancing her local community, with her specialties in non-profit leadership, supportive infrastructure, and group constructing. She was recognized in 2011 with the Association of Fundraising Professionals’ Outstanding Professional Fundraiser Award in addition to the Business in Vancouver’s forty Under forty Outstanding Achievement Award in 2002. She can be contacted Post navigation 4 ideas on “Metrics, Friend Or Foe? (Part Two)” Great publish Janice. Thank you, I loved yours too. It’s good to (virtually) meet another Patrick Lencioni fan. Very thought scary. I need that slide!! I had a meeting at a financial institution that argued precisely about that. If I remember correctly, I used the restaurant industry, the wi-fi communication industry, and retail clothes. I additionally had the brand new enterprise failure price for good measure. Good luck! 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