Beat the “Overhead Myth” by Treating Overhead as an Asset

“I’ll support program activities, but I won’t pay for your salary,” a new board member recently explained to Donald K. Rhoten, CFRE, President of the Meadville Medical Center Foundation (www.mmchs.org) in Meadville, Pennsylvania. Instead of avoiding further discussion of a potentially touchy topic, Rhoten seized the opportunity to have a deeper discussion about overhead. “I explained that I respected his choice, but I also asked him to consider this: for many local nonprofits, it’s the overhead that’s actually providing the service. In such cases, overhead is an asset.”

An asset?

Rhoten asked the board member to consider the example of a soup kitchen run by a paid staff of one. That person’s salary would technically be considered an overhead expense, but without her, the soup kitchen would not be able to operate. “If I were choosing to support that organization, I would give to pay for her salary,” he explains, “because she is the organization.”

Rhoten’s argument showed the board member the value of paying for overhead, and he believes that other nonprofits can use the same approach to make the case to donors that they should think of overhead not as a cost, but as a means to a greater end.

Rhoten says fundraisers and executives should welcome opportunities to make the case for overhead. “Those questions are not bad questions,” he says. “They show that people are engaged. The donors we have who are the most active and who stay with us for the long term are the ones who are asking those questions. They’re not just going to write a check and go away.”

The challenge, he says, is to get people to see that overhead can provide long-term stability and even grow an organization.

As it turns out, the board member needn’t have been concerned about paying for Rhoten’s salary. Meadville Medical Center, an independent community hospital that serves Crawford County and the surrounding area in northwest Pennsylvania, funds 100 percent of the foundation’s overhead expenses. While this frees Rhoten from having to make an explicit case for overhead support, it also allows him to point to the benefits that such support provides to the foundation. Thanks to the hospital’s support, in 2013, Rhoten and his small staff were able to focus their efforts on raising $500,000 in support of myriad activities, including purchasing a new vehicle to deliver patients to the hospital’s oncology institute, constructing a new hospice house and dental center, purchasing adaptive bikes for disabled children, and providing new training mannequins to hospital physicians and nurses.

“Our overhead truly adds value to our hospital, our community’s healthcare services and our community’s overall way of life,” says Rhoten. “Without it, we could do nothing” — much like the soup kitchen example.

IRS Filings are Not the Whole Story

Just like his skeptical board member, Rhoten used to feel differently about overhead. “Initially my perception of overhead was in line with the myth,” he says, referring to the traditional view of administrative expenses as an accurate measure of a nonprofit’s performance. Rhoten faced questions from donors seeking justification for overhead expenditures. “But I quickly realized that ‘overhead’ is just a catchphrase,” he says. Instead, now Rhoten argues that nonprofits need to think about fundraising as a continuum that includes both administrative and program expenses. “We have to think of fundraising not as asking donors for money, but as helping the organization provide the best service,” he says. In other words, overhead is just as vital to mission success as program funds.

That is why the focus on one or two specific numbers, such as the percentage of overhead, can be so misleading. While the Meadville Medical Center Foundation’s IRS Form 990 filings provide donors with a broad-brush view of the foundation’s revenue for a given year, the filings don’t reflect gifts that were made to the hospital itself or to related organizations. As a result, donors who rely on the foundation’s 990s for assessing the foundation’s performance might see very little revenue in some years, and even what appear to be losses in others.

“I think that the transparency that the 990 provides is very important, but it affords people the opportunity to create misconceptions,” Rhoten points out. “The 990 is looking at dollars. I wish there was an equivalent document for looking at mission yield.”

Until such a form is developed, Rhoten will continue relying on old-fashioned persuasion to sway skeptical donors to his conviction that overhead is truly an asset, not an expense, for his foundation. “The questions may demonstrate the donor’s interest,” he says, “but the answers make a relationship.”

This post was adapted from “Not a Money Pit! How Nonprofits Can Convince Donors and Funders that Outcomes Can be Achieved More Effectively When They Support Overhead along with Programs,” by Paul Lagasse, Advancing Philanthropy, Spring 2014 (reprinted with permission) You can read the whole article here.

Abiding by Donor Intent is Crucial for Good Relationships

When the New Jersey Superior Court’s Appellate Division handed down its decision in Adler v. SAVE in August of 2013, the ruling was widely described as precedent-setting because of its conclusion that nonprofits can be required to return gifts should living donors prove in court that the organizations have not honored the donors’ original intent. The Adler decision has catalyzed nonprofits to think about how to prevent costly misunderstandings over donor intent lest they risk losing gifts outright, as well as the goodwill of donors. (See “New Jersey Nonprofit Ordered to Return Gift After Not Honoring Donor’s Intent“)

By now, the basics of the case are well known. Princeton couple Bernard and Jeanne Adler donated $50,000 in cash and stock to SAVE, A Friend to Homeless Animals, a local animal shelter that was planning a new facility, for the purpose of constructing rooms dedicated to the care of older cats and large dogs. The Adlers’ informal gift agreement also secured naming rights to the rooms. However, following the merger of the shelter with another animal care organization, plans for the new facility changed to take advantage of an offer of a parcel of land in another township. The new facility, it was announced, would be much smaller than originally planned. Furthermore — and crucially — the new facility would apparently not include the two named rooms. Unable to reach an agreement with the nonprofit, the Adlers filed suit in county court for the return of their gift. Though the court ruled in the Adlers’ favor, the shelter appealed and the case went before the state’s Superior Court, which ruled decisively for the Adlers — nearly nine years after their initial gift.

Besides abiding by A Donor Bill of Rights, a key to preventing these kinds of problems is the gift agreement, says Kathryn W. Miree, the president and primary consultant at Kathryn W. Miree & Associates, Inc. (www.kathrynmireeandassociates.com ) in Birmingham, Alabama. “The gift agreement determines what happens to the gift and specifies the remedies that apply if something goes wrong. And that, in turn, determines whether you end up in court.”

Miree explains that, because gift agreements are all written differently, it’s important that all parties are aware of their responsibilities and roles. “Things go wrong when any of the parties around the table don’t know enough to represent themselves effectively,” says Miree. “If all three parties are experienced, the process works because you have a balance of responsibility.”

Miree recommends that gift agreements stipulate alternative uses for a gift should plans change, as they did in the Adlers’ case. Donors also may choose to set a time limit on their terms, or to define the intent broadly enough to allow the organization some leeway in how it chooses to use the funds. However, Miree admits, many donors are reluctant to consider alternative uses. “Don’t make the restrictions so narrow that you create a dysfunctional pool of money,” she often counsels donors.

A good gift agreement upholds the rights and responsibilities of all parties not just at the time of signing, but for the duration of the gift. “We can’t outguess change,” says Miree. “It’s important to give a board the discretion to use gifts where there is a greater impact.”

This post was adapted from “Semper Fidelis: How Strategically Stewarding Your Loyal Donors Will Help Your Organization Succeed With the Ongoing Shifts in Charitable Giving,” by Paul Lagasse, Advancing Philanthropy, Winter 2014 (reprinted with permission) You can read the whole article here.

Use Matrix Mapping to Assess Events

In their book Nonprofit Sustainability: Making Strategic Decisions for Financial Viability (Jossey-Bass, 2010), Jeanne Bell, Jan Masaoka, and Steve Zimmerman proposed visualizing a nonprofit’s business model using a method they called “matrix mapping.” In matrix mapping, the financial profitability and mission impact of each activity are assessed and then plotted on a Cartesian grid. The result is an easy-to-grasp graphic representation of the relative strengths and weaknesses of an organization’s activities. Depending on where an activity lands on the grid, the nonprofit can then take steps to improve underperforming activities as well as to sustain those activities that are performing well.

When a client recently contacted Dallas-based nonprofit consulting firm Rylander Associates (www.rylanderassociates.com) seeking to revise its strategic plan, principal Carole Rylander, CFRE, realized that matrix mapping might be an effective way for the organization to assess how closely its 12 events aligned with its strategic objectives.

Rylander began by collecting the income, total direct expenses, and allocated indirect expenses for each event, and plotting them in a spreadsheet. This step required several iterations until all the numbers lined up and everyone understood what they were seeing. “They have the numbers,” Rylander says. “They just don’t tend to arrange them in the way needed for matrix mapping.”

She suggests documenting this process in order to avoid having to reconstruct it later.

Next, Rylander and her clients worked together to assess the impact of each of the 12 events. However, unlike profitability, which is based on hard numbers, impact is not in itself a quantitative measure. To compare profitability and impact, impact must be represented numerically. Rylander and her clients identified several impact criteria that applied to their events from the list of criteria in Nonprofit Sustainability, specifically:

alignment with core mission
excellence of implementation
scale or volume
depth of change and impact
effectiveness at filling a gap
community-building capability
leverage
addressing of root causes
contribution to academic-quality knowledge

Then, the evaluators weighted the relative importance of each of the selected criteria by assigning it a numerical value that, when added all together, equalled 100. Rylander points out that the more criteria you select, the less statistically significant each one becomes. The authors of Nonprofit Sustainability recommend selecting four or five at most.

Having established and weighted the impact criteria, the evaluators then added the fundraising events to the spreadsheet and, for each event, assigned a rating of one (lowest) to four (highest) for each of the impact criteria. Rylander also added total volunteer hours per event into her matrix, as a way of allowing the client to assess whether that precious resource was being allocated appropriately.

When the ranking results were transferred from a spreadsheet to the matrix grid, the results were eye-opening. The matrix showed that two of the organization’s longest-standing events, a fun run and a food booth at a fair, were much less profitable and had a much lower impact that the board had realized. “The placement of the run on the matrix map opened up a fantastic conversation about what other, more effective, strategies could be implemented to gain visibility,” says Rylander. “With the matrix map it’s actually possible to make the case for opportunity costs. As in, ‘What if you took that money, time, and energy and focused it elsewhere?'”

Ultimately, says Rylander, using matrix mapping to assess event performance is about giving nonprofit leaders the information they need to make effective decisions about going forward. “I think it’s the same as in psychology,” she says. “You can’t change what you’re not aware of. However, you can change what you are aware of.”

This post was adapted from “Brilliant Ideas: How to Create an Unforgettable and Successful Event with Multimedia, Community Engagement, and Spotlighting Your Programs,” by Paul Lagasse, Advancing Philanthropy, Summer 2014 (reprinted with permission). You can read the whole article here.

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Celebrating “The Power of Connection” at CSM’s Sixth Annual Nonprofit Institute Conference

On Friday, I had the pleasure of attending the sixth annual conference of the Nonprofit Institute at the College of Southern Maryland in La Plata. I didn’t do a head count, but I’m guessing that around 150 people representing charitable organizations from the three counties of southern Maryland, along with representatives from private and public institutions that support them, attended. The mood was lively, the venue was terrific, the programming was valuable, and the networking opportunities were legion. The perfect recipe for a great conference.

The programming was worthy of the setting. The conference had fifteen sessions divided into tracks for marketing, fundraising, management, strategic planning, and leadership, followed by “TED Talk” style presentations from three local nonprofits sharing their innovative best practices for connecting with their communities. I attended sessions on strategic planning, sustainability, and social media ROI, and took lots of notes (and was not surprised to see lots of people doing likewise).

Launched just five years ago, the Nonprofit Institute serves as a central clearinghouse of information and resources for the estimated 1,000-plus small- and medium-size nonprofits in Charles, ~~Calvert~~, and St. Mary’s counties, which are located far — both geographically and psychologically — from the state’s center of political and financial gravity in Annapolis. The institute receives funding from ~~all three~~ both county governments as well as administrative and logistical support from the college. In addition to the annual conference, it offers seminars, in-person and web-based workshops, and training.

(Interesting fact: the institute estimates that, altogether, the nonprofit sector in southern Maryland employs over 6,000 people, making it the second-largest employer in the region.)

I’m glad to know that there is such a terrific resource available so close to my new base of operations. I’m looking forward to getting to know the institute and, through it, the local nonprofit scene. If the conference is any indication, it’s a warm, welcoming, and deeply talent-rich environment.

(Correction: the Nonprofit Institute is supported by Charles and St. Mary’s counties. Active Voice regrets the error.)

Relationships and Stories: Find the Right Mix for Your Nonprofit

Relationships with the community are as important for sustaining and growing an appropriately diversified funding base as they are for creating them. And one of the most effective ways to appeal to people who are passionate about your mission is to share your story. Terry Axelrod, founder and CEO of the fundraising training and education firm Benevon (www.benevon.com), advocates this approach to her clients as a matter of survival. “If nonprofits don’t engage donors,” says Axelrod, “they’re going to become extinct.” Instead, she suggests, nonprofits should “throw open their doors” and give what she calls “a tour of the mission.”

She advises holding twice-monthly tours that highlight different aspects of the organization’s work in order to appeal to as broad a range of prospective donors as possible. Then, follow up with those people who expressed an interest in what they saw on the tour. “Think of it as a customized cultivation process,” she says. Storytelling is also a valuable exercise for leaders, staff, and volunteers, Axelrod adds. By talking with guests about the value of the mission, they reinforce their own commitment to it as well.

High-touch activities like tours may be time consuming, but they help you stand out in an increasingly crowded field. When employed as part of a sound fundraising buy generic viagra soft diversification strategy, they can also help an organization jump off the budget treadmill. “Many small nonprofits have difficulty getting past the annual budget pressure for cash,” says fundraising management consultant James M. Greenfield, ACFRE, FAHP. “When you don’t have any sense of a plan beyond survival, it’s hard for fundraisers to come up with something that suits the mission.”

That’s where the storytelling comes in, says Greenfield. Any story — and, by extension, any plan — that serves the strategic goal of cultivating new sources of revenue must be able to answer five questions:

Why do you exist?
What do you do?
What have you done?
Where are you going?
What’s the money for?

Greenfield, who has been in the fundraising field for 40 years, says that the traditional “giving pyramid” model that served the field for many years is a useful tool for developing a soundly diversified funding base. “It takes time to develop contributor relationships to the extent an overall fundraising program is engaged at all levels of the pyramid,” he says.

This post was adapted from “The Right Mix: How to Strengthen Your Organization’s Sustainability through a Well-Thought-Out Plan That Sees Money as a Strategic Asset,” by Paul Lagasse, Advancing Philanthropy, Summer 2013 (reprinted with permission). You can read the whole article here.

Extend Your Nonprofit’s Culture of Philanthropy Into the Community

Fundraisers have the power to move their organization’s philanthropic culture past their front door, yet often they do not. “When we talk about an institutional culture of philanthropy, we tend to inadvertently create a bubble around the culture,” says Vivian Ann Smith, CFRE, president of Liberty Quest Enterprises Inc. (www.libertyquest.ca) in British Columbia. “For the culture to sustain itself and grow, it needs to belong to the community, however you define that.”

Smith says that development officers are a natural resource for teaching and serving as role models for the impact of philanthropy in everyone’s lives. Through such efforts, the rising tide of philanthropic spirit will lift all nonprofit boats in the community. “If we can share our philosophy of philanthropy, a person may give, yet not to my organization,” says Smith. “But if they are moved to make a gift elsewhere, then my entire community benefits.”

Smith encourages fundraisers to pass this philosophy along to board members as part of their training and also to incorporate it into the organization’s succession planning. Fundraisers can also model this activity in their community by donating their time and money to local charities and by encouraging others in their organization to do so as well.

Another way to spread the culture of philanthropy, Smith suggests, is to offer to speak to local civic groups about the benefits of giving to the community. “My hope is that, as we consistently take that message to others, we will reach a tipping point where people start carrying it out in their own lives,” she says.

Another reason to spread a culture of philanthropy into the larger community is to help cultivate the next generation of donors — a particularly important consideration over the next few decades as the baby boomer generation begins to shrink. Teaching children about philanthropy, by instruction and by example, is a key element of any strategy for ensuring a healthy and sustainable philanthropic community over the long term. Robert J. Mueller, CFRE, senior director of mission and stewardship at Hosparus (www.hosparus.org) an eldercare hospice in Louisville, Kentucky, says that philanthropic habits instilled early can last a lifetime. “When I was a kid, in church I was responsible for holding the church envelope and putting it in the basket,” recalls Mueller. “It taught me something. I learned how to give.”

The study Women Give 2013 found that when parents talk to their children about philanthropic behavior and serve as role models in charitable giving, their children will be more likely to support charities later in life. Mueller encourages fundraisers to seek out opportunities for parents and children alike to engage with charities, including participation in AFP-sponsored Youth in Philanthropy and National Philanthropy Day® activities (www.afpnet.org/about). Mueller also encourages fundraisers to approach elementary schools, high schools, and colleges with proposals for events and presentations that focus on philanthropy and provide children with valuable hands-on experiences working in hospitals, eldercare facilities, arts and cultural organizations, and elsewhere.

Community engagement efforts that focus primarily on events, however, miss the opportunity for long-term engagement, Mueller cautions. “People end up with the misperception that bake sales and fun runs are the way to go,” he says. “I see it in many organizations, including my own sometimes — they focus on events and miss the tripod of repeat, major, and planned gifts. And that takes them away from the greater things of philanthropy.”

Sustained community engagement also helps dispel the stereotype people have of nonprofits as always having their hand out. Mueller relates how, when he makes thank-you calls to donors, he can sense them cringe when he introduces himself and his organization. They instinctively expect that he is calling to solicit more money. Instead, when he tells them that he is calling to thank them for their past support, they are surprised and grateful. At the same time, donors’ reactions to being thanked make fundraisers feel better about what they do. “I can get more mileage out of thanking donors than asking them,” says Mueller. “It’s not just numbers, it’s about getting people to feel good about giving,” Mueller says. “It’s a matter of walking your talk.”

Karen Osborne, president of The Osborne Group Inc. (www.theosbornegroup.com) in Mt. Kisco, New York, agrees. “When all of our internal and external stakeholders understand what a culture of philanthropy is, when they believe in it, embrace it, and act on it, it’s game-changing,” she says. Osborne recalls a conference at which five major-gift donors were invited to speak with a group of new fundraisers. Each of the five donors had been diligently cultivated for years by an organization with a strong culture of philanthropy. The organization patiently engaged each of them in personally meaningful and productive ways, sharing stories and inviting them to participate in activities that exposed them to every level of the organization and allowed them to develop relationships with the leadership, staff, and other board volunteers. Yet, when one of the fundraisers in the audience asked the donors to describe the best solicitation they had ever received, each one of them said, in all sincerity, that they had never once been solicited.

“That is our best work,” says Osborne with pride. “That, right there, is our job. Of course, they were solicited, but it didn’t feel that way.”

This post was adapted from “See the Light: How a Culture of Philanthropy in Your Organization Can Make a Difference in Morale, Board Motivation, and Donor Retention,” by Paul Lagasse, Advancing Philanthropy, Winter 2015 (reprinted with permission) You can read the whole article here.

Rally Community Support for Civic Assets With an American Tradition

Faced with shrinking budgets, many local and state governments have been forced to reduce or eliminate grant support for programs in the arts, recreation, and education. How are communities responding? They are bringing together citizens, civic organizations, nonprofits, foundations, businesses, and unions to make up for the funding shortfalls. To be successful in the long run, says Gareth Potts, who studies urban and regional policy in the United Kingdom and the United States, these coalitions need to build community awareness of the benefits of these civic resources, establish stable funding sources for programs and overhead, and rally a corps of dedicated volunteers.

Potts has found a model for such civic coalitions in the all-American tradition of the barn raising, in which neighbors living in frontier communities gathered together to help farmers build new barns. Barn raisings were — and in Amish and Mennonite communities, still are — as much social affairs as they were construction projects. And because the buildings themselves often served communal functions, it was in everyone’s best interest to help build them.

“Like the communal barns of the frontier United States, our libraries, parks, recreation centers, and art museums serve as key anchors to communal, social, and cultural life,” Potts writes in The New Barn-Raising: a Toolkit for Citizens, Politicians, and Businesses Looking to Sustain Community and Civic Assets (available as a free download at www.thenewbarnraising.com). “In the new economic frontier of public spending cuts, government has a much less dominant role in overseeing the funding, managing, and delivery of community and civic assets. Instead, citizens, foundations, non-profits, and businesses are asked to pull together to do more.”

Potts, the former director of research and policy at the British Urban Regeneration Association, traveled across the United States in the summer and fall of 2012 as an Urban and Regional Policy Fellow of the German Marshall Fund of the United States (www.gmfus.org). He interviewed people from local nonprofits and foundations, government agencies, and academic institutions in Minneapolis-St. Paul, Detroit, and Baltimore in an effort to find out what made those cities’ innovative projects and policies for sustaining civic assets successful.

Potts identifies three strategies for sustaining community assets:

Raising awareness by making convincing cases to stakeholders and forming alliances;
Raising money by identifying and cultivating local and regional funding sources; and
Raising help by growing a base of volunteers who can bring their unique knowledge and resources to bear.

“There’s no magic bullet,” Potts explains by telephone from Detroit, where he now lives with his wife. “It’s really about people pulling together and recognizing the parts that each partner can play.”

Potts has designed The New Barn-Raising to be a comprehensive toolkit, with detailed case studies and examples as well as abundant anecdotal and statistical evidence, all of which local alliances can apply to achieve successes like those in the three cities profiled in the book. Potts supplements this resource by hosting webinars, free article downloads, and other resources on the book’s website. It’s all part of his effort to build an international grassroots community of practice around the barn-raising philosophy.

Potts says that the response to The New Barn-Raising has been positive and is growing slowly but steadily as word spreads. “I’ll keep doing this as long as there are good ideas to talk about,” he explains.

This post was adapted from “The Domino Effect: How Community Foundations are Teaming Up With One Another and With Local Nonprofits Businesses, and Government to Innovate Solutions in Their Communities,” by Paul Lagasse, Advancing Philanthropy, Fall 2015 (reprinted with permission) You can read the whole article here.

Ken Burnett’s Tips for Great Stories

I’ve been reading — and rereading — Ken Burnett’s indispensable guide to writing for nonprofits, Storytelling Can Change the World, for an upcoming article in Advancing Philanthropy (you can read my interview with Ken on relationship fundraising in the Spring 2016 issue here.) As a writer, I’m always looking for ways to improve my craft. Ken’s book includes a useful list of questions that every writer should ask before they start writing their story:

Is it about the reader, best place to order soma online rather than about your cause, case, objective, or, heaven forbid, organization?
Is it interesting, surprising, unexpected?
Is it believable? Real? Accessible?
Is it a good, gripping story? One person, talking to another?
Is it simple, visual, memorable, and friendly?
Does it truly grab the emotions?

I’m going to print these out and put them over my monitor so that I can review them whenever I’m about to start writing a client’s story. You might want to do the same!

Upgrade Loyal Donors to Offset Your Lapsed Ones

“As fundraisers, we have come to accept a lapsed donor as an end result,” says L. Gregg Carlson, chair of the Giving USA Foundation (www.givinginstitute.org/giving-usa) in Chicago and president of Carlson Fund Raising LLC (www.carlson-fundraising.com) in Henderson, Nevada. Instead, he argues, “organizations need to be asking themselves, ‘Where is our money coming from, and how do we find more like them?’ In other words, ‘What does my donor look like?'”

Carlson says that fundraisers can improve their chances of identifying loyal supporters by making a point of reaching out to them through their preferred communication channels, and by being creative and flexible in how they ask donors to consider giving. While these methods are time- and labor-intensive, the payoff in the long run is likely to more than offset the investment. Carlson says that in his experience, roughly half of donors are willing to consider sustained giving. However, says Carlson, “Many nonprofits are not graduating their donors to higher end methodologies. By not graduating them from direct mail to phone to face-to-face, they’re putting their donor base at risk.”

Laura Goodwin, Vice President of The Osborne Group (www.theosbornegroup.com) in Mount Kisco, New York, agrees. “Our clients who have a multi-channel approach to engagement really do better,” she says. However, those channels have to be used for a broad range of messages of interest to the donors. “If you’re only doing soliciting on your multiple channels, you will probably seem grabby,” she points out. Therefore, nonprofits should seek feedback from donors to ensure that the channels facilitate two-way involvement and encourage them to feel like they are part of a community.

Goodwin identifies three building blocks for turning what she describes as a “messy process” into an effective workflow for cultivating and upgrading individual donors:

A table of gifts
A clear vision of the goals and objectives
Accountability and outcomes measurements

“I’m always surprised by how few people are using a simple name-by-name table of gifts,” Goodwin says. “There’s no better way to identify the need, the gap, and who we’re going to talk to.” The table of gifts must also be accompanied by a clear statement of what these gifts will enable the organization to accomplish in the community. “When we arm fundraisers with this knowledge, it becomes a lot easier to identify donors who might be motivated to help us achieve those goals. It helps answer the question, ‘What donor am I looking for?'”

Along with a clear vision of the objectives, fundraisers must also be able to present outcomes to donors. “If we’re not sure what we’re doing in the world, if we’re only focused on telling people news about the organization, then what does that add up to?” Goodwin asks rhetorically. “We need to demonstrate accountability for the changes that we’ve accomplished and that we’re on the way to accomplishing.”

Veteran fundraisers know that while such high-touch approaches are more effective at retaining donors, they are time-intensive; that’s why they have traditionally been limited to major-gift donors. Thanks to today’s sophisticated donor tracking software, though, proven high-touch techniques now require less time and effort, and as a result they can be broadened out to a larger segment of the donor pool regardless of their giving level.

Jay Love, co-founder and CEO of Indianapolis-based Bloomerang (www.bloomerang.co), finds it useful to invoke the Pareto Principle — the idea that a majority of a given outcome is the result of the efforts of minority of a given population — when explaining why it makes sense to use high-touch methods to retain loyal donors instead of acquiring new ones. “One of our clients had 16,000 records in their database,” recalls Love. “We asked them how many of those people had made a gift in the last three years, and their answer was 2,000.”

In addition, Love says, the client’s last direct-mail campaign targeting the lapsed donors netted just two gifts. “Why would they still be spending money trying to get the other 14,000?” asks Love. “They would be so far ahead if they would just concentrate on their two thousand confirmed supporters and let those people be the connectors who bring in others.”

Love recalls the rule of thumb from the world of direct mail that says a donor who informs you about a change of address is 10 times more likely to make a major or legacy gift to your organization. “When that happens, you should be calling them and asking what your organization can do for them,” says Love. “Instead, it’s usually treated as a purely administrative function and not passed up the line.”