Articles

Antidisintermediationism

/ rymerben / Leave a comment
There are some really long words in the English language.  Maybe the best known is antidisestablishmentarianism. Another is the is the Welsh town name Llanfairpwllgwyngyllgogerychwyrndrobwyllllantysiliogogogoch.  And the film Mary Poppins gave us  supercalifragilisticexpialidocious (even though the sound of it is simply quite atrocious).
 white bar padding space

Another, more prosaic, long word is ‘disintermediation’.  A financial term, it simply means ‘cutting out the middle man‘.  Since the credit crunch, the finance sector has embarked on an enormous round of disintermediation, driven by the need to cut costs. While fundraising is yet to follow suit, we may not have long to wait. One example is GiveDirectly. Founded in 2008, GiveDirectly uses ‘unconditional cash transfers’ (translation: giving people money) to communities in Kenya and Uganda to alleviate poverty, boost families’ income and facilitate entrepreneurialism. GiveDirectly use ‘randomised control trials’ (RCT’s; translation: testing if an intervention works by using it on one group but not another comparable group and recording the difference in outcomes) to understand the effectiveness of their work. They claim impressive results, and that cash transfers are very effective in poverty reduction. Others disagree, arguing other interventions including affordable irrigation and micro-credit should be prioritised.  We don’t yet know who is right, but we do know that disintermediation is real and here to stay, in some form or other.  The debate matters for fundraising, whose traditional model is donors gifting money to organisations to do work.  But what if an authentic ‘100% model’ is possible?  (you may already have guessed, but I’m skeptical of Charity:Water’s claims to have achieved this already – I love their website as much as the next person, but there’s no way they have no overheads) .  What if 100% of the donation really could go to the ‘work’?

One way this could happen is by connecting the funder directly to the projects via peer-to-peer or peer-to-business (P2P or P2B).  The Internet makes this more and more possible, as Uber and AirBnB, among others, remind us. A question for fundraising is whether it will embrace the trend to disintermediation or resist and turn to ‘antidisintermediationism’?  Certainly, ‘delayering’ should not be a surprise.  Basic scenario planning or SWOT analysis reveals that peer-to-peer is fast emerging as a rival technology, not least because the traditional donor-led model makes it difficult to effectively scale-up promising ideas, and can be an enabler for ‘founders syndrome’. And beyond P2P, alternative finance channels like crowdfunding and variants of ‘impact investing’ are to the fore, as seen in the recent Cambridge University and EY report on European alternative finance (see Chris Carnie’s recent blog for more on this, and a write up of the recent European Venture Philanthropy Association conference in Madrid).  My takeaway is: start planning for a world with less passive donors and more active investors.

While this change will undoubtedly be disruptive, it could have upsides. Fundraising could seek funds from the capital markets directly, (as Scope have already done) making scaling-up easier; it could evolve its management structures to enable greater varieties (and quality) of governance; it could access more diverse mixtures of funding in order to spend to invest, which could in turn mitigate the endless chase for unrestricted funds which grant-makers and donors alike are often loath to commit; and it could use the greater plurality of funding to develop new types of projects not possible with the traditional binary restricted/unrestricted funding mix.  It could also perhaps encourage a more long-term outlook in developing donor/investor relations. I sensed exasperation in some of the comments of Higher Education attendees at the recent NCVO Fundraising summit, perhaps baffled that a crisis has arisen when most HE institutions have in fact never stopped building long-term donor relationships.  Moving the focus from donations to investments would change charities outlook fundamentally.  Disruptive, yes.  But also potentially desirable.

The Internet has revolutionised many industries, (just ask Borders) and is likely, in time, to revolutionise fundraising. P2P/P2B, crowdfunding, alternative finance and impact investing are exciting or frightening, depending on the viewpoint. But while I’m no gambler, if I had to bet I’d say that to cling to the warm blanket of familiar practice – ie antidisintermediationism, resisting inevitable technological change – would be potentially very damaging for fundraising, if not simply quite atrocious.

Kaytherington

/ rymerben / 1 Comment

Oceans of ink have been spilt in recent weeks to describe and explain the causes and likely consequences of the review of fundraising regulation led by Sir Stuart Etherington.  But the fundamental issue has not received the attention it deserves.  This is not the relative (de)merits of a Fundraising Preference Service, the bonfire of the regulators, or even the need for greater trustee awareness of fundraising, necessary as that is.  Rather the key is, I think, a culture of short-termism in parts of the industry.  This is not directly addressed in the report in any length, and, in terms of proposed solutions,  only perhaps greater trustee oversight will help to remedy it.  Neither a FPS nor extra regulatory muscle will make the slightest headway with short-sighted management, nor the confusion of donations for affinity, where these things exist.  Short-termism is not only a problem for fundraising; far from it.  Al Gore, Prince Charles, the Chief Economist of the Bank of England, and US Presidential candidate Hillary Clinton have all commented recently on the perils of ‘quarterly capitalism’, where organisations sole focus is the next quarterly profit statement.  But an important question is whether the Etherington proposals will have traction on thinking that says ‘as long as this appeal washes it’s face, it’s fine. We’ll cross the next bridge when it comes’.  Because the next bridge has arrived and, as the best Prime Minister Britain never had once said, ‘the first rule is: when you’re in a hole, stop digging‘.

ncvo review pic

Let’s be clear. Larger and more prominent sectors than our own have struggled with the slippery issue of culture change in recent years, not least financial services and media. Neither, as I write, has resolved the serious cultural issues they sought to change following various scandals and crises. In finance, ‘too big to fail’ is still with us, and, were Lehman 2.0 ever to transpire, the resolution would be no less messy than first time around.  And in media, reforms proposed by Lord Leveson are still far from effecting a paradigm shift in culture.  These major, systemically important industries have spent millions of pounds and thousands of man-hours trying to understand how to regulate away toxic cultures existing in parts of their industries.  And they have failed in important respects.  That failure stands testament to the fact that changing culture is hard because measuring it is impossible. The nearest we have to a unit of culture is a ‘meme’, and no one even pretends to know how to use memes as a working metric, even forty years after the idea was introduced by Professor Richard Dawkins in The Selfish Gene. But it is a modern axiom that ‘what gets measured gets done’. So how to fix a culture which we cannot measure in any meaningful way?

Two works by Professor John Kay could hold some of the answers for fundraising.  First is the report, commissioned in 2011 by the Coalition Government and published the following year, on tackling short-termism in finance. Of the 17 recomendations made in the report, most relevant for short-termism are the abolition of quarterly profit reporting; the development introducing a broader stewardship responsibilities for directors; consulting major, long-term investors in board appointments; and the recommendation that companies “should structure directors’ remuneration to relate incentives to sustainable long-term business performance”.  For fundraising, the takeaways are that management reporting should include metrics on the long-term wellbeing of the organisation, not just short-term financial returns, that investment must be aligned with long-term priorities of innovation and new product development, and that risk analysis should be both granular and broad-view, incorporating current, as well as planned, activity. Using these measures would have a demonstrable effect on the ways our organisations set their priorities and structure their activities, and would help to remedy charity short-termism as it has begun to with business, although there is still obviously more to do.

Another of Kay’s works may be even more relevant.  In his 2010 book ‘Obliquity‘, Kay lays out a convincing case that achieving objectives is often best done by working obliquely.  He lists example after example of businesses focused ruthlessly on quality and innovation being massively profitable, often leading their respective fields for decades.   He also highlights the ‘profit-seeking paradox’, whereby firms, (most notoriously Enron, Parmalat and WorldCom, but also stalwarts like ICI who lost their way), whose explicit focus was profits and growth, failed, often spectacularly.  Fundraising would be wise to heed these lessons.  As an industry whose raison d’etre is profit, the message is loud and clear: focusing only on money will not raise more money.  To grow giving, the industry focus must move to incorporate much more than pound signs, and should, where it does focus on income, use a broader range of more nuanced measures.  Fundraising consultant Nick Mason has spoken persuasively of the need for charities to focus less on a narrow toolkit of ROI/cost per acquisition plus one or two other measures, and to take a broader view of the metrics used in guiding strategy.  These include the Internal Rate of Return, Net Present Value and the Hurdle Rate, all commonly used indicators in other sectors.  This is partly in recognition that income targets alone do not beget income; building donor relationships is vital.  As Kevin Schulman has said, the first not-for-profit who can make each and every donor interaction a joy will clear up pretty quickly in a field where customer service levels are often mixed.  The sooner this happens the better, as stronger donor relationships will enable charities to build a true ‘value proposition’, and move the business model from Primark to Waitrose. This will in turn engage whole new segments of society, for example those neglected groups in middle England who could pretty comfortably donate in the neighbourhood of £2,000-£20,000 on a regular basis, but at the moment are not solicited for those amounts, or not stewarded to at the appropriate level for those sums.  Focusing on relationships could, obliquely, be the direct way to raising more.

obliquity pic

In all this, it is important to consider the role of regulation. Whatever form it takes, the new regulator will be an essentially reactive institution. Cf. the Charity Commission who, as a body, can barely keep up with major regulatory events such as the Cup Trust saga.  The handling of this episode led a scathing National Audit Office to conclude that the Commission “makes little use of its enforcement powers, for example suspending only two trustees and removing none in 2012-13”, adding that “[the CC can also] be slow to act when investigating regulatory concerns…Furthermore, the [CC] does not take tough enough action in some of the most serious regulatory cases. It is…reactive rather than proactive, making insufficient use of the information it holds to identify risk”.  Margaret Hodge MP, then-Chair of the Parliamentary Public Affairs Committee was more blunt in saying that the Charity Commission “[obviously] has no coherent strategy and has been simply buffeted by external events” adding that “[i]t is clear that the Charity Commission is not fit for purpose.”  Even with a smaller remit, the new regulator will be at or close to capacity from day one.  We must recognise, therefore, that culture change among not-for-profits will come not from an army of regulators monitoring our every move.  It will come from performance management and incentives set by the sector itself. The new regulator will be a fire service, (and not a particularly well-funded one), called out to the deal with the most serious accidents or offences, not a police force patrolling the beat.  In important senses, we have to fix our own mess.

How we define and measure success will be at the heart of achieving this.  Internal reporting, governance and performance measurement to prioritise donor satisfaction, engagement and affinity, and to dethrone ROI and  RFV, (indeed, to ensure that “no one metric is sovereign“), will be critical in moving from ‘has this appeal covered its costs?’ to proper relationship fundraising.  Developing governance, management and methdologies to ensure donor relationships are at the heart of what we do will be the oblique, but also the most direct, way to growth.  The proposed Etherington reforms do not address this issue, and they will not cure the myopia suffered by bits of the sector.  The solutions will come from not-for-profits themselves recognising the need to change.  Hopefully, oceans more ink will not be needed before that happens.

Computer Says Yes

/ rymerben / Leave a comment

In a New York office in the early 1980s, a young currency trader listened intently during meetings of newly formed NGO Helsinki Watch. The meetings were taken up with passionate talk of human rights and the need to expand freedoms in undemocratic nations, vital issues to the young financier, who was born and raised in autocratic, Soviet-era Hungary before coming to the US to make his fortune.

The trader was George Soros, and the NGO later became Human Rights Watch.  In 2010, Mr Soros made a donation of $100m to HRW, the largest in its history.  It was a transformational gift allowing them to expand beyond their traditional base in wealthy western countries, into influential developing nations like Brazil and South Africa.

At the time of his attending Helsinki Watch meetings Mr Soros would not have scored highly on a recency, frequency, value (RFV) giving model, and he would not have matched on a wealth screening.  His gifts became significant only after years – decades – of involvement with HRW and it’s predecessors.  However, during this time, he formed an enduring attachment with not only HRW, but the cause of human rights more widely.  By 2010, he saw himself (and was) an integral part of the movement; rather than just handing over a cheque, he was funding a project with which he was intimately involved.  The question in his mind when making the gift would not have been ‘how much do they want from me this time?’ but ‘what do we want to achieve, and what will it realistically cost?’.  Indeed, when the call came for a transformational gift, Soros actually bargained up, arguing that to achieve their aims HRW needed more than the $50m they thought. The only explanation for this is that he is deeply committed to and trusting of the organisation and their project.

This story matters for at least two reasons.  First, the number of major gifts made in the UK,  including really large ones such as that of Mr Soros, should be growing — but aren’t (indeed, there has never been a nine-figure gift from a British philanthropist to an operational UK charity).  The wealth of members of the Sunday Times Rich List and value of £m donations in the Coutts Million Pound Report bear no relation, with UK top wealth doubling since 2009 but £m gifts static:

Coutts £m 2014
Also, the majority of such gifts are concentrated in a few sectors such as Arts & Heritage and Higher Education, missing other important areas; of 197 £m gifts in the most recent Coutts Million Pound Report, ‘Human Services’ received 10, ‘the Environment’ six,  and ‘Government’ one.  Vital though it is, non-university education received exactly zero £m donations in that year:
Coutts £m 2014 no2
Wealth alone obviously does not predict donations, but the lack of association between the two in this case is worrying, and indicates issues with the nature of philanthropic engagement, and perhaps the profile of philanthropy fundraising, in the UK charitable sector.

Secondly, and relatedly, charities’ methodologies often direct fundraising appeals  toward those supporters giving smaller, regular gifts.  Indeed, this is a striking absence from recent commentary on UK charities; a critical reason some donors come to be contacted repeatedly is that, time and again, transaction-focused methodologies lead back to those giving recently and/or often.  Major gifts result from major involvement and affinity; but transaction-obsession gives no insight into this causal connection.  Seeing gifts as a synonym for affinity is wrong, rather like measuring the number of leaves on a tree to understand its health, rather than the roots.  Confusing the two is part of the reason charities, like the Red Queen in Through the Looking Glass, must run ever faster just to stand still; RFV always reveals the same pond, and often leads to over-fishing.   Success depends upon asking, and acting upon, the right questions, and our current toolkit often leads us to bad explanations, bad conclusions, and, even worse, may even prevent us from asking the right questions.  This matters because, (as Professor Adrian Sargeant and others have proven), “charities exist as an expression of their supporters’ will to make a difference“, so measuring affinity must be the challenge to tackle in identifying those supporters most likely to increase giving.  Recognising this is crucial to identifying those most connected to the cause, and therefore to stepping off the transactional treadmill (or is a hamster wheel?).  Donations are means, not ends in themselves.
red queen
So, what to do?  We need the computer to say ‘yes’, and be right.  That is, a methodology to identify affinity/connection and capacity to give at higher levels.  My suggested agenda for practical, insightful Philanthropy prospecting, and what Adrian Salmon recently called ‘leadership giving‘, is based not only on donations, but also on the range and frequency of touch-points with the charity, such as spontaneously offered comments and feedback, survey sign ups, questionnaire responses, petition signatures, as well as measures of estimated capacity.  Critical to this is the degree of activity supporters show in their interactions and that the fact that in many cases engagement does not take the form of donations.  In thinking about identifiable forms such engagement can take, I often ask myself things like:

Who is responding to more than one in ten appeals? (‘responding’ not necessarily meaning sending gifts)
Which supporters contact us unprompted to update details, chase us to re-send something or ask unprompted questions about our work?
Do we have petition signatories from affluent areas who may want to uplift their giving or become a supporter?
Who donates via active methods, ie internet donations, cheques, telephone calls or mail donations?
Who attends our advocacy events?  Are there repeat visitors?
Which households have more than one family member who is a supporter?
Who is supporting us in memory? Who among our supporters has direct experience of the cause we work to support?
Whose giving is uplifting spontaneously?

These are just examples, the point being that thinking analytically about supporter engagement can be done with some simple data and a willingness to try.  Stuart McCoy’s useful presentation to the IoF Insight group a couple of years ago gives many more ideas for such data-driven prospecting.

Combining measures of affinity and capacity can be done quickly, cheaply and to great effect.  When this is understood, the case becomes clear for fundraising appeals and products designed for those passionate donors and volunteers able to offer support in four, five six and seven figures.  But this is not ‘just ask more’ for the 1%; it is responsible, evidence-based practice that can and should profitably guide donor relationship-building by aligning fundraising with society’s evolving wealth dynamics and supporters’ strength of feeling.  Contrary to recent coverage, it would be hugely irresponsible for charities not to try to understand who may want, and be able to, offer more significant support.  Because, by doing so, data driven fundraising can be a path to growth, for the sector as well as individual organisations within it.  Unless and until charity fundraising aligns better with the social dynamics of wealth, and incorporates insights on affinity and capacity to grow giving at the top, charity secular stagnation will continue.

Change often follows a positive message: Barack Obama did not say ‘No, They Can’t’, and Dr. Martin Luther King did not say ‘I have a nightmare’.  And in a sector forecast to be heading for a £4.6bn shortfall (around a third of current total income) within the next four years, an achievable, sustainable way to grow overall giving through enduring donor relationships surely fits the bill.

Cargo Cult Fundraising

/ rymerben / 2 Comments

During World War Two, a tribe in the Pacific Islands saw American supply planes disembark their cargo onto a landing strip.  Having a strong belief in the divine, they reasoned that the planes were sent by a God, and that, were they to build a replica airstrip, correct in every detail, the God would send them planes laden with valuable supplies (‘cargo‘).  So they set about building wooden huts, a wooden airstrip, painting their chests with ‘U.S.A’, even staffing the huts with people and building fires alongside them to mimic guide lights.  But the planes were not sent by a God, they were built and flown by the American army, and none brought the hoped-for cargo to the Islanders’ airstrip.

cargo cult pic

Cargo cults are a famous example of ‘magical thinking’, where a conclusion is reached that evidence does not support, or even suggest.  Fundraising seems to be suffering from a classic case of magical thinking.  The patient is serious but stable, although the long-term prospects are dim.  Exhibit A: digital fundraising.  By looking for the next ice bucket challenge or #nomakeupselfie — in effect praying for free money to fall out of the sky — we may as well build our own plywood airstrips.  No doubt a strong digital brand is a prerequisite for many organisations in this day and age.  However, in scrambling to co-opt the next trending hashtag, we are diverted from the demanding, but rewarding and necessary work of building enduring donor relationships of long-term value.  We are also labeled cynical and opportunistic by the very audience we sought to engage; ultimately, this is not an arms race with a winner, it ends in scorched earth and attrition.  Exhibit B: certain types of direct fundraising, including philanthropy and individual giving.  In these areas, for different reasons and in different ways, wishing harder seems to be an accepted methodology.  At major donor seminars, the almost palpable hope is for a wealthy philanthropist to come to the first event they are invited to, immediately write a huge cheque with no expectation of reporting or stewardship, and do the same the next year.  And individual giving keeps a-wishin’ — despite continued 90%+ non–responder rates — for a white knight (looking at you, behavioural economics) to come and save the day, despite no evidence that either response rates nor overall giving will grow, or even remain static, with current methods.  The gifts keep not coming or coming more slowly, but we still build our wooden airstrips, light the fires and wait for the cargo to arrive.

These are off-the-cuff examples — there are more. The point is that growing giving will be disruptive and require a complete refutation of the ‘churn and burn’/’just ask more’ mindset which is “as baffling as it is persistent“.  Innovation always bears risk.  But the risk posed by business as usual is surely greater still.  To mitigate it, we could do worse than follow Rene Bekkers’ suggested agenda to increase donations, proposed recently at the University of Kent:
  1. A serious political discussion about the role of philanthropy in public policy.
  2. Decent research informing policy decisions, paying attention to undesirable side-effects.
  3. An Impact Philanthropy Lab (IPL): creation and evaluation of new philanthropic / business investment instruments.
  4. Knowledge about what works in fundraising, and about failures

My addition to the list would be to discuss failure openly and constructively.  Learning from failure is fundamental to progress and innovation but often, it seems, we brush it under the carpet or quietly shelve ‘failed’ projects.  Organisations such as Glass Pockets and Fail Forward, taking their lead from initiatives like Engineers Without Borders Canada’s ‘Failure Report’, are helping not-for-profits learn that, as NPC said recently,  “the public wants to see charities use evidence to become more effective and don’t mind hearing about past failures as part of this process”.

failure report

Choosing whether to take these lessons on board may now not be a matter for charities, in the UK at least.  The British Government announced this week that, following recent high-profile scandals and tragedies, it would back new laws to limit charity fundraising communications; the first step in this being a review of charity self-regulation by NCVO Chief Executive Sir Stuart Etherington.  Charities’ Minister Rob Wilson has left no doubt that charities are losing control of their own destiny in saying recently: “[c]harities need to take more responsibility for their […] fundraising, and ask themselves how they would feel if they were on the receiving end of their organisation’s fundraising practices..[n]o one should try to deny that there is a problem here or that there are indefensible practices taking place..[charities] do not have the luxury of time. There are demands for immediate action not words…I urge you to take that window of opportunity seriously as [it] may not remain open for much longer.”

The calls for actions should not be a surprise.  As previous interviewee on this site Charlie Hulme pointed out in a brilliant polemic this week, their causes have deep roots in our methodologies, particularly the singular failure to understand donor motivation: “[w]hat do we actually know about the people we systematically bombard with requests for more money? We know their transactional history and demographic profile. But knowing who gave, what they gave, when they gave and how they gave tells us nothing, nothing, NOTHING about why they gave or would give again….As a sector growth is stagnant. Retention rates are catastrophic. And fewer and fewer people like, much less trust, us.  Our jaded, complacent, timid sector is mired in bad business and bad ethics. Bad business because, despite the rhetoric, we do nothing to change a set up that, by definition, precludes the concept of being ‘donor centric’ from being anything more than a buzzword. Bad ethics because this stops us growing and making the slightest dent in mission.”  These are strong words, but to quote economist John Maynard Keynes, to have their full impact “words ought to be a little wild”.  Charlie, Kevin Schulman, Roger Craver, Ken Burnett and others have warned for years (and decades) of the risks associated with ‘just ask more’.  They are surely being proven right now, and deserve to be listened to.

wright bros plane

Charities can persist — as cargo cults do — or they can change and thrive.  The causes we represent are the best imaginable, but as Sir Stuart Etherington said this week, “[c]harities can only do the work they do because of the trust, confidence and overwhelming generosity of the British people”.  Not regaining this trust and confidence will be the death knell for ambitions to grow, or even maintain, giving.  Nobel Prize-winning physicist Richard Feynman famously said that to avoid ‘cargo cult thinking’, “the first principle is that you must not fool yourself–and you are the easiest person to fool”.  Rather than fooling ourselves, we should dare to know why our supporters choose the charities and causes they do, and dare to break the ‘ask less’ taboo.  Rigorous use of evidence, learning from ‘failure’, being honest with ourselves and donors, and actively seeking out disruptive innovation will all be key parts of our being able to raise, and do, more for those who need us.

The planes will not land unless we have the courage and skill to build them.

A Lie That Reveals the Truth

/ rymerben / Leave a comment

This is adapted from a presentation I gave last week for Researchers in Fundraising, titled ‘Introducing Data Analytics’.  Enjoy!

Prospect researchers should care about analytics for many reasons.  There has been no rise in charitable donations in the UK or US for decades; charities urgently need to build stronger relationships with supporters; only half of high-value individuals are covered in wealth screenings; it need not be rocket science, and automation is real, and prospect researchers must remain relevant.

The presentation shows what analytical thinking is using the example (originally from Ernst Gombrich’s ‘Introduction to Art’, quoted in John Kay’s book ‘Obliquity’) of Pablo Picasso.  The Picasso museum in Malaga (where he was born) is ordered chronologically, and the level of realistic detail in his work decreased through his career.  He abstracted more to reveal more; he became more expressive by using ‘styilised simplifications’, a term which also describes quantitative models.  To paraphrase him, Picasso ‘lied to reveal the truth’.

Building a team and culture are central to using analytics and being evidence-based.  As Martin Squires, Head of Insight at Boots the Chemist, said at the Insight Special Interest Group conference in 2014, the essential qualities for an analyst are more than anything “curiosity, communication and commons sense”.  This culture can be built from the bottom up or the middle out.  As Clara Avery (Clara Avery interviewee on this site) has said, Macmillan were “probably calling ourselves an evidence-based organisation for two years before we were one.”  Slide eight below shows how Macmillan use evidence at each stage of the innovation process, a process which, as Clara says, took time to grow but is now established.

In terms of methods, analytics for fundraising often identifies a group of supporters, profiling them using behavioural, demographic and/or attitudinal data and looking to the wider population of supporters to try to identify those with a similar profile.  Different organisations will have different supporter profiles; likewise, appeals and products will have different ‘typical’ supporters.  Slide 11 of the deck shows some of what I think are particularly insightful data points, none of which need any great numeracy to work with.  Indeed, none of the methods I’ve quoted in the slides needs advanced numeracy, let alone a background in statistics or econometrics.  The slides in the deck here are from a great Stuart McCoy/Marcelle Jansen presentation from the IoF Insight special interest group.

Analytical methods don’t need to involve statistical packages, and one of the points of the presentation is that we can gain significant insight using Excel and other widely-used packages.  In my example, I create a simple summary spreadsheet with weighted measures (scored at 1-10) of affinity and capacity.  These are pulled through into the first tab to create a score, indicating overall likelihood to give at a major level.  Some of the major indicators of affinity and capacity mentioned in the slides are:

  • Giving tenure/Continuity of Giving: the length of time a donor has been donating to your organisation, and how continuous this giving has been.  Continuous giving is great, but a high hit rate can also be really useful to measure
  • Giving ‘velocity’: basically the uplift in giving.  Dividing the current years total giving by the average of the previous three is a good way of doing this; another method is called ‘Compound Annual Growth Rate’ (CAGR)
  • Recruitment date: date of first contact with your organisation.  Interesting to contract this with the first gift date
  • Response ratios: rule of thumb is that people responding to more than one in 10 of your appeals is pretty engaged.  This is simply the total number of appeals divided by the number of responses
  • Unprompted communications: how often are supporters contacting you with being prompted?  Updating changed addresses, responding to surveys or questionnaires, signing petitions…all good signs of engagement
  • Wealth flags: setting up alerts for equity sales, or first-time donors who work with wealth managers are just two examples of how screening can be part-automated to help discovery through analytics
  • First gift amount: big first gift amounts are always to be followed up on
  • Current Lifetime Value (LTV): a great measure of potential and engagement, and very simple to calculate
  • Event participant/volunteer: again, simple to measure and a really strong signal of affinity and connection

More advanced methods of analytics include:

  • Regressions: these are a family of mathematical methods which aim to discover how important given variables are in a given situation
  • Text analytics: this uses software to scrape websites to carry out ‘sentiment analysis’, ie how users feel about a product or topic
  • Algorithms: an algorithm is a mathematical model to represent the relationship between variables
  • Automated scoring and screening: using business rules to automate database processes of screening
  • Machine learning: a branch of Artificial Intelligence which aims to teach computers to recognise logic, humour or other complex concepts

And before we get to advanced methods, a few resources to get prospect researchers started in using analytics:

Kevin MacDonnell’s blog: Cooldata

His and Peter Wylie’s 2014 book ‘Score!’ (ISBN 0899644457)

Josh Birkholz: Fundraising Analytics

See list at: https://www.worldcat.org/profiles/BenRymer/lists/3257763

Join Prospect-DMM: scarily advanced at times but well worth it: https://mailman.mit.edu/mailman/listinfo/prospect-dmm

Twitter: @joshbirkholz @iofinsight @n_ashutosh, @mpellet771, @mueggenburg

Finally: some potential pitfalls for those of us looking to use more analytics.  The main ones in my mind are:

  • Just because you find the answer you want(ed) doesn’t mean it is the right one.  Correlation does not equal causation.
  • Various factors quoted by Kevin MacDonnell and Peter Wylie in their great book ‘Score!’: “conservative nature of our institutions, a natural preference for intuition and narrative over data and analysis, a skills shortage, a fear of disruptive change, scepticism over the claims made for algorithms and a lack of time and resources”
  • A popular method in non-profit donor analytics is called ‘recency, frequency and value’ (RFV for short).  For me, this is part of the solution in understanding who is engaged with you organisation, but often leads back to those giving regular gifts by direct debit.  RFV therefor gives important insights, but is not the whole picture
  • With data, it is still true that ‘garbage in, garbage out’.  Take care of your data!  It will pay you back
  • Complex maths ≠ better results! There is no substitute for your expertise, judgement and attention

And the final word to MacDonnell and Wylie, who give a great summation of why prospect researchers should move into analytics as soon as possible:

“Data analysis is a rewarding, challenging, and above all fun line of work that will provide much value to your employer and a stepping stone in your career in fundraising to you”