Reposting one of our most popular nuggets from Tom about how to measure success and productivity in your Development Operation.
RETURN-ON-INVESTMENT: What every Investor wants from their investment and what every For Impact organization should want from its development/advancement/fundraising effort.
I feel this concept is completely absent or totally misunderstood from our sector – Something I want to help change.
With all due respect to the industry, I just don’t get it. An organization invests money and resources in their development/fundraising operation (whether it’s a one-person shop or 50 people in the college advancement division) but doesn’t measure that RETURN-ON-INVESTMENT. I’m not sure how else you would measure productivity or success without making ROI the #1 barometer.
ROI is very simple to calculate. It’s a numerator/denominator math problem:
- Here’s how much money we Raised (the numerator).
- Here’s how much money we spent/Total Expenses (denominator).
In the For Impact approach, the development function ‘write checks’ to the IMPACT.
For example, if you are a hospital foundation raising $2M a year in ‘fundraising Revenue and your total expenses are $1M then your ROI is 2X or 100%; and your cost of fundraising is 50%.
There are two ways to increase your ROI and decrease your cost of fundraising:
- Increase the Numerator (Revenue)
- Decrease the Denominator (Expenses)
In our For Impact world, our own benchmarks are as follows:
- 3X is minimum model/benchmark.
- 4X is great.
- 5X is something you should be very proud of.
If you’re running a Campaign within an existing development operation or as a separate initiative, I believe the cost of fundraising should be a nickel (five cents on the dollar.) That would give you a 20X ROI.
If you are a For Impact leader, senior staff, executive director or a board member, I hope the above gives you some sense of comparison.
Ok, I think you get the point.
Following up on my post about the ‘Sales Driven Funding Operation.’
A critical position on a Sales Team is the Sales Leader.
IF you are committed to a Sales Team then you should identify the Sales Leader – the person who fulfills these duties:
- The ultimate PLAYER/COACH: This person has the street cred and is usually the organization’s BEST sales person. This person has also accepted the role of COACH to the team.
- Has ultimate ACCOUNTABILITY: This person is 1) accountable for the Sales Team results, and 2) the person to whom each Salesperson is ultimately accountable.
- There are also cases in which the Sales Leader can use others to support this function. Example, let’s say your team has ten Salespeople – they can report to a deputy but ULTIMATELY report to the Sales Leader.
- The ultimate PLAY CALLER (or referee): If three Sales Team members want different changes to the engagement tool (for instance) the Sales Leader is empowered to LEAD and make-the-call, end-the-dispute, or unite-the-team around a clear decision.
Just having this vocabulary has been powerfully clarifying for organizational leadership responsible for building Sales-Driven Funding Operations.
A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we will use each action step as a week long theme to help you get it done!
This week’s theme is: Just Ask. Just Ask. Just Ask.
In his book, The Power of Habit, Charles Duhigg explores the formation of organizational habits. (You can read this quick summary by BusinessWeek.) One case study examines Alcoa’s remarkable business turn-around in the 80’s/90’s. CEO Paul O’Neill focused the cultural energy (and habits) around safety–more specifically, around the number of safety violations.
We call this the ONE LEVER. Meaning, to maximize team cohesion and culture change you need to focus energy on ONE LEVER at a time to create organizational change.
What will that lever be? Be specific. Be clear.
The Orlando Magic focus on ‘butts in seats’.
FedEx focuses on number of packages that don’t arrive when promised (aiming for zero).
Just about everyone reading this is seeking some form or another of improved funding results.
Call it a culture of philanthropy.
Call it a sales culture.
Call it greater revenue for impact.
Call it funding the vision.
When you’re bringing your team along there is so much ‘other stuff’ that can obscure progress. Events, predisposition activities, reporting, deadlines, board meetings.
As it relates to INCOME DEVELOPMENT the ONE LEVER is – in most every case – the NUMBER OF ASKS.
This is what we emphasize, design-around, message, measure, reinforce.
Obviously a funding goal is pretty important. However that is a RESULT of this measurable activity. Similarly, Alcoa’s leap in quality (and then profits) was a RESULT of increased safety.
One lever: Number of Asks. Preach it. Measure it. It will be transformational. I promise.
Note: It’s not uncommon to see an organization (of any size) with fewer than 10 real-asks per quarter. In fact, it’s a safe bet that by our definition most are at ZERO.
A few weeks ago we published “10 Action Steps to Help you Engage in 2016.” Over the next 10 weeks, we are going to use each action step as a week long theme to help you get it done!
This week’s theme is: Set your goals of ENGAGEMENT.
What I’m telling you is…
Eliyahu Goldratt is an Israeli physicist who has been described by Fortune magazine as a “guru to industry” and by Business Week as a “genius.”
He wrote a self-published, underground best seller entitled The Goal (North River Press, 1984, Revised 1986 and 1992).
This may be one of the best ‘business books’ I’ve ever read. It’s not dense, text-heavy business gobbley gook with charts, tables and Venn diagrams.
It’s actually written as a fiction story. Jonah (the consultant) uses the Socratic method of asking questions of Alex (the manager) to completely turn around a faltering business/ manufacturing plant.
THE GOAL, on one hand, is complex, with terms like: throughput, bottleneck, the theory of constraints and the cloud theory.
At the same time, it is incredibly SIMPLE: KNOW YOUR GOAL!
IF PRODUCTIVITY is a function of understanding your GOAL… being able to define SUCCESS… being able to MEASURE your progress…
Then, THE CHALLENGE is to:
- DEFINE SUCCESS.
- SET SPECIFIC GOALS.
- CREATE MEASUREMENTS.