Measuring Your Fundraising Effectiveness: The Conversation You are Not Having — and Should Be
Presented by Anne Wallestad, president & CEO, BoardSource, and Andy Davis, director of education, BoardSource.
What if your local newspaper asked questions about your organization’s fundraising strategy? Anne Wallestad and Andy Davis framed their session around that question — and those that follow: Would you feel confident in your answers? Would you feel confident that your board members would be able to answer the questions in a manner that enhances the organization’s public standing? How should your organization determine if it has an effective and sustainable fundraising strategy? And, once it is confident that it has one in place, how should that strategy be communicated?
The subsequent conversation focused on the fundraising responsibilities of the board, including an overview of ethics and accountability, the board’s role in financial oversight, and, finally, an individual board member’s responsibilities as they relate to raising funds for the organization. All tie in with three big questions boards should be asking themselves:
1.) Do we have enough funds to support our mission?
2.) Are our fundraising practices ethical?
3.) Are we investing in growth?
Attention to these three big questions will not give you a pass, however, when it comes to the most popular of questions posed by the media and the public: What is your cost of fundraising? Or, simply put, how much money do you spend to raise a dollar? This question permeates the nonprofit sector as a way to measure fundraising success. Unfortunately, it is extremely limited in what it actually tells anyone about your organization’s fundraising strategy.
Measuring Fundraising Effectiveness, a new framework developed by BoardSource and its partners, provides three main components to measure an organization’s fundraising effectiveness:
- Total Fundraising Net:
Are we raising enough money to fund our mission now and in the future? - Dependency Quotient:
To what extent are we dependent on a small number of large-scale donations? - Cost of Fundraising:
How efficiently are we raising funds, and are our overall efforts achieving high return on investment?
After discussing each of these in detail, Anne walked through the tension that can often exist between cost of fundraising and the dependency quotient. She explained how one type of fundraising can often support the entire plan and the difficulty with looking at one source of revenue in a vacuum that doesn’t consider the whole picture.
To bring all of the learning home for the participants, a handout was passed around detailing the fundraising nets, dependency quotients, and cost of fundraising, for a fictional organization. In small groups, participants assessed the organizations current fundraising strategy and outcomes and identified what questions the board and other stakeholders should be asking about the current situation, long-term strategy, and where the organization should focus moving forward.