by Larry Johnston Ph.D
Okay, maybe I’m just weird (close associates might say there’s no “maybe” involved!). But the simple truth is, I loathe waste. I’m sorry. I can’t help it.
Inefficiency bothers me. And not being strategic just drives me up the wall.
It’s possibly little more than some quirky personality trait, but I suspect the issue runs far deeper. You see, when you take a desperately needy world, limited time and resources, a calling to bear fruit that really lasts (John 15), and add to these concerns a constantly increasing competition for funding among nonprofits generally and ministries specifically, it just chafes my hide to see organizations stuck in the thick of thin things.
And nowhere is this more troubling than the allocation of limited fundraising resources.
Lest you think this only a theoretical issue, let me briefly recount the story of a new client a number of years ago. I’m sorry to say the organization is not a rare exception.
As a first step to assisting the organization with the segmentation of its donorbase, I asked them for a cosmograph (see sample that follows). Since they were unfamiliar with this type of graph, I proceeded to explain the concept and how they could gather the necessary data.
I further explained how the Principle of the Critical Few (also known as the 80/20 Principle or Pareto Principle) – one of the most critical principles to anyone thinking strategically – often applies “in spades” to donor bases and smart fundraising. In fact, not only is it often the case that 20% of an organization’s donors provide 80% of the income, it is not unusual for 5% of the donors to provide 50%, or 10% to provide 90% of the gift income.
When organizational staff had completed the necessary research and constructed the cosmograph, they were embarrassed, to say the least (“ashen” might better describe the color of their faces when we met).
Why? Because their research to build the cosmograph revealed that for three entire decades the organization had allocated the bulk of its resources to communications and fundraising programs aimed at thousands of small donors who were having precious little impact on the organization: the roughly 90% of their donors who were providing only 10% of their total gift income.
As a consequence, they had chronically neglected for 30 years (!) the critical few donors (the 10% giving 90%) who were having a huge impact on the organization and also had the resources to do much more.
I graciously informed our client that the French have a great word for those types of practices: “Stupide!”
That’s why it’s critical to have a cosmograph inform your fundraising and, more precisely, your segmentation practices.
First, it’s a matter of stewardship.
Your donors are investing in your work to make a difference. To see results. To witness lives changed. And when the work of development staff is not informed by these cold, unforgiving numbers, donors’ gifts are often sadly wasted.
Rather than having their gifts allocated to life-changing programs, these funds are unwisely (and generally unknowingly) invested in programs and communications to large numbers of donors who have little potential to make a real difference in the organization’s work (e.g., the 81% of donors giving less than 7% of gift income in the chart above).
Typically, as a consequence, the organization wrongly believes they lack the resources to focus where they should focus: on major donors and major donor prospects. Often, they do indeed have the resources; they are just being misallocated – majoring on the minor.
Second, it’s a matter of strategy.
Part of strategy is how to achieve the greatest possible impact with the fewest resources, and this can’t be done when organizations continue to indiscriminately allocate resources well past the point of diminishing returns, which happens quickly with some segments of the typical donor base.
Third, it’s just plain smart. Many years ago I learned a great truth from the mining industry: You’re either an inch from a million dollars, or a million inches from a dollar. Whether you’re into mining or fundraising, given this truth it’s simply smart to know where you’re digging.
The Formidable Challenges You’re Up Against
Unless your organization is different than most, let me share what you’re up against when you begin to think and work strategically to allocate resources to areas of greatest fundraising potential: Egalitarianism.
Don’t misunderstand. Equality is a great notion. Downright American. But when it comes to successful fundraising, it’s simply a dumb idea. Dumb, but formidably tenacious.
Trust me… tackling the deeply ingrained beliefs about treating people equally should not be taken lightly. These beliefs continue to depotentiate the performance of more organizations than we can imagine. But very simply, here’s your (hopefully easy) choice:
You can be egalitarian or you can be strategic. You cannot be both.
The Widow’s Mite
Many well-intentioned people in your organization are likely to protest, “But what about the widow’s mite?” Well, “What about it?” What many people apparently believe is that her gift was important because it was small.
Wrong! It was important because it was all the money she had!
Thus, donors who give small amounts annually shouldn’t be confused with the widow’s mite (unless, of course, you know that certain small donors are giving sacrificially which is an entirely different matter). Those who are quick to cite the widow’s mite as a rationale for mailing high frequency communications to small donors should give equal attention to the parable of the talents (Matthew 25.14-30), recognizing we’ll be held accountable for the returns on our investments.
Other well-intentioned people in the organization will quickly cite the admonition of James (James 2.1-4) not to show favoritism. Certainly we need to constantly and soberly heed that counsel, but muddle-headed thinking too often causes us to throw the baby out with the bathwater and miss the point entirely.
The point James makes is to avoid mistreating the poor while favoring the wealthy. Note that the cosmograph – and the strategic segmentation it should facilitate – doesn’t call for mistreating anyone. It simply recognizes that “From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked.” (Luke 12.48)
From my vantage point, strategic segmentation has nothing to do with a spirit of favoritism and everything to do with wise stewardship and sound management.
Once you’ve crunched the numbers and constructed the cosmograph, you’ve taken the first critical step to turn the lights on regarding strategic segmentation, which is simply a somewhat technical way of operationally setting the stage for better stewardship of the resources entrusted by donors to your organization. It’s only the first step of many you should take when it comes to segmentation, but without a doubt it’s a step in the right direction.
Larry Johnston is the president of McConkey-Johnston International, where he has spent 40 years working with leading Christian organizations, consulting internationally in fundraising, strategic management, organization development and leading and managing change.
Summer quarter for the CLA Online Academy starts in June 16. (Registration closes on June 9.) See what’s being offered and register early. If you are working on your CCNL, then this is a perfect time to make substantial progress. Here is what’s offered this summer:
Internet & Technology
People Management & Care
- Talent Acquisition and Retention Lifecycle
- Biblical Foundations for People Care & Management
- Practically Applying the 5 Languages of Appreciation in Your Work Place
Thanks to to ECFA for their sponsorship of the 2014 CLA Online Academy.