Is the Fundraising Pyramid Really a Lie? | npENGAGE

Is the Fundraising Pyramid Really a Lie?

By on Jan 13, 2010 | NONPROFIT-FUNDRAISING

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The nonprofit sector needs more spirited debate. Mark Rovner over at Sea Change Strategies blogged some strong opinions about the state of fundraising. So I asked Lawrence Henze, managing director of Target Analytics, to write this guest blog post in response:

Mark Rovner recently offered up the opinion that the fundraising pyramid is a lie because “most major donors at most organizations do not rise up through the ranks of $15 donors, who become $100 donors, and then ultimately become $100,000 donors.”

My 30 years of experience in the fundraising world give me a very different perspective. The fundraising pyramid is not a lie; rather, it is an unfulfilled promise. The creation of a “complete” fundraising pyramid requires time and patience, and can be hampered by a primary reliance upon peer-based major giving programs. Major donors with the greatest staying power are those that develop through the annual giving program.

There is significant statistical evidence for that conclusion and absolutely no foreseeable reason that individuals originally acquired through online giving vehicles will mature any differently in the future. For example, research shows that $1,000 gifts to organizations occur most frequently when that donor has already been giving to the organization for about 7 years. Many years of research with successful nonprofits also shows that those very same donors are approximately 900% more likely to make a major gift in their lifetime than individuals without that progressive history. Of course there are experiential differences among organizations, but the trend is clear.

Mark’s comments suggest that we should accept our major giving fate and do not offer insightful suggestion for change. The primary reason that we do not develop enough major giving donors from our constituents is that many fundraising practices do little to promote transitional giving — the movement from annual giving donor to major giving prospect. Transitional giving prospects are often neglected in fundraising infrastructure and exist in “no-man’s land” between annual giving and major giving staffs.

Throw in related issues of the culture of ongoing campaigns, silo-based fundraising efforts and the transitory habits of development professionals and we have an environment that does not support internal cultivation of top donors. For example, constant campaigning focuses efforts on previous campaign contributors and discourages research into and cultivation of emerging prospects. Institutions organized by functional silos lack internal and external communication integration to support cultivation of emerging prospects. And, of course, migratory development professionals undermine the ability to establish long-term donor relationships.

It is clear to me that the answer does not lie with more peer-generated gifts that often disappear when the peer-solicitor leaves the board. Of course, these gifts should still be sought, but the theory that “major donors come to organizations via other major donors” doesn’t actually hold up to analysis. Furthermore, it is not a sustainable business model. The continuation of the status quo in the nonprofit industry is one of the reasons organizations fail to approach their fundraising potential. Rather, we must address the issues stated above. Creative thinking is needed.

Finally, the reasons many low-end donors give for a year or two and then lapse is also based on time-supported practice supported by faulty thinking. It may be corrected by changing the belief system in the industry. Acquisition is frequently based on the sole goal of increasing the number of annual donors, rather than the more appropriate goal of attracting sustainable donors.

While challenging long-accepted ways of thinking and provoking discussion is always valuable, offering an observation without deeper insight into the cause of the phenomenon is less than helpful and does not encourage change. What we need is greater understanding of the characteristics of loyal donors, cultivation strategies that foster additional loyalty and commitment, and the development of personal relationships with our transitional giving prospects. Then we will have a fundraising pyramid that fulfills its promise.

Suggesting that “this is the way it is” without saying “this is what is possible” encourages the perpetuation of practices that are flawed. We need better ideas and a willingness to try different ideas and strategies.

Lawrence Henze, managing director of Target Analytics, has extensive experience in fundraising, market research and the application of predictive modeling services to the nonprofit marketplace. The founder of Core Data Services, which Blackbaud acquired in 2001, he has also served as vice president of predictive modeling services at USA Group Noel Levitz and president of The Philanthropic Division of Econometrics, Inc. Mr. Henze has 15 years of experience in development, raising more than $125 million, primarily for higher education institutions. During his career, he has personally reviewed the giving histories of more than 30,000 planned givers across the country. He holds a BA in political science from Carroll College in Wisconsin, and an MA in public policy and administration and a law degree from the University of Wisconsin at Madison.

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