Hidden costs in fundraising organizations are illusive
Many colleges and universities look to reduce non-essential costs from their budgets, especially during challenging times. Typically, finance professionals examine the income statement to reduce or eliminate unnecessary line items. Hidden costs in fundraising organizations are difficult to identify. Typically, they lead directly to greater expenses elsewhere that are easier to see. Unfortunately, one of the most impactful costs to fundraisers will never show up in financial statements. However, organizations who effectively identify this one and make adjustments, position themselves to simultaneously ensure flat expenses and will increase fundraising revenue well into the future.
One of the biggest hidden costs
The hidden cost at the core of unnecessarily inflated fundraising budgets is gift officer’s “time waste”. This “time waste” is not scrolling through social media feeds under the guise of “research” or taking extended lunch “meetings”. Rather, it is the one where hard working, well-intentioned gift officers waste time by over-investing effort in prospects that are the longest of long shots to ever donate. Gift officers keep chasing opportunities with a low probability of donating while possibly ignoring the opportunities that have a greater likelihood of giving. A common sentiment may be that “working every opportunity is the cost of doing business”. However, as gift officers focus on building relationships with the most likely donors, it makes their time more productive and reduces the cost of time waste.
The effect of biases
Gift officers and managers – like the rest of us – are human beings. Every human being is subject to biases and tendencies. Biases, however, prevent gift officers from looking objectively at all the open opportunities in their portfolios. Whether tenured gift officers or novices, biases are prevalent. Biases naturally occur when gift officers compare open opportunities to their experience with past successful gift solicitations. Gift officers will often over-rely on their intuition and anecdotal information about the driving forces behind the open opportunities.
Gift officers biases lead to a focus on opportunities that “feel” like winners. They tell their managers, often convincingly, about specific donations coming in. They believe these donations are imminent. Putting these deals in the CRM system at an advanced stage leads to unintended consequences.
In this type of situation, senior leadership believes there is a high likelihood percentage to win or “commit” the donation. Naturally, gift officers continue to exert a tremendous amount of effort on the opportunities that ‘feel’ like winners. Their intent is to fulfill their preconceived ideas about the prospect. Confusion abounds when weeks turn into months and they fail to get an answer from the donor. Shock and disappointment set in when, after so much effort, their prospect declines.
Will this deal win?
A few surprise losses are inevitable in any fundraising organization. However, in collegiate fundraising organizations, the aggregate time wasted on deals that are quantifiably unlikely to ever win is tremendous. This time waste alone can be easily translated into hundreds of thousands of dollars (or more) in unproductive labor hours.
The time that gift officers waste on unlikely-to-donate opportunities always comes at the direct expense of other opportunities that are significantly more likely to win. These winnable opportunities suffer from neglect. Over time, the probability of success on these neglected deals steadily declines.
Honing focus to reduce hidden costs in fundraising organizations
The net result of misplaced focus is reduced win rates, longer donation cycles and lower overall donations. Historically, universities have understood that some inefficient time is expected. However, absent a strategy for pinpointing and rectifying specific instances of misallocated time, universities are forced to over hire or invest in tech platforms that are geared more to mass marketing and less to focused, targeted, personal engagement.
One step forward, is to implement a dynamic data driven solution that provides precise focus for gift officers. An A.I. platform can save the waste of time seen from over-working some portfolio opportunities and underworking others. Making a seemingly small change in processes and gift officers support, can make a large difference in overall gifts.