Hidden Costs in Fundraising Organizations

Many colleges and universities look to reduce non-essential costs from their budgets, especially during challenging times.  Typically, finance professionals examine the income statement for line items that can be reduced or eliminated.  Unfortunately, one of the most impactful costs to fundraising organizations will never show up in financial statements.

Hidden costs are difficult to identify and directly lead to greater expenses elsewhere that are easier to see. However, organizations who effectively identify this hidden cost and make adjustments, position themselves to simultaneously ensure flat expenses and increased fundraising revenue well into the future.

The hidden cost at the core of unnecessarily inflated fundraising budgets is gift officers “time waste”. The rectifiable “time waste” is not the time wasted scrolling through social media feeds under the guise of “research” or  taking extended lunch “meetings”, but 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.  Although common thought may be that working every opportunity is the cost of ‘doing business’, when focused on building relationships with the most likely donors, gift officers’ time is more productive and the cost of time waste is reduced.

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 intuition based on anecdotal information about the driving forces behind the open opportunities.

Gift officers biases lead to them focusing entirely too much of their time on opportunities that “feel” like winners. They will tell their managers, often convincingly, about specific donations that are coming in. They believe these donations are imminent. The gift officer might put these deals in the CRM system at an advanced stage. They might list it as high likelihood percentage to win or “commit” the donation to senior leadership.

Gift officers, naturally, continue to exert a tremendous amount of effort on the opportunities that ‘feel’ like winners with the intent of fulfilling their preconceived ideas about the prospect. They are confused when weeks turn into months and they fail to get an answer from the donor. They are often shocked after so much effort when their donation prospect disappointingly declines.

A few surprise losses are inevitable in any fundraising organization. However, in collegiate fundraising organizations, the aggregate time that is 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.

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.