Culture = Donor Retention

A little bit more on the topic of improving donor retention by focusing on your internal culture. A recent survey, conducted by MSW Research,  discovered that employees ask themselves these three questions.
 1. Do I feel valued?
 2. Do I value the organization where I work?
 3. Do I feel I belong?

The responses to these questions become indicators regarding the engagement level of an organization's employees.

Any guesses on the results and how engaged employees really are?

If your environment looks anything like the above chart how could you possibly increase donor retention by focusing on increasing retention by a certain percent.

These findings are indeed sobering, however  if we peek into the DNA of an organization we may begin to see a correlation between employee satisfaction and donor retention. The level of an employee's engagement is impacted dramatically by feeling a number of key positive emotions ( inspired, enthusiastic, empowered, confident or valued).  70% of all surveyed felt at least one of these five key positive emotions, but only 12% felt three of them. Based on the number of positive emotions felt the findings looked like this:

What happens if employees feel negative emotions:

 To help understand the steps of designing a culture that creates donor retention check out the Donor Retention Boot Camp.  




Research & Charts: Dale Carnegie & MSW Research

The New Science Of Fundraising Metrics & Increasing Retention

Donor retention and measurement is an interesting conversation for any fundraising group to have. So often we gravitate to the linear aspect of measurement because it's easy to grasp. Southwest airlines several years ago decided to measure happiness a unique but highly impactful exercise. As an industry

we may be served extremely well not to throw in the towel so quickly on designing metrics around monetary transactions. Because with a little work we might be able to actually measure the right things and the things that will create the greatest impact to the bottom line that we wish to have. Now this is not to say that the money aspect is not critical to the business of raising money because clearly that is our purpose, however it is important to note that our success with the raising of money is directly related to the length of time our customers or donors choose to remain connected to our organization and our mission.

Another significant achilles' heel for our industry is that our metrics in general are short in nature. We measure items connected to how we are doing compared to last year,   interesting and important pieces of data to understand but they do very little in helping us understand the momentum that we are creating with the people we wish to remain connected to.  Many of the conversations today regarding donor retention revolve around renewing a gift. This consistent focus on the transaction of a gift is continuing to drink from the poisoned well that has actually caused the retention issues we wish to resolve.

I have spent my career studying and redesigning the process of fundraising to address this significant

issue of donor retention. What I've concluded is very similar to the theories that were demonstrated in the movie Money Ball. In a wonderful scene between Brad Pitt and Jonah Hill in the garage Jonah looked at Brad said baseball is archaic in its thinking. They are measuring all the wrong things. You shouldn't be looking to buy players you should be looking to buy wins, and in order to buy wins you need to buy runs.

Take that same logic and drop that over the raising of money. In order to raise money you actually need donors. To raise the most amount of money from those donors you need to keep them longer and have them feel that supporting your organization is adding value and quality to their life.

So what if  you measured major gift officers by looking at the individuals that they manage. What is the average length of time that their donors have remained on the books. Is that length of time increasing or decreasing. That's a linear metric connected to the sustaining of a relationship. Have their gifts for this pool grown over a period of time has it remained stagnant or is it shrinking.  To begin measuring performance around sustaining and deepening relationships with the people that organizations are strategically connected to will pay significantly higher dividends than the shortsighted metric of how many visits that you make this month.

If we focus on the transaction we will accomplish very little with building a motivated donor

Because:

 If you want to raise money you need to have donors.  If you want to have donors supporting you at the capacity with which they could give you need to have emotionally motivated committed donors. If you want to have emotionally motivated and committed donors you need to be measuring whether or not you are adding value to their life. One way to measure that value is the length of time they choose to remain connected in support of  your organization. Since donors typically do not lead with their best gift retention (length of time) matters.

Our traditional belief that measuring transactions will deliver the most resources to our bottom line have

clearly been proven to be inaccurate over time. As it becomes increasingly more challenging to connect with people in an incredibly crowded space we will need to rethink how we've been connecting with our donors over the last 50 years. If am continually surprised that the largest provider of software to our industry does not even have a method of giving you actual retention rates. If you do not know the average length of time your donors stay on the books today and how that relates to the length of time 5 & 10 years ago, then every strategy decision you make is unrelated to your organizations ability to grow strategic relationships.

If you are interested in this proprietary measurement tool or head here. What to dramatically increase retention with proven practices? check out the Donor Retention Boot Camp this summer.

The Secret For Great Donor Retention Lives In A 1927 Publication

For those who have produced strong retention numbers you understand that it is not at all about renewing the second gift. The current retention rates discussed in the fundraising effectiveness report are really not the numbers to review in order to begin designing retention strategies. However they certainly do outline some challenges. 

Retention is understood by knowing the length of time your donors, by category, remain on the books. Example: the donors giving 90% of fundraising dollars today remain with us an average of 2.95 years. A decade ago that number was 3.75 years. The root of understanding momentum boils down to an appreciation for the Heisenberg theory. And the foundation of building a strong sustainable retention initiative is all about momentum.  Loosely translated from quantum mechanics  “ The more you try to understand the location of an object, the less you understand its momentum. “ The location of an object is the equivalent of measuring a single number to understand retention. This means looking at renewing the first year donor in year two is simply a nonstarter in understanding how to design strategy and demonstrates a lack of understanding of the impact physics plays in improving donor retention.

To begin figuring out how to improve donor retention you have to understand that what you are actually

Werner Heisenberg

looking to accomplish is creating a particular kind momentum.  As a result of this fact in 2003 I hired a PhD in Physics to spend the summer with the advancement team. In order for us to impact retention in the manner we desired we had to understand how to  impact and create the momentum we desired.  This required us to appreciate and understand  Werner Heisenberg’s uncertainly principle which he published in 1927.

At the time leaders in fundraising thought we were crazy to be generating customized html pages for our donors connecting them to the impact their investment was having. However, we realized that we were not fundraisers anymore; we were in the business of designing donor experiences. All aspects of our strategy were measured to the physics of creating momentum.

Please pardon the sales pitch, but we were very proud of bucking traditional fundraising thinking. Because of our attention to the physics of momentum we increased retention by 288%, tripled the number of donors and double the average gift size. If you are interested in learning how to build a remarkable retention effort grounded in the science of momentum and in how to effectively measure the impact of your strategies with proprietary tools then maybe check us out.

cue the infographic

What If Our Measures Undermined Our Mission

This past week I witnessed a thread on Linkedin focused on the roi measurement of money raised by Major gift officers. Measuring for money raised leads directly to mediocrity and our industry statistics seem to prove that point. Now please know I fully understand what the outcomes of an advancement effort need to be, however what I have experienced first hand is that you can push results much much further then imagined by focusing on another set of metrics that will drive the results you seek.

Do a google search for Harvard Business school professor Clay Christensen. After a little research one of the many things you will find is that he very simply describes why successful companies fail. The reason is simple....they are looking to be profitable in the short term. By focusing on the short term profit they loose sight of the really key long term stuff.

Now marry that to our world of philanthropy. We are all about short term metrics. Cost per dollar raised, average size gift, participation and many others. The majority of our measures are focused on the transaction, the money part.

I thought we were about relationships? What relationships are build via measuring transactions? Looking at the AFP Fundraising Effectiveness it is quite clear that our short term focused measures isn't working if we are looking to build and relationship momentum. Another indicator for us to pay attention to is the fact that the nonprofit sector has not gained any market share in 4 decades.  In forty years we have not been able to gain any ground on the for profit sector with giving remaining at 2% of GDP. How many indicators will it take for us to just stop and pivot to something else. But where?

So what should we measure for optimal success? Over the past year the New Science Of Philanthropy team has beta tested a tool to measure the momentum and financial impact of donor connections. If we can agree that a retained donor is better than a lapsed one than please read on :-).  The raising of money requires having a donor, not one that leaves in 2 years.  In addition most people do not lead with their very best gift. Keeping donors significantly longer than our national averages will be required in order to successfully fund our missions. But, as Clay Christensen suggests, if we continue to measure for short term profitability we will keep up our 40 year trend of zero market gain, lose donors at a 58% annual rate, un-fund our important work but most importantly not design the opportunity for so many to lead a life of value and service. Measuring for our ability to sustain and grow relationships is the most important metric to understand and it requires long term questions.

Do Your Internal Systems Create A Culture Of Happiness?

Those of us in the nonprofit world have to admit, we just missed it. There are lots of reasons for this, along with future blog posts, but it is freeing to say we just didn't get it. Hop on to amazon and search for books on how to be happy, or just do a google search. As it turns out happiness is kind of a big deal, we all wish to do something of value and that at some level our life matters. These are pretty basic things. I mean who does not wish to have their time on this earth matter? And the other cool thing is when we do something that makes us happy, we tend to do it again and again.

Mihaly Czikszentmihalyi has long been a leader in studying why people are happy. In his book Flow, he helps the reader decipher how we acquire meaning, purpose and happiness in our life. The list of items almost directly align with the reason so many nonprofits exist. Being of value to others, sense of purpose being part of a greater good.

At the end of the day nonprofits exist to change lives. Not only can nonprofits change the lives of the people they serve but if the scientific studies are accurate they also have the power to change the lives of the people who invest in the mission. However, our national statistics suggest we never really accomplish the latter. Our industry stats point out that we never really keep donors long enough to impact their level of purpose or happiness. Without those triggers,  Czikszentmihalyi suggets people do not reach a place called flow. Designing a "flow' like experience for donors is a key aspect in creating a stewardship strategy that actually retains donors.  Designing a culture to deliver a flow like experience can not be attained by looking to our past or current "best"practices. This will require a rethink of how things have always been done.

This is a big topic and one that will be explored in great depth and with concrete take aways at the Donor Retention Bootcamp. It is interesting to note that part of our long term answers may be found in the design of games. Author Jane McGonigal begins to unlock a key ingredient to long term retention in her book "Reality Is Broken".

Back To The Future

I have been reading a lot lately about the importance of retention. Some one recently posted a blog about some incredible information coming from a person with the title "scientist" who is a vendor to the nonprofit sector. The scientist stressed how critical it is not to focus all your attention on acquisition of donors. A compelling case for today's market as it was equally compelling in 1975. The math is simple, we renew each year more than we acquire. Traditional fundraising of course not disaster relief efforts.

Wow Institute

There is a bunch of noise in the market about tools that will rescue us from our own ineptness and completely fix the very real retention issue demonstrated by the recent AFP Effective Fundraising Study. It reminds me of the hammer salesperson who sees the solution to every problem as another hammer. Great customer service is the by product of a mind set. It can not be manufactured with a tool. Putting the world's best scalpel in my hand will not make me a great surgeon. Today there are people talking about retention and providing advice that have never executed strategy that resulted in increased donor retention. Sort of Bernie Madoffs of philanthropy.

If you seriously want to wrap your head around impacting retention please know that it has nothing to do with tools.  It is driven by creating a culture of service and a good old fashion understanding of  exactly who the customer is you can't live without, and then making sure you keep them.  In 2001 I took my advancement team to Disney to learn about customer service because Disney had the highest repeat customer metrics of any industry. We could not learn about retention from the standard fundraising conferences available. In addition we could not embrace the current "best practice" metrics because these metrics have actually produced the dismal results in the recent AFP survey.

The above gaps led a group of us to create the wow institute over a decade ago, it was designed to put the donor at the center of the conversation.  Today The New Science Of Philanthropy delivers a set of metrics never before discussed in best practice circles but proves, in a linear manner,  there is a better set of questions that exists to build a sustainable fundraising initiative. It would be great to hear from any of the old Wow folks who experienced a week in the mountains of New Hampshire to let us know what their perspective on donor retention is now that their wow experience was a decade ago!

Keep Your Goals To Yourself!

I have long believed in the power of having a goal but have also thought it was very personal. Since I entered the fundraising profession I could never figure out why the practice was to tell the donor that it was important for them to give because of the goal the organization had. Never made sense. I mean how might you feel when you entered the car salesroom and the sales person came up to you and said, "Hi great to see you, I nee to sell 5 more cars this month for a bonus". That would so be not about the customer right?  Why have we ever thought this worked in our world, but certainly our industry retention numbers let us know how not about the customer we are.  But here is another poetential reason.   Enjoy

That Is Not Retention

Recently on a LinkedIn discussion in the CASE group there was a fairly typical discussion regarding the retention of donors. It started off as a loyalty thread, which is a topic I look forward to addressing here in the very near future. At one point an individual stepped up to outline the significant success his program had at moving retention from 67% - 70%.

Introducing The New Science Of
Philanthropy in San Francisco last month

First, what is the logic of measuring retention in a percentage? Let’s take the higher number as a quick example. If you kept 70% of your donors that means you are losing 30%.  A next logical step is to stretch that out over time, you would go through 100% of your donors in 3.33 years.  In the business of building and sustaining relationships our questions need to be based on longer-term outcomes.

Measuring a year over year retention rate as a percentage will only hurt your ability to actually do what you want to do. In the above scenario the 70% does not hold level for multiple years, as a result the loss of donors accelerates. The above LinkedIn member’s donor base is most likely barely surviving 3 years on the books.

Founders New Science

I will go much deeper into retention on this blog but let me suggest that retention is measuring by years. Example: ten years ago our donors remained on the books 2.5 years. Today the average length of time a donor remains is 4.28 years.  Now that is a 71% increase in donor retention.

The New Science Of Philanthropy currently has a patent pending on a proprietary dashboard technology that for the first time assists organizations in building strategy for actual retention results. It will impact social media, communications, stewardship and acquisition.