Making the Investment: ROI Hinges On Execution

If you are a fundraiser, you are an investment. Your organization has decided that funding you will do a greater good than directly funding programs because you will return revenue greater than your expense. It is a matter of your commitment to organizational mission.

You have an obligation to maximize the impact of every dollar invested in your organization, especially when funding development and administration. As donors become increasingly savvy, and there are organizations dedicated to evaluating you based on efficiency ratios, maximizing your return on investment (ROI) is a matter of accountability.

There is a need and a purpose for annual giving, special events, and planned giving, yet not all investments will generate an equal return. The current trend for many organizations is increasing fundraising revenue even while the number of donors is in decline. Fundraisers who focus on relationship-based fundraising with prospects with significant giving capacity are experiencing greater success than those relying on direct response alone. If you believe that the current environment will result in a “K-shaped” recovery, this trend is likely to increase.

It is easy to illustrate why there is no bigger determining factor in fundraising ROI than major gifts work. One major gift can be the difference between meeting budget or making cuts. It can determine whether an important new program or service is financially viable. If your organization isn’t focused on relationship-based fundraising, you’re likely leaving money on the table and risking the future viability of your fundraising program.

Starting a major gifts program is far from a flip of the switch, and even those with a major gift effort might not be realizing the type of returns that are possible in an efficiently run program. Major gifts work can appear a high-risk, high-reward endeavor but the associated risk drops considerably when managed properly. It is important to take a step back and evaluate how your program performs in areas that can make or break your results.

Defining a major gifts program

What exactly constitutes a major gift varies from organization to organization. Think of major gifts work as the process of building donor relationships in a way that allows you to match a donor’s passion with organizational priorities, resulting in a more meaningful gift than could be expected through a more transactional approach.

In a more quantitative sense, reviewing the top 10 percent of donations each year by size of gift helps to define a major gift for your organization. This could be $5,000 for some and $500,000 for others.

Using this 90/10 ratio begins to tell a story of the impact major gifts have on fundraising ROI. The chances are that 90% of your fundraising revenue is driven by gifts from just 10% of annual donors.

When done well, you are providing a gift to your donors — the joy of making an impact on the world by turning their financial resources into positive change they could not otherwise make themselves.

In this spirit, staff at every organization can and should be doing major gift work. Even in the smallest of organizations, the executive director maintains close relationships with trustees and top donors. In regular communications, the executive director begins to understand donor passions and programmatic interests. While these relationships might result in steady giving or even incremental gains, they might not be strategically maximizing any one donor’s philanthropic potential.

Major gift work takes staffing, systems and strategy. To maximize its potential requires detailed research, continuous analysis, and grit to follow through on a donor journey that requires months or even years to complete. In successful efforts, these elements are intertwined, but for purposes of illustration, let’s look at major gift work piece-by-piece.

Staffing

Relationships take effort. It is important to be realistic when setting staff expectations. On average, a major gift officer can manage a portfolio of about 150 prospects. That number shrinks as the level of capacity of the prospects grows. It typically takes more time to cultivate a $10-million gift than one of $10,000. The number of prospects in a portfolio might also be reduced if the gift officer has many “other duties as assigned,” such as managing volunteer committees or boards.

When assigning these other duties, it is important to determine whether they are truly mission-critical, as they often have a lesser ROI than if the gift officer spent that time managing their portfolio.

When it comes to scaling your operation, always look to maximize existing resources before adding staffing. Again, it’s important to be realistic. A new gift officer will likely not generate revenue far greater than salary and benefits in the first year.

The earliest major donors to an organization are what you might consider “low hanging fruit.” Not all portfolios are created equal. Not only will it take significant time to engage a new cohort of prospects, but those prospects might not have the same capacity as current major donors.

If you have one gift officer raising 10 times their salary and benefits, it’s not reasonable to expect that simply hiring another gift officer will generate the same type of return. In addition, there will come a point when as gift officers are hired, additional organizational resources must also be increased to manage and support their work.

Systems

Major gifts work is a marathon. It can take 12 to 18 months to bring a prospect from qualification to their first major gift. It could be years, or even decades, before that same donor makes their “ultimate” gift. During that time things will change within your organization, with the donor, and with your external environment.

Gift officers and staff will come and go. Donors will change jobs, have children, and retire. There might even be a pandemic or social upheaval. Therefore, it is important to invest time and effort in systems that power your advancement work.

The most obvious is your constituent relationship management system (CRM), or database. Whether it’s cheap and simple, or expensive and complex, it needs to capture the information you need to manage prospect relationships, and it needs to be utilized. Populate your CRM with contact reports, communications, interactions with digital communications — whatever will help you better understand and engage your donors. As they say, garbage in, garbage out, so be careful with your data management.

While a CRM is a critical component to major gift work, it’s one important tool in a more complex system. What are your expectations of gift officers? How is their performance measured? Can they assess their performance in real time, or at least frequently? How do different parts of your organization interact? What role do we expect leadership to play in major gifts work? And how will we support them and facilitate internal communication? These are just the internal questions that need to be answered.

You also need systems for external relationships. It is essential that donors trust your organization to steward their gifts according to their intent. This means receipting gifts and reporting on giving in annual reports. You need to track donor interests and communication preferences to appropriately engage them. And when donors want to be more involved in the organization on their journey to a major gift, you need to have compelling opportunities to engage them outside of writing a check.

Strategy

If you don’t know where you’re going, any road will take you there. As a gift officer, you are responsible for the strategy that leads a prospect to making a significant gift to your organization. Every major gift prospect in cultivation should have a documented engagement strategy. That strategy will, and should, change over time. The important thing is that you are deliberate in your work.

Engagement strategies define the anticipated steps involved to cultivate a prospect, and what organization leaders, programmatic staff, and key volunteers and donors are necessary in that engagement process. It also means that before any solicitation, you understand that prospect’s financial capacity to give, their giving to other organizations, how your organization fits into their philanthropic priorities, and the impact they wish to make.

The Bottom Line

If you are wondering if you are getting the most out of your major gift investment, or looking to grow, here are some areas to consider:

• Is my gift officer working with all the prospects assigned to them, or focusing on just a small number with a big impact? The 90/10 rule can apply to major gift portfolios, but it is important to qualify new prospects and cultivate new relationships even if the return is not immediate. If you aren’t careful, this will be revealed when the most promising prospects in the portfolio have given and there is not a new cohort of donors ready to step up and give next year.

• Is my gift officer working with the prospects with the greatest potential for revenue? You don’t want your gift officer chasing appointments just for the sake of staying busy. Are there relationships being managed that likely won’t result in a major gift while other promising prospects are sitting dormant? Or do all the prospects in each portfolio have at least signs of major gift capacity and some inclination to support your organization.

• Do I have the systems in place to sustain an effective major gifts program? Ensure your systems aren’t only collecting the necessary information to build and sustain relationships, but also generating the type of intelligence you need to work strategically.

• Is my gift officer receiving the support that they need? A donor’s relationship with your organization should never rest on the shoulders of one gift officer. Quite the opposite, securing major gifts requires the participation of organizational leadership and key internal stakeholders to truly communicate the impact that can be made through a gift. Your organization also has an obligation to ensure there is a sound strategy and vision behind giving priorities to give donors confidence that their investment will generate the impact they have been promised.

Whether you’re a team of 50 or a small organization where the executive director is the chief development officer, building a strong major gifts effort is essential to maximizing the impact of the gifts that have been entrusted to you.


Michael Hutchinson is managing director of agency Changing Our World in New York City. His email is mhutchinson@changingourworld.com