Lighthouse Counsel is proud to be a member of The Giving Institute; the professional association of ethical and successful service providers to nonprofit organizations. Many people are familiar with The Giving Institute’s sister organization, The Giving USA Foundation, and the annual Giving USA Report.
At our board meetings we discuss some of the trends we’re seeing in the sector and, at this meeting, some of the longest-serving leaders help mentor newcomers to the nonprofit fundraising sector.
Here are some of the top lessons from this year’s Fall Meeting and Mentor Series.
Aligning fundraiser incentives with best practices
Gift Officers should be evaluated on three-year averages, not annual fundraising results. We live in an increasingly fast-paced world seeking immediate gratification, but relationship-based major gift fundraising doesn’t lend itself to immediate results. Most fundraiser incentives are evaluated and paid either annually or quarterly. Nathan Chapell, co-founder of Fundraising.AI and senior vice president of Lighthouse Counsel partner DonorSearch, explained why this is a huge problem.
It takes years of relationship building before most donors are ready to make a major gift and, over those years, they need to have good, deepening experiences with your organization as they explore more ambitious initiatives and funding opportunities to support your cause.
The old fundraising adage is that the right donor will need to be matched with the right initiative at the right time. When major gift officers have their annual bonus riding on gifts closed this year, their incentives are not in alignment with these best practices. And their timeline could be at odds with a donor’s timeline. A long view or three-year average aligns those incentives, giving fundraisers and major gift officers time to nurture donors and find deeply meaningful opportunities that invite bigger gifts.
All of us should be adhering closely to the AFP Code of Ethics, which means we don’t violate donor trust and we don’t make an ask simply because it’s right for the organization.
Prior to his time at DonorSearch, Chappell spent three years at City of Hope overseeing a billion-dollar capital campaign. One part of the successful campaign was the organization’s policy of incentivizing fundraisers with metrics over a three-year period. This provided gift officers with a framework to build meaningful relationships on the donors’ timeline.
If your organization has a commitment to relationship-based fundraising, you might want to consider incentives over a three-year average instead of incentivizing short-term asks that might result in smaller gifts and less meaningful donor relationships.
Acting like an expert from day one
Starting a new job is always a little scary – especially a job in an entirely new sector. I had the opportunity to present with Summers Hammel of Benefactor Group to share some advice for newcomers in the nonprofit and fundraising sector.
Behavioral Economics and Capital Campaigns
For years, many fundraising consulting firms – including Lighthouse Counsel – have recommended waiting to announce a capital campaign until a majority of the fundraising goal has been pledged in what is commonly known as a silent phase.
Our experience often is informed by academic research, but we didn’t think anyone performed research on an initiative as important and risky as a capital campaign; we were wrong. There is academic research on silent phase giving in a capital campaign.
Well known in the field of behavioral economics, John List is the University of Chicago Kenneth C. Griffin Distinguished Service Professor of Economics and teaches at the Indiana University Lilly Family School of Philanthropy. He has published many papers on fundraising and raised substantial gifts for his projects. His research was featured on the “What Makes a Donor Donate” episode of the Freakenomics podcast.
List’s paper, “The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign,”proves silent phase gifts make a big difference. This paper showed, “We design a field experiment to test two theories of fundraising for threshold public goods: Andreoni predicts that publicly announced ‘seed money’ will increase charitable donations, whereas Bagnoli and Lipman predict a similar increase for a refund policy. Experimentally manipulating a solicitation of 3,000 households for a university capital campaign produced data confirming both predictions. Increasing seed money from 10 percent to 67 percent of the campaign goal produced a nearly sixfold increase in contributions, with significant effects on both participation rates and average gift size. Imposing a refund increased contributions by a more modest 20 percent, with significant effects on average gift size.”
Simply put, this means there’s deep research showing a campaign with well over half the funds raised in the silent phase will raise significantly more money than announcing a campaign without that known support.
If you’re considering, or in the early stages of a capital campaign, the data suggests you should close your biggest gifts before you tell the world about your campaign.