Outsourcing Planned Giving:

Transcription

1 Outsourcing Planned Giving: When it makes sense, when it s a bad idea, and how to know the difference. by Jay Steenhuysen

2 Presented at the Partnership for Philanthropic Planning National Conference on Philanthropic Planning October 17, 2013 Introduction A planned gift is the ultimate gift. It presumes that the giver has faced the question of his or her life s meaning and has chosen to leave a legacy gift to a cause or organization that truly matters to the individual. A bequest is a deeply personal decision one that is balanced with other heartfelt desires to provide for loved ones from resources that been accumulated and invested throughout a lifetime. So it s fair to ask: when does it make sense for a charity or nonprofit to outsource the fundraising activities and relationships it takes to cultivate such significant gifts? When is outsourcing a bad idea? And how do gift planners know the difference? The Seven Essential Fundraising Steps There are seven essential steps in the fundraising cycle. Connect Fulfill Service Seven Essential Fundraising Steps Cultivate Qualify Acknowledge Invite 1. Connect at this first step, the charity or nonprofit needs to listen carefully to what their donors are saying. They must demonstrate interest; understand the opportunities that are being presented (whether specifically articulated or not); and assess the donor s intent. This requires an in-depth conversation that is personal, friendly, and unhurried. 2. Cultivate listening to the donor s spoken and unspoken values is central at this step of the fundraising cycle. This step requires a sensitive, reflective conversation that probes more deeply into what the donor is saying as a way to explore and discover the donor s intent. When conducted with a sense of trust and respect, this is a conversation that helps grow the donor s relationship with the organization. 2 S t e e n h u y s e n A s s o c i a t e s

3 3. Qualify at this step, the organization is ready and able to truly connect with the donor s needs. The trust gained through the Connect and Cultivate stages encourages donors to reveal emotions and experiences that have shaped their decisions and to convey their expectations. This knowledge givers the organization a depth of understanding about the donor s financial capacity and the level at which they want to give. 4. Invite/Ask at this step, the donor is intentionally invited to give as an expression of partnership with the organization. This is an action that must be performed by someone considered an insider. This can be a development staff person, volunteer or other team member which includes someone retained through outsourcing who would effectively represent the organization. The invitation should not come from someone whom donors could perceive as an outsider. 5. Acknowledge the all-important Thank You reflects a specific agreement with the donor and must be timely and appropriate. It is best done by an insider, though it can be outsourced with clear direction that guarantees the communication whether personal or by mail truly reflects the organization. 6. Fulfill at this step, the ongoing work of keeping an organization s promises to donors is both accomplished and conveyed. The information provided to donors demonstrates the effectiveness of the organization and both fulfills and moderates expectations. 7. Service ongoing donor communications and engagement opportunities are used to keep people connected to the organization; donors will feel cared for and valued. Outsourcing at Every Fundraising Step Outsourcing is using resources from outside your organization to achieve the organization s objectives. In broad terms, there are three methods of communication: Print/Web Content using newsletter, direct mail appeals, websites, etc. to convey information to donors Telephone Contact using the telephone as the medium for communications with donors In-person Visit using face-to-face visits and seminars to communicate with donor For example, outsourcing may mean engaging people other than paid employees (people who are not under the direct control of the employer) to conduct specific activities on your behalf. It s hiring a talented web designer to create and host your website. Or paying an outside vendor to write and/or mail your campaign materials. It s engaging a calling operation to qualify major gift donors. It s asking key board volunteers to meet with donors and invite them to give. 3 S t e e n h u y s e n A s s o c i a t e s

4 Organizations outsource components of the essential steps in fundraising all the time. Not every organization has used outsourcing for each step, but many do outsource multiple activities at the various steps. For example, a typical capital campaign engagement might include the following methods CONNECT CULTIVATE QUALIFY INVITE ACKOWLEDGE FULFILL SERVICE Print/Web Content X X X X Telephone Contact X X X In-Person Visit X X The following chart lists some common examples of the three outsourcing methods: CONNECT CULTIVATE QUALIFY INVITE ACKNOWLEDGE FULFILL SERVICE Print/Web Content Direct Mail Gift Planning Newsletters Thank You Gifts Telephone Contact Major Gift Qualification In-Person Visit Capital Campaign Feasibility Study 4 S t e e n h u y s e n A s s o c i a t e s Donor Motivation Student Thank You Calls Use the attached assessment tool to determine your organization s current outsourcing, areas to consider outsourcing and activities closed to outsourcing. When Outsourcing Makes Sense Board Dinner There are several questions to ask when assessing whether it makes sense to outsource key steps of your gift planning operation to help you connect with donors though content resources, by telephone, or in-person. Do we have more opportunity than staff? What are the skill sets of our fundraisers? Does the consultant we are considering offer an expertise that we don t have with our internal staff? Would our priority middle donors respond better to an external estate planner who can offer a deeper and broader service? When charities and nonprofits take a candid look at the answers to these questions, they find that it is best to focus their fundraising staff on the tasks that will be the most productive use of their time and best utilize their talent and training. Usually, this means expertise in persuading qualified donors to make a gift and providing assistance as they complete estate plans. There are, of course, expenses related to outsourcing and organizations must always consider the return on investment for any expenditure for staff and external consultants and services. One way to do so is to evaluate the volume and cost of hours available through paid staff.

5 There are 2,080 hours available in a 52-week year of Monday through Friday work days. But this is hardly the amount of time that fundraising staff can devote to directly speaking with donors. Hours and hours of each day and week are consumed by required meetings for planning, human resource/employee purposes, professional development, and administrative tasks. More hours are assigned to vacation and sick leave, as well as unexpected personal situations that translate to lost time. All of these hours represent a payroll expense to the organization regardless of whether they are spent talking to donors or nursing the flu. Donor suspects are those who have the right characteristics and could be upgraded; they need to be contacted and engaged so that more is known about them. Prospects are those who have shown interest; when they want more information, a deeper conversation should happen. Donors are those who have taken action and connected with the organization. The process of moving potential donors from the suspects to prospects, and then qualifying them as donors who are ready and willing to take action, is an ideal opportunity for outsourcing. Identifying the right suspects to be contacted can be done through direct mail or data mining, But at some point in the process, no matter how targeted the lists, research, and mailings, someone has to personally speak with the prospective donors and ensure that these are indeed the right people. This qualification step cannot be accomplished through mail or data mining. It requires a personal conversation in which the prospect indicates interest, ability, and intent. By using outsourcing to identify qualified leads, fundraising staff are freed to concentrate their precious working hours on the tasks where their skills and expertise are most valuable. As you will see, this approach has proven to be more time-effective and cost-effective than expecting internal staff to do it all. When Outsourcing is a Bad Idea There are occasions when outsourcing is not the best option for an organization. The examples below are not allinclusive, but serve to illustrate that outsourcing is not always an appropriate tactic. The goal of outsourcing is to save time and money. If a prospective engagement will not provide substantial savings in time and/or money freeing your gift planners to make the best use of their time and expertise there is little to be gained by outsourcing. If you are not confident about your donor data and would find it difficult to create accurate lists of donor prospects, this systems problem cannot be fixed through outsourcing. Building a qualification campaign on flawed data will not yield reliable or actionable results. If you already have a strong and credible existing relationship with targeted donors, it would be a mistake to outsource that relationship. It is likewise problematic to outsource through a communications medium internal staff are already using. For example, if gift planners regularly engage with prospects and donors by telephone, it is unwise to introduce a vendor into those relationships and risk alienating donors. This would be a backwards step unlikely to produce positive results. If a vendor is not able to generate leads in a systematic, moderated way that allows gift planning staff to follow-up in a timely way, the engagement will be unproductive. Creating a flood of leads that cannot be efficiently managed will result in follow-up delays and potential donors will lose interest. 5 S t e e n h u y s e n A s s o c i a t e s

6 Alumni donors affiliated with campus-based organizations (university, hospital, etc.) are intimately familiar with many details about the organization. When outsourcing contact to these loyal and knowledgeable donors, you risk that the vendor will be quickly labeled an outsider. Miscommunication and frustration can occur when donors know more than the person who has contacted them. If the goal of an engagement is to learn more about donors, it must focus on learning something you don t know about donors. You risk alienation and anger from donors who are insulted when approached as if they are not already strong supporters of the organization. An organization cannot outsource the creation of donor relationships. Though normal staff turnover can result in some temporary loss of closeness with donors, it would be impossible to expect that a vendor could manage or maintain relationships between its employees and your donors. The Central Role of Bequests Bequests represent the largest and most important donations that gift planners can bring to their organizations. When known, bequests are gifts that an organization can count on as a future source of realized revenue. In addition to providing confidence about the future, bequests also benefit organizations in other tangible ways. In a study focused on the demographics and motivations of bequest donors conducted by the Center on Philanthropy at Indiana University, the following characteristics of bequest donors were cited: Donors with a charitable bequest in place gave more than twice as much in annual gifts as non-bequest donors on average, more than $2000. Donors who would consider a charitable bequest gave 50% more annually than those who would not consider a bequest on average, about $500. There was no difference in annual giving between donors with no charitable bequest and those who would not consider making a charitable bequest. The value to an organization of knowing about bequest gifts in advance as opposed to receiving an unexpected over the transom gift at a donor s death is quantifiable. Based on the experience of two national nonprofit conservation organizations with tens of thousands of realized bequests known and unknown it was established that known bequests from donors were larger than unknown gifts by 38% for one organization and 47% for the other. Despite the importance of bequest gifts, research conducted by The Stelter Company and Selzer & Company, Inc. found that only a minority of bequest donors (36%) have alerted nonprofits about their gifts. Some 80% of these non-notifiers believe that the details of their wills should remain their private business and that no one else needs to know about their gift. This desire for anonymity confirms research we conducted among bequest donors for a large national client. Prospective legacy society members told us that the most important option that could be offered to them was to remain anonymous. They also eschewed symbolic tokens identifying them as legacy donors. 6 S t e e n h u y s e n A s s o c i a t e s

7 At first glance, this desire to remain unknown seems to be a hurdle for organizations that want to know about bequests intentions. However, donors preference for anonymity can be fulfilled if a two-fold message is communicated: We need to know about your bequest, but the world doesn t need to know; we value your commitment and respect your privacy. By offering an option that protects donors preference for anonymity; organizations will find that donors are more willing to be counted. There are many important reasons that charities and non-profits want bequest donors to notify them of their intended gift. First, of course, is the desire to thank donors and continually demonstrate that the organization s mission and work is worthy of the anticipated gift. Thoughtful stewardship of these donors also can maintain and often increase current gifts from bequest donors, as noted above. Bequest commitments (even when donors remain anonymous) demonstrate donors belief that the organization s mission is important and their confidence that it will continue long into the future. When bequest information and stories are effectively communicated to the wider donor population, it can positively motivate and inspire others to do the same. Stewardship also is important because of the risk that donors may change the bequest provision to reduce or eliminate the planned gift. In a just-released study conducted among Accredited Estate Planners (i.e. CPAs, attorneys, financial planners, insurance agents, etc.) by The Stelter Company and Selzer & Company, Inc., 68% of respondents noted that clients occasionally add to or change the bequest provision in their wills. In a smaller telephone survey conducted by this author, 52% of estate planning attorneys from throughout the country noted that their clients had removed a charitable bequest. On average, this occurs with a frequency of about 12%. The economic value of knowing about charitable bequests intended for your organization is significant. It can lead to increased current gifts, promote larger bequests, and help you actively protect against the risk of being removed from a donor s will. For these reasons, it is apparent that one of the most important tasks for gift planning officers is to identify those unknown donors who have already made bequests, as well as discover which donors who would consider making a bequest to the organization. This is a formidable task for an internal staff. It is, however, precisely the kind of operation that can be cost-effectively outsourced with significant results. Results of Successful Outsourcing Based on a 4-year engagement with World Wildlife Fund (WWF) that was targeted to reach 60,000 bequest prospects, we can report that outsourcing the telephone contact with donors to connect, cultivate, and qualify these prospects proved successful and more cost-effective than mailing to receive a bequest intention. At the outset of the engagement, WWF knew that 1 in 400 of all donors on average would leave a bequest. This enabled them to create calling lists using value-based predictive modeling to increase the odds of identifying their very best prospects. This value-based approach helped WWF understand donor behavior as well as how their solicitation, cultivation, and stewardship efforts increased or decreased the likelihood of a bequest. It also helped WWF determine which marketing or stewardship activities had the greater return on investment and whether tactics should focus on calling or mailing. 7 S t e e n h u y s e n A s s o c i a t e s

8 The data requirements were fairly straightforward: identify past donors who have died; determine those who left a bequest; note the variables in place at the time the bequest provision was made (i.e. giving history, etc.). Ultimately, the best donor criteria/behavior drivers were determined to be: Giving level: high-dollar membership donors (averaging $200 annually) Responsiveness to mail Many consistent years of giving or high number of gifts Age is used as a selection criteria after the donor base has been scored. In Phase I of the project, 30,000 donors were identified for a highly targeted, six-month mail and phone campaign to discover and encourage new bequest intentions. Each received a personal letter notifying them they would soon receive a phone call to offer then a charitable legacy planning brochure. During the phone call, donors also were asked if they had an estate plan, whether it included charities, and if so, whether it included WWF. As a result of the telephone campaign, a total of 155 donors revealed a new intention. Based on their research, WWF expects that 105 of the 155 new intentions will result in a realized bequest. Had the phone campaign not been conducted, WWF s research suggests just 19 of the new intentions would be realized. In addition, WWF realized the following results: 1,267 donors requested the offered brochure. 3.3% (37) of donors requesting the brochure made a bequest commitment. An additional 505 donors are considering a bequest to WWF. The added value of new intentions to future revenue pipeline (less project costs) = $4.5M Return on Investment: 2324% The value of notification as a predictor of the likelihood of a bequest to WWF cannot be overstated. Notifiers are 200 times more likely to leave a bequest than non-notifiers. Other high-value factors include donors who have experienced a personal, high-touch relationship with the organization, which makes them 40 times more likely to leave a bequest than a donor with no such connection; and best donors who are 20 times more likely than remaining donors to leave a bequest. Fifty percent of WWF s bequest revenue comes from the top 5% of bequest donors. Through outsourced calling efforts, WWF had the opportunity to move people from the best donor category to the personal relationship category doubling the likelihood of a bequest gift. A strategy has evolved to treat these very best donors as if they had already notified. The methodology used to capture notifications is significant. WWF discovered that among donors who previously inquired about gift planning by mail, just one in 5,000 would notify of a bequest intention. Among the best donor group called through this engagement, those receiving thank you calls, and donors contacted through another program offering gift annuity information, one in 55 donors notified. On a per notification basis, the calling program was more cost-effective than a mailing program. Following a mailing of 30,000 followed by 11,000 completed calls, some 200 new notifications were received. With a net present value of $20,000, these new notifications have a value of $4M. 8 S t e e n h u y s e n A s s o c i a t e s

9 The cost for the phone program per notification was $1,500 compared to a cost of $2,000 per notification through a mail program. The added value to the phone campaign was a strengthening of the personal relationship factor with donors, plus important inquiry data that was added to donor files for follow-up by WWF staff. Would consider leads followed up by staff resulted in a 15% closing ratio. The engagement with WWF demonstrates the value of an outsourced calling campaign. It utilized external expertise to provide actionable information and leads to internal gift planning staff. The number of bequest notifications received and the cost per notification demonstrate the kind of cost-efficiency that can be realized through outsourcing select aspects of gift planning operations. Conclusion Outsourcing various components of gift planning is not a new idea. With charitable bequests as a central focus of gift planners, it makes sense to evaluate how the efficiencies of outsourcing can strengthen an organization s gift planning operation. Opportunities for effective outsourcing have expanded as new techniques are developed and refined. Web sites offer a new content and interaction venue. Targeted telephone conversations with donors have been added to traditional direct mail and other print communications. As demonstrated by the World Wildlife Fund calling campaign, the very act of bequest notification dramatically increases the likelihood that the gift will be realized. While a targeted telephone campaign may not work for every organization, it has proven to be an efficient and cost-effective solution for those able to provide quality data and skilled gift planners to follow-up qualified leads. Such impressive results should motivate other organizations to consider the benefits of a similar engagement. 9 S t e e n h u y s e n A s s o c i a t e s

10 Organizational Outsource Assessment Tool Determine your organization s outsourcing activity and potential. First, note all current outsourced activity. Then, consider what areas could be outsourced to the benefit to the organization. Finally, identify what areas your organization would never consider outsourcing. Print/Web Content CONNECT CULTIVATE QUALIFY INVITE ACK FULFILL SERVICE Telephone Contact In-Person Visit 10 S t e e n h u y s e n A s s o c i a t e s

11 References Krauser, Emily, Campbell & Company Research Fellow, The Center on Philanthropy at Indiana University. Bequest Donors: Demographics and Motivations of Potential and Actual Donors; March Stelter, Larry, The Stelter Company and Selzer, J. Ann, Ph.D., Selzer & Company, Inc. Discovering the Secret Giver: Groundbreaking Research on the Behavior of Bequest Givers in America; March Stelter, Larry, The Stelter Company. The Stelter Company AEP Survey of Estate Planners; October Malone, D. Kay and Schwass, John, World Wildlife Fund. Data Modeling in PG Marketing Targeting your VERY BEST prospects! Bridge Conference Presentation; July Schwass, John, World Wildlife Fund. Bequest Discovery 2010 Results and Future Opportunity; S t e e n h u y s e n A s s o c i a t e s

12 Jay Steenhuysen is the founder of Steenhuysen Associates, Covenant Calls, and Gift Strategies. Widely recognized as a dynamic and inspiring consultant, coach, and major gifts/gift planning expert, Jay has more than 25 years of experience advising national and international nonprofit and charitable organizations including World Vision, The Nature Conservancy, World Wildlife Fund, AARP Foundation, Bethany Christian Services, and Technoserve. Jay has helped these organizations and others effectively refine and refocus their gift planning, major gift, and marketing programs to meet the needs of donors at all wealth levels. His work in analyzing existing operations, gauging donor potential, and developing customized strategies and tactics is well-known and highly regarded by development leaders in many diverse non-profit and charitable sectors. His unique expertise in understanding, applying, and teaching the principles and action steps that motivate philanthropic giving is based on his extensive work with major donors. He has been cited by Worth magazine as one of the nation s top resources for high-net-worth families seeking assistance with philanthropy. Jay created The Strategic Gifts System a training curriculum that equips principle gift, major donor and planned giving officers to connect with donors, discover their agendas, and offer donor-focused philanthropic solutions. He developed the Philanthropy Coach training program to provide financial planning professionals with strategies and tools to help their clients integrate philanthropy into their estate planning in broader and deeper ways. Covenant Calls was founded to provide high-quality and high-capacity donor qualification and cultivation through telephone conversations with skilled donor relationship managers. Working on behalf of nonprofit clients, trained callers help charities connect with their donors one-on-one, strengthen and cultivate relationships, capture valuable information, and survey donors for major and planned gifts. Prior to establishing his own firm, Jay served as Managing Director of Philanthropy Services at MyCFO, a financial services firm whose 300+ clients had an average net worth of $125 million. He worked with individuals, families, and business owners to identify and develop their philanthropic interests and find ways to express those interests through charitable giving. Jay also was responsible for the development of Brown University s philanthropic planning program within the principal gifts department. Prior to that appointment, he served as the Principle Gifts Officer at World Vision, an international relief and development organization, directing that organization s Gift Planning Program and Capital Campaign. Jay s commitment to the fundraising profession includes leadership positions and service with the Partnership for Philanthropic Planning, where he will serve as Board Chair in He co-chaired the committee responsible for developing the PPP Leadership Institute, a forum where senior members engage in a diverse range of educational, motivational, and networking activities and programs designed to strengthen the gift planning community nationwide and ensure that the values and ideals of charitable giving will be championed with passion and excellence for years to come. Jay holds a BA from Seattle Pacific University, an MA in theological studies from Gordon Conwell Theological Seminary, and an MBA from Pepperdine University. 12 S t e e n h u y s e n A s s o c i a t e s

13 Steenhuysen Associates 1539 Fall River Avenue, Suite 3 Seekonk, MA S t e e n h u y s e n A s s o c i a t e s