DONOR INTELLIGENCE: The Systems and Processes for the Next Generation of Development

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1 DONOR INTELLIGENCE: The Systems and Processes for the Next Generation of Development By Matt Frazier, Founder and CEO of The Pursuant Group of companies There is a tangled web that has been spun over the last 90 years. Ever since 1919, when Carlton Ketchum first introduced a systematic method to raise capital, development organizations have become more complex, decentralized and clumsy. This fact is most evident within institutions of higher education. You don t have to look far to see that colleges and universities have created a vast array of competing niche fundraising functions. A method that once followed a linear path is now disjointed and dysfunctional. Historically, most colleges and universities began their development efforts with one central development function. Later, when a large college within the university decided that the central development office was not representing their priorities, they decided to go it alone. This was the beginning of the decentralization of development on college campuses. Now each college believes it needs its own development officer on-site just to keep up. Additionally, we have seen further niches develop in the areas of athletics, alumni organizations and foundations. The pinnacle is when even individual development officers compete internally for ownership of donors. This competitive atmosphere has created deeply entrenched fiefdoms within fundraising organizations the result of which is inefficiency, low production and waste. To make matters worse, the companies and vendors that serve colleges and universities only add to the dysfunction. Many of these companies are organized around one channel and function of fundraising. For example, direct mail providers are aligned with annual fund priorities, so long as it supports the delivery and production of more direct mail. This is true for telemarketing, Internet, campaign counsel and the like. Vendors compete for business by

2 trying to sell more of their product. This focus has caused institutions to get into the business of vendor management. This takes staff time and resources that, in most cases, do not result in more effective strategies. This decentralization creates separate silos of fundraising that do not share data, resources or priorities. The problem is real, and the victim is ultimately the donor. The donor does not see the athletic department as separate from the annual fund office. The donor does not know that the newsletter is produced by the alumni office and not the foundation. The donor knows your organization as a single entity, a place where his or her experience was profound and important. The burden should not rest on the donor, but on the institution. It is time to start putting the donor at the center. However, putting donors at the center is much easier said than done. The years of separation of development functions and the rise of the fundraising fiefdoms has created many wounds. Relationships are strained; heels are dug in. Changing structures and practices is required, but the pain associated seems to outweigh the benefits. Additionally, this change is almost impossible to accomplish from within an institution. Those that suggest or recommend systemic change are suspect. Fiefdoms are fearful of others benefiting disproportionately. So, how do we change? How do we put the donor at the center? How do we break down barriers and unify our efforts and sharpen our focus? The answer is not singular; however, the benefits are significant. We live in an age of giant leaps in technology. Technology has reached its way from the corporate boardroom to the military battlefield, from the operating room to the living room. It has become so affordable that even nonprofit organizations can benefit from its tremendous power.

3 Technology has a leveling effect. Technology is not a person. It is not a competing fiefdom. Technology is a tool that enables efficiencies and, in some cases, facilitates substantial change while creating measurable results. Take, for example, the corporate world. In the late 1990s corporations embraced the principles of Customer Relationship Management (CRM). This led to systems and tools that enabled disparate systems of customer data to be coordinated, mined, shared and acted upon. The result: a huge increase in productivity and profitability. The tools and systems that created these efficiencies are most often referred to as Business Intelligence (BI) tools. The most popular Business Intelligence tools in the corporate space are Enterprise Resource Planning (ERP) systems. These are systems that integrate all data and processes of an organization into a unified system. In the nonprofit space, often these technologies are too expensive and complex to embrace. However tools like data warehousing have recently become game changers for nonprofit organizations. A data warehouse is a repository of data from multiple sources. Data warehouses are different from donor databases in that they are time sequenced and de-normalized. A donor database by contrast is normalized on the name record, whereas a data warehouse maintains all data as a function of time. Data warehouses can be very large and require significant storage space. The benefits of a data warehouse in a university setting are significant. Imagine unifying all constituent data sets that relate to donors and friends. This would include everything from the core development database, athletics, departmental spreadsheets and online databases to alumni volunteer data sets. Unifying these disparate data sources is just scratching the surface. Now imagine appending these records with wealth profiling data online behavioral data, and consumer cohort data.

4 To illustrate the power of a data warehouse, consider the following: Let s say you want to focus on increasing participation in your planned giving society - the result of which, if successful, can have a dramatic impact on your institution. However, for large organizations, there are too many prospects and too few trained professionals. A data warehouse is like a Magic 8 Ball. You can ask it any question you like. The first question we would ask is to model past planned giving donors. How old are they? What are the average sizes of gifts? What class years are most represented? Then we would use consumer cohort data codes to see which cohorts are most represented. Then we would take that cohort information and cross reference behavior, past giving and wealth data to create a segment that would most likely respond to a planned giving solicitation. The result of the coordination and maintenance of a data warehouse is the significant donor intelligence that comes from modeling and mining the data. The process of mining a data warehouse has far-reaching implications. Data warehouses are only effective if everyone shares data. This requires that fiefdoms come to a common table and understand the benefits of sharing. The beauty of the data warehouse is the fact that everyone wins. John Nash, the Nobel Prize winning economist who was featured in the movie, A Beautiful Mind, developed the Nash Equilibrium. The Nash Equilibrium speaks volumes into the stalemate in which we find ourselves in fundraising. It provides insight into how everyone within a development organization can win by participating. Wikipedia describes the Nash Equilibrium as follows: In game theory, Nash equilibrium (named after John Forbes Nash, who proposed it) is a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy unilaterally. If each player has chosen a strategy and no player can benefit by changing his or her strategy while the

5 other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium. Stated simply, Amy and Bill are in Nash equilibrium if Amy is making the best decision she can, taking into account Bill's decision, and Bill is making the best decision he can, taking into account Amy's decision. Likewise, a group of players is in Nash equilibrium if each one is making the best decision that he or she can, taking into account the decisions of the others. However, Nash equilibrium does not necessarily mean the best cumulative payoff for all the players involved; in many cases all the players might improve their payoffs if they could somehow agree on strategies different from the Nash equilibrium (emphasis added) (e.g. competing businesses forming a cartel in order to increase their profits). In many cases, all of the players or fiefdoms within an institution could improve their payoffs or results if they somehow agree on strategies different from the equilibrium. This is a profound concept that pays dividends within healthy marriages as well as global political negotiations. Therefore, an opportunity exists to advance a shared mission to support an institution by committing to actively sharing. However, no one has incentive to change if there are not equal benefits for participating. This is why the technologies of donor intelligence are so critical. By embracing technologies that unify our efforts and allow each development function to pool valuable insights, we save time and money and increase our results. Recent economic times have wreaked havoc on college and university budgets and caused leaders to reexamine the very core of their efforts. Development professionals are looking for smarter ways to build relationships and fund their mission. The future of donor intelligence tools like data warehouses are bright. It is our hope that thoughtful leaders at institutions will embrace technologies and use them to create significant leaps in efficiencies and effectiveness.

6 Matt Frazier is the Founder and CEO of The Pursuant Group of companies headquartered in Dallas, Texas. Pursuant is committed to a single purpose: serving nonprofits and helping them achieve their greatest potential. Pursuant offers a complete range of fundraising and marketing communications services covering the entire donor relationship pyramid. Competencies include interactive and social media constituent outreach, acquisition programs, direct response communication, capital campaign counsel, and managed major and mid-level giving services. Pursuant serves a wide range of outstanding nonprofit organizations in the areas of health and human services, higher education and fraternal organizations, faith-based organizations and churches, and conservative political entities. Notable Pursuant brands include Ketchum Fundraising Services, RSI Church Stewardship, Pursuant Sports and KMA Direct Communications. For more information, visit pursuantgroup.com.