Myopic Metrics

A colleague told me recently of a university advancement office that requires each member of its regional staff to make 200 contacts and secure at least $2 million every year. The person in charge says it’s working because just about everyone meets their goals every year. Well, when you think about it, that’s the trouble with metrics and a sure sign they are not working. Allow me to explain.

If you impose aggressive metrics on a development staff, you say, in effect, “here’s how we’re keeping score.” If you’re a development officer, you’ll say, “Fine, then I will do what it takes to meet that score.” Since 200 substantive contacts is extraordinarily difficult to achieve, you will be forced to secure appointments with those most likely to agree to them. Yes, every institution has them, the loyal folks who can’t get enough of the place and will agree to meet once or twice a month is asked. If you have five of these folks in your portfolio, you can use them to rack up close to half your required visits. It would be far more productive if some of that time was spent pursuing new, high end prospects but they are very busy, and being chased by multiple organizations, so getting to them is much, much harder -- and your incentives don’t encourage you to stay in pursuit of the very best for very long. Yes, you will try to meet the best prospects you can and to make every interaction as substantive as possible but you always have one eye on the score card. The longer the year wears on, the more you worry about your progress toward the required metrics so you take the easy appointments or start to stretch the definition of a “contact.” One morning, you’re so frazzled that you have a traffic accident. As fate would have it, you hit someone who once gave a $100,000 to your institution. You file a contact report which reads, “Had a wonderful encounter with Beulah Bumpkin this morning. Despite her incredibly busy schedule, she made time for me on her way to work. Though she seemed discombobulated at first and complained of screaming neck pain, I was able to bring her around and talk about our new initiative in non-invasive imaging. Though she has not given in a long time and no one has been able to get an appointment with her, she clearly has far greater capacity so I feel good about creating the opportunity to rekindle what could be a very productive relationship. She promised to get back to me soon, or to have her lawyer call. Next step: Call back in two weeks if I don’t hear from her.” Come on now. Let’s tell the truth. Necessity is the mother of invention. Don’t we have the tendency to do what we have to do to make the numbers? And the more ridiculous the goal, the more ridiculous the extremes we will go to.

And then there’s that $2 million bogey. Now, it might make more sense for you to pursue some very promising prospects that might make a gift in 18 to 24 months of relationship building but you’ve got to make your numbers. You’ll focus on those most likely to give, even if it may be smaller amounts. Again, “the system” incentives are such you end up asking for $250,000 today rather than working with that prospect to develop a $1.5 million gift a year from now. And the other thing you will do is insist that gift accounting provide you a list with every gift that has come in from your region so that you can take credit for it. Now, if you had been instrumental in development of those gifts, you would have heard directly from the donors; you wouldn’t have to learn about it from the folks in gift accounting -- unless you’ve been reduced to taking credit for anything that comes in over the transom, regardless of or despite your efforts. Yes, yes, I know you’ll argue that you need to know about these gifts so that you can steward the donors but it that dark place in your scared soul, you’re just looking for anyway to meet your goal. A sure sign of metrically-mad development operation is a gift accounting operation under siege by the development staff asking for more timely, more specific donor information from their region.

And the person who put these metrics in place will argue until he or she is blue in the face that they work. Look at the numbers, they will say. Just about everyone has met or nearly met their goals. Great, I say, so how many new dollars are you raising and how many new prospects are you bringing in year upon year? And, in most cases, there’s not that much movement in the aggregate numbers. That’s because the operation is really raising that much more; its just found a better way to turn otherwise decent folks into credit-seeking hounds. The more ambitious the metrics, the more the system can actually work against the kind of assiduous relationship building that produces more significant, sustained support.

I’m not against all metrics, just the wrong kind. I don’t believe in individual dollar goals because they force development officers to sub-optimize the long-term potential of many donors and weaken their ties to institution by asking them to give too often to purposes that are not near and dear to their philanthropic hearts. I would advise development operations to focus more on substance, both in terms of what the institution is asking for and those it is seeking support from. I would ask the front line development officer to orchestrate 60 substantive interactions each year. And to orchestrate something, you have to work in harmony with others, be it on the development staff, on the academic side of the house and, perhaps, volunteers. I would try to create a culture of orchestration, not one of lone, hungry, frightened wolves.

Good metrics, ironically and unfortunately, create goals that are so realistic that some people can’t meet them. The measure of an effective system of metrics, then, is not that everyone is meeting them, no matter what, but that some are and some not, and that they are bringing out the best in the best people and exposing the weaknesses of the pretenders.

Hitting Student Debt Head On

Recently released research showing that tuition-related debt is the major barrier to giving back to their alma maters for 8 out of 10 college and university alumni under the age of 35 has generated a lot of discussion in higher education circles in the past week. Jon Hite, the former alumni director at UMass Amherst, says it would be wise for college and university presidents hit this issue head-on at their commencements. He suggests language along these lines:

"First, I want to congratulate you for attending this college. All the evidence suggests you received a great education, had a chance to interact with top-notch faculty, and become friends with other bright and talented people, many of whom you will remain close to and, if you're lucky and work at it, be in love with, for the rest of your lives.

Second, I want to thank you for enriching this institution as much as I believe it has and will continue to enrich you. I hope you will agree that your campus experience allowed you to learn not only from your teachers, but from your friends and yourself and, in turn, to contribute to your friends’ understanding of the world and our understanding of you and your generation. We are a better place because of you.

You paid a steep price for the diploma that you will be awarded today, in effort and expense. You leave here today -- many of you-- in far too much debt, and for that I'm sorry. It’s not the way to start the next chapter in your life but I know you will work your way through it and excel despite it.

My hope for you is that as you go on to do whatever it is that you will do, that you will remember this place. I promise you that we will not forget you, and what you did for us.

Money is fungible. Loyalty is not. We will remain true to our mission, to your younger brothers and sisters, and to your children. We will call on you for your help, for your ideas, your constructive criticism and for your involvement. If we live up to what you expect of us, I am confident that you, when you are able, and for many that will not be until after your loans are paid off, will pay forward the opportunities that 150 years of your fellow alumni made possible for you."

What do you think? Should we go after this issue before students graduate? If colleges and universities continue to clamor for support from indebted alumni, will it come across as insensitive to their struggles and cause them to feel less of an emotional connection? Would it be wiser to provide a range of programs for young alumni, scale way back on the annual fund requests, and work on preserving ties for long run?

Shouldn’t we be at least willing to survey our own alumni and find out how they feel about this issue so that we respond in a considerate and appropriate fashion? Certainly without some reconsideration, some change, we will continue to leave far too many of our alumni behind.

Establishing and Strengthening Corporate Relationships

A colleague has asked me to address the most effective means of establishing and strengthening corporate relationships. A corporations view of giving is conditioned by profit-making imperatives including the discipline of calculating return before making an investment. In other words, corporations will not invest in open-ended processes; they will expect your institution to project specific, measurable outcomes in its gift proposals. If they believe those outcomes are consonant with their corporate objectives, they will contribute.

There are three major reasons that corporations support universities:

1. To improve their recruitment efforts.
2. To gain early access to research findings.
3. To promote buying habits among young adults and move their product.

In the past few decades, the first has been the greatest impetus for corporate giving by a wide margin but it does wax and wane with job growth potential in that corporation’s particular sector of the economy. Science-based or technology-driven companies align with universities to get an early look at new knowledge but tend to affiliate with the disciplines and departments that they see as most germane to their product development rather than with an entire institution. Coca-Cola is an example of a company that supports universities but usually through contracts to secure exclusive pouring rights on various campuses with the assumption that such contracts will drive up student consumption which, in turn, will lead to long-term brand loyalty.

In the case of non-profits, corporations may give to strengthen their brand or soften their image. Many give from community funds to demonstrate corporate citizenship but those kinds of grants tend to be under six-figures and awarded to numerous organizations.

When instigating or broadening a relationship with a corporation, then, it is important to have a deep and detailed grasp of its business objectives and to be well prepared to show how the activities and aspirations of your institution align with them. The place to begin is with an institutional inventory of various points of interaction with that corporation including:

Are they employing our students as interns or co-ops? How many students do they recruit each year? What percentage of them are former interns or co-ops? How many of our graduates work for them? How many are in senior positions?

Do they have any consulting or research relationships with any members of our faculty?

Are they a vendor? What do we spend on their products or services each year?

Is there any crossover between the members of our boards?

Do they lease any of our conference space, athletic facilities or avail themselves of other campus services.

Are they corporate sponsors of our athletic department?

The more of this information you can gather, the better you make this case: “Our institutions are already aligned and interdependent in a variety of ways. It is our mutual interest, therefore, to cement this relationships and, wherever possible, make it more strategic and productive. Here are several ways. With an investment of x, you can expect the realize the following objectives...”

If you are effective in making this kind of case, your potential corporate partners will approach the gift agreement negotiation like a business deal. They may ask very specific questions about the degree of recognition you will provide including naming rights, publicity, events, and access to alumni and faculty. It is profoundly unwise to humor a potential business parter, to go along with their requests while not being sure if you can fulfill the terms or somehow hoping they may not be so demanding after they make a gift. Be prepared to negotiate in the style of the buyer, forthrightly and in considerable detail. Since campus and corporate cultures can be very different, make sure that all key campus stakeholders are comfortable with the arrangement before it is announced to the campus and the public. Many a potential corporate gift has come undone at the last minute when outspoken members of the faculty raise questions about the process or the prospect of infringement on academic privileges or academic freedom. These last minute blow ups are damaging to all involved and often lead not only to the withdrawal of the gift from the negation of the possibility of future partnerships.

If few or no connections exist between your institution and a corporate neighbor, one of the best ways to build toward a broader alliance is through the establishment of a student internship program. If your students acquit themselves well in these positions, the corporation is apt to expand the alliance and, as they do, become more inclined to hire interns into full time positions when they graduate. And the more students the corporation hires, the more it will come to see your institution as a preferred provider and seek to strengthen the relationship.

If you do succeed in developing corporate partnerships, your institution will have to accept, respect, and make long-term adjustments to business practices including the expectation of detailed analyses and performance reports about the program they have supported. In addition, most corporations will expect, and the best university corporate relations offices will provide, one-stop shopping. For instance, corporate executives will expect to make one call to one person at your institution and have him or her coordinate an extended agenda that will cut across various lines of internal authority including research reviews by the faculty and briefings from various academic administrators, lab or facility tours, and recruiting interviews with the most accomplished graduating students. In other words, don’t pursue strategic alliances with corporations without first establishing a centralized means of managing those relationships. The coordinator of a corporate relations office must have the authority and support of various campus claimants to forge a common agenda. Corporate executives will have little tolerance with layers of administration, highly decentralized decision-making, slow responses, and weak analyses.

Yes, there really are many examples highly productive strategic alliances between universities (and other non profits) and corporations. When executed correctly these alliances can be highly complementary and bring out the best in both cultures. When done naively, they can lead to no end of misunderstanding and friction.

Fund Raising Performance

As most institutions of higher learning begin a new fiscal year, I thought it might be important to look at a report by Target Analytics, a Blackbaud company, looking at higher education fund raising performance (as measured through annual funds) from July 2008 to June 2009. I predict the fund raising performance of the recently concluded fiscal year will be eerily similar and represent a continuation of these trends. Excerpts from the Target Analytics report are in italics.

Donors are continuing to give and be retained at comparable rates... Overall retention rates were relatively flat compared to 2008. The two year trend shows only slight erosion, down from 64 percent in 2007 to 62 percent in 2009, despite the tough economic climate. In fact, in 2009 retention rates increased by one percent for private institutions. Translation: Loyal donors remained loyal.

The overall median reactivation rate of 16 percent is the lowest recorded in recent history and marks a new low for programs’ ability to recapture lapsed donors. Overall the median change in the number of new donors was down another 11 percent in 2009. Translation: Recently reactivated donors didn’t stick; new donors were very hard to come by.

Overall, the change in median revenue was down 13 percent. For retained donors this median change was 12.9 percent, and for reactivated donors an even starker decline of 15.9 percent. Translation: The total amount given by loyal donors declined less than that given by reactivated donors.

As further evidence of just how challenging 2009 was for annual fund programs, the median change in revenue per donor was down 8 percent, with private schools dipping 5.5 percent and public schools down 9.2 percent. Translation: Graduates of private institutions reduced their giving less than graduates of public institutions.

Target Analytics’ data was accompanied by a set of observations and recommendations, again in italics.

During recent tough budget cycles many programs decided to invest heavily in retaining donors as a primary goal of the annual giving programs— these efforts appear to have worked. My observation: Amen. Secure your base, especially in tough times. Spend disproportionately on the loyal.

Institutions will need to recommit significant resources to recapture lapsed donors in the future. They will also need to refresh the case for support by creating a more compelling message and sense of urgency that will convince these lost donors to renew their giving. My advice: You should invest in market research that will help you understand why donors lapsed. Pouring more money into recapture techniques -- new, old, soft or aggressive -- is a terrible waste if you don’t know why they left. You can’t develop a more compelling case for support until you understand what didn’t work in the last one.

Some institutions reported using softer ask levels in 2009. But even those institutions that continued to be aggressive with ask levels, for the most part, still saw decline in revenue per donor. Again, with revenue per donor measures increasing every year in recent memory, this trend is alarming. Institutions should return to aggressive ask strategies in the current and future years to begin regaining ground from these losses. My observation: Their advice is not supported by their own facts. If the evidence shows that “aggressive ask strategies” resulted in less revenue per donor, why would you recommend returning to them? Again, it would be far wiser to find out why revenue per donor declined. Research conducted by Engagement Strategies Group, which I cited in an earlier post would suggest that donors are not responsive to “aggressive ask strategies” especially if they think their alma mater hasn’t done enough to establish an emotional connection with them.

The report makes a powerful case for the importance of loyalty but doesn’t do enough to stress how important it is for us to understand how it is created and and how it can sustained. There’s a reason that privates in general do better than publics; quite simply, they provide more personal attention to, and create a more intimate learning experience for their undergraduates. This is why most of the colleges and universities enjoying the highest rate of alumni participation are private. All to often we focus on the fund raising technique and not what makes the alumnus receptive to a fund raising request, or not, to begin with. We need to learn far more about the character, emotional make up and student experience of the loyal donor, the occasional donor and the never giver. The more closely we look at those issues, the more we will come to understand that the roots of alumni generosity lie largely in family values and student experiences. If the root system is strong, any and all fund raising techniques will prove successful. And if they are not, none will work well for very long.

In the face of these continuing trends, we should commit ourselves to a deeper examination of these roots and a closer assessment of our families of support.

What Trends Portend

Until the air went out of the economy, the trend in American philanthropy was “dollars up, donors down.” As long as the former was true, we didn’t seem to worry about the latter, as if the declining number of donors would never catch up with the totals. It was a bit like saying, “Yes, I’m running low on gas but I’m getting better and better mileage!”

Then came the downturn. The increasingly few we had come to rely on could no longer write checks big enough to cover the loss of many. Then it was “dollars down, donors way down.” At that point, it would have been nice to say, “Okay, so we’ll offset the decline in the size of the average gift by getting more to give.” Except our bases had already eroded. We left them unattended, or paid insufficient attention to them because dollars were up. Loyalties migrated. Emotional connections waned. Getting donors back or finding new ones now will require new strategies, significant investment and a serious, sustained effort over many years.

If, on the other foot, we persist with the “get what we can now and worry about tomorrow later” strategies, the consequences will be even more dire. It will be like tromping on the accelerator as the tank hovers on empty. “Now, Jim,” you say, “It’s not as if we’re in any real danger of running out of gas any time soon.” Well, unless and until we do a better job of looking down the road than we have, we really don’t know what will happen. So, let’s try.

The more we rely on fewer donors to provide ever larger amounts, the more fragile our philanthropic future becomes. Even if the very few can cause the dollars to go up, we put our institutions in the hands of ever more powerful oligarchies which, in turn, increases the potential of greater influence being exerted from a more narrow set of interests. I am not suggesting that the exertion of influence will always be in the naked self-interest of the oligarchy (i.e. special access to high-level health care or the admissions of unqualified offspring to schools) or that non profit leaders will always succumb to it. But I am saying non profit leaders will run the risk of developing strategic, ethical and exclusionary blind spots by being forced to spend larger amounts of time with an increasingly select few on whom the future of their institutions have become profoundly dependent.

In addition, paying excessive attention of those who can give the most the soonest comes at the cost of developing future philanthropists. We know, for instance, the vast majority of college graduates who give back to their alma mater in the first few years after graduation will persist in that habit for the remainder of their lives but most of us spend too little of our time and resources nurturing their interests. We also know that those who give the largest estate gifts are often loyal yet modest annual contributors. But if they give for 15 straight years, their probability of giving a major portion of their estate increases dramatically. Yet, these loyal unassuming donors rarely capture the same level of institutional attention as those who give large outright gifts. It only stands to reason, then, that inattention to building the long-term base reduces the size of the garden from which loyal givers are grown which, in turn, diminishes the probability of significant estate gifts in the future.

And, finally, consider the consequences already visited upon us as a result of the “get it now” approach. College and university alumni participation in annual giving is at an all-time low with no real prospect of reversal any time soon. Far too many alumni have concluded that their alma mater doesn’t really need the money, allows contributions go into a “black hole,” and doesn’t do enough to build emotional connections with them. At the same time, a majority of Americans believe that non profits are too large and poorly managed. The way we have raised funds, often by being far more ambitious in what we asked others to do for us than in what we actually obligated ourselves to do for society, has diminished the stature of many institutions, and that is the most worrisome erosion of all. So, no I don’t think we’ll actually run out of gas but I do think many of us will run so low that we will be forced into making difficult and painful changes. And, when we seek to refill the tank, we will have to spend more dearly than ever before to even have a chance.

Institutions, by definition, bridge generations. They are a means of transferring something of value from one to another. Anyone who works for an institution, no matter how long, is but a temporary occupant. Their work, therefore, must build on what they have inherited so they can bequeath as much if not more to future generations. For the sake of the institution no generation can be in it for themselves on only for their time. Many of this generation will fail in their obligations to the future but huge opportunities and great rewards remain for those who subordinate a portion of today to build a better tomorrow.