Going Beyond Cost-per-Dollar; Benchmarking Against the Best

Stuart R. Smith, FAHP, CFRE

Benchmarking systematically compares one organization’s business processes and standards with that of industry leaders. The goal is to observe and create new and improved processes used by the top industry performers who set the standard that will enable your organization to improve its performance.

Performance benchmarking is a manager’s tool which positions today’s Chief Development Officer to answer the following questions:

• Are you using your budget resources wisely?
• Are you securing the best return on budgeted investment?

Fundraising has moved from a value-added function to an integral part of financial planning for non-profits. Because philanthropy is now understood as a “countable” revenue stream with net income and debt capacity, chief development officers are being asked to demonstrate their use of organizational resources at the highest levels of return and productivity.

The objective of performance benchmarking is to identify and enable the incorporation of an industry’s best practices into your development program. Methodologies and tactics are the absolutes; however, variables such as environment, personnel and budget are the impact factors. Thus, CDO’s should seek improvement based upon best practices but should not attempt to “absolutely mimic” the benchmark numerically. The benchmark may be “hit”, but there will always be uncontrollable factors that are unique to each organization and its environment. For instance, one organization may not have similar demographics to another, such as a rural service base vs. a “high-end” suburban gated community. Nor can the six figure bequest be repeated the following year, much less with a 10% increase. Therefore, progress toward the desired performance benchmark should be the objective, not the benchmark number itself. As performance toward the benchmark is measured, it can be monitored with regard to the organization’s adoption of best practices and the investment by the organization to implement them.

The key to successful performance benchmarking rests with the organization’s understanding of its purpose and management’s commitment to support the process.

It’s More than Cost per Dollar

Today’s thinking no longer embraces the statement “it should cost x cents to raise a dollar.” Just as there is no real average family of 2.5 people, there can be no absolute “dime to a dollar” real cost benchmark. Management’s thinking must shift from keeping fundraising costs down by expense reduction. This limits program investment and staffing. The new view supported by benchmarking leans toward measuring return on investment, thereby focusing on securing the highest return on budgeted investment. Performance benchmarking is a process or a video, not a fixed snap shot.

Within the resources available, adoption of best practices may require several budget cycles; and, much like any new program, investment return may take more than one cycle to rise. However, by tracking progress and investing in the methodologies that demonstrate high return, the performance benchmark will move toward the desired outcome. If not, then timely adjustments can be adopted.

Monthly Tracking Guides Progress

Performance benchmarking is supported by a monthly tracking system to insure progress toward annual targets. Data collection is crucial to this process and must be responsive to the need of real time information gathering and reporting. Data gathering is no fun so it is important that the team be informed about process and purpose and is supported by a capable data system. The development staff must understand and adhere to honest and timely reporting practices. Open data sharing amongst the team is mandatory. Genuine agreement on the “definition of terms” regarding the data collection is absolute. For example, what constitutes a move or contact; how is a pledge counted; when should an “ask” be delayed and for what purpose?

Once implemented, the willingness of the development team to discuss, alter and accept change due to findings and best practice implementation must be followed. As this performance discipline is practiced, a cultural acceptance for benchmarking will follow. New organizational resources can be justified, and retention or elimination of programs can also be warranted through benchmarked outcomes. This process supports objective decisions eliminating “sacred cows” and champions best practice, which moves fundraising outcomes up as a predictable consequence.

There will be Uncontrollable Factors

There are, of course, common controllable and uncontrollable factors that have been identified through many current industry benchmark programs. Factors which an organization may have no control over are predominantly observed in three areas:

1. The organization’s efforts to attract philanthropic support and longevity of its fundraising effort (e.g., absence of, or a weak major gift program).
2. The organization’s case for support
   (e.g., limited appeal).
3. The economic capacity of the organizational constituents. (e.g.,geographic factors) The presence of one or all three of these factors could be seen as seriously damaging to an organization seeking to raise a dollar with a dime philosophy; but using knowledge of these factors when selecting performance-benchmarked fundraising methods could deliver appropriate returns for the enlightened non-profit development program. Equally predictive are three major controllable factors seen in successful benchmarked organizations:
4. Development staffing levels for higher performing fundraising programs are higher.
5. Longer tenure of the fundraising staff fosters the understanding that this is a relationship business.
6. Budgets in successful fundraising organizations are stronger, reflecting the first two observations; they also frequently include resources supporting a major campaign.

It’s not about Absolutes

The performance value of benchmarking can be seen in the deliverables. Benchmarking is not a fixed outcome, nor an absolute number; it is a process toward a goal which is derived from the top performers in your industry. The objective is to move your organization toward and into that Best Practice Performance Group by adopting their best practices.