Financial Performance: The Unmanageable Metric
I am passionate about many things in life but the 'science' of fundraising management would be at the top of the list. I'm not afraid to admit that I love tracking and analyzing the minutia of numbers and activities that run in the background of an “ask” but are absolutely essential for maximizing success of matching prospect's passion with philanthropic need. Am I the only one out there that thinks like this? I seriously hope not.
The lack of operational ‘science’ in our profession is incredibly alarming. Think about it. It’s mind blowing when you reconcile with the fact that we work in a $300 billion ‘industry’ that represents 2.2% of the U.S. gross domestic product in comparison to how few in our field understand and practice (dare I say) for-profit business practices to quantifiably drive, forecast, benchmark and report out the productivity of our work.
I know this is going to be a touchy subject, so bear with me for a few minutes. It goes without saying that the nonprofit sector is abundant with incredible people, great intentions and deep passion. But if you are reading this posting, I’m going on a limb to guess that you, like me, have never been even remotely comfortable evaluating individual, departmental or organizational performance on good intentions or personal feelings. For you and me, performance value goes way beyond feelings and intent, it’s measurable, predictable, quantifiable and reportable.
At it’s best; the nonprofit sector is a place where fundraisers and fundraising managers find the altruistic nature of our business a suitable reward for their blood, sweat and tears. For my colleagues and myself, our early mornings and late nights are a sacrifice for what ultimately is an opportunity to make some small dent for the betterment of humanity. We work hard to “earn” our salaries while striving to advance our profession and ultimately sleep better because our toil has a purpose greater than ourselves. At its worse, our sector is a place where good-intended citizens end up stopping-by for what they (and most of the outside world) perceive to be an easy job - grossly underestimating the level of challenges and complexity of our business –thus desecrating our space upon their inevitable failure.
Assuming you buy the premise that we are living in the second philanthropic age then you will also deduce that with this era comes a heightened awareness about what philanthropists deservedly expect in return for their generous ‘investments’. In the global philanthropic world, mediocre results are no longer a luxury. Rightfully so, gifts today come with a multitude of deliverables that must be carefully and strategically crafted. They stretch our experience and challenge our ability. They force us to work intelligently and collaboratively with our nonprofit and for-profit peers to ensure the greatest chance of successful outcomes. If we agree that this ‘age’ requires a higher level of strategy, an unwavering focus on results, and a more sophisticated type of fundraiser then we must modify the way we manage our fundraising activities to conduct business in a way that will maximize outcomes in all areas.
Of course, one of the unique challenges of successfully managing results in the fundraising profession is the negative connotation that metrics, quotas and results have with many in the frontline. And rightfully so. For an overwhelming portion of the frontline workforce, a variety of metrics are employed by managers simply as a means to evaluate personal financial performance rather than guide the right kind of activity needed to achieve prescribed goals. Very little study has been done to identify which specific (or combination of) metrics yield the greatest results in the nonprofit sector. However, there are lessons learned by our for-profit brothers and sisters. Of the all the metrics that are deemed to be the best "performance" indicators, the one that I am least concerned with is "financial performance", simply because it is unmanageable at its core. Unfortunately, that seems to be the single metric that most fundraising managers would point to if asked to evaluate individual or departmental performance. Like a balance sheet, metrics such as “financial performance” are great for demonstrating the cumulative result of individual or organizational effort at any given point in time, but they are extremely limited to helping pinpoint deficits in productivity or even helping predict the eventual outcome of a goal. Conversely, metrics that track and evaluate various types of “activities” such as emails, phone calls, visits and solicitations, are not only manageable but they can also be used to effectively predict future outcomes. Studies in the for-profit sector show that while a majority of metrics can provide overall organizational, departmental or individual viability, only 17% of metrics are actually "manageable". (http://t.co/udLpIxZXd4) So, why do we continue to manage the unmanageable?
Please understand that I am not suggesting that we banish the use of financial reports and forecasts to make business decisions. In fact, reviewing financial data such as pipeline reports, open proposals, solicitation activity etc. all yield extremely valuable insight for managers to evaluate progress and determine the probability of success toward achieving goals. Thus, my soapbox today is narrowly focused on the proper use of "manageable" metrics that not only monitor, but are able to steer and modify the type and quantity of activity (in realtime) that are needed to achieve goals.
Tragically, a lack of understanding on how (and what) to track using metrics in the nonprofit sector ends up perpetuating the management of failure. Essentially, by the time a financial metric is able to demonstrate a problem, it is typically too late to realign activities to yield successful outcomes. You can guess by now, this is an area that gives me significant heartburn. Personally, I believe that the lack of understanding and proper application of performance metrics do more harm for our sector than good.
I know the overall premise of the need to quantify our ‘industry’ is difficult to swallow but for professionals on the most experienced end of the spectrum there is a recognition that our work is not simply limited to the challenges of our own employment. We carry the vital responsibility of protecting and advancing the reputation of our sector. This sounds daunting I know, but to make any dent in this area and embrace the 2nd philanthropic era with the sophistication that it requires (and deserves), we must deliberately and articulately quantify the value of our work.
With all this said, I want to be clear that I am not trying to minimize the very difficult job that fundraisers or fundraising managers have. I’m simply trying to strengthen the argument that we need to overcome the unspeakable fear of quantifying our business. That train has left the station and only those on board will consistently produce long-term results.
The philanthropic arena is a rewarding place to spend ones career but it isn't rainbows and butterflies; it's a quantifiable business that strategically matches passion with need, and it’s our responsibility to do that in the most ethical, effective and measurable way possible. Certainly these issues can’t and won’t be resolved by one person or any one strategy. We must be proactive, we must stretch and we must commit our very best work, lest we will all pay the price of public scrutiny and lackluster results. We must learn, grow and share together. We must embrace and exceed the expectations for quantifiable activities and leverage our sector’s intellect to advance the charge that we have bravely accepted.