What's your "Stress Test" Result?

The Fundraiser Blog • Steve Reed • November 08, 2023

The Federal Reserve Board in June released the results of its annual bank stress test. That regulatory exercise determines the degree to which banks are resilient to a range of economic scenarios, market shocks, and other stresses.

Speaking of stress, the Giving USA 2022 annual report on philanthropy, also released in June, showed nonprofits suffered a 3.4% year-over-year drop in current dollars and a 10.5% downturn last year when adjusted for inflation. All categories decreased when adjusted for inflation, with individual donations dropping the most—a whopping 13.4% loss.

The problem is the economy, right?

Wait, not so fast. Sure, undoubtedly a volatile stock market and high inflation is stressing donors. But stress is what exposes weakness in structures and systems. And we suggest that’s what’s happening in the fundraising world.

Here are the numbers for your Fundraising Stress Test. Do a quick comparison of your 2022 numbers by category with the following from Giving USA. (These numbers are NOT adjusted for inflation)

Total giving. Down 3.4%,

Individuals.

64% of total giving.

Down 6.4%

Foundations.

21% of total giving.

Up 2.5%,

Bequests. 9% of total giving.

Up 2.3%

Corporations. 6% of total giving.

Up 3.4%

Did you do better or worse than the sector as a whole last year?

The temptation is to blame the economy. But, as Veritas partner Richard Perry points out in his August 28 blog post, “Donor dissatisfaction is what drives donors to reduce their giving more than any other factor in philanthropy.”

We agree. Fundraising needs systemic ways to better align development processes with donors’ philanthropic objectives.

But—as performance improvement specialists— we add another consideration, efficacy: The ability of a method of achieving something to produce the intended result.

Here’s another test—this simple metric measures achievement vs. resources. Calculate your total production number for last year, less any non-philanthropic revenue and outlier gifts. (Outliers are unusually large gifts that push your production number up by more than 10 percent above the trendline when they are not excluded.) Then divide that figure by your number of all fundraising-staff FTEs.

If your result is $1 million or more, congratulations! You are one of the top fundraising shops in the not-for-profit world. You need to make a return-on-investment business case for more people so you can raise more money. There’s unprecedented opportunity today for philanthropy to make a vital difference.

The fact is some fundraising operations are overstaffed relative to the amount they are raising. The tragedy is that most are understaffed for what they could be raising.

If you’d like to improve where your shop falls on either of those performance scales, stay tuned to this blog.

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Our Mantra

Given the resources and freedom to do so, most fundraising shops could dramatically increase revenue, typically at least doubling production. But to do so, organizations will need to change the way they raise money. Fundraisers need to adopt tools, changes in structure, well-defined processes, and supporting technology—with emphasis on personalized individual giving strategies—that create high-performance development organizations. And—most importantly—we need to be willing to challenge the ways we think about, talk about, lead, manage, and do fundraising.

About the author

Steve Reed offers 30 years’ experience fundraising, the last 20 of which include the application of Lean 6-Sigma principles for performance improvement in healthcare and healthcare fundraising. He is president of Engage Performance Advantage (USA) and a partner in Engage Performance Advantage Canada.

About Engage Performance Advantage

We are performance improvement change agents offering nonprofit organizations a way to radically redesign how they raise money, with more emphasis on personalized strategies and larger gifts. Our process-based critical path major gifts framework is paired with supporting technology to help leadership create a top-level fundraising organization. It’s a complete solution that can be rapidly deployed with dramatic gains.

Contact Us

To comment or pose a question: sareed@mpicompanies.com or 269.208.3577