Is Your Organizational Structure Hurting Your Donor Pipeline?

I think it’s crazy how often non-profit leaders create an organizational structure that’s counterproductive to their organization’s purpose and productivity.

This happens when an authority figure designs a structure based on personal opinion, personal desires, and input from personal friends and acquaintances. And it often happens out of sheer ignorance.You’ve seen it and experienced it. Where Finance owns everything that goes to donors once they’ve given – so, they own the donor services function. Or Marketing and Communications decide everything that goes on the website or the copy that is used in the donor thank you process. Perhaps an event is organized by Public Relations without consulting with the donor-facing team. Or the direct marketing manager who tells the major gift team how they should manage their major gift efforts.

I could go on and on. But you know what I’m talking about.

The structure of a non-profit – how it’s organized – has everything to do with whether the organization is running effectively and efficiently or not.

As you read this, you might be saying, “What does organizational structure have to do with mid, major, and planned giving effectiveness, and why are Jeff and Richard wasting time dealing with that?”

Fair question. I will answer it a little later, but first I want to talk about the nature of the donor pipeline.

If you’re not familiar with the term, the donor pipeline refers to the stages a non-profit goes through to acquire, retain, and upgrade a donor. A donor pipeline is typically made up of the following stages all of which have increasing return on investment (ROI).

• Acquisition – This is mostly direct marketing and what we call a one-to-many function with an ROI of between .5 to .75. In other words, the non-profit loses money on the first cycle of acquisition.
• Cultivation – This is also direct marketing, appeals, newsletters, etc. It is also a one-to-many function with an average ROI between 3 and 4. For every dollar spent, $3 to $4 comes back in.
• Mid-Level – This is a combination of direct marketing and relationship fundraising. We call it one-to-some in that the objective and supporting strategies are focused on upgrading some donors to major gift status. The ROI is between $4 and $6 return for every dollar spent.
• Major Giving – This is all relationship fundraising and what we call one-to-one outreach. The ROI for a new caseload is often 1:3 or 1:4 but growing, with a mature caseload moving up to 1:10, 1:15, and even higher.
• Planned Giving – Planned giving is another relationship fundraising strategy that is one-to-one where the return can be extremely high if a large estate is given to the non-profit.

All of these stages are connected and interdependent. You can’t have an effective mid-level or major gift program without a healthy and robust donor acquisition and cultivation program. Why? Because mid-level and major gift programs find their best donors in the pool of donors who have been acquired and cultivated by the direct marketing team.

But here’s a very important fact. Your donor pipeline needs care and feeding. It is a delicate ecosystem in your non-profit that requires careful attention and management for it to operate effectively.

Here’s what I mean. Recently I saw our analysis of one large organizations in the Northeastern United States who had put most of its fundraising investment in donor acquisition and cultivation, but hardly any investment in mid-level, major, or planned gifts.

The result: the organization’s ratios were way off because the programs that deliver the best ROI (mid, major, and planned gifts) had very few donors in them and were not contributing net revenue to the fundraising effort. Most of the donors, thousands of them, were in the lower giving levels.

This is a mistake. What the leaders of this organization need to do is move almost a million dollars (or more) of investment from acquisition and cultivation programs over to the mid, major, and planned giving program. By doing that, there would be substantially more net revenue for programs and the organization’s ratios would be better.

But oftentimes, a manager can’t manage the donor pipeline properly because the organization’s structure is working against them.

For example, in the situation I talk about above, where there are very few donors in the mid, major, and gift planning programs, the manager of that area cannot secure more budget investment in her area because the direct marketing manager – the person who owns the donor acquisition and cultivation programs – is a long-term employee who is routinely favored by the administration with larger and disproportionate budget investments that do not take into account the health and welfare of the donor pipeline. It’s a no-win situation. Which is why it stays that way.

This is why Jeff and I are so obsessed with organizational structure – it directly affects how fundraising performs.

If you find yourself in a structure that works against proper management of your donor pipeline, here are some practical steps you can take:

1. First, revisit the structure of your organization.

And then align it, as best you can, to the key functions of an organization which, in our opinion, are:

• Program – Product / Services
• Resource acquisition – Fundraising of all types and Earned Revenue (i.e. tickets)
• Brand maintenance and enhancement – Marketing/Communications, Public Relations, Events
• Operations – Human Resources, Operations, I.T.
• Finance – Accounting, Receipting

2. Then, revisit and align the structure of the resource acquisition area.

This should be managed by ONE person, not more, to allocate roles by key functions as follows:

• Direct marketing – acquisition, cultivation
• Relationship fundraising – mid, major, and planned gifts
• Earned revenue – ticket sales, memberships like the Y for their fitness work, etc.
• Brand maintenance and enhancement – Marketing/Communications, Public Relations, Events
• Donor Services – the back office of fundraising. Note that receipting of gifts is done in finance whereas all the communication with donors is done here.

Of course, there are a lot of details to all of this, but here’s my main point. Take a look at how you’re organized and ask yourself if the structure is properly supporting a healthy and productive donor pipeline. If your organization isn’t set up properly, you are likely creating adversarial relationships, silos, and unclear responsibilities. This could mean the wrong people are managing functions they are not equipped to manage, or your budget allocations are based on favoritism versus strategic thinking. The result is a dysfunctional organization.

Take steps to make this right. And we can help you create a more effective structure. Just call on us. Don’t think, for one minute, that this problem will just go away in time. It won’t. And your numbers and ratios will show it.

Richard