I’ve seen something interesting lately. It’s come up five times in the last three months in discussions with nonprofits about their major gift programs.
What I’m seeing is a change in the way gifts at certain dollar levels are being counted by nonprofits.
Let me give you an example…
Jane Smith is a consistent donor to your organization. She gives 1-2 times per year, and pretty much always at the $1,000 level. She’s never been called by anyone at your organization. Never been visited. She prefers to give to your year-end matching gift direct mail appeal, and from time to time also to your newsletter.
This year, however, your organization has decided to focus on growing your major gift program. You’ve set a minimum of $1,000 as the floor for major gifts. Your desire is to make sure you’re capturing the right donors at the right levels in the major gift program so that you can begin to build upon your current successes.
Last month when Jane made her $1,000 gift to your newsletter, that gift was coded as a “major gift” because it was at or above the minimum threshold you’ve set.
Over time as you have more donors like Jane giving at this level (and hopefully upgrading), this process will make your major donor program look really great!
There’s only one problem…
You’re still not talking to or building relationships with Jane or any of her friends that are giving those $1,000 gifts.
Here’s why this is a problem…
1. Simply counting large gifts as “major” artificially inflates your major gift revenue and donor numbers. By counting any gifts of a certain size toward your major gift program, you’re making it look like the program is healthier than it really is. Next year when you begin to project revenue growth from this audience, you’ll be estimating and making assumptions based on flawed data, which is a recipe for disaster.
2. You’re artificially deflating the results of your other revenue producing efforts. You can’t accurately measure the ongoing performance of your newsletter, special events, online giving, direct mail, etc., if you’re arbitrarily robbing those revenue streams of their largest gifts and best donors.We saw this recently in a few organizations. The decreases in revenue in multiple fundraising channels (because the big gifts were being move to “major gifts”) caused boards to seriously consider cutting the organization’s investment in the very channels that were actually producing those gifts!
3. It creates the perfect storm. If you’re like a lot of nonprofits, you might have a unique contact strategy for major donors. Maybe that strategy includes reduced solicitation frequency (i.e., they get fewer mailings, emails, etc.). Maybe you take major donors completely out of the mail stream. If you start taking all of your $1,000+ direct mail donors and counting them as major donors (even though they give via mail), and you make the arbitrary decision to mail them less (or not at all), you’re cutting off the very tool that has proven to successfully deliver revenue for you. Do this and you can pretty much guarantee you won’t see those $1,000+ gifts again next year.
I’ve seen this incorrect major donor contact strategy change cost more than one nonprofit over $1 million in lost revenue. Don’t make this mistake!
4. It’s just “a little” dishonest. There are a lot of great major gift officers out there. People who work their backsides off building relationships and matching generous supporters to worthy causes and projects to help improve the world. And then there are the ones we’ve all heard about at AFP lunches and networking meetings. The people who tend to stay at a nonprofit for 12 months. Just long enough to implement bad strategy, but short enough not to suffer too much personally for their decisions. The gift accounting we’re talking about here only benefits that latter type of development officer. The type of fundraiser who always wants the easy solution, is unwilling to make the qualification call, meet w/donors to cultivate relationships, or do the heavy lifting associated with crafting and making the perfect ask. It’s really easy to look successful if all you have to do is change the source code on gifts as they come in the door from someone else’s efforts.
But…these people aren’t growing your organization’s philanthropic capacity. They aren’t expanding your network of supporters, and they sure aren’t building a wide and deep pool of connected and committed donors that can help you grow into the future.
I hate to say it, but this accounting trick (and yes, I called it a trick intentionally) helps keep more bad fundraisers employed than just about anything else I can think of.
While it might seem logical to structure your gift accounting this way, do your best to avoid it.
There’s really no upside for you in doing this. And the downside risk is significant.
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