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How advancement programs can demonstrate ROI during challenging budget times

Now that the initial shock of the COVID-19 crisis has passed, higher education institutions across the United States are facing a difficult landscape in which nearly every revenue stream has been affected.

In response, 73% of advancement leaders have cut their budgets or put controls in place, 61% have put a hiring freeze in place, 30% have reduced salaries, and 21% have furloughed workers, according to a recent survey by GG+A’s SurveyLab.

While budget cuts may be inevitable amid this crisis, many institutions are preserving what they consider “essential revenue generators.” By maximizing the investment made in the fundraising effort, an advancement programs can demonstrate its value to institutional leaders as they come to appreciate the increasingly important contribution philanthropy must play in the future budget models.

Here are three strategies that we at GG+A recommend our clients use to reinforce their role as essential revenue generators using data analysis.

  • Growth scenarios

To align an institution’s expectations to raise private support with the investment staff resources, advancement leadership can show the correlation between fundraising growth and the expenditures required to sustain that growth over an extended period. In the near term, this will help make the case for continued investment in advancement staff. For the long term, they can frame their fundraising performance by developing scenarios that support increased fundraising results. In the graph below, which is based on leading higher education institutions’ data, you can see the strong correlation between fundraising growth and the investment in advancement programs.

Given the uncertain economic climate, we suggest creating a range of growth scenarios with various outcomes. Advancement leadership can then use those scenarios to engage institutional leadership in a discussion about the investment required to achieve the growth necessary to support the institution’s financial projections. As a point of reference, over the last 40 years, fundraising programs in higher education have averaged 6% to 9% compound annual growth.

  • Benchmarking

Analysis of a program’s internal data is a useful tool that advancement leaders can use to demonstrate their value to their institutions. However, institutional leaders often need additional context to fully understand their advancement team’s performance.

That is why we encourage our clients to analyze the relationship between fundraising performance and staffing and resource expenditures by comparing data with a set of peers or aspirational peer institutions. Helping their leaders understand how other institutions invest and allocate resources provides important context in budget discussions.

To instill a sense of ownership in the process, the advancement team should invite its institution’s leaders to help it identify the appropriate peer cohort, as a university’s research peer set may be different from those based on its fundraising performance. The results provide reasoned, evidence-based guidance to properly evaluate the resources invested in advancement.

  • Donor and prospect analysis

Advancement leaders too often miss the opportunity to leverage their prospect base as a key rationale for sustained or increased investment in their programs. While many institutions conduct wealth screening and often some form of predictive modeling to help fundraisers engage the best prospects, they should also employ the same analysis to demonstrate return on investment in the fundraising program.

We recommend clients conduct what we call a penetration and yield analysis of their prospect base. This analysis will help advancement leaders understand two critical elements:

  • The effectiveness of their current fundraising staff.
  • How current staffing levels may limit their capacity to reach additional prospects capable of making significant gifts.

With nearly every institution feeling pressure to meet enrollment goals to sustain revenue, philanthropy will become even more important to their revenue models. Advancement leaders should use evidence-based techniques to demonstrate that they are one of the few areas that can boost revenue amid this challenging environment. These same tools will also benefit the advancement program by helping them make the case for additional investments once the COVID-19 crisis passes and we return to some semblance of normalcy.

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