If it’s worth doing, it’s worth measuring. This is the mantra of successful development shops.
To grow your major gifts program, it’s important to first set realistic, reportable, and actionable goals and then measure your progress towards these goals. Key Performance Indicators (KPIs) are a valuable tool to help make decisions that are tied to past, current, and forecasted trends and results. They also provide a clear illustration of whether you are reaching your goals.
Let’s first think about goal setting. Major giving goals should be realistic while inspiring growth. They should be both broad in scope and time bound.
Nested within goals are objectives: the steps necessary to accomplish a goal. Narrower in scope than the goal, objectives help us to deliver results on a timely basis. Here is where KPIs come into play. Think of KPIs as significant, measurable benchmarks towards your targeted objectives and ultimate goals.
The Difference Between KPIs and Metrics
All KPIs are metrics, but not all metrics are KPIs.
The difference between a KPI and a metric is in the word ‘Key.’ Both should be reliable, standardized, and simple data sets that measure and report outcomes. Metrics are more appropriate to measure tasks necessary to achieve an objective. You will see in some of the KPI examples below how metrics complement the data used to establish trends and marks toward goals.
Let’s look at a few important major gifts KPIs that will position your development or advancement shop to measure performance against goal. By monitoring them closely and regularly, your major gifts program will find new levels of effectiveness.
KPI: Major Gifts Conversion Rate
Major gift conversion rate is the percentage of potential major gift donors (metric: total major gift prospects) who ultimately make a major gift to the organization. Measuring a conversion goal against the total number of prospects in your pipeline will help you visualize how well your major gift strategies are performing.
A low conversation could indicate that cultivation and solicitation strategies need to be reviewed and enhanced. Conversely, if you see a bump in conversions from annual fund to major gift donor, you can look to leverage and continue the strategies that made them possible. Major gift conversion rate differs from the retention rate as it considers newly acquired major gift donors as well as retained donors.
KPI: Average Gift Size
Measuring average gift size allows you to identify trends and adjust fundraising and stewardship strategies accordingly. This KPI can also be used to project anticipated dollars raised from current major gift donors by looking at total major gift donors (metric), donor retention rates (KPI), and the average gift size (KPI).
Calculating average gift size is simply dividing the total amount of major gifts received by the number of gifts received. The formula to establish a current year target is: (Total Major Gifts Donors x Donor Retention Rate) x Average Gift Size. As the fiscal year progresses your metrics and KPIs will show how you are executing towards your goal. Adjustments to your planned actions and activities may be necessary if targets are not being met.
KPI: Donor Retention Rate
Donor retention rate is the percentage of donors who give to your organization year over year. As you know, it is easier and less resource-intensive to keep donors than to acquire new ones. And focusing on donor retention is the best way to increase your total donor base and total amount of contributed revenue.
Tracking this KPI each month will alert you to retention rates that are low or trending down against goal. We recommend striving for at least a 70% major gift donor retention rate. If the donor retention rate falls short, you may need to change stewardship methods or consider making an MGO change.
KPI: Major Gift Program ROI
Dividing the revenue generated from major gifts by the total cost of the program will yield a measurement of efficiency. A high ROI (more than 10:1 in a mature program, or a cost of $.05 to $.10 per dollar raised) indicates that you are utilizing resources and strategies effectively. If your ROI is low, look at the cost and resource components of your program to help determine action items.
A new major gift program may take as long as 18 months to see positive returns on program investment. Depending on the age of your program, ROI will adjust as your program matures. A newly established program may set the goal of breakeven for the first year of fundraising and then gradually increase the goal to 5:1 and then up along a sliding scale. Tracking the ROI will provide some of the data needed to determine how you are progressing.
How Often to Monitor Major Gift KPIs
It’s important to assess these major gift KPIs monthly to keep track of trends and adjust as needed.
The overall program ROI should be a quarterly review as it is related to a longer-term outcome. Setting up a dashboard on your CRM is the easiest way to routinely monitor these indicators.
Adopting these KPIs provides you with the information you need to make data-driven decisions and to effectively manage the many tasks that deliver fundraising results. These four are just a start. Incorporate other KPIs and metrics that fit your program and measure progress against goals for greater fundraising results as well as more effective donor cultivation and stewardship.
About the Author
Before joining the Winkler Group as Senior Campaign Consultant, Rick was campaign officer and director of annual giving strategies at CUNY (City University of New York) and executive director of the Stony Brook Athletics Fund at Stony Brook University. Connect with Rick on LinkedIn.