Investing in Fundraisers Who Cultivate Big Donors Pays Off, Studies Find

Updated February 7, 2014, with additional information.

Nonprofits that spend a lot of money to hire staff members who seek large gifts and tend to loyal supporters fare much better in fundraising than other institutions of similar size, according to two studies commissioned by the Association for Healthcare Philanthropy.

Among the 335 hospitals and medical centers surveyed for the larger study, a subset of 45 kept detailed benchmarking data on their fundraising revenue and expenses from 2007 through 2012. Of those 45, the association identified 12 that raised an average of $10.8-million, doing well even in the worst years of the recession, 2008 and 2009.

Those dozen groups, which raised more than four times as much as the other 33 hospitals and medical centers, spent an average of $907,000 on salaries and other fundraising expenses. The remaining 33 organizations spent much less, an average of $291,000, on fundraising.

The best-performing institutions devoted a good chunk of that money to hiring fundraisers to focus on attracting big donations, bequests, and other planned gifts: 15 staff members, on average, compared with six among the poorer performers.

And the fundraisers at the best-performing groups had staff members who helped them keep in touch with donors and assisted with other administrative tasks: 13, on average, compared with five among the other institutions.

Institutions that did well in reducing fundraiser turnover also fared better. Hospitals with fundraisers who had spent a median of five to six years on the job raised much more than groups with newer fundraisers.

Not only were the veterans able to raise more money, but they also managed to avoid losing as many donors as other institutions did during hard times. That allowed the hospitals to avoid layoffs and other cost-cutting measures that were common at many hospitals in the recession.

Individual Attention

Hospitals that spent the most on fundraising were able to conduct more face-to-face visits with donors while paying careful attention to thanking supporters and letting them know how their money was used.

“Stewardship is a leading priority,” the researchers wrote. “This is commonly the area where many organizations drop the ball due to staff shortages and a one-dimensional focus on securing larger gifts.”

Albert Alvarez, chief development officer at the Community Hospital Foundation, in Monterey, Calif., says an intense focus on working with donors both before and after they make large gifts was the key reason his organization, based in the state’s second-poorest county, raised $14-million last year.

Five development officers work closely with people who can afford to give $10,000 or more, and Mr. Alvarez manages six other people who handle administrative tasks.

The hospital pays its fundraisers better-than-average salaries, and as a result, turnover is low.

In fact, Mr. Alvarez says he cannot recall any employee leaving his staff in the nine years he has spent at the foundation.

“We recruit the best people, and we pay well,” he says.

The hospital foundation also hires contractors to handle direct-mail appeals so fundraisers can concentrate on serving people able to make large gifts, and it has avoided holding big campaigns to raise money.

“We all see these public efforts about the campaign goal,” says Mr. Alvarez. “Why should the donor care? We don’t base our fundraising strategy on that artifice.”

A ‘Cultural Shift’

Many executives and board members do all they can to cut the cost of raising a dollar in hard times, but the research findings show that approach is misguided, says Bill McGinly, president of the Association for Healthcare Philanthropy.

The 12 highest-performing hospitals and medical centers in the association’s research had an average of seven or more full-time fundraisers meeting with donors and taking other steps to bind donors to the organization, he says.

Those organizations achieved median returns on each dollar spent that were up to six times higher than for more than 300 other hospitals and medical centers surveyed that spent a lot less on fundraising.

But “it’s a big cultural shift” to get executives and trustees who oversee fundraising to understand that, Mr. McGinly says.

He hopes the new data will help leaders of hospitals, medical centers, and other nonprofits grasp the benefits of spending more on fundraising, especially in seeking large gifts.

“Gone are the days of heavy investment in annual funds and special events as the cornerstones of development operations,” the researchers wrote. “More sophisticated organizations rely on a mix of programs with heavy investment in major gifts and grants raised through individuals, their estates, government funding, and corporation/foundation grants.”

Copies of both studies, “Characteristics for Sustaining High Performance” and “Optimal Investment Levels in Health Care Fundraising for Chief Development Officers,” are available to download free on the organization’s website.