Decisions without data are merely opinions.

While data is important, superficial benchmarking and shallow metrics are problematic. In recent studies with liberal arts colleges and independent schools, Marts & Lundy's Analytical Solutions team has addressed three benchmarking dilemmas.

How can one compare fundraising results if the wealth of the institutions' donor pools is different?

To ensure meaningful comparisons among different-sized educational institutions, analysts typically “normalize” fundraising results by dividing them by number of alumni (such as “alumni participation percentages”) or number of students (such as “total gifts per student”). However, this baseline normalization does not take wealth into account. Does it make sense to compare the fundraising results of a college full of Wall Street alumni with another that has an alumni body of “teachers and preachers”?

To address this dilemma, Marts & Lundy's analysts created capacity-normalized benchmarks, such as “average commitment from a $100,000-plus prospect,” that reflect the behaviors of prospects of similar wealth.

What are the true costs of fundraising?

Decision makers often ask for comparisons of development budgets and staffing. However, most comparisons do not include the costs of fundraising that occur across departmental boundaries. Work that may be part of the development office at one institution, such as computing services, may be part of central computing elsewhere, resulting in apples-to-oranges comparisons.

Marts & Lundy's solution is to gather information functionally rather than departmentally, allocating people and expenditures to typical development processes such as major gifts, development communications, and computing services, regardless of each function's home office or department.

What's the future return on today's investment in development?

Institutional decision makers need to understand how resources affect fundraising outcomes. Therefore, leading indicators—metrics that include an element controlled by decision makers—are essential in planning for the future.

Cost per dollar raised (C$R) is regarded by many as an important leading indicator. Some decision makers believe that the less you spend per dollar raised, the more effective your operation. However, while C$R may be a useful measure of transactional efficiency, it is not a strong measure of fundraising productivity.

Large gifts are the result of long-term effort. When large gifts are paid off, they often have no correlation to the current year's fundraising costs. Additionally, cash received in one year is often only a portion of a donor's commitment. Because it limits analysis to one year, and measures the cash gift rather than the total pledge, C$R is an illusory statistic.

Marts & Lundy's solution is to explore the flip side of C$R, return on investment. Through research with liberal arts colleges and independent schools, Marts & Lundy discovered correlations between what an institution invests and its top prospect productivity.

Some of the correlations, while hardly earthshaking, are nonetheless significant. “Institutions that are most effective with top prospects are ones with the highest percentage of ‘frontline’ fulltime equivalents within their staffs,” explains Catherine H. McGrath, Marts & Lundy senior consultant. “Additionally, those with better ‘coverage’—that is, fewer prospects per fulltime equivalent, regardless of function— show the strongest top prospect productivity.”

“The bottom line is indisputable,” says Bruce R. McClintock, Marts & Lundy chair. “There is a correlation between strategic investment and fundraising productivity. The upshot is that boards of trustees, university officials, and development offices—if they are serious about strengthening institutional philanthropy—need to look not at cost per dollar raised but at return on investment.”