Key Note Speech made at Measuring Outcomes Conference 4 March 2008
18 Mar 2008
Measuring Outcomes: Demonstrating Success in the Third Sector
4 March 2008
Keynote Speech Given by Jon Scourse, Chief Executive, Fundraising Standards Board
Good morning and many thanks for the invitation to speak today
We launched the Fundraising Standards Board just over a year ago as the new body to self-regulate fundraising in the UK. To date we have over 800 members and these represent 33% of all UK giving and the membership continues to grow. Our role is to encourage best practice in fundraising, build public awareness through our scheme logo and to underpin this with an independent complaints process. Unfortunately I have to leave after this session, but my assistant Barbara Arnold will be here until and during lunch should you require more information.
When I agreed to do this session, it was with some trepidation as my own experience is limited to the fundraising end of the process and I do not pretend to have any experience at all of service delivery issues. So with this caveat, this may be a slanted view of outcomes measurement, but I am going to raise some questions that are of a more strategic nature regarding how we report what we do, especially to our donors.
The issue of how performance is measured across the sector has been a matter of increasing debate in recent years. The primary focus has been on the value for money for the donor £ and the primary target has been fundraising. Today, there is a lot of focus on how a charity is raising its funds and how efficiently it does so, rather than how well it is delivering its outcomes. Put simplistically, a charity could superficially appear to be highly efficient in terms of its fundraising ratios but could be woefully inadequate in its delivery of services to its client base. This may make the donor feel happy but the reality in terms of delivery could fall well below the expectation. Of course, the reverse could also apply. So, ratios alone cannot be a measure of overall effectiveness.
Measuring fundraising is probably easier than measuring service delivery – but it is still a minefield. Our problem is that the measurement of fundraising has been on the agenda for some time and the structure of the sector is so immensely complicated. The sector is unlike most industries where the criteria are more easily defined – I used to work in retailing and industry wide reporting was on the whole pretty accurate. Try applying those principles to a sector with 57000 fundraising organizations with the top 2.5% dominating with 85% of all donations, which works across every type of service delivery activity at home and abroad. And each of these charities probably fundraises in a slightly different way. If you came here today and expected a quick fix and easy solutions, I suspect that you will be disappointed, but there is good progress being made by the likes of New Philanthropy Capital to take a broader picture. Unless a simple formula can be applied, achieving any meaningful measures of comparability is going to be a real challenge.
Benchmarking can be useful for donors, but is arguably of more potential use for practitioners. Some large charities are already pooling data via third parties such as Fundratios to enhance comparable reporting and the work of Sean Triner in Australia is seeking to compare data and openly share experiences between participating organizations for the wider benefit. New initiatives such as Donor-Centric are interesting possibilities.
One issue of great interest to the public and media is the dreaded fundraising ratio. The problem with this is that it is not – in itself – a reliable measure of efficiency, especially when we consider that service delivery outcomes are not usually included in the overall assessment. The fact that the press and public probably think it is a reliable measure exacerbates this problem. It is perfectly possible to have a high fundraising ratio but actually deliver a service that is exceptional – the donor gets a real result in terms of the use of the money raised. It is perfectly valid for a charity to drive up fundraising expenditure providing this is resulting in substantial improvements on the bottom line to meet and deliver its objectives. Conversely, an obsession with lowering ratios can lead to less investment in fundraising and result in erosion of net funds available to meet the need.
I have often referred to what I call the Fundraising DNA – the unique fingerprint for every charity. Let me give you some examples. Every charity has it own mix of fundraising – more established charities may have high legacy income in contrast to more modern campaigning charities that may rely on income from face-to-face and direct marketing activities. The impact on fundraising ratios of this mix can be substantial. My point is this – every charity is different and has its own fundraising DNA fingerprint. Let us take, by way of example, a well established charity with a national reputation that has attracted an enormous legacy income that dominates the bottom line. If we take gross income into account, the ratios would look pretty healthy – but then remove the direct fundraising costs used to service legacies and remove the legacy income from the bottom line and look again at the ratio – you could have a much more realistic – and dare I say less acceptable – ratio. Conversely, the newer charity that is trying to get itself established may choose to invest heavily in higher cost fundraising such as direct mail and face-to-face - so the fundraising ratios are going to look far less healthy. Taken in isolation, the donor may well choose the lower ratio charity irrespective of its performance in terms of meeting need.
My argument is this - true performance measurement has to be about fundraising performance that is intrinsically linked to service delivery outcomes. A holistic approach is needed. How and when a standard can be established that can really work is anyone’s guess at the moment, but at least we are here today, discussing this properly which I guess is real progress. The recent work of the RNID in taking a more holistic approach in its reporting has served to widen the level of accountability by including service outcomes as a key ingredient of success. Declaring service targets in public and having the courage and confidence to publish evidence of achievement is to be applauded and will be appreciated by donors. They appreciate honesty, even if the message is difficult, and expect no less from the charity sector.
Public misconceptions are another, but related, issue. The ImPACT coalition have made a real effort in this respect, but there is a very long way to go before the media and the public fully appreciate that investing in fundraising is essential to success and that low administration and fundraising costs are not implicitly virtuous. It never fails to astonish me that people that I meet socially will expect a charity to be really well run and yet be outraged if it has administration costs that are still very reasonable. Somehow it is acceptable for their Bank or their supermarket to have admin costs, but this becomes sinful in a context of charity. It is not logical and we need to educate the public far more on this issue. Arguably, over the years we have created this problem for ourselves through championing low costs in the past. As with ratios, low fundraising costs are not an implicit sign of effectiveness.
The idea of a single agency to evaluate and monitor in detail the overall charity performance has been suggested by New Philanthropy Capital and this may take root in the future. The provision of such a service could be of use to potential supporters, but the problem of direct comparability would be likely to still cause difficulties. In the final analysis, each charity deserves to be considered on its own merits in the context of its role, its age, its size and its fundraising and service effectiveness – and its overall value for money to the donors and beneficiaries.
Ultimately, the sector depends on the trust and goodwill of the public. So it is also imperative to look outwards and consider what the public are thinking. I would suggest that in this respect the sector has become complacent, of being inward looking and failing to really embrace the public view. People’s opinions matter. Compared to my previous experience of working in industry, I have been appalled at how many fundraisers only focus on the income that can be generated and use this as their sole justification, without much thought to the wider implications. Response rates, attrition rates and ROI have all become the omnipotent and systematic key measures and ever more aggressive fundraising techniques have become justified simply because they produce the bottom line result. It has just become a numbers game. An assumption is made that if the figures look good, everyone must be happy. This culture has embedded itself to such an extent that the reputation of the sector as a whole is at risk of damage.
Why not listen more to the donor? As Ken Burnett has pointed out already, fundraising has become stereotypical, and in seeking the lowest common denominator, it is the victim of its own formulas and with formats designed for easy mass reproduction. As Ken has said recently, “This is clearly unwise and will only dismay and ultimately deter committed donors”. We have the fundraising, but where has the relationship gone?
Public trust and confidence is the very heart of our work – both in terms of fundraising and social capital. We take this for granted at our peril in the longer term. I appreciate that analogies with the corporate sector are by their nature flawed, but let us just consider for a moment the relationship between consumer and supplier. Meeting the needs of the consumer is the core of commerce, doing so in a way that is better than your competitors. Enormous effort is put into researching and understanding the aspirations and needs of the marketplace - and products and services will always strive to meet those needs. In contrast, the third sector – or I should now say Civil Society - is not always good at researching and understanding the needs of the donor and is more inclined to follow sector trends without any real effort to assess the impact – surprisingly, the donor is rarely seen as a key stakeholder. This is reflected by the make-up of the governance of many charities – the beneficiaries often have a role as Trustees, but how often do we see a Trustee to represent the donors?
The complexity of our sector is that there are two important groups to service – firstly, your donors on whom you depend and secondly, your beneficiaries who depend on you to raise the funds. It is a noble aspiration to seek every means possible to maximize income and improve capacity to meet need, but it carries a huge risk in the longer term. We need to complete the 360 degree shift and explore this from the donors’ perspective.
We have this lemming-like characteristic which leads to saturation of the market, as we have seen before with overseas challenge events and face-to-face fundraising. A technique is heralded as effective and then adopted as the great new opportunity and taken up by many of the influential charities. New businesses are fledged to meet this demand and when the returns begin to stall through saturation, smaller charities are persuaded to adopt the idea to sustain the activity.
If, as would seem to be the case, enclosures (or gifts or inserts whatever word is used) in direct mail improve response rates, it is possible that there will be a headlong rush into this technique. The individual donor may tolerate the odd pen – but we can envisage a situation where a high proportion of mailings include unwanted items of questionable value from a wide variety of different charities. We have already had a case at the FRSB of one donor receiving 27 gifts within one year, including slippers, umbrellas and even a rosary. Given that so many charities have also swopped their lists, the problem gets even worse. Imagine the current volume of pre-Christmas mailings landing on your doorstop, all competing for your goodwill with an increasing mountain of gifts. The end result is that people get very irritated with “charities” in general – in other words all fundraising is implicated and damaged by such behaviour. It is environmentally questionable and the incentive ultimately self-destructs through saturation. Some may say “great – that’s the market place working” but we cannot ignore what the cost is in terms of public goodwill.
Our own research at the FRSB reinforces a great desire on the part of donors to have a real two-way relationship with their favoured charities. As part of the need to measure, we should also think about this – surely it is only prudent to establish what your donor is thinking, what they like and what they do not like. Recently, the UK division of Médecins Sans Frontières did just this and had a very clear indication of what their regular donors wanted and did not want. One quotation that stands out from their research is the statement “don’t treat us like a consumer who has to be sold to”.
This reinforces our own findings – but is has been embraced by MSF UK in building a new and successful fundraising strategy that enables the charity to have the confidence to be different. It has not been the deathnell of direct marketing – Médecins Sans Frontières have made some real efforts, as have Marie Curie and no doubt others, to determine what is wanted by donors and to build their strategies around this knowledge, with good results.
Furthermore, what about the cohort of those that have chosen not to donate – surely understanding this dimension is worthwhile and does not deserve to be ignored because it may be uncomfortable. I appreciate that some charities are doing this, but it is not common practice. We know from our own research at the FRSB that the majority, 76%, of regular donors do not want their details swopped with other charities, 77% said they do not want excessive frequency of mailing and 90% do not want to receive gifts that, in their view, would be far better spent on the work of the charity. Given the status quo, these messages are not very comfortable. Such research has been criticized by some on the basis that “people say one thing and do another” which is a feeble response to such clear messages. Peoples’ opinions matter. Could we imagine Richard Branson saying this about his research findings? Clear messages need to be listened to and heard, and public trust and confidence will be the ultimate factor in determining whether we have state or self regulation in the longer term. The political agenda is heavily influenced by public opinion and we must understand this dynamic in the context of regulation. Therefore, if we take public goodwill for granted, we do so at our peril.
So, where should the sector be going? Putting the individual donor in the heart of the relationship, let us identify what this donor might want to see from us? Firstly, the fundraising – how the donor would like to have some say in the relationship in terms of frequency of contact and content, with clear indications about the fundraising performance. Add to this the objectives and results in terms of service delivery, with honest appraisals of what went well and what did not, and this will enhance confidence even more. Finally, cap this with the opportunity for the donors to provide feedback on how they feel about the charity.
If fundraising and service delivery are part of the same equation, does this present an opportunity or a threat to self-regulation? With state funded contracts now becoming so important, how can the sector ensure that the services are monitored properly? Not knowing the content of your other speakers today, hopefully more light can be shed on this challenging issue in later sessions. A more holistic approach could spark the debate about a “charity ombudsman” concept to handle all complaints. However, in terms of functions there is a wide difference between fundraising issues and those relating to the specifics of service delivery which would be a challenge to a single regulatory body. By precedent, an Ombudsman is a statutory regulator so such a position has its implications in terms of self-regulation. Our immediate focus should be to make the best of the short window of opportunity we have to prove that self-regulation is working for fundraising, with a view to extending this principle into service delivery as well in due course.
What happens if self-regulation does not succeed? Well, let us have a look at telephone marketing. Back in the mid-1990’s, the telephone marketing sector was invited to self-regulate – they failed for a variety of reasons, including the flawed argument that as sales were good everything must be OK, ignoring the level of public animosity to unwanted calls at inconvenient times. The telemarketing sector paid lip service to this self-regulatory opportunity saying that a service to give the public a choice is excellent - but so lo long as it does not effect me. This opened the regulatory door to a disastrous effect. Eventually, the European Commission and in turn UK Government intervened with the introduction of new regulations requiring outbound telemarketers to recognize the consumers wishes to receive unsolicited calls to their home. As part of the regulations the TPS was formed as a data file of households that did not wish to receive sales and marketing calls without their prior consent. . Today, there are 15m households registered and another 200,000 are signing up every month and the TPS receives 2000 complaints a month despite this. This has really curtailed the outbound telephone marketing industry and organizations have to re-engineer their business models to cope. This should be a warning to those who are skeptical or only half-hearted about self-regulation for fundraising.
For a taster, within the sector, just look at how complex the recent issue of disclosure of fundraising costs has been and then consider such a regime across all of your activities. The bureaucracy would be daunting.
So, to conclude. The messages are clear – 1. Donor goodwill cannot be taken for granted and the donor must be restored at the heart of the relationship and protect the common reservoir of public goodwill. As a matter of routine, the 360 degree shift needs to be taken seriously to look at the donor perspective – 2. A more holistic approach is needed to measure and report outcomes in terms of service delivery as well as fundraising; and – finally, 3. Let us all make sure that self-regulation works well and is sufficiently effective to avoid the spectre of state intervention.
Thank you