The Call of the Cosmograph
Featured Article by: Larry F. Johnston, PhD
Okay. It’s time for a personal confession
I loathe waste. Inefficiency bothers me. And not being strategic just drives me up the wall.
It’s conceivably little more than some personal biases, but I suspect the contributing factors are a tad more complex. But whatever the mix of causes, as a strategic thinker, it just chafes my hide to see organizations stuck in the thick of thin things.
In fact, the apparently irresistible tendency of some organizations to major on the minor is common.
As a development and management consultant with an incurable commitment to thinking and acting strategically, rarely is this propensity to major on the minor more troubling than in the allocation of limited fundraising resources.
Lest you think my distress is only so much theoretical and abstract nitpicking, let me briefly recount an experience with a new client a number of years ago in the U.K. I’m sorry to say the organization is not a rare exception.
At the conclusion of a development seminar I had just conducted in London, I was approached by members of a fundraising team from a very prestigious organization with a request for help applying the segmentation concepts I had just shared. As a first step to assisting the organization with the segmentation of its donor base, I asked them for a cosmograph (see sample that follows, reflecting data from another client but with similar donor/dollar patterns). Since they were unfamiliar with this type of graph, I proceeded to explain the concept and how they could gather the necessary data.
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“Not only is it often the case that 20% of an organization’s
donors provide 80% of the income, it is not unusual for 5% of the
donors to provide 50%, or 10% to provide 90% of the income.”
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I further explained how the Principle of the Critical Few (also known as the 80/20 Principle or Pareto Principle) – one of the most critical principles to anyone thinking strategically – often applies “in spades” to donor bases and smart fundraising. In fact, not only is it often the case that 20% of an organization’s donors provide 80% of the income, it is not unusual for 5% of the donors to provide 50%, or 10% to provide 90% of the income.
When organizational staff subsequently completed the necessary research and had constructed their cosmograph, to say they were chagrined would be a masterpiece of understatement. “Sheepish” might better describe their demeanor when we next met. The historic implications of their findings were nothing short of chilling.
Why? Because for three entire decades the organization had been allocating the bulk of its communications and fundraising resources to thousands of small donors who were having precious little if any real impact on the organization: roughly 90% of their donors who were providing only 10% of the organization’s gift income. (I fear that the thinking of some is, “Since there are more of them, they must be more important, right?”).
As a consequence, for an unbelievable span of 30 years they had chronically neglected the critical few donors (the 10% giving 90%) who were having a substantial impact on the organization and who also had the resources to do much more had they been adequately cared
With a smile I informed them that the French have a great word for those types of practices: “Stupide!”
Although their head-on collision with the truth of their cosmograph was jarring, I’m confident that this confrontation with their previously neglected data yielded an extremely valuable insight that continues to influence their fundraising focus and now more enlightened and strategic allocation of resources.
So, why is it critical to have a cosmograph inform your fundraising, and, more specifically, your segmentation practices?
- First, it’s a matter of stewardship. Your donors are investing in your work to make a difference. To see results. To see your mission advanced. To witness lives changed. And when the work of development staff is not informed by these unforgiving numbers, many donors’ gifts are often sadly and unnecessarily wasted. Rather than their gifts positively impacting programs and services, these funds are unwisely (and far too often unknowingly) consumed in largely fruitless communications to donors who have little potential to make a real difference in the organization’s work (e.g., the 81% of donors giving only 7% of gift income in the following chart). Typically, as an unintended consequence come planning and budgeting time, the organization starts with “bottom-up” planning in their donor pyramid and, having exhausted the bulk of their budget on the inconsequential many rather than the critical few, ends up wrongly concluding that they lack the resources to focus at the top where they should have started: with major donors and major donor prospects. Often, if organizations would just heed the call of their cosmograph, they would see that they do indeed have the resources; they are just being misallocated – majoring on the minor many rather than the critical few.
- Second, it’s a matter of strategy. Part of strategic thinking entails achieving the greatest possible impact with the least amount of resources. This can’t be done when organizations indiscriminately and counter-strategically allocate resources — something that can happen quickly without the insights of a cosmograph. Sadly, this indiscriminate allocation of resources often occurs with large segments of the typical donor base, resulting in substantially higher fundraising costs and decreased fundraising ROI.
- Third, it’s just plain smart. Many years ago I learned one of fundraising’s greatest
truths from the mining industry: “You’re either an inch from a million dollars or a
million inches from a dollar.” Whether you’re into mining or fundraising, the
principle holds: it always pays to know where you’re digging!
If you haven’t constructed a cosmograph – and I would make it a policy to update yours annually — let me encourage you to make it a priority. Pronto. The results could be a real wake-up call with significant dividends to your organization if heeded and consistently
Once you’ve crunched the numbers and constructed your cosmograph, you’ve taken a critical step toward “turning the lights on” regarding improved segmentation and strategic fundraising, an eminently practical step toward setting the stage for better stewardship of
limited resources and ultimately for greater impact on those your organization serves.
It’s only the first step of many you should take when it comes to segmentation, but without a doubt it’s a key step in the right direction.
Larry Johnston is president of McConkey • Johnston International, an internationally recognized consulting firm serving nonprofits of all sizes. He is the developer of Donor Value Mapping, a leading edge process that enables organizations to identify and manage the key drivers of donor loyalty and lifetime value. www.mcconkey-johnston.com
For a complimentary copy of a spreadsheet to construct a cosmograph, email him at firstname.lastname@example.org, or text or call him at 303.638.1827. He’s here to help.