How can charities implement an effective long-term strategy against a shifting social and economic backdrop? Tobin Aldrich takes a practical look at the issue

It’s an interesting time to be a fundraiser. Total voluntary giving is falling in real terms while competition between charities continues to increase. There is great volatility in world markets and huge uncertainty about many things previously taken for granted.

In this context, it is more important than ever before to have an effective and realistic fundraising strategy, and even more challenging to develop one that accounts for the enormous uncertainties we all face.

Facing the challenge

This is the toughest fundraising market that even the most grizzled of senior fundraisers can remember. The economy is unstable and uncertain. Giving has been essentially static in the UK since 2008, with the latest data showing that voluntary income for the top UK charities in 2011 increased marginally in cash terms but declined in real terms.

Meanwhile there are dramatic changes taking place across the broader horizon. China will be the world’s biggest economy by 2020. Rapid economic growth in Asia, and increasingly in Latin America and Africa, means that Europe will become less economically important and influential in the world. Populations are also ageing rapidly. By 2033 over 65s will make up 22 per cent of the UK population compared to 13 per cent in 1971.

And then there’s the small matter of the communications revolution that continues to transform how people access and share information. The internet is rapidly becoming both mobile and social and reaching to every part of the planet. This has the potential to completely transform the practice of fundraising, and the implications of this are only just starting to be grasped by non-profits.

Shaping events

Creating a fundraising strategy in a world moving so quickly, and with so much so unclear, is no easy task. One response would be to give up on the traditional five-year strategy altogether. There’s some sense to this; an internet generation is reckoned to be 18 months, so trying to predict what the world will look like in half a decade is a pretty tall order.

But without a strategy, fundraisers are simply responding to events without having any chance of shaping them. In my view, fundraising is not a short-term business. The heart of all fundraising is having successful relationships with donors. These take time and investment to develop. Fundraising as a series of one-night stands does not lead to long-term success.

Successful fundraising charities have effective long-term strategies. Despite the recession some charities have done well in the UK over the past few years. The likes of the British Red Cross, UNICEF, Dogs Trust, NDCS and WWF have shown consistent year-on-year growth that is seemingly unaffected by the economic malaise.

What these charities have in common are long-term growth strategies involving sustained investment in developing key areas of fundraising, most commonly including regular giving from individuals.

The trade-off

What are the characteristics of successful strategies? Most important is absolute clarity of objectives. Being really clear about what the organisation is trying to achieve and which of its goals is most important is key.

It is easy to state that the goal of a fundraising department is to generate as much income as possible. But there is usually a trade-off between maximising income today and developing income for the future. Short-term views will prioritise cash generating activities that might not be sustainable or scalable over a longer period. Is all money the same or is unrestricted money more important than restricted? The former is usually harder and more expensive to raise.

It is also important to be clear about the organisational goals and parameters that your strategy needs to operate within. How much can the charity afford to invest and what return does it need to make on those investments? Is there an overall cost of fundraising ratio that the organisation is committed to operating within? Fundraisers may need to be robust in explaining why a higher ratio is sometimes necessary. Are there restrictions on the fundraising messages that can be used? Again, fundraisers often need to explain to the organisation why they will need powerful and compelling messages and propositions for fundraising to be effective.

The long and short of it

There is no ‘one size fits all’ template for a fundraising strategy. I have seen strategies that can be captured on a single sheet of paper and others that run to over a hundred pages. The former are certainly easier to communicate. Longer strategy documents will probably include more detailed implementation plans. However, the overall thrust of a strategy should be something that is fairly simple and easy to communicate.

The most effective strategies are those based on thorough evaluation of current fundraising activities and analysis of their challenges and opportunities. Really understanding what has gone on before is very important, but something that can be hard to do in many charities where past record keeping and institutional memory are not all that might be wished for.

For opportunities, looking outward at the market is vital, both in terms of where it is now and how it might develop in the future. But fundraisers should be careful of overdoing this. Rather than describing every current or possible trend that will be relevant, look for the big trends that seem most relevant to the organisation’s fundraising.

I find it helpful to set out a few simple principles for a fundraising strategy, describing what will be different going forward. For instance, more innovation and risk taking (all my strategies seem to involve a bolder attitude to risk!), more joined-up working between fundraising teams, or between fundraising and other departments, and so on.

Good influences

The heart of the strategy should be about prioritisation. In any fundraising operation there will be many things being done, and much that could be added. There will probably be lots to improve in virtually all areas, but it won’t be possible to do it all.

The key is to identify the few specific areas in which there is the biggest potential to increase income and a reasonable chance that this is achievable. This is about understanding those areas that can really be influenced and over what time period. Some areas of fundraising are harder to influence than others and some take a long time to do so. Legacies are a good example. Legacy income can definitely be influenced by a good fundraising strategy. But it takes a long time to see the benefits of any changes you may have made. Over a five-year period it is very unlikely that anything that an organisation does about legacy marketing will significantly impact its fundraising income. This is not a reason not to do anything (investing in legacy marketing is very cost-effective in the long term), but you need to have realistic expectations for such a strategy.

The areas that are not priorities for growth should be looked at for efficiencies to fund those that are. What are the minimum resources required to keep a non-core area ticking over? Which areas should be closed down? It may be possible to persuade the organisation to provide investment funds for the new strategy but only if senior executives can be satisfied that existing resources have been used to the full extent of their effectiveness.

For each priority area identified, you will need to ask yourself:

• what are the major things that will be done differently to produce growth;
• how much money and what other resources will be required to make this happen; and
• how will success be measured, both at the end of the period and along the way, so you know whether or not you are succeeding?

The measure of success

Choosing the right set of key performance indicators (KPIs) for the strategy is important. There needs to be a small number of key measures which will really tell the charity whether or not it is on track overall.

KPIs should be used to monitor the key assumptions that underpin the strategy and whether they are being upheld. These assumptions need to be clearly expressed, because the extent to which they hold true will drive the financial numbers in the strategy. These might include factors such as how much a new donor costs to acquire, the charity’s donor retention rate or how well the organisation converts standard value donors to major donors.

A strategy needs to have numbers, forecasts of income and expenditure budgets and supporter base projections. These should be as robust as you can make them, but spurious accuracy should be avoided. The numbers will be as good as the validity of the assumptions that underlie them, and there will probably need to be a significant margin for error. Trustees and senior managers will need to understand the level of uncertainty that is involved.

This is why it is important to spell out the risks of any strategy clearly and openly. What are the major specific threats to the achievement of the targets? What steps will be taken to mitigate these risks and to respond in the event that they materialise?

The strategy will need a detailed implementation plan to make it a reality. How much of this needs to be developed prior to getting approval of the new approach will depend on the situation and organisation. Sometimes it is helpful to reassure senior management and trustees that there is realism underpinning the strategy.

Selling the strategy

Of course a fundraising strategy needs organisational buy-in to be effective. A wonderful strategy that sits on a shelf is no good to anyone. In order to gain approval, the document will need to sell the new strategy to key people in the organisation: the senior management and trustees, and the people who will need to implement it. How to sell the strategy needs nearly as much thought as developing it does.

Once agreed, the strategy then needs to be a living and breathing document. It will need to change and adapt to respond to the many changes both in the outside world and in the charity that will undoubtedly occur. In the world we are in now, flexibility and adaptability is absolutely critical. Setting clear goals and objectives is no less important than it has ever been, but they must be flexible enough to be able to respond to the many challenges and opportunities of our uncertain times.

Tobin Aldrich is fundraising director at WWF UK

This article first appeared in The Fundraiser magazine, Issue 19, July 2012