Fundraising, Part 2: Healthcare groups invest in capacity

By Todd Cohen

[This article was written for Blackbaud.]

Investment in fundraising capacity continued to pay off in 2013 for hospitals, medical centers and long-term care facilities, says Bill McGinly, president and CEO of the Association for Healthcare Philanthropy, or AHP.

Organizations that raised the most money invested more in staff, in securing major gifts, and in overall fundraising capacity.

“It costs money to bring in money,” McGinly says.

Total giving to AHP’s roughly 5,000 members totaled $8.9 billion in 2013, roughly the same as the previous year.

And over half of fundraising revenue typically comes from an institution’s “family,” including employees, physicians, top executives, major donors, board members, and patients.

An AHP survey that generated responses from 28 percent of its members found median net fundraising grew in sync with spending on fundraising.

Organizations that spent $4.8 million on fundraising, for example, generated over $18 million in median net fundraising revenue.

In comparison, organizations that spent $2 million to $4.8 million on fundraising generated $9 million in median net fundraising revenue, those that that spent $425,000 to $910,000 generated $2.2 million, and those that spent $60,000 to $425,000 generated to $565,000.

Spending on staff was a key investment, McGinly says, with the most successful fundraising taking place at organizations that invested in staff compensation, in hiring experienced fundraising professionals, and in making sure at least one fundraising professional was dedicated to each fundraising program, such as the annual fund, major gifts, planned giving, and events.

“They’re hiring and compensating staff, and bringing staff in that have more  experience,” McGinly says.

Among organizations that performed best in fundraising, even those that posted the most modest results typically spent $800,000 or more on direct expenses for staff.

Organizations with the most effective fundraising operations also focused on their return on investment and recognized that spending on overhead is “essential,” McGinly says.

“You’re not going to raise dollars unless you are hiring people and paying the overhead necessary to support those activities,” he says.

AHP has encouraged its members to develop “dashboards” that track net fundraising revenue, return on investment, and the cost to raise a dollar.

Organizations can use that data to measure gains and successes, providing their executives and boards with information they need to make decisions about fundraising strategies and investment.

While the cost of raising a dollar measures efficiency, McGinly says, investment in overhead is equally important.

“A lot of organizations that are efficient aren’t raising the dollars they need,” he says. “They lose an opportunity because they’re afraid to take a risk or take advantage of something that’s really going to give them a return.”

Next: Higher education cultivates major gifts.

The series:

Part 1: Growth tied to capacity, cultivation, communication.

Part 2: Healthcare groups invest in capacity.

Part 3: Higher education cultivates major gifts.

Part 4: Data key for independent schools.

Part 5: International affairs groups refine message.

Part 6: Religion focuses on fundamentals.

Part 7: Arts and culture groups focus on donors.

Part 8: United Way diversifies.

Part 9: Conservation groups connect with donors.

Part 10: Communication, planning key for human services.

Part 11: Peer-to-peer strategy fuels medical research.

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