How Organizational Culture Impacts Donor Retention

On this episode of Bloomerang TV, Jay Goulart, co-founder of NewSci, joins us to talk about how organizational culture can impact donor retention.

Full Transcript:

Steven: Hey there, welcome to this week’s episode of Bloomerang TV. Thanks for tuning in. My name is Steven, as always, I’m the host here for Bloomerang TV, and I’m very excited about today’s guest. He’s a friend of ours, he’s someone we’ve talked to a lot over the last three years, someone paying attention to the retention issue, which we always appreciate.

He is Jay Goulart. He’s the cofounder and chief data artist over at NewSci. Hey Jay, how’s it going?

Jay Goulart: I’m doing great. Good to see you today, thanks for the invitation.

Steven: Oh yeah, always. Thanks for being here. Just in case some people don’t know about you or NewSci could you talk a little bit about the work you guys are doing over there?

Jay Goulart: Sure. Just a quick little bit of background, I’ve spent just about 20 years as a front end practitioner, as a fundraiser running those initiatives for multiple institutions, both here in the U.S. and outside the country. That was a great experience, and like a lot of folks we all evolve, and I’ve always been incredibly interested in data and what it can teach us and how we can capture it and how we can use that then to inform good strategy decisions.

So myself and a fellow named David Lawson, and anyone that’s listening that’s been around the industry for a while will know him… we’ve known each other for a lot of years and never found a way to connect, and we found the third leg of the stool, a gentlemen named Anand Mahurkar, who has offices both in Boston and Mumbai, who is really into the big data stuff and got into that in 2008, before it was sort of a hip word.

What we’ve done is we’re really bringing and very focused on bringing a new level of analytics and big data analytics to the non-profit sector, and we’re very excited. This has been a passion of ours, and it’s always been for me, just sort of information and how can we enhance the work that we do at our non-profits and ultimately enhance the experience that our donors have.

We’ve also, at least in the short term, have the recognition of being the first organization to write an application on top of IBM Watson technology, and it’s designed specifically to help organizations measure impact. I know we’re going to get into more of donor retention, but this new era of cognitive computing and the ability now for machines to read in Watson and to read natural language and then put together information is going to be an incredibly powerful tool to help us connect with donors and have them see what impact we are having with our mission.

With our nonprofits it’s very difficult because our impact lives in studies and research and reports and it’s voluminous for many organizations, so that’s what we’re up to. Thanks for letting me give it a little bit of a plug. We’re bunch of mature folks in the industry with hoodies and flip flops, so we’re pretty excited.

Steven: I know what that’s all about working at a startup, so you’re in good company. And you guys are putting out really content and you speak a lot, Jay, you blog a lot, and you’re talking about retention, which makes me happy because obviously Bloomerang is all about retention as well.

But what I like about you and what I wanted to talk about is you kind of take a different approach. When people talk about donor retention you typically hear things like donor communications and maybe database usage and things like that, but you sort of talk a lot about organizational culture, which isn’t something I think that comes to mind naturally when you think of donor retention and fundraising. But as I listen to you and read what you say, it makes a lot of sense. So could you talk a little bit about the idea behind how culture, maybe your organizational structure, how people interact within the office, how that can affect your actual donor retention as it relates to fundraising?

Jay Goulart: Sure. If you’ll permit me to sort of even step back, I don’t know if you’ve read recently the book, A Beautiful Question.

Steven: No.

Jay Goulart: One of the wonderful stories in it is about how institutions are sometimes so close they don’t have the ability to step back and look. So if we went macro for just a second, and then I’ll drill in, but I think we’re living the metaphor of what you just asked me. If you would look at our sector as a culture and realize that we all sort of talk the same language, we use the same things, the fundraising effectiveness project hits in 2004. There were a couple of books, whether Donor Loyalty written by Adrian Sargeant, which came out in ’04. Within all of that this new level of knowledge began to happen, but when you begin to have conversations or try to plant seeds in soil where it’s not able to grow it tends to wilt.

So if we were to step back and just look at our own sector, for example, as a culture, despite all of the language, despite all of the conversations, you and I both know that the numbers aren’t improving.

Steven: Right.

Jay Goulart: So I think if we just looked at that, the lesson of the power of culture is pretty clear. Does that resonate a little bit?

Steven: Absolutely.

Jay Goulart: So my own experience is that I got really interested in this topic back in the late 90s, believe it or not. A couple of guys named Gilmore and Pine out of Harvard wrote a book called the Experience Economy. One of the things that struck me about it is how consumers, and you’ve written about this and the retention in the business world, but how consumers ended up buying things. They’ve got a great YouTube clip. If you Google Gilmore and Pine there’s a terrific example about how we’ve changed our purchase patterns and they use the birthday cake as an example. I don’t know if you’ve seen that or not.

Steven: Mm-uh.

Jay Goulart: In essence they say it all start with mom in the kitchen in the 50s and it cost a dime to make the cake, all the products, the eggs and all that kind of stuff. So that’s kind of interesting. A few years later Betty Crocker comes out. It’s not a dime anymore, it’s a buck and a quarter, because we don’t have the time and we buy the packaging. Fast forward into the 70s and 80s and mom and dad are so busy they’re willing to spend $15.00 or $20.00 for that birthday cake at the local bakery because they don’t have the time to do it.

Steven: Right.

Jay Goulart: Now fast forward to today, and I’ve got little guys and I know you’re in the parenting world as well, birthday’s now aren’t just about the cake; it’s about the entire experience around the cake. Now parents spend a premium to actually just have that cake and have that moment. So when Gilbert and Pine wrote this book in ’99 what struck me was that we were no longer really in the business of fundraising. To be really successful we had to be in the business of designing a donor experience.

Steven: Right.

Jay Goulart: So we began to create… I ran an office, and in a lot of ways it was a great opportunity. It was an office of 9 or 10 staff, it was a private school, but it was the perfect Petri dish to experiment with some new thinking. After all, what could really go wrong? We were an institution that had had some marginal success, but what we learned was that when we began to rethink what we did and we turned our back, if you will, on what was considered at the time best practice, we saw incredible growth of not only the types of donors that we wanted, but grew the length of time that they stayed on our books by about 280%.

Steven: Wow.

Jay Goulart: I’ll give you an example. What’s fascinating is that you think about our industry, and I grew up in conferences where conversations were about how it’s all about the quality of the relationship, yet as you and I both know it’s the one thing we can’t sustain. But if we looked at industry, for example, I happened to grow up around a table with a dad who was in the life insurance business, they actually knew how long a policy stayed on the books because they had to know a way of how to price it and pay a commission and renewals.

I remember looking at the software that we used, and I won’t use a name because it’s really not the point of the story, but I remember looking at the software we were using at the time at the school, and we’d all know it, there was no button I could push to tell me the average length of time we kept the people on the books. I didn’t view that as a negative for the company, I viewed it as an industry that wasn’t asking that question.

I hope I’m getting to the heart of your question, but I think we can see from our sector that if you don’t focus on long-term elements you will end up with the short term results that we get. I think you guys just tweeted something about good old fashioned customer service. In essence, that’s the piece we haven’t gotten right as a sector. Part of that is related to culture. You know, the guy who founded Burger King said “What gets measured is what gets done.” Our conversations, I spend a lot of time these days speaking in boardrooms, to begin to have them take much longer views of the business of raising money because the short-term question of how are we doing compared to last year is an important data point, but that doesn’t begin to help us understand the momentum of the relationships that we’re looking to build and our ability to make them.

I’m hoping that part of this mosaic of answers and thoughts is sort of zeroing in on the pieces of why without the culture and without that being the passion and driver, it’s hard to add the three elements that make the retention checklist, or the five or the ten. We’ve all seen them. Without being able to plant those concepts in an environment that is all about building and sustaining strategic relationships we’re going to continue to see the results that we get. I think that as an industry we reflect each of us as a microcosm, but as the macro, I think we can see what the results are. Hopefully that keys in a little bit.

Steven: Yeah. What I’m wondering is, maybe using that organization that you worked for as an example of success, what did you all do from a real sort of boots on the ground thing to make all those things happen? And maybe you can contrast it to an organization that maybe didn’t have that sort of culture of looking ahead and focusing on measurement. What did that actually look like? If maybe a non-profit is watching this video and they want to improve their culture, what can they do to sort of emulate that?

Jay Goulart: That’s a great question and I’m hopeful it’s one that fuels a book one of these days. It’s actually a fascinating story. Let me preface it by saying that we couldn’t have done it without great leadership that gave us the ability to scrape our knees, because to try new stuff, again you come back to culture… first of all, we had that element.

I’ll scroll into the details of what you’re asking. I think the first step that we really knew we had to do was prioritize. I think what happens often in the fundraising department is that you can get lost pretty quickly in trying to accomplish 100% for 100% of the people, and it’s just not doable. So I think if you want to have success you’ve got to first prioritize. I’ve been a big fan of prioritizing based on the initial level of support or capacity to support.

I was reading one of your posts recently, which has been an old mantra of mine, the sort of 90/10 ratio. So the first thing that we realized as an office is the only reason any of us had a job, the only reason any of us had a place to come each day was a result of what the people did who gave 90% of the money, and we realized that that population was a key population to our institution. We wanted to make that population larger and the only way that we could do that was through two avenues, acquisition and retention.

So that was our first priority and at the time our retention rate was 2.19 years, for that population. We grew it to over 8.5 years and ultimately we grew that population by about 300% because we knew that we had to do two things really well each year. The other thing that we realized, again that prioritization, was that what you were interested in, Steven, what I’m interested in, what Jay Love might be interested in, are all different things, and yet we had a built a communications model that was about scaling to everyone, and so we realized that once you tried to create a piece for everyone it wasn’t for anyone.

So if we really wanted to begin to connect we had to begin to get into the business of really personalizing and customizing communications, because once the fundraiser leaves the room and the coals are warm, what are the steps you have in place to make sure that those people are still connected to that fundraiser or that front line. We refer to ourselves as relationship managers.

Steven: Yeah.

Jay Goulart: So we really began to build, and the moment we did that what happened was, we were in another business. So all of a sudden the traditional staff A model didn’t look the same. In other words we were now focused on creating a different outcome then being focused on, for example, in the private school world, a big item was participation. That’s volume. I’ll never forget the first year we gave a shot at this, and we ultimately got these folks back because we learned a lot by prioritizing by the group that was generating the most, we lost 400 donors on the lower end because all of a sudden we said we’re not going to worry about participation, we’re going to really focus on growing this pool that gives us 90% of our money.

That pool of 400 donors represented somewhere around $11,500. We grew the population that we prioritized on by 27 donors and that same group generated $175,000.

Steven: Wow.

Jay Goulart: Now the interesting part is that it’s a lot easier to keep 27 people happy than it is 400. That was back in the 90s. I don’t think you could do that same thing today because of the way that wealth moves, the way things are, I think it’s a little bit different. But I think, at least from an anecdotal perspective, I think to the heart of your question, I think the first step for an organization to ask is, if we want to begin to create some change, you better first define the group of people that if you get it wrong for, you’re out of business.

Steven: Right.

Jay Goulart: I often joke… it was 1975, Steven, and I went to my high school prom in the powder blue tux and the ruffled shirt and it was the whole 70s show. I’ll never forget my mom, God rest her soul, my mom said, now be a gentlemen and dance with your date. And so for our sector our date is the group of people that are our most significant investors, and Pareto’s law is alive and well, you and I both know that.

So I think the first step to creating any sort of change, and even if a non-profit wanted to experiment with a small group, make sure it’s the group of people that you have got to get it right for.

Steven: Yep. I love the dance with your date metaphor; I may steal that if you don’t mind.

Jay Goulart: No, absolutely. Please feel free. But it’s true.

Steven: Maybe a good way to wrap up is to say, if you were talking to an organization who buys into everything you just said, wants to get started, but needs to take that first step, what would you say to that person, that executive director or board member or fundraiser who really wants to get this going for their organization and turn it around?

Jay Goulart: Yeah. It’s a couple of things. I think one, the first step is to prioritize and you better know what you’re current success rate is with the people that are giving you 90% of your money. How good are you with acquisition and how good are you at maintaining those relationships? Now, if you get up to leadership level the next question you have to ask is you’ve got to know what has been your success rate. I can’t tell you the number of organizations that I’ve talked to now that have absolutely no idea what their renewal rate is for donors or their retention, the longevity of keeping people on the books. If you don’t know those things you don’t have any way of reconciling any strategy.

I think the other is we are in an era of incredible sameness. You and I could draw… when I learned this I was a big fan of reading Tom Peters, I don’t know if you’ve ever read Tom Peters…

Steven: Yeah.

Jay Goulart: Management guy, and he wrote a great book called The Pursuit of Wow ages ago and it was interesting. So you and I both know that we could go out and get feedback from our donors in all the different segments and we could hypothetically draw a line of what their expectations. The problem is what will keep them around is what’s beyond their expectation. It’s above that line, which means that they can’t tell you what it is. So the skill sets that are required in today’s marketplace to be incredibly successful is really being able to get to know donors in a new way that we’ve probably never done.

I sort of look at it this way. There’s the back story behind a donor, there’s the evolving story, which is another circle of who a person is looking to become, and then there’s the intersection of the impact of the mission of the organization. I think our challenge today is to be able to understand where people are coming from but also each of us has our own running narrative of who we believe we are and who we want to become, and so the skill sets that got us here won’t take us beyond.

So I think if you just prioritize, know what your own math is, and then have the courage to have a blank slate. Small organizations can do one thing. A big organization would be well served to take a big population and hire people who have never done any fundraising in the past and ask them to build a model because they wouldn’t build what we’ve got, what we’ve used for the last 40 or 50 years.

Steven: Absolutely.

Jay Goulart: I think it’s a fascinating time. It’s a fascinating time for folks like yourself at Bloomerang to be focused on the right conversation and providing tools. I loved your session on how do you weed through. How do you weed through who knows their stuff and who doesn’t and the skill sets today to run a successful office probably aren’t the skill sets that got a lot of us into the business in the 80s and 90s. So I think prioritize, courage to ignore the pack, and realize that if you’re not sustaining the relationships that you truly value or have the ability to really advance your institution, how could you make a case to keep anything you’re doing in place?

Steven: Right, makes sense. Well Jay, this was awesome. Great advice, no surprise that that was the case. Where can people find out more about you, follow you online, read more of your stuff, because we want to keep this conversation going for sure?

Jay Goulart: You’re a good guy, thanks. Certainly @jaygoulart, my Twitter handle. You can find us at NewSci.co, and we’re out on the circuit like yourselves and I look forward to our paths crossing. It’s always great to connect with fellow Massachusetts folk, so I appreciate your time and the invitation and it was great to participate with you today. Keep up the great work.

Steven: Yeah, this was a lot of fun. We’ll link to all your stuff. Check out Jay, you’ve got to follow this guy. If you see him speaking in your area buy a ticket to that event immediately. He’s super smart and he knows what he’s talking about. So Jay, thanks for joining us. Thank you all for watching, we will catch you next week with another great conversation on Bloomerang TV. See you then.