Calculating the Cost of Losing High-Performing Fundraisers
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If you work in fundraising, you know turnover is a long-standing problem. Back in 2014 an Education Advisory Board study revealed that the average tenure of a major-gift fundraiser ran 18 to 24 months. A 2019 Chronicle study showed that 51 percent of fundraisers expected to leave their jobs within two years. The biggest reasons fundraisers gave for wanting to leave: seeking higher compensation or a promotion.
Losing an employee costs 90 to 200 percent of his or her salary, benefits, and expenses according to the Society for Human Resource Management and the Center for American Progress. We believe the cost of losing major-gift officers is much higher.
Understanding the value of fundraisers can be difficult because all are not equal — some are much more productive and, thus, more valuable to an organization. Plus, new fundraisers are generally inefficient; it takes time to cultivate relationships and understand what will motivate a donor to make a large gift. Fundraisers must "earn the right to ask for a gift," and this takes time. So does learning about the nonprofit and knowing whether money can be spent in ways the donor wants.
As much as 90 percent of fundraising revenue comes from major gifts today, so high-performing frontline fundraisers are more crucial to fundraising success than ever. We wanted to quantify the value of a major-gift fundraiser and answer questions such as:
- When do fundraisers begin to raise more than the cost of their salaries and benefits?
- Do fundraisers with longer tenures raise more money on average?
- When a fundraiser leaves how much potential revenue walks out the door with her?
When a major-gift officer departs, a nonprofit also loses the subtle insights that come from getting to know people well, observing their body language, and listening for cues about interests. And if donor reports are incomplete or missing, the charity loses out on even more.
Unfortunately, ongoing pressure to close budget gaps through fundraising has led to explosive growth in fundraising programs across North America, but the development of fundraising talent has not kept pace. Surveys by consultants Bentz, Whaley, Flessner show that high-performing gift officers are in short supply. This reality increases competition for top talent and makes it exceedingly hard for small institutions to attract and keep them.
The Value of a Fundraiser
To quantify the cost of losing a high-performing major-gift officer, we reviewed nine years of data on more than 180 major-gift officers at one organization. The average tenure was four years. We created a formula we call the Net Fundraiser Value, which can be used to determine the value of fundraisers at any organization.
The Net Fundraiser Value is the ratio of the total amount of money a person raises in major gifts during his or her tenure to the dollars invested in that person's salary, benefits, and expenses in one year.
Calculating Net Fundraiser ValueNormalized Fundraised Amount Estimated Fundraiser Cost
Estimated Fundraiser Cost
Because closing transformational gifts is often due to luck as much as skill and hard work, we believe big gifts skew the results. To make up for that, we made sure the formula considers the average dollars each person raises as well as the average number of major gifts each person secures.
To do that, we multiplied the average number of major gifts raised per year by the median gift size to determine the value of major gifts, which we call the "Normalized" Fundraised Amount. (For more details on this calculation, download the explainer below.)
To calculate the Net Fundraiser Value, tally the amount raised during a fundraiser's tenure, deduct his total compensation for one year, and then divide by that same number — the total compensation for one year. This gives each fundraiser a score.
For example, a gift officer who raised an average of $780,000 — based on fundraising results over several years — with an estimated cost (including salary, benefits, and budgetary expenses) of $120,000 will receive a score of 5.5. In other words, she is worth at least 5.5 times her overall cost.
Here are the steps to take using the hypothetical fundraiser described above as an example.
- Calculate the average amount raised during his tenure = $780,000.
- Determine the annual cost of the position (salary, benefits, and expenses for one year) = $120,000
- Deduct the cost of the position from the total raised: $780,000 - $120,000 = $660,000
- Divide $660,00 by the annual cost of the position: $660,000 ÷ 120,000 = 5.5
Many fundraisers with a tenure of fewer than four years received very low scores (often less than 1) because:
- They raised fewer major gifts compared with those with a longer tenure
- The total amount raised was low
In other words, they actually cost more than they raised during this period. Others, especially those with lengthy tenures and a high level of productivity, scored well (e.g., 12.5, 18.5, etc.), which indicates they are worth much more than they cost.
Surprisingly, it took four years on average for major-gift fundraisers to mature into their roles. After that, we saw a big increase in the "average dollars raised."
We calculated the median gift size from our data and observed that it depended on the fundraiser's years of experience.
The median gift size for fundraisers with one to four years on the job was about $200,000. (Note: For this group, the minimum major gift threshold was $100,000)
The median gift size for fundraisers with more than four years and fewer than seven years on the job was 50 percent higher, about $300,000.
For those with seven years or more on the job, the median gift size jumped another 83 percent to about $550,000.
Based on our findings, productive fundraisers with more than seven years of experience at the same organization are the most valuable. (We understand that for most organizations, keeping good gift officers for seven years or more is exceptionally challenging.)
Turning the Tide
Employee turnover occurs in every industry where there is a dearth of talent. In the post-pandemic boom, we expect turnover — dubbed the "great resignation " — to be extraordinarily high.
Losing a development professional with a high Net Fundraiser Value reduces current and future revenue, erodes institutional knowledge, and diminishes understanding of potential donors. This has been true for years, but as more people are vaccinated and the economy stabilizes, turnover is likely to soar.
Organizations must identify their best talent and provide incentives for them to stay by designing and promoting long-term career paths, investing in their development, and providing deferred compensation or other conditional benefits tied to their longevity.
Fundraising leaders must begin to identify top talent and invest in retention and promotion strategies for each. We can't afford not to do so.