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Listen to the weekly podcast “Around with Randall” as he discusses, in just a few minutes, a topic surrounding non-profit philanthropy. Included each week are tactical suggestions listeners can use to immediately make their non-profit, and their job activities, more effective.

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Episode 75: Understanding the True Nature of Capacity

Welcome to another edition of “Around with Randall,” your weekly podcast making your nonprofit more effective for your community, and here is your host, the CEO and Founder of Hallett Philanthropy, Randall Hallett. 


Thank you again for joining me here on “Around with Randall.” Today's conversation is about this concept of capacity and this stems from some recent work that I’ve done with a couple of clients trying to figure out how much they should be raising and how do they reach those potential numbers. I’ve always been bothered - it's little past struggled - with this issue because I’ve said on this podcast, I’ve said in the blogs, if you've heard me speak, I get frustrated because we are, as an industry, so dependent, so addicted to this concept of well, screening. And I think I’ve mentioned the story but it's worth repeating. I was, before the pandemic, on site and was, felt fortunate enough to be asked to speak to the entire advancement division about this idea of how we build better relationships and really about what pipeline looks like. And I asked the question, “would you rather have the wealthiest people, the people most connected who have some wealthy indicators as a part of the process?” And 95 percent of them says they want the wealthy people. And then I walk them through some of my thoughts, which we'll talk about here today. And by the end probably seventy or eighty percent turn the other direction saying, “wait a minute, maybe connection's more important.” 


The addiction that we have is we're looking for simple solutions. Many gift officers, not all but many, say well you know if they screen well - i.e an outside company and by the way i'm not saying screening's bad I think everyone should do it, I just think it has a much lesser value than most. But what gift offers, one is it's easy, it's simple, it's a number. These people are wealthier than these people. And then sometimes screening companies throw in some other information and they say yeah they're wealthy go talk to them. What I’ve learned, and what I’m honing in on as a part of the business model that I do is is that when I look at capacity I’m looking at discounting immense portions of a wealth screen because the wealth screen doesn't tell us anything about connection.


So I’ve had two or three of these capacity studies in the last couple of months and the way that I look at them is is I’m taking data and they the they maybe have screened it through their vendor or I’ll screen it through a vendor that I choose. And I start down the path of trying to figure out how to tell them how much, maybe, they should be raising on a range. Number one number, two, and then how do they get there, who really - who are they missing.


What I find is that when I explain the methodology of the rationale or rationale of why I do what I do there's like an opening of eyes, and mind, and heart to say wait a minute this is actually legitimate. Let me give you an example. I was working with a client going through the capacity study, got their data and, I’d asked for I wanted all their giving for the past 20 years, all their information out of the CRM, and they had actually well-screened it. Now they used a company that, it's not one of my favorites and we're not going to get into names here because it's not that that important, but it's not the one I use and they're in a place, to be candid, where housing values are extreme. And so they get this list back and if you only sorted the list by wealth it gave you a list in some prioritization or numbers. But remember, I asked for all kinds of information. And when we went through the process of kind of doing what I’ll think of as the mathematics, which is the part that I love, and trying to figure out what kind of equation should we put together that would give them the best opportunities to not only identify those that are people that could be higher-level donors that are current, but also people that they're missing, what we did was, is remember we have these donors last 20 years all their gifts. What we figured out for this first client was, is that less than 15 percent of the mathematical equation was actually going to be a wealth number that we were going to prioritize the number of gifts in the 20 years, the total amount given in the 20 years, and when the last gift was. And so every time we would re-sort the data in those particular areas and adding certain percentages of value, those three added up to more than 85 percent of the totality in trying to get them the right list. And then we overlaid the 15 percent ballpark or so of wealth - let me get to the end and then I’ll come back - and why it worked so we handed back the capacity study and said he raised between you know $8 and $13 million, which would be about a, I don't know probably about a 60 or 70  percent increase over two or three years, they need some additional resources, internally in terms of staff. But it could be done. They got the names back because the other part of capacity study, in my opinion, it's just not how much money you can raise but how to do it, and that's really based on people. s


So we were able to hand back the ones that were underperforming, the ones that weren't managed, so they weren't part of portfolios, and we were able to prioritize them. And when the client saw the names they were like, “we don't know this person, we didn’t,” and they've already started to turn on their production internally, portfolios, into those opportunities regarding building relationships. And they're already finding success, which is validation for the work, not for me but for the value it delivers to the client. They've already actually closed a couple of pretty decent sized gifts that they were not even aware could be possibilities before this. I find it most interesting because we ended up waiting, last gift a lot higher than maybe I anticipated, because and when you think about it just you know on a high level it makes sense. 


We got 20 years of data. If we didn't take last gift as a heavy proponent a good size percentage of creating this listing, this ranking, well if someone could have given 20 years ago and been incredibly wealthy but they're not connected to you, and that is really what we're talking about, and I talk about this from the moves management four part series about when I  teach, it's not capacity. That's the most important. We call it a capacity study but that's really not what we're measuring. It's an inclination study. It's who are the people that are closest to you that are more likely to give you either more money or you didn't even realize how close they were and you need to be elevating that conversation with them in dramatic fashion or form. It's really about a relationship study.


I couldn't be more pleased in really thinking about this from that perspective. Another one that we did recently had very much the similar portions. The difference was I got to use some of my, wealth screening opportunities and connections and part of those wealth screens included we could overlay other publicly known philanthropic gifts which the first example I couldn't do. So we added that in and so not only did we have their own giving history with that organization, we had a broader world to say who's philanthropic, generally. And what happened was it was illuminating to the client, like oh my gosh we didn't know these donors who were giving $100, $200 had given $1 million dollar gift over here. And by the way they gave every year for the last five years, and they gave multiple times each year, and they've attended events. They're screaming out for a relationship. That was beneficial and uplifting for me, beneficial to the client, as well. 


And what we really get to is that capacity studies are mislabeled and misnamed. That the idea of capacity is, many times, only thought of in regards to money. And what we need to spend more time on is the connection to relationship. Who are the people that are closest to us that have wealth indicators? 


So what are the tactical pieces that maybe you could take from this thought process? First and foremost, maybe this is just a randomism if there are such things, we need to stop calling these things capacity studies and start calling them relationship studies because capacity has a connection to money. And I’m not saying that it shouldn't but the fact of the matter is that if you live in a high housing cost area, cost of living's higher, and you are running the list, and if you, particularly if you have people who are from other places and somebody has a million dollar house that may not mean that they have any money. And if you're here in Omaha, Nebraska I know a lot of people that have $250,000 and $300,000 houses that are billionaires maybe $500,000 because it's a different cost of living area. So my first tactical piece is, help me. Let's call them relationship studies. 


Number two is, if you're gonna go through this capacity study or maybe it's part of feasibility study, I do recommend, almost insist that a capacity study is buried into a feasibility study. Maybe this is just my 30-second soapbox moment, is I’m all for the interview process it's very important, we need to be engaging with individuals. Where do they stand? Do they believe in the case? Is there a challenge to them making a gift and what level would they consider making a gift? I’m all for that but if you're not doing some hard data analysis then you're missing an important cog of a feasibility study, i.e what's possible. So I bury them or make them a part of a feasibility study. Number one, if you're going through that, ask the consultant how they do it, what's their methodology? It's kind of amazing I don't get that question very often. Now I talk about it and I show them charts and statistics and graphs and all kinds of, say, look when you bring on health philanthropy this is what we do. But more importantly, here's why, here's how it fits into this larger picture. And I’m kind of stunned, particularly in feasibility studies, how few feasibility studies are including a data quantitative approach that include some type of capacity or relationship connection, opportunity. Ask your consultants. Ask the question. It's your feasibility study. What is it that you need done? So that's number one. Take that into account. 


Number two, be aware of the type of screening that you're doing. I really don't want to get into company versus this company versus that company. I suppose if you're interested I would say so privately. I’m not sure putting on a podcast makes a lot of sense, but while screening and the industry has been condensing in terms of the number, consolidating in terms of the number of organizations, companies that do this anymore, and because of cost-cutting, because of actually some private equity purchases of some of these companies, they've dropped certain pieces of the puzzle. Yes, they all have the ability to go out and look at public information in terms of what a house is worth. Great. I guess that's a point of data or point of interest. But one has spent more time collecting immense amount of philanthropic data and they collect political donations and it gives a more rounded view. Yes, sometimes it's a little harder to go through a change. Yes, sometimes it can be, i'm not even sure it's more expensive but change is tough. Yes, sometimes it's easier to go if you have a CRM that has a component of screening included but is easier, better. So my second tactical thing is, when you talk about process internally, not just in terms of a relationship/capacity study or feasibility study but just daily screening, are you getting really what you need to be successful, and do, does the team or the organization that you're partnering with to do that work, are they actually helping you in that process? So ask some tough questions not only of a vendor but of yourself and what you really need.


What the third thing is is that there's a realization, and this goes back to my original story at this academic medical center where I was lucky enough to speak, is that wealth screening, capacity screening, relationship screening, well that's not true without the relationship piece is only a leading indicator. It is not meant to be ironclad for sure. Absolutely going to be on point. This is your top 10 and all 10 are going to make a gift. What they are, as a list, as individuals, are leading indicators of conversations in both examples where I spoke of the relationship study work, and one was part of feasibility study that I mentioned a few minutes ago. When we looked at the list there were people on that list, they were like, “well this person's wrong,” and my answer was, “okay the recommendation I made wasn’t, but just take these ten and go ask them. It was review these names and figure out which ones make sense to either add to a portfolio or to increase the relationship opportunities with, or to create a plan with, and if something doesn't feel right, look right, and there's additional information that data quantitatively can't tell us, realize that that's okay.” I think of, it's in one particular, example there were 206 people that could make you know six-figure gift that were identified that were unmanaged, as I tend to call them. They aren't in somebody's portfolio and they went through the 206 and there were a few that were like, well this person a, b, or c doesn't mean that they can't make that gift. Okay, what about the other 160? And that's also a tactical piece when you get back. This analysis, it's not to see one wrong name and then blow the whole thing out of the water. They're leading indicators. Who should you be talking about? And then you get to make the decision as to who goes into portfolios or has additional opportunity capacity is an interesting thing, and I really want us to think more about in terms of pipeline relationship. Yes there's a wealth component to that, but it’s, this may be one of the smaller parts of the equation. And if you're doing this internally, on a daily basis, and trying to identify pipeline, or you're doing it as a capacity or part of feasibility, all pipeline kind of conversations have this discussion internally. What are we actually using to determine who are our best opportunities, and is it the right data, i.e not always about wealth that drives us to where we want to be?


Always appreciate your time right here on “Around with Randall.” Don't forget to check out the website, hallettphilanthropy.com, posting blogs there - two or three a week - on various topics regarding leadership, regarding philanthropy, regarding the world business, just things that I read and see. Read a lot of newspapers every morning. At least online. Might find something interesting that could be applicable for you. Also, please share this podcast with others. Heard from somebody this week in the banking sector who said there are some interesting things that I talk about. I’m fascinated, number one anyone's listening, number two someone in banking thinks it might be of help. Maybe there's somebody out there that could be helped by or give some thought-provoking opportunities for listening right here? And if you would leave me a review on Downcaster, Youtube, Spotify, make sure you subscribe, I’d be very appreciative as well. Remember what you're doing is incredibly important and incredibly valuable. Nonprofit work has never been more important. I just wrote a blog post on Ukraine and who's the first people, first entities, first organizations in the door for this humanitarian for the piece of the humanitarian crisis? Nonprofits. They're the first there. While you, what you're doing may not be quite that level of immediate impact, it's incredibly important to your community. Know you, that you are have incredible value and that what you're doing is making a difference and in doing so you're making your world a better place and we need a lot of that, more. We need a lot more of that right now. We need more opportunity to be philanthropic to each other. Remember my favorite saying, some people make things happen, some people watch things happen, then there are those who wondered what happened, and our world's full of a lot of people wondering what happened. And philanthropy, the love of mankind, love of humankind, the nonprofit work we do is about helping others, those wondering what happened, while we're people who are trying to make things happen for them. I look forward to seeing you next time right back here on “Around with Randall.” Don't forget make it a great day.