How to Apply Performance Improvement Principles to Healthcare Fundraising
By Steven A. Reed
A recent confidential study that we conducted within a major nationwide faith-based health system revealed that the hospital chief executives believe, on average, that they are raising half or less of the money they should be able to raise.
Those same CEOs expressed optimism about how much their organizations’ fundraising will improve. But they provided little rationale for this confidence, other than that the need for philanthropy is increasing and the economy is expected to improve.
Hope appears to be their primary strategy for increased success in fundraising.
But hoping for better results doesn’t work. Read “10 Problems Hope Won’t Cure.”
Adopting quality principles
Today, hospitals are embracing process as the key to improving quality, safety and costs, and beginning to adopt the quality improvement principles used in manufacturing, such as those employed in Toyota’s “Lean” and GE’s Six Sigma programs.
A Lean organization strives to cut waste and increase value for customers by creating an efficient flow of products and services. Six Sigma is a disciplined, data-driven approach to eliminate defects in any process. When you combine the methodologies, Lean Six Sigma emphasizes speed, reduced waste and making the best use of resources through a powerful data-driven system.
Virginia Mason Medical Center in Seattle, which has been named a “Top Hospital” by the healthcare improvement coalition The Leapfrog Group, is known for applying Lean methods in healthcare. The Virginia Mason Foundation was raising $7 million annually in 2002 when its health system adopted Lean as a key transformation strategy. In its presentation at the Association for Healthcare Philanthropy meeting in 2011, the foundation reported raising $15 to $20 million per year with a staff of 24 and an annual budget of $3 million, as well as dramatically reducing “time in process” for major gift solicitations, citing an average of less than one year and a 90 percent completion rate from prospect identification to solicitation.
We’ve seen similar results with our clients, first with the development of the “Core Process” — an early implementation of Lean principles — at the Florida Hospital Foundation, which completed a $100 million campaign over goal and a year early.
How to apply Lean Six Sigma principles
It’s difficult to boil down to a few paragraphs how to apply Lean Six Sigma principles to create fundraising processes that are more effective and eliminate wasted effort. Here are several basic steps.
- Focus on major gifts. A basic principle of Lean is flexibly placing resources where they will generate the most value. Of course, you need a complete pyramid of fundraising strategies and methods, but if you focus on maximizing your major gifts program you can significantly increase your ROI. A mark of a high-performing operation is a revenue mix of about 80 percent major gifts, which in number make up about 20 percent of total gifts.
- Develop stage-gate criteria to ensure that development officers spend time on the most likely prospects. Stages are the various phases in a process, and the gates are review points between each stage, where tough decisions are made about proceeding, reworking or stopping. If each gate has specific criteria, you can clearly assess when all criteria have been met — and only then move to the next stage. For each prospect, you move through specified stages and gates before reaching the “ask” — at which point the prospect is well-primed, and asking is only a formality.
- Define your processes for relationship development from first introduction through gift agreement and into stewardship. In Lean Six Sigma lingo this is called mapping your value stream. Essentially, you block out on paper all the key steps involved in the major gift process. Then go back and identify all the activities that take place between the key steps. Pinpoint the steps and activities that do not bring actual value into the process. Can any of these be eliminated? Automated? Reassigned?
- Shorten the solicitation process. This equates to the Lean Six Sigma concept of cutting waste and shortening cycle time, with a “cycle” being the time from the beginning to the end of a process. In a typical fundraising operation, a development officer might have a portfolio of 130-150 prospects, and the time from identification to solicitation and gift acquisition could take 18 months — or even up to three or more years. If you intensify the relationship-development process — which, among other things, involves reducing the size of the prospect portfolio to around 30 good, active candidates — you can shorten the cycle time to less than a year, increasing throughput and raising more money.
- Use high-cost, scarce resources to do only high-value work. Good development officers are truly a scarce resource. They should focus on cultivating prospects, not on making database entries. Can a clerical staffer input the data instead? What about things such as routine reporting, other paperwork and thank-you letters? What can you do to increase the number of prospect-facing meetings per week? You’ll need to develop high-volume, point-of-entry activities and programs to create abundant prospect flow into the “pipeline.” For example, in one model the initial connector, often a board member, brings people to interesting events where they learn about new initiatives or treatment advances. Some become qualified prospects and move through the process. A good metric is this: For every 10 people brought in by the initial connector, one gives a gift at the target level.
- Set multiple process measures, with emphasis on cycle time. How many prospecting events will you hold each month? How many connections should you make at each event? How many prospects should you be cultivating at each stage? You must establish criteria to let you know how you’re doing, as well as a system for alerting you when a particular measure is or isn’t being met. For example, you can use a “dashboard” system where green means you’re on track, yellow is the continuous improvement zone, and red calls for immediate attention because you’re seriously behind where you need to be.
- Measure early, and use metrics that correlate with success. Instead of simply measuring things at the end, such as how much money was raised or the total sum each development officer brought in, use measures that help you see at key points whether you are on track for a positive outcome. Not only will you get what you measure, you will build a reliable forecasting system. Your CFO will love you.
- Maintain a constant effort to eliminate out-of-bounds process variance. Create your “way” of fundraising, so you have a tried-and-true baseline process that is ingrained in your culture. In other words, if you have four gift officers, you will still have one consistent way that your organization goes about acquiring major gifts, instead of four different ways, each with numerous variations. That one way should allow for a clearly limited degree of variance so that your front-line people can apply their experience and creativity to specific situations. You can then continually improve that one way.
Steve Reed is chairman and CEO of Marketing Partners, Inc., (www.mpicompanies.com), a business improvement and marketing services organization formed in 1983. He is president of its Performance Advantage subsidiary, which specializes in business process and organizational performance improvement.