the rise of managed analytics services · for decades, we have seen telephone programs managed...
TRANSCRIPT
The Rise of Managed
Analytics Services By Joshua Birkholz, Principal
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The Rise of
Managed Analytics Services By Joshua Birkholz, Principal
An Evolving Profession
About 17 years ago, I completed my first predictive model at the University of Minnesota. At
this point, the prospect research profession was already well defined. We had found ways to
assess the capacity to give major gifts, likelihood to give major gifts, and the warmth of the
relationship through in-depth exploration of data sources. This was the time of the early
billion dollar campaigns, emerging CRM-like database systems, and, what was then called
“proactive research.”
As campaign goals increased, prospect research was shifting its position in the fundraising
business process. As the need for more prospects exceeded the need for more information on
existing prospects, the profession shifted to the primary engine of prospect identification.
Researchers used the same criteria of capacity, likelihood, and engagement to identify
prospects. But, it was costly to apply this framework on a case-by-case basis.
Screening, which emerged through the 1990s into a service we would all recognize in the
early 2000s, provided scalability in determining who to research. The criticism of frontline
fundraisers to prospect research was, “These prospects have no connection,” or, “This name
hasn’t given.” The demand for scaling likelihood and engagement was the emergence of
predictive analytics.
As an early adopter, I saw the profession change with this new technology. In the first few
years of my consultancy, it was my goal to speed up the change and have every
development program develop in-house analytics. And the profession did change. In my
first 10 years as a consultant, I helped train over 100 nonprofits in the essential skills of
applied data science.
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Adversity in Analytics
The analytics profession matured, but we hit the same wall facing much of the fundraising
profession; we lacked adequate staffing. We are in a profession that depends on highly
trained, experienced fundraisers. And there are not enough fundraisers to meet the sector’s
demands. Likewise, the ability to hire analytics professionals with the skills to communicate
and lead organizational change with data is challenged by three limitations.
Limitation 1: Cost
Data science salaries in the for-profit space exceed the budgets of most nonprofits. Bloomberg
Businessweek cited salaries for starting data scientists exceeding $200,000 in a 2015 article by
Rodrigo Orihuela and Dina Bass. Cross sector analysts (Individual contributor level 2 on
Glassdoor) held an average salary of $125,000 in 2015 and 2016. The BWF Fundraising
Analytics survey of 2016 showed an average analyst growth in salary to $75,000, still well
below other industries.
$0
$25,000
$50,000
$75,000
$100,000
$125,000
2015 2016
Annual Salary
Fundraising Analyst Cross-Sector Analyst
Limitation 2: Management
In my 13 years consulting in data science for the business of fundraising, the business
question I get the most is, “Who manages it?” The ability to conduct analytics is one thing;
the ability to manage an analytics professional is another. Although we have many examples
of development managers with the ability to direct the strategy, deliverables, and creative
autonomy necessary for an effective in-house effort, this gap continues to be a topic of
conversation.
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Limitation 3: Transiency
After an organization hires, trains, and integrates a quality professional, she or he is already
being recruited away. Butchworks stated, “89% of data scientists are contacted monthly by
recruiters. 25% are contacted weekly.” (4/2015). Any of us in the fundraising analytics sector
see many colleagues jump around between great opportunities.
In basic terms, data scientists are expensive, hard to manage, and they don’t stick around.
Changing Winds
In the last couple of years, nonprofits began shifting their approaches to analytics. Although
the very large, top 50 fundraising programs have mature analytics programs, and small
nonprofits are content buying simpler scores from screening vendors, the majority of
development programs with mature major gift efforts are struggling with meeting
organizational demands for analytics.
The requests we field, as the leading consultancy for fundraising analytics, have shifted
along with these winds. Although we still have much interest in building in-house
programs, the majority of inquiries are for high-level services beyond screening. They are for
serving as a substantial analytics partner. Our most recent surveys of the profession have
seen a marked turn back towards partnering with a provider.
We’ve found the average in-house analyst produces seven predictive models a year,
conducts two–three projects assessing the organization or a program, and serves as close
partners with both prospect development for pipeline management and with annual giving
for direct response segmentation. With such definable objectives, programs without the
budget or management bandwidth to maintain an in-house effort are turning to a new
solution: managed services.
35%
37%
39%
41%
43%
45%
47%
49%
2012 2013 2014 2015 2016
Perc
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Pro
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Managed Services
Maintaining a virtual analytics department has benefits and limitations.
Benefit 1: Cost
Although costlier than simple screening scores, maintaining a virtual team is about half the
cost of the average fundraising analyst. Additionally, there is no hiring, firing, onboarding,
training, or physical space costs associated with virtual teams.
Benefit 2: Defined Deliverables
When using a third-party organization, the buyer is in more control of the deliverables and
timeline. In-house staffing is more likely to get scope creep and distractions from unrelated
job expectations. When a provider is paid for a defined service, it is in both parties’ interests
to focus on the defined deliverables.
Benefit 3: Expertise
Managed service providers are motivated by market discipline to maintain a highly
competitive team with significant domain knowledge. Either trying to teach a fundraiser
statistics or trying to teach a statistician fundraising is possible. But, both take time. Domain
knowledge takes years of experience. A third-party can pay for these costs.
Benefit 4: Effectiveness
If a provider does not provide value, word gets out in the marketplace. They are heavily
incented to perform for their own success and stability as a company. This motivation
translates to effective work-product. In a sector hamstrung by limited employee incentive
flexibility, nonprofits have great ability to incent their providers.
Limitation 1: Nuance
As is often said, “No one knows your data like you do.” The obvious benefit of an in-house
analytics team is a nuanced knowledge of the data and its history. A third party will never
have as deep a knowledge as an in-house team; however, they will learn more as a
collaborative partner than a screening or software company would.
Limitation 2: Precedent
Although many healthcare, human service, religious, and environmental nonprofits are
comfortable with third-party partners, the higher education sector, with the largest
investment in prospect development, uses partners in place of in-house analytics less often.
However, this is beginning to change. Anecdotally, BWF is seeing a substantial increase in
managed service contracts from universities.
Limitation 3: Data Extraction
Providers of analytics services still depend on organizational resources to audit, clean, and
pull data for analytics purposes. This can add a strain to already busy systems professionals.
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So Where Do We Go From Here?
For decades, we have seen telephone programs managed externally. Large nonprofits are
increasingly outsourcing their caging/gift processing procedures. CRM systems are
increasingly moving to cloud-based providers. And networking technology is
increasingly moving to third parties. In all of these cases, the cost savings, accountability,
and staffing challenges have made third party technology solutions very attractive to the
fundraising sector.
As a leading evangelist in building in-house decision science programs, it might be strange
to hear me advocate for a managed service approach. Nevertheless, in-house services are not
a fit for every organization. I expect the benefits of analytics, which are well documented,
will continue to push programs towards adoption. But the way these services are delivered
will continue to evolve.
Contact BWF Insight Today
BWF Insight is the prospect development and analytics division of Bentz Whaley Flessner, providing
managed services, in-house program development, and targeted prospect development services.
Prospect development describes the underlying infrastructure necessary to operate a best-in-class
fundraising program with a major-gift oriented business model. The components of this infrastructure
include analytics to identify prospects, segment the base, and evaluate portfolios; prospect research to
feed the pipeline, discover emerging constituent sectors, and profile prospects; and relationship
management to manage portfolio composition and gift officer activity and to provide contextual,
actionable reporting.
As the leader in consulting for prospect development, BWF Insight uniquely provides The Total
Pipeline Solution. Using the latest innovations in data science, BWF Insight meets the critical needs
of feeding the pipeline, clearing the pipeline of clogs, and keeping prospects moving. Additionally, our
experienced team of analysts and consultants will guide the development and excellence of in-house
programs. BWF has established several hundred prospect development programs and formed nearly
100 in-house analytics departments.
Whether you need a provider to find you more prospects, a guide to develop a cutting-edge program,
or a fully managed service approach to analytics and prospect development efforts, BWF Insight is
your ideal partner.
Contact us today to bring data science to your fundraising business.
BWF Insight
www.BWFinsight.net
(800) 921-0111
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Joshua M. Birkholz is a principal at the international fundraising
consulting firm Bentz Whaley Flessner, where he consults leading
nonprofits in higher education, healthcare, and human services in
comprehensive campaigning, organizational structure, data-driven
strategies, and productive business processes. Josh also oversees a team
of consultants with specialties in the data sciences and prospect
development. He is widely regarded as a leading innovator in 21st-
century development strategies.
His contributions to the fundraising industry include founding the BWF analytics division,
BWF Insight, guiding several institutions through billion dollar campaigns, advocating for
the integration of data science, and establishing more than 50 in-house analytics programs
throughout North America, Europe, and the Pacific Rim. In addition to his numerous articles
and videos, Josh is the author of the sought-after book, Fundraising Analytics: Using Data to
Guide Strategy, and contributor to the books A Kaleidoscope of Prospect Development and Return
on Character.
Josh is the Chair of the Advisory Council on Methodology for Giving USA. He is an
instructor at the Rice University Center for Philanthropy and Nonprofit Leadership.
And he is the recipient of the prestigious Apra Visionary award for his contributions to
prospect development.