Viewing entries tagged
Pareto

Pareto's Principle in Fundraising: An Interactive Example

Over the last few months, I’ve presented and written quite a bit about Pareto’s Principle in fundraising. Better known as the “80-20 Rule,” the idea is simple: Most of the money we raise comes from a small number of donors. This dynamic shows up in nearly every campaign I’ve worked on. Even so-called “grassroots” campaigns are heavily dependent on a small number of donors; just because we ask for small gifts doesn’t mean all of our donors contribute equally.

What is just as amazing to me as the math, however, is the fact that many people have trouble getting their heads around the idea. Even though most of us use donor pyramids and gift tables every day, it is often hard to understand how even massive programs are really driven by small percentages of donors.

This interactive graphic, built from actual campaign data, is designed to help illustrate Pareto’s Principle. Click on any gift level to see how many donors contributed at that level — and how much of the total revenue those gifts represented.

All of this begs at least two questions: Are you trying to grow large numbers of donors or are you spending time finding and cultivating donors who are connected to you? And do you treat donors equally or do you talk to them differently based on how important they are to you?  

Click to interact.

Click to interact.

RWR Preview: Where Should I Focus?

Tomorrow I’ll be speaking at the annual Run-Walk-Ride Conference in Atlanta. As is the case every year, our team will have a large presence at the event and will be leading several sessions today and tomorrow. I wanted to share a quick preview of my keynote tomorrow, reprinted from the Event 360 blog. I hope to see you at the conference later today!


Last month, I wrote about the link between strategy and focus for the Event 360 blog. Specifically, I mentioned that in an increasingly busy world, competitive advantage isn’t about being able to do more, but rather about being able to focus on those things that make a difference. We all have limited time and resources. Trying to be excellent at everything is the quickest way to guarantee you won’t actually excel at anything.

In the several weeks since we published the article, I’ve heard from many of you who’ve essentially said, “Okay – I believe you. I’m ready to focus. But, where should I focus?”

The answer to this question obviously depends upon your function within your organization and upon what your organization is trying to accomplish. No two specific answers are the same. That said, the general answer is always the same: You have to focus on what is going to make the most impact.

So the real question is, how do you identify what is going to make the most impact? And, how do you know what is going to deliver the most return?

Just like all questions of strategy, these aren’t ones that can be solved with a calculator. It would be great to plug numbers into a spreadsheet and find out where you need to focus your time. But of course, life doesn’t work that way. There’s more to what we do than math. Still, I want to share at least one mathematical property that can help you focus your efforts.

At the beginning of the 20th century, an Italian economist named Vilfredo Pareto was studying the distribution of land in his home country. He noticed something interesting: 80% of the land was owned by the wealthiest 20% of the citizens. A century later, we’ve inherited this observation under a few different names: Pareto’s Principle, the power-law distribution, or as it is most commonly known, the 80/20 rule.

Now, it’s worth mentioning that there’s nothing inherently magical about the numbers 80 and 20. It could be that 60% of your management headaches come from 10% of your team members. Or that 70% of your monthly income is spent on 15% of your hobbies. What the principle is really saying, in more general terms, is that in many situations, a large part of the result is caused by a small number of the inputs.

What is amazing about Pareto’s Principle is how many applications it has. You can find it in business (the bulk of the revenue of Fortune 500 companies is concentrated in a small number of the largest firms). You can find it in healthcare (the bulk of money spent on healthcare is directed at a small number of patients). You can find it in social issues (the majority of crime is perpetrated by a small percentage of criminals). And most importantly for our use, you can find it in fundraising, where it is very common that most fundraising revenue comes from a small number of donors.

In our consulting work we have seen power-law distributions in almost every level of every fundraising initiative we’ve studied. Most fundraising programs derive the vast majority of their revenue from a small percentage of constituents. Sometimes, programs that look to have thousands of donors are really powered by a handful of generous people. The bad news is that this means our organizations are dependent on far fewer constituents than we might imagine. The good news is that this means that to influence profound change we usually need to direct our efforts to a small subset of our total universe.

After working with dozens of nonprofits I’m convinced that Pareto’s Principle applies to our day-to-day activities as well. Most of what we spend time on does not directly impact our missions; and most nonprofit leaders I talk with can quickly identify what actually impacts their organizations and what is busy work. Answering trite emails, sitting in bland management meetings, reviewing work other people are supposed to do – these are activities that usually contribute little or nothing to our long-term goals and, yet, often occupy the bulk of our time.

To make significant change, we have to be willing to decrease or eliminate the time we spend on busy work, and shift our focus to those things that directly power our missions: meeting new people, sharing our vision of a better world, and asking others to join us in creating that world. All of the above is easier said than done. To learn more, I invite you to join me at next week’s Run Walk Ride Conference in Atlanta, where I’ll explore Pareto’s Principle, what it means, and how it can help us change the world.