Charities are wasting too much time measuring the wrong things, distracting them from what really matters, according to Nick Mason, head of fundraising strategy at the RNIB.
Mason gave a presentation with Roger Lawson – a consultant at both Clayton Burnett and About Loyalty – at the Institute of Fundraising national convention in London yesterday.
He said that instead of measuring return on investment, charities should be focusing on measuring the life-time value of their donors.
Speaking about what he described as the "tyranny of ROI", Mason said he wished that charities would not measure their ROI because they would not be any worse off by not doing it at all.
Mason said that although most people believed a higher ROI meant more money was going to the cause, but ROI was the "death of growth". Charities with lower ROIs could raise and spend more money than those with higher ones, he said.
"You can’t have gross income, net income and ROI as your success metrics on your performance spreadsheet," he said. "You need to work out which is your leader and which is your master, then put them in your performance spreadsheets, rather than having spreadsheets that give you all of them."
Mason said that the tricks charities pulled to make their financial year targets could often be disastrous. He said it was common for charities to shrink their acquisition spend – the amount spent on acquiring new donors – in order to increase their net income and ROI, and that the RNIB had done this for many years. He said charities that did this would end up losing their supporters in the long run.
Charities should stop focusing on their cost per acquisition and instead concentrate on delivering against their strategies, Mason said. "Most of us end up slaves to the spreadsheet," he added. "Am I hitting my targets? From a strategy point of view, you mustn’t get caught up in that financial year rubbish."