The Participation Rate Game - You Can't Win If You Play!

This was a big weekend for colleges and universities around the nation as the annual "America's Best Colleges" issue of US News & World Report hit newsstands late last week. I'm betting more than one annual giving director has spent time this weekend looking at the numbers in print or online. The annual participation rate extravaganza is officially underway!!

Let me start by making my thoughts on the participation rate metric clear: I hate it. Hope that was clear enough. I'd use stronger wording, but I don't want to get an 'explicit' tag on the 'getting giving' blog.

Annual giving folks in higher education are all very aware of the participation rate metric. They may feel pressure to focus on it if their president/board/supervisor thinks participation rate is important to the success of their institution. In some cases, it's truly 'do or die' and in others it's simply another issue to remain aware of. For those that have the 'do or die' type of pressure, it's likely their strategy is greatly impacted as a result. And usually not in a good way.

The bottom line is that those who chase participation rates are often making strategic decisions that damage their overall fundraising efforts in both the short- and long-term. Some methodologies may be considered cheating the system or, at the very least, walking a fine line between right and wrong but I'll not be the judge of that. I have great sympathy for those who find themselves in a situation where decisions are made to make a number look good in an annual magazine issue. I can see why they do what they do. I'll just share a few examples and how these strategies are detrimental to the efficiency and effectiveness of our programs. I'll assume you all know enough about participation rates to jump ahead a bit.

So, on we go to 'The Participation Rate Game 101 - Two Common Methods to Look Good in US News"

Method #1 - Reduce The Denominator
How can you increase your participation rate without increasing the number of donors to your institution? It's simple really - just decrease the number of solicitable alumni you have to report! 100 donors from a population of 1,000 alumni is a 10% participation rate. Find a way to rid yourself of about 200 solicitable alumni and suddenly you have a participation rate of 12.5%. You're a hero!

You can't do that can you?

Of course you can, it's done all the time!

• You can reduce the amount spent looking for lost alumni in the nondonor and even lapsed populations. Geeze, who wants to find a good address for somebody who might not ever make a gift? Of course, it's possible they aren't giving because we haven't reached them, but why take the chance by asking them? It might bring the participation rate down if we knew where they were!
  

• Try coding those same folks 'no contact' and determine them not to be solicitable as a result. Of course, then you'll never reach them. They'll never give. But again, they're not a problem in that pesky denominator anymore!

• Perhaps the elderly non-donors are especially problematic. Again, you might want to code anyone who graduated prior to a certain year as 'no contact' since you can't teach an old dog new tricks. You might not want to mention this to your planned giving department - they'll likely miss out on some pretty good marketing opportunities to that group. Then again, they don't have to worry about participation rates do they?

I'm all for allocating resources wisely, and there are valid reasons not to solicit certain populations each and every year based on predictive models, historic giving patterns and more. But a strong annual giving program wants as many solicitable alumni as possible. They fight like dogs to keep up with alumni who move, to find good contact information for everyone, and to at least have the opportunity to receive a gift from as many potential donors as possible. For those who aren't the best populations, you might not solicit them every year but by keeping the option open you have the chance to eventually bring them on board as loyal and consistent donors in the future. It's a sad day when the strategy is to eliminate them from the denominator to help the participation rate today when it may negatively impact your fundraising efforts tomorrow.

Method #2 - Increase the Numerator (At All Costs)
With those same 1,000 alumni, taking your number of donors from 100 to 150 raises your participation rate from 10% to 15%. That's better than Method #1, but the strategy to get from 100 to 150 donors may end up backfiring on you.

• You could overwhelm your population with enough mail to keep the USPS operating at a surplus next year. Everyone can get 20 mailings per year and eventually they'll give something just to get you off their back. If you've got the resources, you can buy yourself a pretty good participation rate. Might not build many good friends that way though. The long-term negative impact might want to be considered.
  

• You can always let your alumni know that 'it isn't about the money, it's about the participation rate' and hope they'll give $1 or $5 because that's what you ask for. You might tell them you are just hoping to 'get them on the books to help the rankings' and any gift will help. Then again, 'for the participation rate' isn't the best case for support is it? I wonder if those donors have the same positive feelings about their philanthropy as they would if they were doing something important like helping deserving students get a great education?!?
  

• You could also give gift recognition credit to your donors' third cousin twice-removed and their half-brother if they're alumni too - then you get three donors for one gift! I'm not even sure who my third cousin twice-removed is, but I'm sure they'd appreciate a note of thanks for my generous support! Maybe all three will renew next year too!
  

I once had a friend who claimed he could get you any participation rate you wanted, but he might have to bankrupt you in the process. Chasing donors at any level, at any cost, can do just that. In addition to using limited resources to buy donors, have you ever computed the real cost of having that donor? From data entry of the initial gift to gift receipts, stewardship pieces, and renewals, it's likely more than that $5 you're asking as a 'token gift'. Do you really want a bunch of donors that actually help you lose money every year they renew?

It's also important to remember that your renewal rates on small donors are usually much lower than for those making larger gifts. You may spend a fortune to acquire that $5 donor, spend some more stewarding them, and find that only a very small percentage ever give again. Now what!?!

The whole purpose of the annual fund is to generate much-needed support today while building a pipeline of potential major-gift donors for the future. Buying small-level annual fund donors doesn't achieve either of these goals and wastes precious resources in the process. Those resources could be utilized much more wisely stewarding your current donor population, acquiring donors with potential for the future, and actually helping (rather than hindering) your bottom line.

These are just a few examples of how programs work to increase their participation rate. There are many many more ways. Some are just bad strategy. Others are downright dishonest. Almost all are wasting both human and financial resources chasing a number that really doesn't mean much of anything.

By the way, it's important to remember that participation rate is only 5% of the US News formula. It's the smallest variable. That's right. . . 5%. Since it's such an insignificant part of the rankings, maybe a better strategy is an annual fund that generates the support needed to work on other aspects of the US News formula. Scholarships that help recruit the best and brightest students. Faculty support and research funding that attracts the best and brightest faculty. All those things that make an institution truly better come from fundraising programs that keep their eye on the prize. The impact on rankings might be greater when the institution is provided the resources it needs to improve in those areas that matter rather than focusing on making a random number increase year after year.

If that isn't an option, I'll just give you some good news to hold you over until the next issue of US News & World Report. . . . it's still early in FY10. There's plenty of time to get that participation rate up for next year!!

The Participation Rate Game - You Can't Win If You Play!