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.

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$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.

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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.