How To Think About Leading vs Lagging Indicators In Fundraising

Welcome to my weekly LinkedIn newsletter! Connected Fundraising Weekly will be?my way ?of providing easy-to-engage insights around donor behavior, fundraiser enablement, and technology. I hope you enjoy the content, and please share if you think someone would benefit from what I'm writing!

I just got back from a lovely few days in St. Petersburg, Florida. I was invited by AFP Florida to present at Planet Philanthropy , a conference that supports several hundred nonprofit professionals who come from Miami to Jacksonville, Pensacola to Orlando and Tampa, and everywhere in between!?

I presented a talk about geographic influences on donor engagement, but a topic that continues to come up over and over is the importance of marketing. What I wanted to do for this week's newsletter is talk about the difference between what would be defined as "leading indicators" and then what is defined as "lagging indicators."

Much of this comes down to intent versus action. The more you understand donor intent, the more likely you can smooth the process to create action (e.g. obtaining a gift).

Lagging versus Leading Indicators

I don't need to reinvent the wheel here in explaining the differences between lagging versus leading indicators. This chart found below from GeckoBoard is a nice outline of the basics, but I'll translate it into the nonprofit space right after.

The long and short is that lagging indicators tell you what has already happened in your data and leading indicators give you insight into what MIGHT happen. Lagging is fact, and if used incorrectly leading is fiction.

How Nonprofits Should Think About Lagging VS Leading Metrics

A large amount of discussion in the nonprofit space is heavily focused on lagging indicators. Things like retention, average gift size, growth in giving, etc. are all lagging indicators of success or improvement for a nonprofit. However, they are also hard truths that you can plan around.

Lagging KPIs

I've spoken about KPIs for nonprofits before , but generally, folks should be prioritizing these lagging metrics in their daily, quarterly, and yearly analysis:

Growth In Giving Rate: The net of gains and losses in giving from last year to this year, divided by the total value of gifts received last year. Nonprofits raise more money by investing more money in growth-oriented fundraising strategies that both increase gains and reduce losses.?

Donor Retention Rate: Total number of donors who gave both this year and last year, divided by the number of donors who gave last year.

Donation Page Conversion Rate: The number of unique visits to an online donation page divided by total donations processed by that page.?

Leading KPIs

Less discussed in my opinion is a deeper understanding of Leading metrics to prioritize. These get into the daily workload of what a nonprofit professional ends up prioritizing their outreach efforts on. A few examples include:

Recurring Revenue Projections: take the number of recurring donors and their aggregate amount of giving that comes in on a monthly basis and multiply this by how many months are left in the year to understand where you should expect to be.

Outstanding Pledges: individuals who have indicated a pledge either for your annual fund or through a multi-year commitment are expected by end of the fiscal year, so this is a leading KPI in terms of intent to give. We'll get into pledge management another time and pledge fulfillment percentage is actually a lagging indicator to pair with this one.

Prospect Calls/Meetings: this helps indicate interest and are good for understanding the flow of major donor cultivation and prospect pipeline opportunity. If you have discussions that lead to potential interest but perhaps not a pledge outright, this should still be tracked as a possibility to help manage your revenue expectations.

Moves management metrics are a whole can of worms though and a super fun webinar I did was with Dr. Kathryn Gamble of the Gail Perry Group about how we think about something like the number of phone calls in the wrong way. That isn't necessarily the true barometer of intent, so this is a big topic to unpack.

The Future Is With Leading Indicators

The leading indicators are telling what you believe the future story of revenue will be and the lagging indicators are the litmus test on if your hypothesis is correct. Both of these should be taken into account and there are many more discussions, especially when it comes to marketing, on the innovations that relate to leading indicators becoming some of the most important and creative opportunities for nonprofits to truly build a community of lifelong support.

What did I miss?