Data Health and Integration for Foundations Part 2: Business Imperatives

I recently received my copy of Giving USA 2021.  This year’s publication highlighted how different 2020 was and, in fact, added a special section to call out ‘an unprecedented year’, in which American philanthropy was directly affected by both the COVID-19 pandemic and civil unrest triggered by issues surrounding race and justice.

The ‘unprecedented year’ may be why foundations were so busy in 2020 and beyond, but it doesn’t change the fact that they were busy.  Both giving to foundations and grantmaking grew – giving by almost 18% since 2018 and grantmaking by 17% over 2019.  Giving by foundations reached an all-time high in 2020.  Over the past five years, the growth rate of giving to foundations was nearly twice the growth rate of overall charitable giving in the US.

This growth is certainly welcome.  But for foundation professional teams it makes for a lot of data and information to be managed, surrounding both the contributions and the distributions.

Business priorities for foundations

This continued growth, and the natural gravitation toward technology to support growing foundation operations, is leading foundation professionals to examine the business priorities – or ‘imperatives’ – that need to be highlighted so that they can remain effective.  From an operational standpoint, we believe there should be three areas of focus.  When understood, optimized, and executed-on, these focus-areas can directly impact the effectiveness of a foundation’s mission delivery overall.  These are:

• Data health and integration – there’s a brief refresher from part 1 of this series immediately below
• Cloud-based technology – what it is and what its benefits are
• Key business and data flows for foundations – what is a data flow, and which ones are the most relevant to foundations (and why)

Data health and integration – a brief recap

Part 1 of this series advocated that effective data management for foundations and other nonprofits falls into understanding three key areas:  data health, data integration, and how data integration supports data health.

Data health can be defined as the condition of a foundation’s data, and how well it supports effective interactions with stakeholders and as well as decision-making that furthers organizational goals.  We look at data health along three key dimensions: currency, cleanliness, and completeness.

• Current data are fresh data. Current data means that your information is timely and up-to-date.
• Clean data are accurate and free of errors, and a clean database minimizes duplicate records and other data clutter.
• Complete data tell a complete story about – and to – foundation stakeholders.

Data integration is the process that consolidates data from different sources into a unified and cohesive information system, typically your main system of record.  The more foundations deploy new and different software applications to support different aspects of foundation operations, the greater is the need for data integration to prevent repositories of data from residing in various siloes across the organization – which causes stakeholder information to be not current, unclean, or incomplete.

Historically, data integration was done manually, ie, by keying data from one system into another.  An integration solution is a software platform or application that automates the various components of the data consolidation process (or processes).  Many contemporary integration solutions leverage application programming interfaces (‘APIs’) that further automate data-mapping and the exchange of data between naturally corresponding locations within the source and destination systems.

Integration applications can do a lot of the ‘heavy lifting.’  That said, foundation professionals still need to be responsible for identifying which data need to be integrated, how often, and who is accountable.

Data integration technology can ensure that a foundation’s data remain current, clean, and complete in several ways:

• Automation, so that data get transmitted quickly and routinely
• Standardization, so that data remain unsullied and conform with your data standards
• Record-matching, to ensure that records being integrated from one system don’t create duplicate records in another
• Process centralization, to support expedient integration of data from the variety of a foundation’s ‘satellite’ applications, so that your main system(s) provide a complete picture for all stakeholders.

Cloud-based integration technology

The cloud, when discussed in terms of computer systems and resources, refers to networked computer hardware, data storage, data access, software applications, and computing power that are not managed directly by end-users.  Rather, the entire suite of hardware, data, and software is managed by external service providers and made available to end-users over the internet.

As way to put this in perspective, the list below frames up the benefits of cloud technology, and is not limited only to integration tools, but to cloud technology overall.

• Installation and Maintenance – With a cloud solution, administrators and end-users have nothing to install or maintain – no hardware, no servers, no special laptop or desktop software, etc.
• Savings – There are really two aspects of savings: saving money on the cost of ownership as well as the saving time and effort by not having to install and maintain hardware, software, updates, etc.
• Access – As long as you have a computer, a web browser, and an internet connection, you can access the solution, anytime, anywhere.
• Updates – Cloud solution providers are typically responsible for software updates and hardware upgrades. Generally, new releases are more frequent, engendering newer/better features delivered more quickly.
• Security – because of the nature of the industry, cloud solutions leverage highly secure data centers and server technology furnished by leading providers such as Microsoft Azure and Amazon Web Services. In addition, solution providers typically comply with Service Organization Control reporting, also known as SOC2.  The goal of SOC2 compliance is to make sure that systems are set up to assure security, availability, processing integrity, confidentiality, and data privacy.

Cloud technology is becoming more and more pervasive in the nonprofit sector.  Today’s main nonprofit CRM, financial management, and single-function solutions have all migrated to the cloud.  Hence, data health and integration technology should be cloud-based as well, to ensure effective interactions with the applications being integrated, as well as to take advantage of ever-evolving cloud-deployed innovation.

Key business and data flows for foundations

If, in today’s more complicated nonprofit technology environment, 1) data integration supports data health, and 2) cloud technology can offer the most effective data health and integration solutions, then the  ‘3)’ is having a solid understanding of your foundation’s operational data flows.  Another way to put that is:  which data from which systems need to flow into – be integrated with – other systems.

With that in mind, you can devise a data health strategy that includes staff decision-making and sensible focus on which data from which systems need to be integrated, and in which direction(s) the data need to flow.  But you can rely on the technology to do the ‘hard labor’ and own the lion’s share of the actual effort.  Below are some examples.

Data maintained in spreadsheets

One of the most basic integrations that a foundation may need is to import data into your main CRM database or financial system from various spreadsheets that staff members maintain across the organization.  Also known as ‘flat files’, such data may also come from third-party sources such as a bank lockbox (donation transactions) or an external stakeholder who wants a number of agencies added to the mailing list.  Some spreadsheets may contain information on donors or applicants that you already have, so you want to be careful not to overwrite good data or create duplicates.

Online transactions

For community and other foundations that engage in active fundraising, and any foundation that holds Donor Advised Funds and routinely accepts contributions, online giving is an ever-growing source of payments.

As online transaction volumes grow, manual entry is not only time-consuming, but can undermine data currency – and manual entry errors can affect data cleanliness.  Online transactions need to be integrated into your main CRM system quickly – so that your view of each donor is current, so that you can expedite acknowledgments, so that there can be routine bank deposit reconciliation, and so that fund managers have the most up-to-date information.

Grant applications

Grant applications today are online affairs in which a variety of data is collected in electronic application systems – biographical, programmatic, financial.  It’s important to determine which grant applicant and application information would be valuable to integrate into your main CRM system and which data can ‘stay put’.

Certainly, any new contact information, biographical data updates, and key agency information should be transferred from the online portal to the main system.  The business needs of your particular foundation may determine other applicant or application data that would be useful to maintain in your main system of record, so that staff across the organization have the information necessary for their jobs.

Grant awards and disbursements

Grant awards are frequently tracked in the same system that houses the grant applications.  There’s really no question that this information needs to be transferred to the finance system so that the funds can be disbursed, as well as to the main CRM database, if that’s a separate system, so that those across the organization can have a complete stakeholder story.  For foundations that run Donor Advised Funds, awards and disbursements advised by donors also need to be transmitted to the finance system.

The issue here, then, become a matter of expedience.  How quickly and efficiently can this information be effectively transmitted.  As with online donations, manual entry is time-consuming and error-prone.  Foundations need award information, and DAF distribution data, transmitted to the other system(s) with alacrity so that disbursements can be made to awardees when promised and so that fund balances are never overstated.

Bulk email

Similar to online payments, email marketing in the nonprofit sector has continued to grow geometrically.  This includes email fundraising solicitations, as well as a variety of information for grant applicants, grant recipients, and stakeholders across the board.  Cogent analyses of who opens email messages, clicks through, and opts out (or in) can help foundations engage with stakeholders as effectively as possible and leverage the most productive communication strategies.

Point systems that specialize in email marketing do a great job of maintaining contact information, managing various lists, and – especially – keeping track of who opened the email message, who clicked and on which links, whether a message was delivered at all (bouncebacks), and when subscribers choose to unsubscribe.  That said, the volume of email can become so large, that leveraging an integration tool – built to ‘marry’ email data with your main CRM system – is really the only reasonable path forward.

Investment and banking transactions

Similar to the discussion above on grant awards, it’s not a question of whether monthly investment and banking transactions get transmitted and posted to your financial system, but how, and how quickly.  At the risk of being repetitive, manual journal entries can be time-consuming and error-prone – and reporting can be delayed even further when the numbers don’t tie out.  An integration solution can ensure that transactional data from financial institutions do not need to be hand-keyed or taken apart and reformatted, but rather, can be integrated into your general ledger in near-real time.

CRM to general ledger

Aside from grant and DAF awards, fundraising foundations will often have online as well as offline transactions that are recorded in the main CRM database and, of course, have to be posted to the general ledger.  The challenge is that most standard transactional outputs from a CRM system may not include some of the fields that the financial system needs, and often the output options do not provide the required file format.  That could mean manually adding columns, manually keying in data, manually summarizing transactions, converting the output to the right format, and manually cleaning up the file in the wake of that conversion.

Integration applications can eliminate the manual labor described above, and also support more frequent posting, fewer discrepancies, and more streamlined reconciliation.

From Technology to Mission Impact

The proper tools and technology can effectively address the three areas of focus positioned at the beginning of this piece – supporting data health and integration overall, being cloud-based to ensure IT efficiency and data security, and doing the ‘heavy lifting’ for high-volume data flows.

Overworked and overstressed foundation professionals tend to look at technology to solve tactical problems – ‘I have to get these online donation files imported quickly’, ‘I have to make sure I’m not adding duplicates’, ‘I have to get all the award data entered and reconciled before month-end statements’ – but sometimes we don’t observe the longer-term strategic value:

• High-caliber tools and smoothly running technology will help ensure current, clean, complete data.
• High-quality data – and more confidence in your data – will support more effective business processes.
• Effective business processes will inform the most appropriate interactions with stakeholders – communications, reporting, compliance requests, and more – ensuring building and maintaining the most beneficial relationships with stakeholders.
• More beneficial relationships will support the credibility and success of the foundation overall – whether it’s raising more funds from community foundation / DAF donors, improving the caliber of your pool of scholarship or agency applicants, or increasing leadership volunteer capacity.
• The composite of all of this is a foundation that is more effective and successful in delivering its mission, now and in the long-term.

The ‘unprecedented year’ for American philanthropy may turn into years (ie, plural), but if 2020 was any indication, that will likely mean continued growth for foundations along both the contribution and distribution dimensions.  Foundation teams need to be prepared, continue to focus on the imperatives for their particular operations, and take advantage of sector-specific technology to help with the tactical as well as the strategic.

Learn more…

• In our Part I, May 2021 ENGAGE post: Data Health and Integration Fundamentals for Foundations
• In our recent PEAK Grantmaking webinar: Fundamentals of Data Health and Integration for Foundations

And don’t miss…

. . . our Peak Grantmaking  October 27 webinar on this very topic—co-presented by Blackbaud Foundation Solutions, Omatic Software—will delve even deeper into these topics and and present solid examples of leveraging business imperatives for foundations.