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Can You Really Wave Goodbye to Fundraising Forever?

By Nell Edgington



There’s a new, or perhaps it is very old, idea kicking around the blogosphere that is probably a dream of many nonprofit leaders. The idea, put forward by Appropriate Infrastructure Development Group (AIDG) founder Peter Haas, is that there could be a company to which nonprofits completely outsource fundraising. Although the idea is intriguing, its underlying assumption that money and mission can, and should be, separated is a potentially destructive one.

Peter proposes a new business idea that takes the burden of fundraising off the backs of nonprofit Executive Directors. A fundraising contractor would solicit donations and take a 10% cut of the revenue:

This is an industry that is waiting for its day…There are incredibly talented development people with strong contacts who raise hundreds of millions of dollars for big organizations…who could do a lot of good in the world by going solo and helping smaller organizations…There need to be more contractors and less consultants in this field, people who will treat it as their job to do the work and the heavy lifting of the fund raising task instead of just offering advice.

Peter’s post set off a string of mostly positive comments and a response blog post by Change.org blogger Nathaniel Whittemore, who thinks it’s a “pretty fascinating idea.”  Nathaniel’s post similarly drew comments, which were largely positive.

I completely agree that we need innovation in how nonprofits fund their impact (read my series on Financing not Fundraising), but I don’t think Peter’s justified frustration has developed a valid idea. First, there are legal and ethical challenges, for example the Association of Fundraising Professionals, the largest association of fundraisers in America, calls fundraiser commissions unethical because they inject personal financial gain into a charitable transaction, and the IRS frowns on parts of charitable donations benefiting individuals.

But in any innovation there are hurdles to overcome, so these issues are not what really bothers me. Where Peter’s idea gets dangerous is in his underlying assumption that fundraising can somehow be separated from mission, as he argues:

If the mission of the NGO is the service to the community, and fund raising is truly something administrative (as most donors like to classify it in costs analysis), then it should be something an NGO can easily subcontract. NGOs subcontract back end services all the time, book keeping, accounting, payroll. I don’t hire somebody to tell me how to reach into my heart and find my inner book keeper, I hire a book keeper. Why not fund raising?

But, fundraising is NOT simply an administrative aside that can be tossed to someone else. The money that supports a nonprofit is integral to, not distinct from, the organization’s impact. Unlike a for-profit company that has one customer group, a nonprofit has two: 1) those who benefit from their services and 2) those who fund those services. To separate an organization from one of their customer groups is unthinkable. Not many successful for-profit companies outsource their sales function. Indeed, the most successful companies are those who integrate feedback that their sales team gathers as they meet with current and potential customers (the marketplace). So too should a nonprofit integrate ideas and feedback it gets from its second customer group: its funders.

Ah, I can hear the screaming now. In some nonprofit circles it is close to blasphemy to consider that those with the money should be able to influence a nonprofit program.

But funders (love them or hate them) provide a very necessary input to an organization’s theory of change. An organization can have a phenomenal solution, but if that organization is not able to articulate and demonstrate why a community as a whole should care and how that solution provides a positive return on investment, the solution is pointless.

Nonprofits cannot outsource the absolutely critical function of understanding, building relationships with, and gathering feedback from funders. To separate financing from impact would be to wave goodbye to half your business model and the customers who support it.

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.

Tuesday, June 15th, 2010 Financing, Fundraising, Nonprofits

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9 Comments to Can You Really Wave Goodbye to Fundraising Forever?

Jason Lewis
June 16, 2010

This concept is certainly not new and yet deserves some serious consideration for a variety of reasons. Undoubtedly, as the author suggests, there are plenty of sacred cows when it comes to fundraising, how it should be done, and according to what codes of behavior. Hang around fundraising long enough and you begin to read between the lines when it comes to ethics, compensation, etc.

[…] Can You Really Wave Goodbye to Fundraising Forever? | Social Velocity Nell Edgington looks at the potential for nonprofits to outsourcing fundraising and questions whether doing so might damage the organization's ability to achieve their mission. (tags: philanthropy) […]

Nell Edgington
June 17, 2010

Jason,
Thanks for writing. My issue with the concept of outsourcing fundraising is not that it attacks some sacred cow in the nonprofit arena. I’m all for big, new ideas in the sector. My issue is that by outsourcing fundraising you are fundamentally undermining the “product” that a nonprofit is creating for the marketplace. That product is a nonprofit’s mission. And by distancing a nonprofit’s mission from the feedback the market provides you are limiting and compromising that mission.

Sasha Dichter
June 18, 2010

Nell, great post. I share your concerns about Peter’s proposal. More thoughts and reflections here:

http://sashadichter.wordpress.com/2010/06/15/time-to-outsource-fundraising/

Nell Edgington
June 18, 2010

Thanks Sasha. I read your great post shortly after I posted mine. We must have been on the same wavelength. You make some great additional points, and I’m glad to know that there are others that share my concern about this “new” idea. Thanks.

Karl Miller
June 22, 2010

Nell, I agree with you and Sasha. What Peter describes is very transactional, more akin to a VC cash infusion or perhaps political fundraising.
I’m also trying to picture this “gun for hire” carrying his/her Rolodex of donors from city to city calling these contacts to now please give to their cause of the week. “Oh, and please remember, good friend and donor to all my causes, a small 10% fee will be taken out for my salary. Thank you.” I know of companies that provide fundraising services (I interviewed for one once but did not want to leave my family for weeks and months at a time), but what they do is still not what Peter describes.
I see what we all see that fundraising, taxing, issuing bonds, and all the other ways we help raise funds for services and non-profits is becoming unsustainable. Non-profits were created to provide services our governments could not or would not provide. Donors were happy to support them. Now, however, the government can’t afford to provide the services it’s supposed to provide. Society now has to help them make up the difference. Where a donor was able to give some money to the church and perhaps a non-profit or two, they now have to give to their child’s public school, their public university, their local police department. etc.
If our tax rolls (government-mandated fundraising) cannot adequately support government services, our fundraising “rolls” (that percentage who give/donate/support) will never adequately fund all our religious, educational, charitable, and other NGO’s.
There has to be a better way. I thank you, Sasha, Peter, and all my colleagues toiling to find it. It’s this kind of discussion that can uncover disruptive initiatives and transformational ideas.

Nell Edgington
June 22, 2010

Thanks Karl. I agree that there are some serious structural challenges (government offloading an increasing amount of social services to the nonprofit sector)to be solved. Those are going to take time and resources. In the meantime, I think the better way is for nonprofits to work to finance not fundraise their social impact, which is what I argue here: http://www.socialvelocity.net/resources/financing-not-fundraising-a-social-velocity-blog-series/.

Karl Miller
June 22, 2010

Wonderful series! Really struck by the “pull” fundraising v/ the traditional “push” fundraising.
I’ll be sharing this with others. Great stuff!
Thanks for sharing this. I always enjoy your e-news.
-Karl

Nell Edgington
June 22, 2010

Thanks Karl. I’m glad you are enjoying the content. Thanks for sharing it!

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