Paying Fundraisers On A Percentage Is Bad For Agencies

By | January 20, 2017

A close friend, who makes more than twice as much money as I did at the time, asked me to write grants for her. She wanted me to work for a percentage of the grant awards. Prior to this, she asked me to work for a friend – also for a percentage of the grant awards. My friend is in the comfortable triple-digit salary range. (An experienced grant writer will study an agency’s F990 before agreeing to work for them, for pay, for a percentage, or for free.) I thought I explained this to her pretty well (from an agency’s perspective) the first time she asked, but she didn’t get it.

(The rest of the story is below this link.)

Here is a link to a position paper about the issue by the Association of Fundraising Professionals, and frankly, they say it better:

Association of Fundraising Professionals – position_paper

Here’s the rest of the story and my feelings about why it’s bad for an agency to pay on a percentage:

Being friends, I agreed to meet with her friend to see if I could give them some direction. The agency was not in a strong position to be funded – not attractive to potential foundations for several reasons. Here are two:

  1. They were operating at a big deficit.
  2. They were not registered as a nonprofit in our state.

If I agreed to work for a percentage, I would probably earn nothing for at least a year. I would have to start from scratch to build a development program (budget, F990, annual report, etc), and that takes time. They would obviously have to go through the registration process in our state, which also takes time.

In this agency’s case, private funders would be more likely to contribute to them because they are less likely to conduct “due diligence” research. They are also more susceptible to a charismatic leader than foundation staff. Unfortunately, their donations might not be tax deductible, but they may not care. I spent a few hours with the manager, for free, gave him some ideas for private fundraising that would work in the near-term, ideas for getting registered in our state, ideas for long-term fundraising, and wished him the best.

Why it’s bad for an agency:

Professional fundraisers who are paid on a percentage of the grants awarded would probably be inclined to only work on proposals that have the best chance of being funded. This matters because:

Many supporters, including foundations, will not fund requests the first time they are approached. They may consider an agency after two or three proposals; meaning after two or three years. There are several reasons for this:

  1. Foundations and corporate funders need time to ensure they are making a good (and safe) investment. I’ll never forget one foundation that came for a site visit. They told us that they had just made a site visit to an agency that wanted funding for a swim program for people with developmental disabilities. There was no pool. There were no agreements (e.g. memorandum of understanding – “MOUs”) to use anyone else’s pool. It was a bogus program designed to raise grant funds.
  2. In larger cities, such as Los Angeles, where I live, foundations and corporate funders have their own professional groups. In these groups, they discuss the major issues facing their cities and surrounding areas. I hear that they also discuss local nonprofits and how they are – or are not – addressing those issues. These issues change, and an agency’s issue may be “tabled” for another, more pressing issue, meaning that they may not get a lot of grant funds for a while.
  3. Foundations may have made funding commitments for large projects and are not considering new agencies for a year or two, although they may not state that on their F990 or website. This means that if the foundation looks like it may not fund the first grant proposal, the fundraiser would probably not send it. But it also means the agency does not get the opportunity to make introduce itself to the foundation and set themselves up for the next funding cycle.
  4. Foundations are required to spend a percentage of their assets each year. Some under-spend, some over-spend. If a foundation over-spends one year, they can count the overage as a qualified expenditure for the next year. This means that they will probably donate less money. Also, a grant professional that is working on a percentage may decide it is not worth their time to approach a foundation that over-spent the previous year, as the chances of the foundation taking on new nonprofits is slimmer.

Other considerations:

Most foundations and informed supporters will not fund agencies that pay their fundraisers on a percentage because it can take the focus away from promoting the agency’s mission and turn it into “how can I get paid enough to make my rent” issue. When all the other staff are being paid, this forces the fundraiser into a “volunteer” position for a lot of their work. It is unfair and unethical: not all of the grants will be funded no matter how good they are, so a lot of a fundraiser’s work will be unpaid.

Good and clear writing are of course important but not essential to winning grant awards. I’ve seen proposals that had typos and still get funded. The funders either trusted the agencies or liked the issues. Good writing will bring in more money, a comprehensive grant strategy will bring in more money, but it ain’t just the writing. It’s the cause, the backup materials, especially the budget, the level of transparency, flexibility, and the ability to identify, accomplish, and evaluate goals that support the mission. These are all things that a grant writer has to put in place in addition to the grant.

How will an agency put a line item in their budget for paying their fundraiser on a percentage of the donations or grants, particularly when so many foundations look down on the practice?

Personally, I give agencies copies of their grant proposals so they can have their administrative staff send copies to other foundations, foundations that would not require a grant written specifically for their guidelines, which saves the agency money.

Agencies are not just paying grant writers to write proposals. Grant writing is a long term fundraising strategy, as is planned giving.An experienced grant writer is giving their:

knowledge of the local industry

prior experience with individual foundations and corporations

knowledge of what components make a persuasive grant package (budget, evaluations, etc)

knowledge of how to create an overall grant strategy for the agency that will benefit them for years to come

I would not work for a percentage, but if I did, obviously the priority would be given to agencies that were paying me.

 

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Payment On A Percentage Is Bad For The Agency by Laura O’Neal is licensed under a Creative Commons Attribution 4.0 International License.

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