First published on July 5, 2018.

Four years ago In Part 5 of our Barriers to Growth series I raised the question of whether the “full service” fundraising agency has outlived its usefulness.  More pointedly I wondered whether in fact they’re actually a danger to the sector.

Today, I’m revisiting this issue because, if anything, I’m convinced the “full service” agency is more of a barrier to growth and change than ever.

A lot of what I’m about to say will seem offensive to those agencies that deign to call themselves “full service”.  Or, that I’m insensitive to their problems. I mean to be neither.

But neither can I ignore the fact that in an age of increasing subject matter specialization with its science-backed insights into donor attitudes coupled with the fast and inexpensive use of technology’s algorithms almost no agency can afford – let alone claim– to have the range of skills and knowledge required to truthfully label itself “full service.”

Of course, I realize the “full service” term carries with it a variety of meanings.  Traditionally “full service” in direct response fundraising has meant we handle the strategy, creative, digital, telemarketing, print/mail production and analysis.  Two decades ago that was a pretty acceptable definition because conditions and knowledge were far more primitive and “full service” was possible.

Today, if an agency is to truly serve its clients in a climate of declining numbers of donors, rising donor expectations and mistrust amidst a vastly increased number of nonprofits the “primitive” is no longer good enough. Settling for the status quo processes and personnel of the ‘80s and ‘90s just won’t cut it.

I’m sure lots of agency andnonprofit folks understand this.  After all, the signs abound that change, restructuring, new mindsets are needed. Higher fees, lost respect, absence of serious innovation and risk taking – all are characteristics that manifest themselves in the anger, frustration and angst expressed by clients over their agencies.

I’m also sure most agency heads are aware of all this and don’t quite know what to do about it, any more than do their client.  And so, a very sick cycle sets in.  A nonprofit retains a full-service agency following an expensive Request for Proposal (RFP) process….a honeymoon period sets in…only to be followed by disillusionment…then the inevitable issuance of the RFP and the recyle begins anew.

Meanwhile growth has plateaued, retention declined…the willingness to take risks and break out of the same-old-same-od sidelined by paralysis. Paralysis on the part of the nonprofit afraid it won’t ‘make the numbers.’  Paralysis on the part of the agency fearful of losing the client.

It’s time to seriously search for workable alternatives admitting that the so-called ‘full-service agency’ model as we once knew it has largely passed its prime.

In 1971 I founded and for 35 years headed a successful full-service agency not only in terms of profitability but also in terms of innovation and growth for our clients.

I couldn’t–and wouldn’t even try– to do it today. Those were different days. Days when full-service firms worked with the founders and top officers of nonprofits. Days when the agencies had skills and tools not readily available through an Excel sheet or online as they are today.

Frankly, given today’s climate I don’t blame the agencies for their often wuss-like behavior and failure to demand their clients take more risk and be more innovative. Their difficulty in attracting experienced and energetic talent … the cost of their payrolls … the need to please their corporate investors has led to a frenetic brand of competition to see who can most honor the status quo. Despite lip service to ‘innovation’, in reality it involves too great a risk that the numbers won’t be met.

And the clients are as complicit – or worse – as the agencies themselves. Although most nonprofits talk the talk of innovation and breakthrough thinking, very few walk their talk.

The first and arguably last job of most nonprofit fundraising managers is to meet last year’s number. 

Of course, nobody openly describes the process this way, but virtually every informal discussion, dictate and mindset I’ve seen steers toward that no-growth status quo result.

I want to repeat and emphasize what I consider a major flaw of the current climate/process—The RFP.

If anything assures agency – and client – paralysis, it’s the usually thoughtless RFP process.  And believe me I’ve seen more than a lifetime’s share of client RFP’s and agency responses.

Because the primary goal is usually to protect (and hopefully increase) last year’s net income, the agency response is most often long on rhetoric and short on the sort of substantive guidance (investment, risk assessment, dramatic change in strategy, donor attitudinal research, etc.) necessary to foster growth. Thank heavens for Power Point, Global Replace and Excel.

Adding insult to injury – and further eroding the ability of agencies to properly handle their clients programs – too often the RFP is used as a club to merely beat down the incumbent agency’s fees.

Enough of that problem.

If we truly care about growth in our sector we all have a stake in finding solutions. For all their problems, the agencies continue to provide a lot of the routine functions for those nonprofits that are limited in the amount of staff they can hire.

We’re in the midst of a significant change wave and need to help each other figure this out. To get us started, I offer three kernels of grist for the discussion and debate mill:

1. Differentiate Between Facilitators and Counselors.

Maybe 60-75% of all agency folks are ‘facilitators’ rather than true counselors. This is because they simply don’t have enough experience to add value to the process.

Ten years ago, this was good enough, but that was before clients had ready access to information and specialized services, whether list broking, or data analytics, or high-level strategic insights. Face it. Easy-to-access information and technology has devalued the traditional agency.

Even worse, today many agencies persist on further watering down their value by insisting they’re ‘full service’. And, in theory, a full-service agency with top notch, subject matter experts in each category makes a ton of sense for any nonprofit to hire. ‘Full service’ almost always includes four functional areas — strategy, creative & copywriting, analytics and reporting, and production management — across all pertinent channels.

In reality, in today’s world, you might find an agency with – at best – two areas of expertise but with a monthly tab that charges for all four.

2, Recognize the Importance of Coordinating and Cooperating with ‘Specialized Expertise’.

No single agency or nonprofit can afford or attract the range of expertise and skills required in today’s complex and fast-changing markets. Only when that reality is accepted and the pretense of ‘full service’ ends will both agencies and nonprofits figure out how best to coordinate and work in tandem with the range of specialists required for true growth. They’re out there and they’re skilled, but too often agencies are afraid to recommend them to clients because such recommendation might be seen as a sign of agency inadequacy.    [ Damn good thing the great symphony orchestra conductors don’t think that way.]

Without question in my mind the greatest sin of all is acceptance of the status quo.

So, how do we go about properly arraying a combination of ‘facilitators’ and ‘expert counselors’ and organize for growth?

3. Re-direct Financial Incentives to Reward Innovation, Growth and Value.

‘Meeting last year’s number’ is a reason for termination, not reward. Yet, the conventional payment system for agencies and consultants is to put in the time, organize plenty of meetings, not rock the boat, and get paid.

Same holds true for much of the direct response supply chain. For example, it’s ridiculous for a list broker to be paid on volume of names rented or exchanged … or data analysts to be compensated on records passed or names output from a model … or any of the many other activities that are rewarded based strictly on volume rather than value.

There simply has to be a way within ethical bounds to measure – and reward – the fundraising performance that matters most for the long haul: the annual increase in lifetime value of a nonprofit’s base of donors. It’s easy to calculate. It’s either up, or down. And compensation is adjusted accordingly.

Make no mistake … agencies aren’t going to wake up tomorrow to discover that there’s some new death ray that will put them out of business. The game doesn’t change that fast.

As with all industries, those who survived the past five years are likely to survive the next five. Equally, as with all industries, competition will continue to intensify, margins will be increasingly compressed.

As we’ve seen time and time again, in sector after sector, change and innovation are the only solutions on the path to growth.

Fundraising is no exception.

What are your thoughts and recommendations, please?

Roger