Fundraising Agencies — Barriers To Growth, Part 5
A lot of what I’m about to say here will seem offensive to fundraising agencies and insensitive to their problems. I mean to be neither.
I decided to call out this thorny barrier to growth because I’m not alone in observing a dangerous pattern that’s emerging.
Higher fees, lost respect, absence of serious innovation – all are trends that manifest themselves in the anger, frustration and angst expressed by clients over their agencies.
I’m sure most agency heads are aware of all this and don’t know what to do about it, any more than those clients who recognize the trend don’t know what to do about it either.
The time has come not to cast stones, but to engage in the search for workable alternatives admitting that the so-called ‘full-service agency’ model as we once knew it has largely passed its prime.
In many instances that once-workable model now serves as a true barrier to innovation and growth, especially in the direct response sector.
I founded and for 35 years ran 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 again 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 the internet and clients respected them for these unique traits.
The result: agencies respected their clients and clients respected their agencies.
Frankly, I don’t blame the agencies for their oft 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 price 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.
Ensuring agency – and client – paralysis is the usually thoughtless RFP process. 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) necessary to foster growth. Thank heavens for Global Replace.
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 the problems. 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 talented staff they can hire.
We’re in the midst of a giant Game Change 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 and 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 to 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.
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, not rock the boat, and get paid.
And it’s ridiculous for a list broker to be paid on volume of names rented or exchanges … 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
8 responses to “Fundraising Agencies — Barriers To Growth, Part 5”
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One of the things I find very difficult is talking with clients who have used other agencies that have set up very unrealistic expectations ie. spend $50,000- $100,000 with us and you’ll get a strategy (often a template), heaps of new donors (um yes and how?) and stacks more income. They don’t explain to the client how much work is required internally – to change the mindset of CEO, Board and staff that fundraising is evil, to set up systems for handling and tracking donations, to actually have friendly people answering phones, to work on making donating online easy, I could go on.
Another very annoying thing is when agencies recommend as part of their “strategy” that the client employs a fundraiser. That’s all fine but then the client expects that single person to do EVERYTHING from strategy to writing copy to making donor calls and managing the database. I may be very harsh but having come across several poor fundraisers in this position, I do wonder whether these agencies want a “goto” dogsbody within the organisation to do the dirty work while they charge a fortune for the supposedly top level services they provide.
When I work with a client, I try to explain upfront that while some short term gains may be possible through improving appeal writing or a different approach to the appeal plan, they must look long-term at developing donor relationships through their communications.
Although my comments are not technically about innovation, often these basics are required before you can start looking to break the mould.
Anyway that’s my rant for this afternoon.
As a specialist fundraising copywriter and strategist, I totally agree that providing high level advice and execution in all four of the areas you identified – strategy, creative and copywriting, production and data/data analytics – at the level each organisation needs is very very difficult to do well.
I favour an approach where the ‘agency’ role is to identify the key needs and then pull together particular experts to meet the needs of individual clients.
This creates an opportunity for a very agile, responsive approach tailored to the culture, vision and challenges of each organisation.
And they don’t have to all be located in an expensive building – there’s nothing wrong with using a designer based in one city for your web work, and a demographer or data analyst based somewhere else in the world – so long as they are really good at what they do and they are briefed properly by your consultant.
My suggestion is to look for a group of very high level experts and get them to work together. Or perhaps the new model is for your ‘agency’ (which is what we try to do at Praxis Fundraising) is to be that co-ordinator, drawing on their knowledge and experience of who is the best in the field and/or the best to help you get results beyond what you would have expected.
At the risk of sounding bold and also self-promotional….
I have innovated. I have changed the system.
This is not a promotional comment. It’s just a fact. And I’d be thrilled to share these innovations with anyone who calls or emails me. PLUS THERE WILL BE ABSOLUTELY NO SELLING. In fact, if you are a consultant or work for an agency, I have nothing to sell you. I just have new innovations that you should see.
So, what am I talking about?
Well imagine what you would have thought if someone told you they could show you the iPad back in 1979. Would you go look?
I couldn’t find the software products I needed to alter the course of fundraising, so I built them myself with my own team of developers and programmers.
People like Phyllis Freedman (http://www.smart-giving.com/plannedgivingblogger/) call my innovations “Game-changing.”
Greg Lassonde said, “the results have been outstanding.” http://www.greglassonde.com/
Rob MacGregor (Wayne State Univ.) said, “the system uncovered more prospects for me than my prior methods would generate over many years.”
But that last quote is misleading because we don’t only help fundraisers zero-in on who to call to attain the most funding the fastest, we tell them precisely when… almost to the minute.
Anyway, sorry to get excited here but you said “The time has come not to cast stones, but to engage in the search for workable alternatives.” And I’m telling you, the innovation (like an iPad) is already here if you’ll only take a few moments to see it.
Cheers!
This gets at so many issues that are destroying donor relationships, reducing revenue and ultimately creating barriers to good (like cures for diseases, poverty reduction and the like).
Agencies love to blame their clients (at least in the hotel bar at conferences) for being risk-averse, but if we aren’t leading the battle for innovation and risk, we must forfeit our right to be viewed as experts in our field.
Charity staff and leadership need to hold agencies to a higher standard and ask tough questions about contracts and fees. My pet peeve is retainers for the sake of retainers. I have polled dozens of clients about retainer agreements and not one could point to any actual value being created by these arrangements. This is unconscionable in my view.
Thanks, Roger for putting some fire back in my belly on a Wednesday! Onward in the good fight.
Very good points and I agree with most. However, the one point I would question is that agency be measured by “the annual increase in long term value of a non-profit’s base of donors”. I am not meaning to split hairs, but net long term value is a better overall measurement. What we need to look at to measure success are three things. If these are all tracking in the right direction then the organization is on track: Average gift, frequency and number of donors. The only ways to raise more money is for the organization to have more donors, or the donors give more often or the donors give higher average gifts. The optimum objective it to get all three going in the right direction in concert. But if one or two are stable and the other(s) are growing, success is around the corner. Sadly, very few agencies or organizations are using the tools available to analyze their donor file on a regular basis and fewer still set annual growth targets. What gets measured gets done.
Thank you, Roger, for your ongoing commentary! I owe you a few things and I’ll get to them to you & Tom sooner but probably later. I save every Agitator article so someday I can combine them into a book & download onto my tablet when I have time to read them all.
The agency-client dance is complicated and mine is from the tele-fundraising side but still relevant. Smart clients use multiple TM firms or they contract with the few DM firms that have TM experts or “TM strategists” like our agency. Competition among call centers most often generates higher performance. Telemarketing is also much more complicated than it was back in the day.
I spent many years trying to convince clients to pay 5 cents more per donor contact and fill call center seats at the same time. I’m now on the other side — educating clients about how to work with TM firms in the US, Canada & UK. We want to help them better integrate TM, DM, online, major gifts, etc.
We facilitate business arrangements with built-in success for clients — at least the ones willing to let us negotiate contracts with price protections, risk limitations, financing, guarantees, etc. Perhaps these arrangements are easier with TM firms, but it’s mind-boggling that some clients chose status quo arrangements. BTW — most of our TM partners accept reasonable conditions because it keeps them in the game (and fills call center seats). A case study of such “facilitated arrangements” will be the subject of a future Agitator submission.
With our bank, we set up a “non-profit loan fund” to facilitate managed-risk fundraising programs for clients that don’t have the budget to do what is in their best interest. The bank put us in charge of deciding what programs will generate enough money to repay the loan with interest. We offer some clients no interest (because money is still cheap) or we get a partner agency to lower their price by 3%.
The “assistance fund” was an idea of yours as well and we discussed it a few years ago.
Maybe it’s the fear of scams or kicking gift horses in the mouth. How do we change mindsets to foster financial/performance-based innovations among non-profit organizations?
I want to draw attention to an issue Roger made passing reference to and that’s the agency having a full, ongoing strategic relationship with an organization’s leadership. It was always one of the keys to CMS’ success and is more important than ever today.
It never made much sense to let direct response programs operate off in a little corner of an organization. But now, it has gone from being inadvisable to being flat out unworkable.
My only pushback is use of the past tense. Those kinds of intense partnerships with a client’s CEO and senior staff are still available for agencies that seek them out and know how to hold up their end of the conversation.
Direct response communications strategies and overall organizational positioning are inseparable now. And the risk-taking and openness to innovation so critical to a future-facing strategy can only come with engagement and buy-in from the top ranks of a nonprofit.
Agencies need to keep seeking out that kind of partnership.
No consultancy can be all things to all organizations anymore. Fundraising is a lot more complicated than it was 20+ years ago when many of the large-scale agencies started. Yes, the basic principles are the same, but there are a lot more moving parts now in the machine. The complications are external (legislation that impacts us and our clients in terms of fiduciary duty and privacy/donor protection, for example) as well as internal (the explosion of data and the ability to access and create new insight from it).
I agree with Jill – the most innovative consulting I’ve been involved with has been a closely-knit coordination by a ‘traditional’ agency that pulled in specialists to work in collaboration with clients on their areas needing help. Some full-service agencies don’t want to admit that they don’t know much about some aspects of fundraising (like using research and data analytics for campaign readiness) so they just ignore them altogether to their clients’ disadvantage.
Would you hire a ‘full-service’ contractor to single-handedly draw and frame your new house, put up the electrics and plumbing, install the appliances, choose the flooring and tile, paint the interior and exterior, and design the landscaping? Building flexible teams with specialists that work well together just makes sense.
I hope your post creates some honest soul-searching, Roger. I’m very grateful that you got the conversation started.