Financial Resource Development for Israeli Organizations

Financial Resource Development for Israeli Organizations: Hiring a Professional Fundraiser or Outsourcing to a Professional Firm

One of the most challenging dilemmas that Israeli non-profit organizations face when raising funds outside Israel is whether to hire a professional fundraiser or engage a professional fundraising firm. The decision is not a simple one and often depends on many variables that all have to be taken into consideration. Making the decision requires a thoughtful process to allow for the proper planning.

A number of larger Israeli non-profit organizations have established relationships with their American “Friends” groups and may have an existing body of volunteer leadership and professional staff in an office located in a major city. A director who is a seasoned fundraiser is included in the staff along with additional staff members depending on the size of the Israeli organization and the overseas office. This is certainly true of offices representing universities, hospitals, museums, and other non-profits of a particular size and scope. Occasionally, these groups may engage outside firms to consult around the structure, focus, and/or message of the campaign, but most of the fundraising is implemented by the organization’s professional staff and volunteer leadership in coordination with the Israel-based organization.

The question of whether to outsource or engage additional staff is most relevant to smaller and mid-size organizations that do not have an established operation outside of Israel. Often these non-profits are not sure about whether to invest funds and hire an additional staff member who has experience and contacts overseas. Generally, the person is engaged to follow up on present contributors and to use her connections with potential donors (and find brand new donors) who might be willing to contribute to the organization. In addition, there may also be an expectation that she will approach foundations and secure multi-year grants based on her past experiences in previous places of employment. The parameters of her position are negotiated and reflect her knowledge, skills, abilities and experience.

The professional fundraiser’s compensation is either based on a salary or on a percentage of the funds raised while she is working. The first approach is for the agency to hire a staff person to raise funds and to pay her a salary for her efforts but it does mean the organization incurs the cost of the salary and other expenses prior to realizing the fruits of the fundraising effort.

The second approach is to base the compensation agreement on a percentage of the income generated from the fundraising activity. This is very attractive because it requires a minimal outlay of money on the part of the non-profit. It is common for the fundraiser’s expenses to be covered but the actual salary is dependent upon the person’s success. It is also possible to provide a base salary and then award bonuses when the overseas fundraising campaign is successful.

Paying out a percentage of the funds raised is not always perceived as the most professional way of compensating a professional fundraiser. There are a number of ethical issues that could be discussed and perhaps a future column will focus on them. The most glaring issue is that no donor wants to know that a percentage of what he is contributing to the organization is going directly to the person who is soliciting the contribution. It is common practice to pay a salary to people who work on behalf of non-profit organizations and donors know this and do not question the compensating of salaried employees, however, most would look askance at the practice of paying a percentage of the funds raised to a professional fundraiser. No one would want to lose donors over this practice.

A second approach to fundraising overseas is the outsourcing of the services to a professional firm specializing in financial resource development (FRD). There are a number of firms providing comprehensive services for non profit organizations including planning the strategy for the campaign; developing the local leadership group; preparing the Israeli-based professionals and volunteer leaders who travel to meet with contributors overseas. In general, the firm brings a wide range of expertise and services to the table and the agency can select those which are most helpful to its fundraising efforts.

The relative advantage of the professional consulting firm is its very ability to access expertise and use its contacts throughout the overseas country. Often there is more flexibility when there is a comprehensive service, and there are greater resources available to the Israeli organization than can be provided by one individual staff member. This can often be to the advantage of the smaller agency that would otherwise not have a wide enough reach to use a number of approaches to increasing its financial resources.

However, when comparing the relative advantages and disadvantages of hiring a staff person versus engaging a consulting firm, the agency must look at the investment of its time and money. In general, the cost of engaging an individual is limited to salary and expenses. If the agreement is to provide compensation based on a percentage of the raised funds then the non-profit has limited liability. But when a firm is engaged, the agency is making an investment in building a strategic approach and this requires the willingness and ability to accept the responsibility for paying a monthly retainer up front before the contributions have been received.

A non-profit has to consider all the advantages and disadvantages of hiring a professional or contracting with a consulting firm to increase its financial resources. Much of the decision depends on whether the organization has the necessary resources and how broad they want their scope of activity to be. Of course there is also an issue of whether the agency wants to keep the fundraising “in house” as opposed to “outsourcing”. All these issues have to be considered by the professionals and lay leaders associated with the agency and thought through deliberately before making a decision. The way the agency decides to raise funds will often reflect on the public image of the organization so it must be done with care.

Stephen G. Donshik, D.S.W., is a lecturer at Hebrew University’s International Leadership and Philanthropy Program and has a consulting firm focused on strengthening non-profit organizations and their leadership for tomorrow. Stephen is a regular contributor to eJewish Philanthropy.