#77 A New Hope or a Phantom Menace?
There is one question that has puzzled me for the past week - Is it possible to run a direct employment-only model f2f fundraising agency in Australia in 2019?
I’m having trouble naming a f2f supplier who only employs their own staff. Much like the compliant employment model, it’s not an impossible feat but is challenging. In the past two-years all the major players in the Australian f2f space have shifted some of their capacity to the subcontractor model leaving a handful of smaller boutique agencies to carry the torch of bygone days.
So, why has this happened and what does this mean to you and your relationship with your supplier?
As far as I can tell, there are a few reasons for this recent phenomenon:
Class-action lawsuits against the troublesome Independent Contractor (IC) model led to a huge shift to direct employment.
When +80% of the agency expenses are wages, annual minimum wage increases on the largest cohort of the workforce, the fundraiser, forces agencies into an unsustainable and high-risk position where cashflow can sink them overnight. Moving the risk to a smaller subcontractor who is only remunerated with results is a safer version of the IC model everyone rushed away from.
Recruiting new staff is expensive and hard, especially as a compliant employment model means you need to pay everyone for their training and continue paying them even though they are not performing at a profitable level.
The ability to move focus away from the daily grind of training fundraisers to the much easier job of back-end management can be a relief and raise your sanity back to a normal level.
After fundraising or selling for three-months with no prior management experience an individual believes their own hype enough to think they are ready and capable to run their own fundraising company or marketing agency and make a lot of money.
The dangers
If the parent supplier is not skilled in subcontractor management, they will have trouble holding their third-party teams to account. This means that the client may experience highs and lows much more vigorous and unpredictable than if the agency used directly employed staff.
Not all, but some of the current crop of subcontractors seem to switch allegiances whenever a bigger bag of cash is swung in front of them. A higher multiplier and fewer restrictions offered by a new parent can mean your entire capacity is lost overnight.
A couple of the subcontractors might not take the same care to reference-check new hires, and even worse, one or two of these companies are rumoured to have PFRA-banished owners operating under pseudonyms within their ranks. This behaviour can leave the parents and the clients in a very precarious situation.
Without the ability to grow their own teams, some parent suppliers are known to be offering subcontractor opportunities to less than deserving staff. Team Leaders with less than 1-year’s fundraising experience, no management skills, no business ownership training and no understanding of legal compliance are recklessly starting companies. This is bad news for the client and the sector, and in the long-term to the parent and the Team Leader.
Opportunities
An experienced Campaign Manager who has been bumping their head on the ceiling of their company would either wither and die without a new challenge or just leave. By offering a subcontractor opportunity to these skilled few a supplier is able to sustainably expand operations whilst the Manager can grow with the guidance of their director and with the support of a familiar back office.
A supplier with strong account/subcontractor management processes can scale-up a campaign effectively in a controlled manner holding all parties to a level as high as a directly employed workforce.
An extensive network of subcontractors can give your cause capacity all over the country, including smaller cities and regional areas that are only used inconsistently as travel trip locations by the direct employment mob.
When a subcontractor is adequately supported by their parent and client, they can be a real asset that can grow alongside your ambitions and one day be a fully-fledged agency loyal to you and your cause.
Precautions
If you work for a charity and are unsure of what precautions are needed to mitigate any risk:
Make sure you and your suppliers use the Fundraiser Registration tool provided by the PFRA and Sales Assured Ltd.
Complete full due diligence on your full supply chain – including organisation charts and business ownership documentation. If you hear any rumours that your subcontractor may not be who you think they are you need to investigate immediately.
Your contract must include a clause that prevents the use of any subcontractors without prior written permission.
Your contract must include a clause that gives you the power to remove any fundraising staff/subcontractor from your campaign for any reason.
Broken lines of communications will mean that messages passed from you to your supplier that would usually end in the hands of their fundraisers may now be buried with the account manager, so build relationships with your subcontractors by inviting them into your charity family. This will also limit the likelihood of them dropping you for a higher multiplier.
This latest shift makes me wonder whether this is the end of the model we grew up with or whether we will see the Force Awaken and watch The Rise of Skywalker.
I hope you find this useful. Happy Fundraising.
PS: After browsing the titles of Star Wars, I realised that you can draw a f2f comparison to all of them – ‘Attack of the Clones’ referring to the 100 subcontractors who modelled themselves after one rather infamous sales company. Please feel free to add your own in the comments - you know who you are.