How to negotiate your funding

When I started out as a director of a small nonprofit, I believed my fundraising duty essentially came down to a high-quality pitch on the substance. If I would present a better plan than my competition, the funding would start to flow. Or so I assumed…

An approach to fundraising inspired by negotiation theory offers better odds I found out along the way. Distinguishing between positions and interests is one of the fundamentals of negotiation theory. So-called positional negotiation has been proven to create less value for both parties and to lead to breakdowns (no deals) more often. When my pitch to a donor is “you should fund this project because it is the best around”, that is a position a donor can respond to with either “yes” or “no”. Often it will be “no” because competition is fierce. Similarly, if my only focus is on donor’s official positioning on funding (e.g. “highest impact, value for money and proven concept”) I am likely to adjust my position to what is required. Even if funded, those adjustments are often not in my interest as they reduce the impact my organization is seeking in the field.

When only pitching, fundraisers are (often unconsciously) engaging in a positional negotiation. By doing so they forego exploring the underlying interests of both the prospective donor and the soliciting organization. These underlying interests are usually diverse and at least partially hidden. They may have to do with a new direction a funder wants to explore, a desire for a stronger public profile as a funder, the personal preferences of a funding officer or her boss, or recent actions by other funders. There may be hidden bureaucratic interests as well; for example, the need to spend down a certain envelope of resources before the fiscal year ends. Every student in an introductory negotiation course will learn the importance of uncovering the interests of the other side as well as clarifying one’s own.

At first, I believed an interest-based negotiation approach would only work with high-end individual philanthropists. After all, they have no formal mandate to abide by and they will more easily reveal what is in it for them: a deeper cause they believe in, a geographic area they are passionate about, a development challenge they like to occupy themselves with, credibility towards their friend and colleagues, or a mixture of motives. But in raising resources from large foundations and institutional donors, I found out that largely the same logic applies. In raising money from the World Bank, for example, a positional pitch-only approach would have failed because our small NGO did not have the track record and scale-readiness that bank-funded projects require.

However, in broadening the discussion to interests we found out a number of departments and individuals were interested in piloting new approaches to supporting marginalized communities in conflict-affected areas. Scale and track record mattered less; innovation and local momentum is what counted. At the same time, exploring our own interests more deeply, we found out we were not just in need of money; we were looking for technical expertise as well. This meant a whole new area for value creation opened up between a mammoth-sized international institution and a small NGO.

Beyond sharply increasing your odds for funding, moving from positions to exploring mutual interests has another important effect. It widens the scope of potential agreement and provides you, the party requesting money, more leverage. Few fundraising professionals, for example, are comfortable asking for more than what they are initially offered. When you develop a relationship that is based on joint interests and creating value, this becomes easier. It also becomes more comfortable to say “no” to a donor’s particular demand without risking the relationship.

_

Want to sharpen your negotiation skills? Pre-enroll to our next training Negotiation skills for nonprofits!