Key Takeaways

A Phone Call I Had This Week

I had a call this week with the CEO and CFO of a small direct-service nonprofit. Around half a million in annual revenue. Solid mission. Real impact in their corner of the country. The CFO had been hired about a year ago. It was his first nonprofit role after a long career in corporate finance.

The development director had just resigned. Before she resigned, she had been reporting to the CFO. The marketing function had also been reporting to the CFO. Every consultant the organization worked with, including my team, had been routed through the CFO.

The CEO, a kind and thoughtful person who genuinely believes in the mission, had been spending his time on operations, programs, and board management. He had not had a single substantive conversation with a major donor in months.

I want to tell you what I told them on that call, because I have been having a version of this conversation for fifteen years, and the structural mistake is so common that almost no one in our sector sees it until someone names it.

What Happens When a CFO Owns the Fundraising Function?

A few things happen, in this order, every single time.

First, the language of the fundraising shop changes. The CFO is fluent in ROI. The CFO measures everything against cost-benefit. The CFO asks, every time a new initiative is proposed, what is the return on this dollar?

That is a great question to ask about a piece of equipment. It is a terrible question to ask about a donor relationship.

The return on a donor relationship is not visible at the level of the individual interaction. The thank you note does not pay for itself. The site visit does not pay for itself. The handwritten birthday card does not pay for itself. These things compound. A donor who feels seen, year after year, becomes a transformational gift in year seven. The CFO frame, which demands a return on each line item, cannot see year seven. It can only see this quarter.

So the thank you notes get cut. The site visits get cut. The birthday cards never start. The donors quietly leave, not because they got mad, but because they stopped feeling like a part of anything.

Second, the donor file starts showing the gap. When we audit an organization in this situation, we do a simple thing. We pull the donor file. We sort it by gift size. We look at the top 20 donors. We ask, when was the last meaningful contact?

In a CFO-led shop, the answer is almost always:

“I do not know”

or

“more than six months ago.”

Sometimes the answer is:

“more than a year ago.”

For the top 20 donors. The people funding the organization.

The CFO did not stop the contact on purpose. The CFO simply does not think of donors the way fundraisers think of donors. Donors, in the CFO frame, are a revenue line. Revenue lines do not need thank you calls. Humans do.

Third, the consultants pulled in to help start producing the wrong work. When the CFO is the point of contact for the consulting team, the consultants get asked CFO-shaped questions. What is the ROI on this campaign? What is the cost per acquisition? What is the conversion funnel on this lead magnet? These are all fine questions in their place. They are not the right questions for a $500K direct-service nonprofit. The right questions are:

Are we calling our donors? Are we asking them how the mission matters to them? Are we co-creating with them?

But the consultants are never asked those questions because the person in the chair does not think to ask them. So the consulting hours get spent on the wrong work.

By the time the development director resigns, the organization has often spent two years and significant money producing the wrong outputs, and it has no idea why its revenue line is flat.

Why CFOs Are Often the First Choice for This Role (And Why It Backfires)

I want to be careful here, because the CFOs we work with are almost always good people doing the best they can in a structure that was not designed for them.

The reason CFOs end up in this role is almost always one of these.

The CEO is overwhelmed and is looking for someone to delegate to. The CFO is the most senior person in the building who is not the CEO, so the fundraising function rolls up to them by default.

The board sees the CFO as the “business mind” of the organization and assumes that fundraising, being a revenue function, belongs under the business mind. This is the same instinct that puts sales under the COO in a startup. It is a category error in our sector.

The CFO actively wants the responsibility, because in their professional identity, controlling revenue is part of what makes you a senior leader. They are not asking for the role to hurt the org. They are asking for it because that is what senior finance people in for-profit companies do.

None of these reasons are nefarious. All of them are structural. And all of them produce the same result.

The CFO is trained to optimize. Optimization is the right move when you have a stable, well-understood process and you are trying to squeeze efficiency out of it. The development function in a $500K to $5M nonprofit is not a stable, well-understood process. It is a relationship function. Optimization, applied to relationships, looks like neglect.

For a deeper look at how the wrong person in a fundraising chair quietly bleeds the organization, our post on the development role mismatch that is quietly killing your major gift pipeline is the companion to this one.

The Math Problem That Is Actually a Relationship Problem

Here is the conversation I had with the CFO on the call this week.

He said, “We just are not seeing the ROI on the consulting spend. The ad campaigns are not pulling their weight. When you add up the spend, the staff time, and the consulting fee, we are losing money on every campaign.”

I said:

“What is your retention rate on existing donors?”

He paused and said he did not know.

I said:

“When was the last time the CEO had coffee with a donor?”

He paused again. He did not know.

I said, “The reason your ad campaigns are not pulling their weight is not the ad campaigns. The ad campaigns are doing what ad campaigns can do, which is bring new email addresses into the top of your funnel. The reason your fundraising is flat is that the bottom of your funnel is broken. Your existing donors are not being talked to. Your existing donors are the ones who would fund you at 10x your current level if anyone bothered to ask them.”

He looked at the CEO. The CEO looked at the floor.

That moment, the moment where the CEO realizes that the math problem on the screen is actually a relationship problem in the room, is the moment that organization gets unstuck or stays stuck. Some CEOs hear it and immediately rearrange their calendar. Some CEOs hear it and find a new reason to delegate. The ones who hear it and rearrange the calendar are the ones whose organizations double in three years.

What Should the Org Chart Actually Look Like?

There is no single right answer. There is a right answer that depends on the size and the life stage of the organization. Here is the framework we use.

Organizations Under $1M

Fundraising reports to the CEO. Period. There is no second layer. The CEO is the chief fundraiser. The CEO spends at least 50 percent of their time on donor relationships, board fundraising, and major gift cultivation. The CFO handles finance. The CFO does not touch the donor file.

If your organization is under $1M and your CEO is not spending half their time on fundraising, you do not have a fundraising problem. You have a role definition problem. Fix the role definition first.

$1M to $5M

Fundraising still reports to the CEO. You may now have a director of development. The development director reports directly to the CEO, not to the CFO, not to the COO. The CEO is still the chief fundraiser. The development director runs the operational engine. They meet weekly. The CFO is in finance, not in the donor file.

This is the size where the org chart mistake is most common, because the organization has just gotten big enough to feel like it needs hierarchy, and the easiest hierarchy to add is the financial one. Resist that instinct.

And, For $5M to $20M

Now you can have a chief development officer or a VP of advancement. They report to the CEO. The CEO’s fundraising time can drop from 50 percent to about 30 percent because there is a real institutional fundraising team underneath them. The CDO and the CFO are peers. They both report to the CEO. They sit in the same C-suite meetings. The fundraising function is structurally treated as the equal of the finance function, not as a sub-function of it.

This is the only structure I have ever seen that consistently produces durable revenue growth in this revenue range. According to data from Giving USA, the organizations that meaningfully outgrow the sector average over a five-year window are almost always the ones with this structural setup.

What Do You Do If You Are Already in This Structure?

If you are reading this and you are realizing that your fundraising reports to your CFO right now, do not panic. You did not break it. You inherited a structure. You can also un-inherit it.

Here is the sequence we walk clients through.

First, name the structure to your board. Not as a blame conversation. As a diagnostic. “We have been operating with a structure where fundraising reports to finance. That structure is common in our sector. It is also the structure most associated with stuck small nonprofits. I am proposing we change it.”

Second, change the reporting line on paper before you change anything else. The development director reports to the CEO starting Monday. The CFO continues to manage finance. The CFO continues to be part of the budget conversations. The CFO is not penalized. The reporting line just moves.

Third, change the CEO’s calendar. Block out 20 hours a week for donor work. Donor visits, donor calls, donor thank-you notes, board fundraising calls, major gift cultivation. Twenty hours, every week, for the next six months. No exceptions for operations crises. Operations crises will always be there. The donor work, deferred, compounds into a revenue cliff.

Fourth, audit the top 20 donors. When was the last meaningful contact with each one? If the answer is more than 90 days, that donor goes on the CEO’s calendar this week. Not next quarter. This week.

Fifth, change the consulting brief. If you have consultants supporting your fundraising work, the brief they get from you should now be about relationship architecture, not about ROI optimization. The right consultants will be relieved. The wrong consultants will quietly disappear. Both of those outcomes are useful.

The 50 Percent Rule for CEOs

I want to land on the hardest part of this, because it is the part that almost every CEO I know resists.

If your nonprofit brings in less than $5M a year, you, the CEO, need to be spending at least 50 percent of your time on fundraising and marketing. Not 20 percent. Not 30 percent. Fifty percent.

I know what you are going to say. You have programs to run. You have a board to manage. You have HR fires. You have a building lease. You have funder reports. You have everything.

You have all of those things. You also have a $500K revenue line that needs to become a $1.5M revenue line in three years, and the only person in your building who can make that happen is you. Not your CFO. Not your development director. Not your board chair. You. Because at this size, the major donors are giving to you. They are giving because of the relationship they have with you. If you are not in the room, the relationship is not in the room.

The CEOs who get this right become the CEOs of organizations that grow. The CEOs who delegate fundraising to a CFO become the CEOs of organizations that stay the same size for a decade. I have watched this pattern play out so many times that it no longer surprises me. The math is brutal. The decision is yours.

FAQs

What if my CFO is excellent and my CEO is weak at fundraising?

That is a different conversation, and it is the right one to have. The answer is not to keep fundraising under the CFO. The answer is to coach the CEO into competence, or to find a CEO who can do the job. The CEO of a sub-$5M nonprofit who cannot fundraise is in the wrong job. That is a hard truth, and I write about the hardest version of that truth in our post on how nonprofits get unstuck.

Is this an attack on CFOs?

No. CFOs are essential, and the good ones are some of the most valuable people in our sector. This article is about role assignment. Putting a CFO in charge of fundraising is the same category error as putting a fundraiser in charge of audit and compliance. Neither one is an insult to the person. Both are structural mistakes.

What about a COO-led fundraising function?

Slightly better, often still wrong. The COO frame is process and operations. Donor relationships are not a process to be optimized either. The CEO needs to own this until the org is big enough for a true CDO peer.

Our board chair says we should run lean and not have the CEO doing donor work. What do I do?

Your board chair is wrong, and they almost certainly arrived at that view from a corporate background where CEOs do not do sales. Nonprofit CEOs at the sub-$5M level are the chief revenue officer, the chief relationship officer, and the chief storyteller of the organization, simultaneously. Show your board chair this article. Have the conversation.

How do I know if my structure is hurting me?

Three signals. Donor retention is below 50 percent. The CEO cannot name the last three donors they called. The development team is producing more reports than relationships. If two of those three are true, your structure is hurting you.

Wrapping Up

Your org chart is a strategy document, whether you treat it that way or not. The reporting lines you draw are the priorities you have signaled to your team, to your board, to your donors, and to yourself.

When fundraising reports to finance, you have signaled that fundraising is a function to be controlled. When fundraising reports to the CEO, you have signaled that fundraising is the work of the organization.

Move the line. Change the calendar. Call the donors. Do the work.

Start today. Go slow. Do not stop.

Is Your Fundraising Strategy Built for the World You’re Actually In?