Navigating protocol when checking job seekers’ references

Q. When seeking candidates for position openings, is it recommended (or even ethical) to phone prior employers even if references had not been given when the rsum was submitted? The rsum states, “References available upon request,” but the organization has phoned prior employers even before the interview has occurred.

A. “I don’t think it’s unethical or unfair to call the former employer when that information has been provided on the résumé by the candidate,” says Cynthia Hedricks, who directs research and development at SkillSurvey, a reference-checking company in Berwyn, Pa.

But Ms. Hedricks and other observers draw the line at calling a prospective employee’s current boss without the candidate’s consent. “I doubt that people would want their current supervisor to know they’re actively looking,” Ms. Hedrick says.

Nicole Cossette, director of human resources at Community Action, a social-service charity in Hillsboro, Ore., advises recruiters to alert applicants that prior employers may be contacted — and to allow applicants a say in who is contacted — by including check boxes next to the spaces where applicants list past employment on the job application form. By checking a box, job seekers indicate that it’s OK to call that particular organization.

Because nonprofit managers are often trying to hire someone quickly, Ms. Cossette does not recommend that they bother to check references before interviewing candidates.

“It’s actually a better practice to check late,” when you’re about to make an offer, she says. Reference checking, she says, is more effective as a way to confirm who the most qualified finalist is, rather than as a way to weed out applicants in the early stages of the hiring process.

Ms. Cossette and Ms. Hedricks also have advice for job seekers who don’t want a prior employer to be contacted. If a nonprofit organization does not include a “do not contact” option on its job application form, Ms. Cossette suggests that job candidates write a note on the application or on their résumé. A good recruiter won’t hold the note against the candidate, she says: “It doesn’t insinuate a bad relationship.”

And Ms. Hedricks recommends that candidates provide their reference lists right away, rather than writing “references available upon request” on their résumés. Doing so makes their preferred contacts clear, she says, and also saves the recruiter from spending time seeking references.

Hiring organizations may want to check out this Chronicle article about reference checking; job seekers may be interested in this previous Hotline column about overcoming bad references.

Q. We’d like to start an endowment for our charity. What steps should we take?

A. First, determine whether your organization is truly ready to start an endowment, says Diana S. Newman, author of Nonprofit Essentials: Endowment Building. Creating an endowment is not an activity for fledgling charities, she says: “If you’re brand new and you’re struggling to keep the door open, you need to solve that first.”

But for established organizations, “an endowment is a great long-term development strategy,” says William B. Pratt, a fund-raising and management consultant in Helena, Mont., who works with nonprofit organizations. In other words, he says, if your charity has five to 10 years under its belt, a good reputation for getting the job done, solid finances, strong leadership, a large pool of donors, and the manpower and willingness (among staff members, board members, and volunteers) to embark on a time-consuming, open-ended fund-raising effort, then starting an endowment is a great way to ensure the charity will have enough money to stick around for the long haul.

Next, you need to raise the money that will go into the endowment. Asking for endowment dollars can be harder than other types of fund raising, says Kyle Caldwell, chief executive of the Michigan Nonprofit Association, an umbrella group in Lansing.

“Every donor’s going to want to know why do they want to give to an endowment as opposed to giving directly to the cause to see their dollars used right away for services,” he says.

For that reason, Ms. Newman says, “you need to be clear about why you want to build an endowment,” and come up with a case for it.

One argument you can make, she says, is that building an endowment is “adding another leg to your stool. An endowment will give you money forever and at a countable rate.” More specifically, she says, get your staff and board to think about long-term goals and what it will take to achieve them.

Endowment fund raising is different from raising money for annual operating expenses or capital projects in an important way, Mr. Caldwell says: It doesn’t rely on liquid cash. “Endowment wealth is often tied up in investments or property,” he notes, which means an organization needs a sophisticated development department that understands such things as wills and charitable remainder trusts. If you don’t have such expertise on your staff, you might want to seek help from a planned-giving consultant, he says. (The Chronicle recently wrote about the use of planned gifts to build endowments at small charities.)

While the uncertainty of today’s economy may make conversations with donors about giving more difficult, Ms. Newman says this is a better time to ask for endowment gifts in the form of bequests and other long-term investments — rather than, say, asking for cash to improve a charity’s facilities. “There’s a lot of things people can still do that won’t be affected by the economy,” she says. And, she adds, it is a good bet that, in the future, when a charity cashes in those gifts, “the stock market won’t be as lousy as it is today.”

Your endowment fund-raising plan doesn’t need to be complicated, she says. To start, it can be as simple as encouraging donors to put your organization in their will, she says. To achieve that goal, you don’t need additional staff members, she says. Simply drive the message home in every communication with donors, from newsletters to annual reports to e-mail messages to annual-giving pledge cards. Over the years, you can build your way up to promoting other types of planned giving, she says.

Even before the first gift comes in, you’ll need to decide how you will manage the money. Mr. Caldwell and others say small to midsize charities should consider using the services of an investment management firm or a community foundation. “I don’t recommend that they start striking out on their own, going to a bank and setting up an endowment,” Mr. Caldwell says. Doing so could sap a lot of time and energy that would be better directed toward a charity’s programs, he says.

For more information about starting an endowment, see The Chronicle’s previous article on the topic.

Q. I have a colleague who is considering a new fund-raising position at a very small nonprofit group, whose current budget is $150,000. The organization is not in a position to pay her a salary, but it is willing to pay her a percentage of what she raises. Very risky and unprofessional, but OK. So, what is a reasonable percentage for her to ask? If she were to raise $1-million within a year, for example, could she ask for 25 percent, or $250,000?

A. We’ve answered questions about percentage-based compensation before, and your comment that accepting the nonprofit organization’s proposal would be “very risky and unprofessional” suggests that you know what we’re going to say: The Association of Fundraising Professionals, in Arlington, Va., considers such an arrangement unethical and prohibits its members from accepting percentage-based compensation.

“The purpose of the nonprofit sector is for public benefit, not private gain,” says Paulette Maehara, the association’s chief executive. By taking a cut of what you raise, “you run the risk of putting personal gain above the mission and the donor,” she says. (The association’s code of ethics and its position paper on percentage-based compensation are on its Web site.)

To be fair to the charity courting your colleague, organizations with tiny budgets often find themselves wrestling with the challenge of how to pay a fund raiser when they have little cash. Often, very small charities’ executive staff and board members would prefer to spend that money on programs and advancing their missions, rather than put it in the pocket of a fund raiser.

“A small nonprofit kind of gets caught in a corner,” says Liane Morrison, executive director of Great Education Colorado, a Denver charity that promotes public education. The organization has four part-time staff members “who work more than they’re being paid for,” she says, and an annual budget of about $140,000.

Ms. Morrison says her board members would prefer to give a fund raiser an incentive to reach a goal, rather than hiring someone on retainer, with no guarantee that urgently needed money will be raised. She has twice been turned down by consultants to whom she offered percentage-based compensation, she says. As a result, Great Education Colorado has had to enlist staff members and volunteers to raise money, a situation that has drained time and effort away from the organization’s mission, Ms. Morrison says.

In fact, incentives such as bonuses and shares of a flat fee or salary are not out of bounds in the Association of Fundraising Professionals’ code of ethics, Ms. Maehara says.

Keeping in mind the limited resources of a small charity, Ms. Maehara suggests that your colleague charge a flat fee — say, $5,000 — for a set list of services. The fund raiser could also ask for an additional 5 percent of that fee, Ms. Maehara says, if she meets agreed-upon goals, such as recruiting a certain number of new donors or raising a set amount of money.