Why Commission-Based Fundraising Is a Bad Idea
Robert Evans makes an ethical and practical case against commission-based fundraising. Despite attempts by the mainstream nonprofit community to discourage commission-based relationships, the practice persists – and it fuels donor skepticism.
The tone of the potential donor’s email was skeptical and a little accusatory. Why, the individual wrote, should he or she support the organization’s multimillion dollar capital campaign when a certain percentage of the funds raised will “pay” the fundraising consultant? The donor had a mistaken impression that the nonprofit in question had engaged in the ethically problematic practice of commission-based fundraising. How, and why, would the member have gotten such an ill-formed impression?
The answer impacts impressions donors may have, especially based on previous practices dating back many decades.
Recognize that the charitable sector has worked hard to eradicate the practice of linking compensation to funds raised and paying consultants a percentage commission. Reputable organizations, including the Giving Institute and the Association of Fundraising Professionals (AFP), have come out strongly against the practice of commission-based fundraising in favor of a set, fee-based approach for a consultant or established salaries for in-house employees.
Moreover, a brief Google-search of “Commission-based Fundraising” reveals a plethora of blog posts, position papers, and explanations of why it may be legal but is an all-around bad idea. Why is so much ink, or pixels, devoted to discussing a practice that long ago was shunned by the mainstream nonprofit community and deemed as unsavory? It is the same reason that the authors/editors/redactors of Hebrew Bible included so many references to the sin of idol worship. The practice refused to die. Commission-based fundraising still happens, more often than one might think. Some organizations are hiring fundraisers on the condition that the employee will be paid only when funds are available or establish compensation levels directly based on gifts received. Others are attempting to engage a consulting firm on a similar basis, though most reputable consulting firms won’t agree to such terms. So, it appears that there is still a need to explain why this approach doesn’t conform to accepted ethics practices and serves as a disincentive to donors to be generous.
Why is this practice wrong from a philosophical perspective? The Association of Fundraising Professionals (AFP) writes,“With commission-based fundraising: charitable mission can become secondary to self-gain; donor trust can be unalterably damaged; there is incentive for self-dealing to prevail over donors’ best interests.”
The AFP argues persuasively that the nonprofit world operates in a different fashion and purpose from a business. While fundraising professionals are expected to earn a living, their primary purpose is expected to be aligned with the mission of the charity: to perform a public service. Having profit or financial gain as a primary motivating factor is fundamentally antithetical to the spirit of philanthropy.
You can learn more about the Association of Fundraising Professionals’ (AFP) Code of Ethical Standards here.
A donor’s decision to support a charity is based on trust, and the act of fundraising based on commission erodes, or at least strains, that trust. The issue of overhead in fundraising is one that has faced the nonprofit sector for several decades, as donors have demanded more accountability and that more of their dollars go directly to programs and services – and not to help raise more dollars or pay for heating the NPO’s office. The charitable sector has made enormous strides in this regard, aided, or spurred on, by resources such as Charity Navigator. But the persistence of unethical fundraising arrangements, coupled with stories in the press about unseemly behavior on the part of certain nonprofits, rightly feeds donor skepticism.
Why is this practice wrong from a practical perspective?
- It can take a development professional up to 18 months to build relationships; this can’t really be accomplished when the employee is worried about how he or she will put food on the table.
- It encourages fundraisers to grab low-hanging fruit rather than build the long-term relationships necessary to maximize a donor’s potential.
- When professional and volunteer and lay leaders are not working towards the same goal, it creates significant potential for conflict.
How many potential donors have held back because of misconceptions about fundraising arrangements? If our umbrella groups took a more decisive stance, how far would it go to eradicate these donor misconceptions?
These questions may be impossible to answer, but we do know that donor skepticism is hurting our already challenged collective efforts to support worthy capital, endowment, and other projects. As a nonprofit community, we must do whatever we can to more closely align our practices with our lofty missions. It may not be too much of a stretch to describe the trust displayed by a donor as sacred. Let us do all we can to uphold that sacred trust.
At Evans Consulting Group, our nonprofit consulting fees are never based upon charitable gifts received or a percentage of contributions earned during a campaign. Learn more about our fee structure, fundraising services for nonprofits, and how we can help your organization.