Should we hire a fundraiser and pay him a percentage raised?

One of the most common questions I get from board members and nonprofit leaders is some variation of:

We're a small nonprofit without any fundraising program. Are there ever any conditions where it makes sense for us to hire a fundraiser that gets paid a percentage of what they raise?

It's an understandably seductive question. It seems to contain the promise of great financial gain with limited or no cost.

That itself should raise a red flag, shouldn't it?

I was asked this question twice last week, so I thought I'd address it again. (The last time I blogged about it seems to be this percentage based fundraising post in 2007!)

Here's an actual copy of my answer over the weekend to this "percentage" question. It was written on my phone so it may read a little choppy.

Great question. I know of no professional that operates that way. It is expressly against the Association of Fundraising Professionals Code of Ethics.

A fundraiser worth hiring for your nonprofit will have worked to develop a skill set and knowledge base worth investing in. Also, success in fundraising is very dependent on the leaders & board of the nonprofit actively participating. Paying on percentage can unfairly penalize a professional for the organization's lack of follow through.

There should be some money paid upfront. If there isn't, it is reasonable for the professional to question the organization's commitment to fundraising.

You may be able to hire someone with a base pay and more at agreed upon benchmarks. I don't have any experience working that way so I am unable to advise you there.

Finally, I am sure there are people that will work for a percentage. Please be careful in hiring that way if you choose to.

Marc

Do you agree?

Do you think I covered the reasoning soundly? Or am I off-base? Should nonprofits ever hire someone to solicit money and pay them a percentage of what they raise?

About Marc Pitman

Marc A. Pitman is the author of Ask Without Fear!, director of The Nonprofit Academy, and founder of FundraisingCoach.com. A coach to leaders around the world, Marc's expertise and enthusiasm engages audiences and has caught the attention of media organizations as diverse as Al Jazeera and Fox News. Marc’s experience also includes pastoring a Vineyard church, managing a gubernatorial campaign, and teaching internet marketing and fundraising at colleges and universities. He is the husband to his best friend and the father of three amazing kids. And if you drive by him on the road, he’ll be singing 80’s tunes loud enough to embarrass his family!

Follow him on Google+, on Twitter @marcapitman, and like "Ask Without Fear!" on Facebook.

Comments

  1. You are so right! Actually I asked the same question to my fundraising lecturer since it seemed to me impossible for an organization struggling for money to pay a fundraiser a part from what one raises…I didn’t know it was expressly against the Association of Fundraising Professionals Code of Ethics though. Yet I wonder what would be a good solution for a little organization…

  2. Thanks Valentina!

    I think I have a good solution for a small organization [cough] my book [cough] but I’d love to see other people’s responses! :)

  3. The problem with a commission, from a consultant’s point of view, is that it is a distraction. When I am assisting an organization to have a fruitful conversation with a donor, there is ample complexity in that two-way exchange. If I throw in my own anticipation of compensation, it distorts my thinking in an unhealthy way.

    I am willing, when I am excited about a client’s mission and fund raising potential, to discount my rate substantially for an initial period with clear benchmarks. If we meet the benchmarks, the rate goes up. If not, we walk away.

  4. Marc covered the ethical dilemma of commission-based compensation, as well as the notion of fundraiser as “hired gun” to absolve the organization’s leadership of their role in fundraising.

    I want to point out that commission-based compensation is unhealthy for the organization because it focuses on immediate gain and not lasting relationships with donors. The fundraising will be wildly successful at first and then wane as all of the donor contacts are “flipped” for the maximum amounts they can donate. This “scorched earth” approach is not only not sustainable over a period of more than a couple of years, it also leaves the organization having gutted its strongest fundraising asset — donor loyalty.

  5. I’m interested in why this is different from hiring a professional sales person? The best sales people want to work on commission.

  6. As a Development professional and member of AFP Associaton of Fundraising Professionals (and a board member of our local chapter) accepting commissions as compensation is against our code of ethics.

  7. Paul and Gina: Great comments.

    Paul, it’s good to see that we all can work flexibly.

    Gina, thanks for the “scorched earth” phrase. That’s SO true!.

  8. True Gloria, how would you (or any of you) respond to Gene’s question? His question makes a lot of sense.

    And, to those familiar with sales, our not working on “commission” makes it look like we don’t really have results we say we’ll have.

  9. Jon Hardie says:

    Sadly, the question, the proposition here is not about fundraising $$, but about whether you choose to invest in building a sustained personal relationships, from the point of first contact, to their bequest, or gimmie the money

    This is an affirmative vales choice, to build a sustained personal relationship of transparency, authenticity & passion delivering value, earning trust, and building social capital.

    You outsource your soul, your passion, your vision, your mission, your values … and your relationships … at your peril.

    Observation: This says volumes about a predatory institutional fundraising culture, that is feeding an institutional edifice complex that is absent walking the talk of customer-centric vision & mission values. Donors will instantly detect the slight of hand.

    Suggestion – don’t go there

  10. As a consultant I am often asked the percentage question and the answer i give is the following:

    a.) It is against the rules of almost every fundraising organization in the country.

    b.) The reason it is against the rules is it places the donor, the organization and the consultant on opposing sides in the equation.

    b1.) A donor might withhold an important pace-setting gift until AFTER the consultant leaves so as to “save the organization” money by not having to pay a commission.

    b2.) The consultant might employ overly aggressive tactics, high ask amounts, and lots of pressure in order to close gifts at uncomfortably high amounts so as to enhance commission.

    b3.) All sorts of odd rules about when the consultant gets paid based on pledge collection rates that are in many cases out of the hands of the organization or the consultant.

    b4.) The organization might hold back on providing key donor information and solicit those donors “privately” to protect them from commission-thus negatively impacting the pace of the campaign.

    c.) There is more to a consulting contract or the efforts of a professional development person than just the dollars raised. Being measured and compensated purely on dollars raised ignores about 75% of the work of any development professional.

    I could go on and on but I am usually able to finish the discussion with the first couple examples of how a commission based arrangement places what should be teammates on potentially opposing teams.

  11. Jon: Great observations.

    John: Ooh. What a complete answer. I’ve actually heard boards talk about (b1) and (b4). Talk about handicapping a fundraiser! If they can ask, why aren’t they?

    And (c) is right on too. I recommend development folks set goals that show where the other work is too, not just $ goals.

  12. The idea that “fundraising = sales” seems to be increasingly popular. Please resist!

    On top of the excellent comments above, there’s this …

    Some of the most strategically important work of a development professional is to develop the organization, so it’s a good investment for donors.

    And to encourage a climate of giving in the larger community, through collaborations with other organizations and involvement in the philanthropic community.

    And to facilitate long-term, trusting relationships with the most powerful people in the community.

    It would be smart for organizations to recognize that development is a leadership function (not sales). You don’t outsource leadership on commission.

  13. I agree with Pam’s comment that good fundraising is not about sales…it’s about relationships. That’s why commission fundraising is considered unethical; it creates a conflict of interest. The donor will begin to question, “Does this person/organization really care about me as a person? Or am I just a means to an end? ($)” That’s tough enough to deal with anyway (not treating donors like ATMs) and requires real intentiality to be “donor centered.” But when you add the issue of a commission to the equation, things become totally muddy. John outlines all those downsides well. The question for fundraisers is are we about transformation or transaction. Commissions are based on a transactional approach…relationships are about transformation.

  14. Ok, just playing the other side of the argument: but good sales is all about relationships too. Like fundraising, the goal is repeat sales from the same person.

    So you have to get to know customers and find out what’s important to them.

    Isn’t that the same?

  15. Marc, I love your devil’s advocate question!

    I think the major differences between sales and fundraising stem from what is being “sold,” and how the fact that what is “purchased” through donations benefits a third party rather than the donor:

    In sales there is some kind of product or service being rendered, and the buyer is purchasing that product or service based on its perceived benefits to him- or herself. As much as you can dress it up as “selling a lifestyle” or a given image, at the end of the day, there is still a tangible result that has immediate implications for the buyer: a product provides satisfaction or doesn’t, or a service gives good results or bad. There’s a feedback loop that doesn’t include the salesperson. If the product or service sucked, the buyer isn’t going to make that same purchase again, no matter how good the salesman is.

    In fundraising, barring some kind of catastrophic scandal a la Three Cups of Tea, that feedback loop is much harder to come by. Donors, by very nature of their position as outsiders to the organization, need to rely to a certain degree on the fundraiser to provide them with information about what is going on inside. If a percentage of a fundraiser’s salary is going to come from the gifts he or she can secure, there’s a major incentive to say whatever it takes to get those gifts. You could argue that it’s up to donors to do their own due diligence, but still–why build that incentive in? Besides the scorched earth effect that Gina pointed out, there’s a larger issue of potentially bad information going to donors.

    Asymmetric information in any market can cause havoc (the most classic example is the market for used cars and the origination of the “Lemon Laws” http://en.wikipedia.org/wiki/The_Market_for_Lemons), but in the donor market, this problem is particularly pronounced. Other than charity rating organizations (which admittedly are far from a perfect system in themselves) it is hard enough for donors to know if they are supporting “lemon” nonprofits, and if the only information donors get is from fundraisers who are relying on that gift for part of their own salary, the information problem can only be exacerbated.

    Sorry if I maybe got a little carried away there : )

    • I am astounded

      All of the arguments against fundraising on commission seem to be by fundraisers trying to avoid accountability for their results. Sales management has solved these issues decades ago. Let me address a few:

      “The problem with a commission, from a consultant?s point of view, is that it is a distraction. When I am assisting an organization to have a fruitful conversation with a donor, there is ample complexity in that two-way exchange. If I throw in my own anticipation of compensation, it distorts my thinking in an unhealthy way.”
      MY VIEW: Independent sales rep organizations face the exact same issue – what exactly is the distraction? How about your thinking be this “i need to figure out a path to success here – if I cant help these two parties to communicate and see eye to eye and consummate a transaction, then I don’t eat!”

      “I want to point out that commission-based compensation is unhealthy for the organization because it focuses on immediate gain and not lasting relationships with donors.”
      MY VIEW: Any sales organization worth a hoot knows that scorched earth sales is an absolute loser… commission plans can even be structured with an up front and a tail paid later if that is a temptation. Again, most sales is by relationship.

      John gives us a wealth of reasons:
      b.) The reason it is against the rules is it places the donor, the organization and the consultant on opposing sides in the equation.
      MY VIEW: I disagree – the Donor and the organization but want to achieve the organizations stated goals (otherwise the donor would not even consider a donation). Donor and organization on same side. Commission Consultant and organization both want to raise as much as possible for the organization. consultant and organization are both on the same side (AS OPPOSED to a fee or hourly arrangement, where consultant has very little incentive to actually raise as much as possible – they get paid they same for modest raise ans wildly successful raise – this puts consultant and organization at odds). Consultant and donor both want to fund an organization delivering what Donor wants to back…and the consultant is costing the organization resources for the capital raise whether it is on commission or not!

      b1.) A donor might withhold an important pace-setting gift until AFTER the consultant leaves so as to ?save the organization? money by not having to pay a commission.
      MY VIEW: This is the same as the customer that tries to bypass the sales rep to buy wholesale or without paying rep commission. By either moral or contractual obligation, the organization simply pays the commission and tells the donor they cant bypass. Same as independent sales rep and company they represent.

      b2.) The consultant might employ overly aggressive tactics, high ask amounts, and lots of pressure in order to close gifts at uncomfortably high amounts so as to enhance commission.
      MY VIEW: This is also an issue in a sales organization – you have to have commissioned consultant with integrity that follows the messaging and tactics approved for them…same as a sales organization.

      b3.) All sorts of odd rules about when the consultant gets paid based on pledge collection rates that are in many cases out of the hands of the organization or the consultant.
      MY VIEW: Same issue faced by a sales organization – simply predefine how these situations are handled, and for things you cant imagine, and ultimate decision maker. What about sales reps where they get paid on collected sales…all kinds of difficulties in collections can impact their commission – guess what – they follow up and make sure the customer keeps their commitment to pay…Exactly what I want my commissioned consultant to do – follow up on significant commitments to make sure I get the CHECK!

      b4.) The organization might hold back on providing key donor information and solicit those donors ?privately? to protect them from commission-thus negatively impacting the pace of the campaign.
      MY VIEW: again, already well trod in the commissioned sales world – the contract covers this.

      c.) There is more to a consulting contract or the efforts of a professional development person than just the dollars raised. Being measured and compensated purely on dollars raised ignores about 75% of the work of any development professional.
      MY VIEW: If I hire you to raise funds for my organization using materials, messages and tactics I approve based on establishing “repeat customer” relationship building…what else is their? Sure there is the multi step multi visit process of closing a deal and building a relationship – guess what – THAT IS SALES…heck yes I want to pay for performance.

      What I see are a bunch of consultants who want to protect their ability to perform at mediocre levels but make the same pay – you guys ought to unionize.

      • Thanks for your comment, “Charity Guy.”

        I am surprised that you chose to hide such an impassioned argument behind anonymity. It definitely weakens your argument.

        While I’m sympathetic to your reasons, I’m also disappointed that you resorted to an insulting tone. The “you guys” you slam at the end is really is an industry norm built into the ethics of one of the biggest associations in the profession, in response to some serious issues seen in the field. Whether you agree with it or not, it’s not a slap-dash, fly-by-night plan by shysters.

        I appreciate passion. I hope in the future if you choose to leave a comment on this blog you’ll at least share your real name.

  16. Jon Hardie says:

    If we were to cut to the chase here – we fundraise to fund our orgs vision mission and values – believing that we will utilize those funds well – boots on the gound – responsibly, appropriately, cost effectively, efficiently collaboratively.

    The only thing the organization has to take to the bank (the mind of the donor) is it’s hard earned social capital – built on integrity, authenticity transparency and passion & good data. and sustained earn trust engagement & support in an exceptional customer experience

    All of that is built on, and sustained by, long term personal relationships with a donor whose needs will change dramatically over the trajectory of their relationship with organization.

    Over that 20-30 year trajectory – not just the next ask – stuff happens, circumstances change, what the donor needs wants and values change

    AND when that happens does the donor call the (last of 20) telemarketers?

    what’s the message here to the donor – is our sending them to customer service because it’s already broken – confirm for them that there never was a proactive customer centered supportive relationship – you bet!

    Here’s the trade off -we need to deliver the responsive perfect message at each perfect moment. if you support nurture engage your (social capital invested) passionately loyal supporters and let them become your passionate marketing department. the close rate on their passionate personal referrals – to their trust networks is 75% … and they will do it for free…. and are offended if you want to pay them.

    The ROI on DM is 1-2% 35 times LOWER than a customer centric relationship earned trust and passionate loyalty driven approach.

    I can’t tell you the hundreds of times donors
    have been outraged at how they have been treated by telemarketers – guess what the org facing donor patron customer sees – the telemarketer, fundraiser for hire – is the organizaton.

    And when the fertilizer hits the fan who do they call ooops they are nowhere to be found.

    ….but it was so easy hire them give them a list churn and burn spray and pray
    pay the commission and move on

    I would suggest this Mephistophelian contract can’t deliver the sustained exceptional responsive supportive customer relationship experience over the trajectory of their relationship with us.

    bottom line … that’s all that counts

  17. Thanks so much Elyse and Jon! I love your passion!

  18. ok Marc- we did this on FB so now here as well :)

    soooooooo…what would happen if donors were told UP FRONT the fundraiser gets a very low salary (keeping org. overhead low) and receives his fair compensation via a % of donations?

    I saw the discussion above about sales equaling/not equaling fundraising. We all know that insurance salesmen work on a commission, for example. What if fundraisers did? Would a donor give less? In the end, every org. has overhead, including the fundraisers salary.

    so I get the ethics and am ok with that. but to play devils advocate: would it hurt the fundraising effort if donors knew up front?
    that might avoid the problem of the fundraiser always trying for a max donation…and it may create empathy for an org who doesn’t have the finances to pay a full time fundraiser and has to pay on commission…

    figured I’d try the “dark side”

  19. Welcome Ephraim! :)

    That reminds my of my post “Don’t be a Ned” http://fundraisingcoach.com/2008/01/29/fundraising-secret-11-dont-be-a-ned/

  20. Just watched this video with Ned Ryerson again. CRACKS ME UP! http://www.youtube.com/watch?v=-xwCy_ai_E0

    Also makes me wonder what Microsoft was thinking when they named their search engine Bing. :)

  21. Here’s the critical distinction that drives the argument, in my opinion…

    Sales — the relationship supports the value of the product, and presents both the product and the relationship to the consumer for evaluation and purchase. Once the product or service has been deemed satisfactory, the relationship moves towards dormancy. It could be revived again for sale of a new product, but the consumer has no reason to be in touch with the salesperson if their needs around the product have been met. As an example, while your real estate agent might have been your best friend when you were buying your house, ten years into ownership that realtor is not checking in with you to see that you still love the neighborhood, unless the realtor is trying to gain your testimonial to sell another house nearby. Similarly, you are not calling the realtor to chat about what you?ve done to make the closets in the back bedroom larger, unless you are trying to list the house for resale.

    Development — the relationship supports not only the value of the “product” (the non-profit’s societal impact) as presented by the non-profit, but it also supports the donor’s own beliefs in the societal impact. Both the charity and the donor have mutual concern for the continuous improvement of society or remedy of a societal problem. The magnitude of a mission-based ?product? makes a satisfactory transaction endpoint a true rarity (the curing of polio completing the March of Dimes? original mission being one of a handful of notable exceptions). So the relationship with a donor never really goes dormant ? at least in genuine relationships with donors. A charity is out there continually marking its position in achieving mission, relevant to the donor?s beliefs about the mission. To extend that to the realtor metaphor, your real estate agent not only sells you the house, but is coming back seasonally to see what?s growing in your flowerbeds and to share news about the folks who moved in down the street and converted the house to solar energy. That realtor keeps such a level of communication ongoing with all contacts in the neighborhood because the improvement of quality of live in the neighborhood is the goal ? the escalation of real estate values is a fortunate by-product of that mission. If the escalation of real estate values is the goal, that impetus is to create a sense of prosperity (real or fake) as a means to an end.

    The 2008 mortgage crisis and Enron are both pretty good examples of scorched earth practices and their subsequent crashes in commercial markets ? creating fake prosperity to drive prices well above actual values and bankrupting investors in the process.

    Sorry to carry on so, but it will pay a charity in the long run to resist this temptation to burn their donors by offering commission incentives for fundraisers. Pay for the work done and you?ll get what you pay for.

  22. Jon Hardie says:

    Folks it’s not about fundraising it’s about relationships – donors want all of their funds to go to direct services. Period don’t manipulate excuse justify or play mind games with them – think zappo’s for exept cust exp.

    I set total admin @ 10% period – no games no slippery slope no rationalizing nada zero zip. That forces me to recruit 100’s of Vol., build passionately loyal supporters build community awarwness, understanding agreement buyin collab support & ownership

    Money’s not the problem it’s about relationships and delivering fanatical internal (our first cust are always internal) and external exceptional cust experience to donors – everyone is a major donor (to them) – in a respinsive listening learning culture.

    This is not let’s make a deal – this is not keep building your list and keep getting the same 2% and you continue to be wrong in what the remaining 98% want need or value – it’s spam to them.

    Don’t sell your soul, your vision, your mission your values or your precious relationships to the lowest bidder – set your max admin and do the real work of investing in social capital.

    Would you say to your best friends I don’t have time to see you but I hired somebody to smooz with you if you pay them?

    Well … How long would your friendship last

  23. Still Angry says:

    Well, I certainly would not hire a fundraising professional coach again. That is a PURE waste of money. What a joke. He claimed he could do a better job of raising money…but could not leave us with a sustainable working plan. He left my organization with a board quitting and a staff so miffed…it still hurts. $5k later…we will do our own plan…This plan follows the law of…if you make your goals…you can be awarded a bonus…and no one gives to anyone who doesn’t have their boots on the floor and shadow on the ground. Oh, how I wish I could name the man that refused to do follow up, did not leave us with the workable plan we asked for and got all of our board of directors to quit. I am still letting the LORD show us the lesson in that experience.

  24. Elyse,

    I don’t think this is valid, “If a percentage of a fundraiser?s salary is going to come from the gifts he or she can secure, there?s a major incentive to say whatever it takes to get those gifts.”

    A development director is always at risk at saying whatever it takes to get those gifts. Whether paid a salary or on commission, development directors need to demonstrate results. If they aren’t bringing in money and meeting benchmarks, they risk losing their jobs (or raises).

    The relationship and financial incentive is always present in some respect.

  25. @Brian: “The relationship and financial incentive is always present in some respect.” This is definitely true, but what I wanted to note was that the percent-based compensation model really exacerbates it. I think is due in part to it being used (from what I can tell) largely by firms and organizations whose sole purpose is fundraising for other organizations. They come in, do the whole tele-fundraising/d2d/f2f thing without really knowing the org, and get out. It’s like a revolving door of college kids needing a summer job (and I say that from experience).

  26. one other thing: we all know about the low salaries, high turnover in nonprofits. I’m not saying paying on commission is a good thing…but would it attract a different, more effective, type of fundraiser to orgs.?

    yes- his incentive is to work for himself and get max donations every time. buuuuuuuut..just sayin

  27. Wow. Great comments.

    I know a few development directors who have felt pressured to ask for more than they would’ve preferred because they had deadlines and a board meeting coming up!

  28. Marc–

    It occurs to me that whether we are employees of a nonprofit, consultants or vendors, ultimately, we work for the donor. When we serve the donor?s best interests then we serve the agency. If our compensation is tied to the size of the gift, then we serve ourselves, maybe the agency, but hardly ever the donor.

  29. Hi Marc,

    Firstly, it’s important to note that most professional, reputable and ethical sales reps receive a good base salary as well as commission. I worked as a sales rep before transitioning to the NFP sector, so I’ve seen both sides.

    I think the position of AFP is wrong. Giving a commission does not cause people to act unethically, however, it also won’t save a non profit any money. To give you an example. It’s not unreasonable for a sales rep to earn 100 – 150K for revenues of 2 or 3 million dollars. How many charities do you know of that can afford to pay a fundraiser that kind of remuneration?

    I also disagree with David. It’s nonsense to believe that commission will cause someone to become unethical or act out of greed. In my corporate career I often referred clients to my competitors when their product was better suited to their needs. It was the right thing to do, and that earned me the respect of my clients later on, when it was appropriate to approach them for a sale.

    Having worked on both sides of the equation, I can tell you that there’s very little difference between sale people and fundraisers. The people, and the processes are the same.

    I’m often outraged at the attitudes towards sales people. There’s an inherent “we’re better than them” attitude that fundraisers seem to hold towards corporate sales people. It’s arrogant and it’s remarkably uninformed.

    Good sales people will tell you that they work for their clients, while being paid by their company. I considered myself an advocate for my clients… in the same way I considered myself an advocate for the clients and donors of the charities I’ve worked for.

    Good sales people know that being honest and demonstrating unparalleled integrity are the keys to success. That said… as a person who prizes integrity, I abide by the AFP rules, even though I think they’re based on old, out of date principles and arrogant, uninformed attitudes.

  30. Jon Hardie says:

    My concern – from the start – is not about the ethics of sales people – been there done that – well.

    We need to treat all donors as major donors – and offer each one a sustained, responsive listening, exceptional personal relationship, and customer experience.

    My focus concern for NPO’s fund raising is institutional alignment, intentionality, motivation
    … and walk the talk – boots on the ground behavior – that is customer donor centric

    – And very simple –

    It is inappropriate to outsource our personal RELATIONSHIPS with our donors, with whom we have a lengthy and dynamic personal relationship from the point of their first contact – to their bequest 30 yrs later.

    mano a mano

  31. Sure, it might be inappropriate (and ultimately ineffective) to “outsource” fundraising.

    However, I guess you ask the original question with a slightly spin: Is it appropriate to offer commission (or even benchmark-based bonuses) to development employees in order to create a competitive offer and retain top talent?

    Additionally, it is highly unlikely that all of the same people will be present from the donor’s first contact to their bequest 30 yrs later, right?

    So when does standard, acceptable personnel turnover become outsourcing? If a development associate only stays with the organization for two years, is it really much different to hire a contractor (who might even stay with the organization longer) to assist with some of the development functions? It seems like there is some lumping of “heartless fundraising corporation” together with “talented and dedicated independent consultant/contractor.” I’m not convinced an independent contractor, paid partly on commission is necessarily more ruthless or less integrated with an organization than a flat-salaried employee.

  32. Wow Marc! You’ve stirred things up here!

    I think a commission might encourage a fundraiser to do whatever he/she needed to in order to close the gift. That’s not risk we want or need.

    Plus, the nonprofit needs to learn to invest in themselves, especially in hiring staff or consultants.

    As a coach/consultant, I’ve had this conversation many times with nonprofit Boards, and once I explained it, they were able to grasp and embrace the position of AFP.

    Sandy Rees

  33. Thanks Sandy et al. This is a very interesting conversation.

    One thing I keep wondering about is the number of consultants who make a stink about sales people. Isn’t that how we consultants feed our families?

  34. Marc – sad as it seems – I suspect that NPO consultants view hired samouri to fundraise as folks who borrow your list, and your Rolex, to tell you the time, clean out the town, leave with your Rolex, and you still don’t know what time it is –

    But they get the job done not very pretty…

    and next year they come in and do the same thing all over again – with a whole new crew of warriors, with no long term responsibility or accountability for all the bodies left in the street.

    It’s the price of doing business in this NPO roman galley gladiator funding culture.

    next ask…

  35. Jon: Yikes.

    Especially as I’m about to be hired on site campaign counsel for a capital campaign. That picture couldn’t be further from the truth.

    In your powerful analogy, are these samouri only telemarketers? Because the original question is something I get asked alot and I never to telemarketing/phonathons…

  36. There is a pervasive asking for money adverse gestalt in the NPO culture. In simplistic terms -Ivory tower doing good vs down and dirty panhandling.

    First, there is a gladiator culture on the foundation grants side, where 9 out of 10 equally qualified – but not equally well presented grant apps – are rejected – where NPO’s warily compete with each other – not collaborate with each other in win win -in the same pool.

    NPO’s manifest a naive moral aloofness about asking for money to do “good works” and often distain hiring (in their view) a siding salesperson or used car sales person to extract the cash – Like hiring a mechanic to fix your card – we don’t want to get grease on our hands and clothes. It often feels like class warfare where we hire surrogates to do our dirtywork for us.

    Marc, It’a a cognative disconnect – Which flies in the face of a customer donor centric relationship where we are partners with our donors to meet needs in the community.

    It is that disconnect – along with the failure to see the need to build evaluation and good data into our donor relationships – just give us the money….

    We need to own this aloof and naive view that impacts our ability to build community, Corp, and major donor partnerships and shared ownership AND both do measurable good works, effectively, responsibly transparently … And be accountabile to the public trust – as any viable business delivering value to & in the community

    The Queen of De’nial is a bad source of good data.

  37. Ah-ha. THAT explains, in part, the % question from nonprofits.

    At least when I’ve heard it, it’s felt more like a “We want to keep you at arm’s length” than “we want to welcome you on the team.”

  38. Precisely …I apologize for the short post :)

  39. Marc,

    I agree wholeheartedly with your answer. However, I know an organization who has two tiers of fund raisers – annual fund officers and major gift officers, who work to build relationships with constituents who are at different giving and capacity levels. The AF officers are soliciting smaller gifts and are being paid a lower salary than the MG officers who are soliciting much larger gifts. I understand that the annual fund officers are more “transactional” in their work, and the MG officers are more relationship and cultivation focused, which creates complexity in their work and the need for a greater skill base.

    I’m wondering if there’s an element of a fund raiser being paid what they raise somewhere in this model?

  40. As Heather said….

    “I understand that the annual fund officers are more ?transactional? in their work, and the MG officers are more relationship and cultivation focused, which creates complexity in their work and the need for a greater skill base.”

    Precisely. The compensation of major gift officers being higher than annual fund officers corresponds to the complexity of their work and the skill set required to carry it out. In correlating the complex work with the large donations, it’s easy to lose sight of the work and form the conclusion of big donations = big salary.

    • Thanks Heather and Gina: I’ve trained AF officers. They are often frustrated by getting the “churn” list or doing the annual work of developing a donor only to pass them off toe MG.

      I’m not convinced that the AF lower salaries are a product of their effectiveness.

      It’s too bad you can’t quantify hard work as easily as you can money raised! :)

  41. Tim Hanoian says:

    You guys really crack me up!

    This thread is comprised of fund raising consultants who bilk much needed revenues out of non-profit organizations.

    In the start of one of your responses you even self-admitted that many of the organizations that hire you pay you, and you don’t meet goals and then you walk away….with their money!

    Working on commission requires significant upfront commitment from the fund raising professional and vests his future in the success of his efforts.

    If your concerned of unethical behavior, check references any good fund raising professional has them.

    Especially for small organizations, without a donor base the services of a commission based fund raising professional could prove to be invaluable in jump-starting the organizations community relations and revenues.

    IMO, fund raisers on commission typically work much harder than those paid a salary. If you are salaried it’s much easier to excuse lack of results on the economy or probably even more common, back on the membership of the employing non-profit. If you’re a top performing fund raising consultant, I can see a salary with commission incentives. Otherwise, unless you are established organization with a significant donor base and need the services of an order taker, I feel a salary is not sensible.

    But hey, in all seriousness, god bless America!

  42. I wrote such a long response to this, I thought I had better post it elsewhere: http://on.fb.me/n4gz1R

    I’ve been around long enough to know the guys that first proposed the current sector position on commissions and to know some old boiler-room guys.

    Cheers, Bill.

  43. Thanks Bill for the thoughtful FB.post. I’d like to respond to a point toward the end, which I have copied below. It raised a # of issues.

    “The prohibition on commissions says the charity must take all the risk and the consultant or fund raiser takes none.”

    If one accepts the proposition at face value,
    (1) THE RISK exposure to both parties is simply financial & transactional (2) So the goal is to distribute risk more evenly (3) the solution is the payment of a % of sales commission.

    Problem solved …I hope not. Where is the donors seat at this table?

    Where is the institutional vision mission and values as reflected in transparency, integrity, passion, real engagement, sustained value delivered, trust and real social capital earned – through a responsive listening and passionate emotional connection vested in an ongoing dynamic personal relationship over the trajectory of their multi year relationship with the NPO organization – and then with their spouse and their children.

    How long is our telescope?.

    In terms of Relative Risk I would suggest that the much greater risk to the institution rests -a priori -with the institutions implicit & explicit decision to view fund raising as commoditzed, transactional & commissionable – NEXT

    Rather than relational, an ongoing mutual investment in a sustained, shared long term, donor centric, personal relationship – from the point of first contact to their bequest many years later.

    Question: Should physicians be compensated on based on a commission schedule of income generated for the institution by their surgical practice – or their quality of their peer to peer engagement, patient outcomes and quality of life..

    Interesting Data: Research overwhelmingly indicates that the quality of patient outcomes – and donor satisfaction – is driven by the quality of patient AND donor engagement. When both have an equal seat at the table, and neither have a CFO ROI commission calculator in hand -between them.

    Where you start from in terms in institutional alignment, intentionality and motivation – and behavior – dramatically impacts and drives choices, decisions and long term positive outcomes, for the institution, the patient and the donor.

    Fred Reichheld HBR The One Question … suggests – and my experience confirms – that when we make patients and donors full partners in their care and feeding and deliver real value – we turn them into passionately loyal supporters whose referrals to their trusted networks close 75% of the time – for free.

    We risk all of that – by commoditizing the relationship as a commissionable fundraising ransaction … and the patient and the donor relati0onship – at our peril.

    What do we want for outcomes? Are they short term cash extraction goals whose outcomes best measured in “We gottm’ for a couple mil and it only cost us a couple hundred thou” or

    “We have a long term passionate partner who enthusiastically multiplies our relationships – and dollars received 10 fold – for free.

    mmmmmmm What is the risk in investing in a sustained personal relationship VS the risk of commissionable cash extraction management?

    What is a sustainable institutional renewable relational energy ecosystem model that builds social capital AND what is an increasingly expensive churn and burn, spray and pray model that consumes more social capital than it builds – called eating your principal.

  44. Hey Jon,

    Happy to respond.

    I don’t suggest commission as a panacea for managing the fundraiser/charity relationship. However, I don’t think not-paying commission is a panacea either. My comment about risk was only within the bounds of compensation. I agree that there are other risks that must be addressed.

    Performance-based compensation is challenging, but it can also be rewarding and yes this means all stakeholders including donors. One of the problems with this issue is that many don’t realize how sophisticated some of the performance-based compensation models are. Many for-profit models place a premium on Customer Lifetime Value (the term in the for-profit world). Personally, I believe a donor-centered approach (regardless of compensation model) is in my best interest financially — to say nothing of the interest of the mission of the charity.

    As I said in my piece, I am not opposed to the prohibition on commission for charitable donations. I just think the financial tools available to us have very little to do with protecting the donor, and that it is our values we must focus on regardless of compensation model.

    As for Doctors, aren’t the majority actually on performance-based compensation systems with the main focus (on the compensation side) on numbers of procedures and patients seen?

    Cheers, Bill.

  45. Thanks Bill – We agree in several areas

    My question: Where do we put our money and our minds FIRST – A or B – the choice here drives all the outcomes downstream.

    A) Is it in developing broadly inclusive institutional alignment, intentionality, motivation AND empowering a proactive 24/7/365 customer/donor relationship responsive listening and value centric stakeholder action and interaction – that creates a sustained exceptional customer donor experience? .

    Or B) is it in trying to figure out what it will cost us to raise X dollars from y donors – whatever the complex compensation formula.

    I propose (no matter how much you rationalize the process) you can’t get to A) FROM B). One you commoditize the transaction – the customer and the donor disappears.-period

    However, using A) you can become extraordinarily successful in engaging listening responding AND creating & implementing a successful fundraising strategy with innovative, lean, agile, adaptive collaborative relationship building & donation multiplying partnerships.

    The elephant in the room – ya gotta trust the process – the classical problem (in NPO’s and Health care), is that the left brain CFO can quantify cost benefit of a transactional model – And has little data to justify a relational quality of engagement model that is value driven and has social capital and the payoff.

    And, the Billy Crystal mantra applies here – you can’t buy your way to A From B, using marketing hype, PR and BS . using this approach in A has a very very low shelf life.

    You actually have to walk the talk every day – not just for this ask – Said Billy, “It really is more important that you ARE marvelous all the time, and not LOOK marvelous for the campaign..

  46. Wow. When I wrote this post, I really thought it would be nonprofits replying! But thank you all for the thorough and divergent replies.

    Jon just hit on something (and John before him) that I’d love your thoughts on: fundraising problems are usually just a presenting symptom. [My words not his.]

    We all know fundraising success relies on a coordinated communication and relationship system. Gifts not acknowledged won’t be quickly given again.

    As a fundraiser, I know I help with marketing, donor relations, social media, and even management. All are important to fundraising but don’t really reflect on the % raised.

    Have any of you seen effective performance based agreements between fundraisers and nonprofits?

    Though I have always played by the AFP standard, on some level the whole % based prohibition has felt sort of like a cop-out.

  47. Yes – lapsed donors (our word not theirs) are a red flag reflecting our persistent inward facing edifice complex.

    What’s lapsed is our sustained customer / donor centric responsive listening and engagement.

    Blaming the donors for failing to act invariably parallels management blaming staff for poor performance.

    A customer centric collaborative responsive listening culture – on the inside – drives an exceptional customer experience and engagement on the outside

    Fundraising problems? Take a close look at your org culture. Would you like to be treated that way – neither would your donors

    Your brand is your customer / donor experience. Your first customers are internal. Get that right and it’s contagious. Get it wrong and it’s a lapsed donor pandemic

    Low staff morale, high turnover, and aach lapsed donor are a canary in the coal mine – pay attention – listen engage learn adapt respond

    And all the boats rise – inside the thriving harbor and outside on the sea of opportunity

  48. Ok, once again I run across an article that completely ignores micro-groups. I don’t know about other sectors, but in troop support 85% of the orgs I run into are running on a shoestring budget and may fundraise but are functionally supported out of the pocket of 2 or 3 volunteers who are working themselves to the bone for the cause. Average bank account balance in these groups? Like 30 dollars. Most of them have experienced a string of unsuccessful fundraisers (troops support groups don’t fundraise from their beneficiaries, and don’t have a built in captive audience so many traditional methods don’t work) and are VERY hesitant to promise or pay money out before it is in their hands. These are the groups that really NEED percentage compensation, and quite frankly I have no issue with donating to a group that gives 1% of my donation to their development guy, providing that his part of the payment is capped well before it catapults him onto the front page of Forbes Magazine. Is accepting commissions a pain? Yes. That is true in any organization. Should you pay based on pledges or promises? #ell no! But I wouldn’t mind getting a series of small checks for several years after I have finished the work of arranging a pledge. They “aren’t committed to fundraising” if they won’t give you a bulk payment up front? Are you kidding me? I have seen the unpaid CEO’s of small groups sitting for hours in the rain, missing family christmas, or spending a week gluing tiny shiny things to whatever thank you trinkets they are hocking this season, just hoping to collect $300 for their cause so they can keep the doors open another month. Don’t you dare call those brave (if totally misguided) men and women uncommitted. How are small orgs supposed to compensate staff if they have no magic 8 ball telling them what kind of donations this person will bring in? If the fundraiser does badly one month should they shut down so they can keep paying his set salary? I agree, there needs to be a cap, but let’s be reasonable and not pretend everyone is a trained professional or that the top 15% are the only ones out there. Besides, the goliath orgs often spend 10-20% or more on overhead, why can’t a small org hire ONE person and pay them 3 or 5%? That still keeps their overhead at half of the best goliath organizations. Try to remember the little guys, the world is filled with them.

    • Specialized Medical Aid Response Team (SMART) was formed early 2010 out of a community need. We have proven ourselves to be a life-saving and educational 501 c 3 all volunteer public service medical and educational agency. For the first 2 years, my wife and I donated many 1000’s for start up costs. Our medical volunteers do not want to get involved with fund raising – period, but are dedicated to helping save lives. I am looking for someone that would be willing to work on commission basis to raise money so that we can raise funds the way many of you suggest. I do not see anything wrong with looking for someone to help us via the so called “wrong way” or we will cease to exist. In the past 3 years, we have treated over 1000 folks with a handful of true live saving emergencies. It’s easy for many to state our approach is the wrong, but we do not have a choice. We operate in the wealthy county of Santa Barbara (Montecito included) but again, we do not have a cent to spare to go the so called proper route to raise funds and every penny donated goes towards buying vital medical and training supplies and equipment.

      • Thanks for the comment, Vince.

        I can hear the (almost) desperation in your comment.

        Two no cost ways to help might be:
        1. Getting a grateful patient to hold an event for the 1000’s served. Something like a reunion. That could drive smaller gifts and help you build a database.

        2. This type of story seems ripe for news and print media. Perhaps a few stories could help you get more awareness.

        • Thanks for your reply.
          Unfortunately we are not like the typical 501 c 3. When we treat non emergency or emergency victims, we cannot disclose names – strict federal HIPAA rules & regs – and if I did get permission, we may be opening ourselves up to potential legal issues down the road. It took about 3 years to become the noted “first aid standby” choice for nonprofit community event coordinators in Santa Barbara County (SBC) and we are also recognized by fire and EMS and the City of Carpinteria (SBC) We get letters of “Thanks” from event coordinators, fire department, schools, city which are posted on our website.
          I guess we have to be patient and try a little harder to get more publicity. BTW after I wrote to you I was contacted by a Raymond James associate that helps secure grants for local charities wanted us to team up with him, so maybe there is light at the end of the tunnel. Thanks again!

    • Shawn Garza says:

      Jeanne, I think we’re related. I think you’re married to my brother-in-law Charles. If that’s true, then small world!

  49. Shannon says:

    I don’t know if someone already asked about this – but if hiring a commission-based salesman to fundraise for you is against fundraising ethics, then how come those telephone solicitation companies (such as the ones who call for the AHA) are not an issue? I read an article a few weeks ago that explained that much of the time, those telephone call centers keep more than 50% of the donations they receive for their charity! THAT seems highly unethical to me – yet it is a common practice. I get calls all the time from police and fire organizations – children’s organizations – medical charities… etc. So I am wondering, what makes these call centers any different or more ethical than a hired gun?

    • Shannon, great question.

      Does anyone else know why this is allowed?

      Or is it just that these companies choose to not work in line with the ethics statement of AFP?

  50. Linda Snyder says:

    Twenty years ago I worked at a non profit mental health agency as a full-time, paid grant-writer and housing developer. I was pretty successful, and brought a lot of money into that organization.

    I eventually left, and worked in other fields, including as the CEO of a mental health agency and as a real estate investor/developer. (I also held my Realtor’s license for several years.)

    About 5 years ago, I was asked by a local arts agency to do some grant-writing for them on a commission basis. The agency was hurting, and couldn’t afford to pay me upfront. I was thrilled because I’d previously served on that agency’s board for several years, and was committed to its mission. Since it looked like I was going to rekindle my grant-writing work, I looked into professional associations… and found that what I’d agreed to do was considered “unethical”.

    The rationale didn’t make sense, but I wasn’t comfortable going against the standards of the professional organizations, so I immediately notified the agency that I couldn’t work on commission. They didn’t have the money to pay me, so we amicably parted ways on the project… sadly, because we were both going to lose.

    A couple of years ago I revisited the idea purely as an intellectual exercise. I again researched the rationale, and found a blog forum where there was lots of discussion about the “ethics” of refusing to work on commission… and the only argument that forum had was based purely on money… the consultant/fund-raiser’s likelihood of getting screwed out of money. I was stunned… it seemed pretty self-serving – and frankly, unethical – to create “ethical standards” that are based on a consultant’s likelihood of getting paid. Because pure and simple, that is indeed what it looks like to me. (Getting paid should not be the basis of an ethical standard; a policy and procedure, yes… )

    At that point I decided that if I ever again had the opportunity to do grant-writing or fund-raising work, I would take it. I haven’t yet, but have recently been asked by several small organizations if I would design a fund-raising program for them, that I would then implement.

    I logged onto this forum to see if there might be any arguments that would sway my beliefs, but I have found none. As others have noted, the arguments against commission-based fund-raising appear to be based more on a concern regarding opening up the field to renegades who buy into successful business models and who may taint the “pure” non-profit environmental aura.

    That’s a sad thing, since non-profits have the same need for self-preservation through making a profit as do for profit businesses. Anyone who doesn’t see that doesn’t understand the nature of organizations.

    • Linda, Thank you for such a thoughtful response.

      I love your comment that getting paid isn’t a standard for ethics as much as for policies and procedures!

  51. Shawn Garza says:

    On a quick side note, I think I’m related to Jeanne Tanksley earlier in the posts. I think she’s married to my brother-in-law. Small world.

    I am feverishly working on starting a 501c4 that focuses on policy-making for special needs children and offering resources to their families that are otherwise not available through the plethora of c3’s that are out here taking in loads of cash and effectively offering little to the actual people who need help. The reason I’m starting a c4 versus a c3 is because of lobbying restrictions. My 2 sons with autism don’t have a voice at the capitol, and I intend to put one there. I’m a former lobbyist who chose not to continue lobbying after my efforts were successful, because I’m pretty picky about my issues.

    All that being said, we are starting this with very little money. We are hoping to raise seed funding so that we can pursue bigger fundraising efforts. I have a friend who is very good at fundraising and is asking me to hire him on a performance-based plan, i.e., commission. He knows he can produce; he has a long history of long relationships. What I’m getting at here is that it seems somewhat presumptuous for any organization to dictate ethics to this extent. If the organization is willing to pay commission, and the fundraiser is willing to accept commission, and both act in good faith, where is there an ethics issue?

    And, frankly, folks, all fundraising is a sales job. For crying out loud, DATING is a sales job! My wife works sales on a commission basis. She sells flooring to apartment communities. They don’t continue using her if she does not have a good relationship with them. Trying to say that fundraising and sales are totally different because of the repetitive, relationship-based nature of fundraising is, in my opinion, an effort in futility. Many sales are repetitive and relationship-based. They require great amounts of trust between the customer (donor), the salesperson (fundraiser) and the company (non-profit.) There is no difference other than the product.

    One other point that was made earlier in this thread that kind of grated on me was the notion that having someone fundraise on a commission basis was a way to keep the fundraiser on some second-tier or was just laziness on the part of the directors or the staff was rather insulting. My directors are people with other responsibilities in their lives besides just the non-profit. Most of them have special needs kids (which if you don’t happen to have one, let me tell you, the time involvement with therapies, schools, and just life is extreme), almost all of them have regular 9 to 5 jobs, and every single one of them is involved in other organizations trying to help kids. I want to spend my time at the capitol fighting for these kids, which limits my time fundraising. Does that mean that I’m not going to do any? Of course not. But it does mean that I can hire someone on a commission basis to kickstart this organization until enough money is raised to hire someone on a salary basis.

    I think the ethics statement on this is short-sighted and ignores the small, new non-profits who are working on a shoestring.

    Thank you for the chance to express my opinion here. I found this thread captivating, and you have won a reader for life!

    • Hi Shawn! This thread proves something Daddy Tanksley once told me.
      “Great minds … will argue until they are dead.”
      Vive La Conversation! :)

  52. Wow this thread has nine lives-i guess its a hot topic. As a long time fundraising consultant who does not accept commission based arrangements either for myself or my firm i’d like to add a bit more.

    1.) Many consultants would LOVE to work on a percentage. My firm has raised several billion dollars for our clients over the years-had we been working on a percentage we’d all be well retired by now. The commission versus flat fee arrangement has absolutely nothing to do with consultants not wanting to be judged or compensated on performance and everything to do with our understanding of the fundraising dynamic and donor – organization – consultant relationships.

    A few questions for the commission advocates in this thread:

    Does the consultant get a commission on just dollars collected? or does he get a commission on a signed multi month/year pledge? If it is just dollars collected how long does the consultant get paid for? One month? six months? three years?

    If its a a new donor does the consultant get paid every time that donor makes a gift? or only on the first gift? different rates for first versus second gifts? How long does this relationship continue? Are you going to pay residuals over the lifetime of that donor? Ie. the new donor makes a $500 gift (initial commission) and then makes a $250 gift every year for X years-does your commission based consultant get paid each/every year?

    Does the consultant get a commission on a gift made by an existing donor but to a new campaign? Ie. a $500 donor to your annual fund now gives $10,000 to your capital campaign (having received a letter that the consultant wrote on behalf of the campaign) -does he get paid for this?

    How does your consultant get paid for a gift in kind? Lets say she arranges for a local lumber mill to donate $100,000 worth of product to your building project. Are you going to pay cash to your consultant to compensate him for this “in kind” non cash donation? If not-should he bother pursuing such a gift? If so-how do you measure the size of this donation to base your commission on?

    What do you tell your donors? Do you tell them that you have hired someone who gets a percentage of every dollar you donate? do you tell them the percentage?

    There are a million more questions/scenarios that could come up that i haven’t even begun to explore. And many iterations of multi year giving, repeat/renewing donors that could and would generate tons of challenges. Many issues regarding tracking/auditing and accountability as well. Planned giving? Wouldn’t even know how to begin thinking about accepting an estate/planned gift under a commission arrangement.

    Fundraising is sales for sure! But the relationship between donor, non profit, consultant and employees is not the same.

    Is a commission based approach doable-sure- but it would have to be short in duration (ie all cash gifts that arrive between x and y) and simple. Unfortunately that rarely is in the best interest of solid non profits and certainly isn’t good fundraising-thus-most consultants worth the dollars they are paid stay away from such arrangements.

    Again-measure us on our performance (most consultants can provide extensive lists of dollars raised, dollars collected, projects completed) and compensate us on our results but do so on a fee for services, negotiated up front. Performance goals -sure- but commission benefits ONLY the consultant and in no way benefits either the donor or the organization.

    • I think we can stipulate that contracts are complicated, but if you can’t understand how to read/write a contract you are likely unqualified to fund-raise or run a non-profit. Simple is easier, but it’s not mandatory – just ask the IRS.

      The “we would all be billionaires” is a cop out. The issue easily solved by the capped commission. In our org the commission is capped at the level the salary would normally be paid at. Want a salary? Earn at least what you are promising us and that is what you will make.

      The a fundraiser being paid even if they bring in nothing – is a benefit to the FUNDRAISER not the business unless the business is already established and needs to be very large. Not everybody even wants to be that large. As the woman above noted, this “ethic” is a protection of profits for the fundraiser, as seen by the fact that it is mostly promoted by Professional Fundraisers.

      Does the consultant get a commission on just dollars collected?

      In our organization the contractor gets paid when the dollars are collected, no pre-payments for yet-to-be-fulfilled pledges. There are small monthly bonuses contingent on available for contractors who meet various pledge goals.

      Or does he get a commission on a signed multi month/year pledge? If it is just dollars collected how long does the consultant get paid for? One month? six months? three years?

      He continues to be paid on any pledge he personally arranged as long as he is actively contracted with the organization. “Active” is defined as having added a new donor or renewed/extended a contract by their own effort in the last 6 months. (AKA If you quit working for us, we stop paying you.) Should a situation arise where a contractor wishes to make a large and unusual arrangement with a donor where he feels this payment arrangement would be unfair, he is welcome to seek a renegotiated exception from the board who make their decisions based on the best interest of the organization.

      If its a a new donor does the consultant get paid every time that donor makes a gift? or only on the first gift? different rates for first versus second gifts? How long does this relationship continue? Are you going to pay residuals over the lifetime of that donor? Ie. the new donor makes a $500 gift (initial commission) and then makes a $250 gift every year for X years-does your commission based consultant get paid each/every year?

      Contractors only get paid as long as they are in active status with the organization (see above). If they make a 45 year contract with a donor AND the donor follows through on that contract AND they stay active that whole time then yes, we will happily pay them every year. If they leave the checks stop after 6 months.

      Does the consultant get a commission on a gift made by an existing donor but to a new campaign? Ie. a $500 donor to your annual fund now gives $10,000 to your capital campaign (having received a letter that the consultant wrote on behalf of the campaign) -does he get paid for this?

      Absolutely. He wrote the letter, we wouldn’t have gotten it without the letter, he gets paid. This month he probably won’t have to do a lot of work to meet his full salary. Good on him.

      How does your consultant get paid for a gift in kind? Lets say she arranges for a local lumber mill to donate $100,000 worth of product to your building project. Are you going to pay cash to your consultant to compensate him for this “in kind” non cash donation? If not-should he bother pursuing such a gift? If so-how do you measure the size of this donation to base your commission on?

      Our organization is not in great need of “in-kind” gifts, so we don’t encourage them from our contractors. Since they are rare we deal with them on a case by case basis. In negotiations it benefits the contractor to have raised cash that month if he wants the cash to be there for the board to pay him for the in-kind donation. So far we have had no problems with this, because to be honest all of our contractors believe in our cause and have always been happy to volunteer a few hours on the side to arrange an in-kind donation if they believe it will help the cause. It is also in their interest to have an established relationship with the in-kind donor even if they don’t get paid for that one thing.

      What do you tell your donors? Do you tell them that you have hired someone who gets a percentage of every dollar you donate? do you tell them the percentage?

      Hell yes. Lying to donors is a massive no-no. We also reveal the cap of course. I have yet to meet a donor who objects to a 3% total overhead (which is more than ours has ever been). I think I commented on one of your other blogs about how it actually annoys me that donors frequently give to us based only on that. The anti-commission kerfluffle is almost totally an internal thing, 98% of the donors I have explained it to have laughed at the absurdity of the idea. (I expect Marc that you may have had a different experience with donors, because you present it differently)

      There are a million more questions/scenarios that could come up that i haven’t even begun to explore. And many iterations of multi year giving, repeat/renewing donors that could and would generate tons of challenges. Many issues regarding tracking/auditing and accountability as well.

      Not even sure how to answer this because the answer is so obvious it sounds condescending to say it.
      Contracts are complicated. Life is hard. Anybody who says differently is selling something.

      Planned giving? Wouldn’t even know how to begin thinking about accepting an estate/planned gift under a commission arrangement.

      At the moment we don’t have anyone experienced in planned giving to train our team (not because we don’t think it is important, but because all the experienced people have been brainwashed into thinking commissions=scam and grassroots=not serious)
      However, we do have a provision in case one of our contractors wants to branch out into the area of planned giving. The contractor CAN choose to simply treat a planned gift as a pledge for commission purposes if they think they will be with the company when the gift hits our bank account OR they can choose instead to up to their percentage and/or capped salary for a limited period of time according to a calculation set forth in the contract. Because planned gifts tend to be large the available commission/cap raise and the time period it is available for is not a direct percentage of the expected gift but rather based on a “tier” system.

  53. Yes Jeanne contracts “can” be complicated. You seem quite proud of the contract that you have developed. And if it works for you and your group-fantastic. I am not entirely sure those of us who subscribe to the industry code of ethics (that is present in dozens of fundraising associations not just the AFP) object to commission based compensation as much as we agree with fee based compensation.

    As for the rest of your post-there are certainly point by point reasons to object/debate but online forum debates quickly reach a point where its less about real dialog and more about pontificating.

    If your system works and your donors understand and support it and your contractors are willing to embrace it-then that seems just swell. I (and a few others) were just posting reasons why the organization that we belong to and support have long since settled the issue.

  54. Accountant hubby points out that a fundraiser whose salary was negotiated is effectively receiving a pre-paid commission – often based on his own estimate. THAT policy is what leaves organizations open to a scams. How could an organization possibly ethically contract to pay a guaranteed commission based not even on pledges but on wishes and promises?

    Example 1:
    A fundraiser requesting a 70,000 salary based on their promise to bring in 1,000,000 per year is suggesting they are worth a 7 percent commission. 7 percent is more than we pay our contracted commission fundraisers – especially if they get up past their cap to the 1,000,000 level.

    Example 2:
    A fundraiser requesting a 70,000 salary based on their promise to bring in 100,000 per year. Nobody would agree it was ethical for an organization make this deal because we all instinctively know the fundraiser is effectively requesting a 70% commission.

    Example 3:
    The organization above agrees to pay the fundraiser a 7% commission – a rate equivalent to the fundraiser in Example 1. He makes a little less than he thought, but he still gets $6,000 working in his spare time and they keep $85,714 for their cause.

    Example 4:
    A fundraiser promises 100,000,000 and negotiates a 70,000 salary. Lets assume he is honest but deluded, and does not realize that 95% of the organizations former donor pool are now dead or unemployed due to a freak Twinkie factory explosion. He manages to raise 100,000 anyway. But the organization has to close because they can’t meet the growing need for their services (so many adorable children who cant afford the surgeries to remove the twinkies embedded in their little faces!) on only $30,0000.

    Example 5:
    A fundraiser promises 100,000,000 and negotiates a 70,000 salary. His confidence seriously shaken after his experience with the Twinkie people, he only manages to raise 50,000. Now this organization not only has to close, they also have to declare bankruptcy and stiff their fundraiser and all their other employees their salaries.

    By your standard the organization in Example 4 that CLOSED after paying 70% of their income to a fundraiser and the organization in Example 5 that CLOSED and screwed over all their employees behaved more ethically and were more benefited than the organization in Example 3 that made $85,714 and fulfilled all their commitments to their employees, their fundraiser and their beneficiaries.

    Now to be fair there is an:

    Example 6:
    Fundraiser negotiates an uncapped 7% commission from a phenomially stupid organization and raises 900 bazillion dollars and laughs all the way to the bank.

    Example 6 is what we in the trenches of the non-profit world like to call “a high class problem”, since we still have 93% of 900 bazillion dollars.
    Is it un-ethical for the fundraiser to not institute his own cap at that point? Yes.
    Is Example 6 the sort of thing that keeps me up at night? No. What keeps me up at night is trying to figure out how to get our volunteers to the base after gas reaches $5.00 a gallon.
    Was it the type of payment that was the problem in Example 6? No, the problem was an idiot at the wheel of the non-profit who hired a greedy douchbag fundraiser.

    The Four Morals of the Tale:

    1)Pay your fundraisers capped commissions – it’s more complicated but almost always more beneficial to the cause and more ethical than a salary.
    2) Don’t put idiots in charge of hiring.
    3) Don’t hire greedy douchbags.
    4) Always protect your face from Twinkie shrapnel.

  55. Wow. I’m amazed by both how this almost 2-year old post is still really alive! And how passionate both are in articulating their positions.

    (1) Please keep this civil. “douchbag” is really the limit of language here. You may not realize this but language like that doesn’t help persuade people. It puts them on the defensive. As John points out, it takes skill to actually dialogue in blog comments. But please try to. If you want to pontificate with colorful language, you have that freedom…by starting your own blog.

    (2) I think a major problem for either position is the term “ethical.” As I’ve been mulling this over, and had a comment from a colleague in a different forum, I wonder if it wouldn’t be better if there were two sides that talked to clients with reasoned explanations for their payment structure. Calling one or the other unethical seems like a nonstarter, merely making the other person defensive.

    Thanks for keeping the comments interesting and lively. But let’s try to produce dialogue that might persuade others rather than op-ed style comments designed merely to preach to those already entrenched.

  56. Shawn Garza says:

    I have been very worried about Twinkie shrapnel.

    I agree that the “non-ethical” moniker is a non-starter. I think my main gripe is that an organization with the credentials AFP would actually forbid something like this by calling it “unethical.” I find it horribly limiting especially when due diligence is performed and both parties agree to the arrangement and act in good faith.

  57. MariaN. says:

    Hi everyone!

    I’m a promotional copywriter and not a professional fundraiser, and this is one of the most fascinating threads I’ve read in a blog. I’m coming at it from an outside standpoint, that is, a direct marketing point of view. If I write copy that brings in 900 bazillion dollars in sales, I’m worth a lot a money to the company, reflected not only in a fee but, in some cases, royalties (fee + commission). The company’s hope is, the next time I’ll bring in 10 times as many dollars, and you can bet not only my fee but the royalty percentage will go up as well. It seems to me, in example 6 above, if a fundraiser, in fact, brings in 900 bazillion dollars to an organization, he/she is worth every bit of that 7% commission and I don’t believe any organization could be called stupid in rehiring that person at an even higher, uncapped percentage. Nor would I consider a fundraiser unethical in not capping it him/herself. In business, you pay for what you get. And, there are always risks, never guarantees. The next time, sales might not work out the way you hoped; nonetheless, “the laborer deserves his wages.” Why should it be different in fundraising?

    That’s a real question, not a rhetorical one. Perhaps I’m missing something?

    I also admit to being bemused by how much passion fundraising arouses. By contrast, sales seems so much more straightforward.

    Thanks for the chance to participate in a really great blog!

    Maria

  58. Jack Benson says:

    With commission based fundraising, the benefits to a Not-For-Profit can enormous. Especially for a NFP with limited resources. Lawyers have embraced this practice it for years, taking 30-40 percent on contingency — and is generally accepted. AND CONSIDERED ETHICAL. Like lawyers, if the fundraiser doesn’t produce, they get nothing. If they both only make a phone call to produce big results, it’s a windfall. Other times, it may take more work than the contingency/commission covers. But over time, it balances out.

    What’s the difference?

  59. Lawrence Koosman says:

    (this post is in regard to a soon-to-be-completed $10 million campaign)

    Marc.

    As a volunteer I have raised modest funds on occasion for a small town’s long-existing civic group since the 1990s. Two board members of that town’s new non-profit organization (who also served on the board of the older civic group) asked me in April 2012 if I could figure out a way to raise $10 million for their cause. I’ve been a close friend of one of these board members for 15 years, and I’ve known the other (who is employed by an established organization that is partnering with this new group) for three years. I was asked by the latter what salary I would desire for the executive director’s position, and I said $75K, which is well under the market rate in most areas of the country for non-profits with $10 million budgets, according to the Watkins Uiberall 2010 Nonprofit Compensation survey which can be found online. He said my request sounded reasonable, but noted I would have to work out my salary with the board as a whole, and that I couldn’t get paid until funding began to arrive. I said those conditions were acceptable, and then he formally offered me the position, which I accepted. He congratulated me, we shook hands, and I began to strategize on the most efficient way to raise $10 million.

    Within three weeks I identified and recruited a professional fundraiser who worked in the 1990s for the new organization’s founder, who is world famous. Due to his admiration of our founder, the fundraiser said he would be honored to conduct the campaign pro bono. I spent the next 10 months assisting our campaign leader by proposing and researching potential members for our steering committee.

    Then this past February the two board members who I met with in April 2012 came to my home and said “the fact of the matter” was that I wasn’t the executive director after all, but that I could apply for the position, and if I didn’t get it, then “maybe” they could get me “some contract work.” I was stunned, especially considering one of the board members has been an old family friend. She called me three weeks after this meeting to say that she and the other board member only said in April 2012 that they would “recommend” me for the E.D. position if my efforts were successful. That simply wasn’t true. After I let the shock subside for a few days, I contacted the board chairman and briefed her on the unpleasant recent meeting. She immediately expressed her displeasure of her board members arranging to meet with me without her knowledge. I told the board chairman that I didn’t request a written agreement at the outset because I thought it might be perceived as an affront to the organization’s founder — I didn’t want to elicit a “What, don’t you trust us?” reaction, which is the last thing I wanted to do. Besides, I said, I’d been a friend of the town and most of the board members for 15 years.

    I then spoke of the April 2012 meeting, which astounded her — she said the two board members never conveyed to the rest of the board that I’d been offered the E.D. position. Of course, the fact that no one else on the board had been told by the two board members that I’d been offered the job almost a year earlier in turn astonished me. I then e-mailed the chairman a draft of a solicitation letter that I’d sent to my good friend on the board upon her request about two weeks after my hiring, which included my name and title at the bottom. She never replied with a “Oh, no, there’s been a big misunderstanding” or words to that effect in regards to my title — in fact, she never replied at all. As I see it, her silence implied her agreement that I held the title, and put her on notice that I was under the impression that I was the E.D. She and the other board member let me continue to work under the belief for the next 10 months that I was indeed the E.D. of the organization.

    The board chairman said it seemed apparent the the two board members had offered me the E.D. title prematurely, which they evidently came to realize. I gathered from the chairman that the organization’s founder wanted all board members and the E.D. to live in or nearby the small town in which they all reside (I live two hours away). It was hard for me to fathom that proximity to the non-profit’s office would trump all else — you’d think figuring out a way to raise $10 million, within three weeks of being given that task, would have commended me for the position.

    I said if I’d been told that I wasn’t eligible for the E.D. job to begin with, then I would have only undertaken the assignment as a consultant. I said I was a team player, and that if the board wanted someone local to serve as E.D., I’d be supportive. However, I made it clear that I felt it would only be fair for me to be compensated as a consultant. I drafted a proposal and sent it to the chairman within about six weeks of my calling her with my grievance.

    1. I opened the proposal by re-stating the first sentence in the previous paragraph. I also said, I think it is reasonable to conclude that this organization, just like any new or low-budget, non-profit that asked someone to devise a way for them to raise $10 million, would have readily approved a consultant’s proposal in which the organization would retain 90% of the funding raised directly or indirectly by the consultant.

    2. Since I don’t agree with receiving strict commission-based compensation from a non-profit, I submitted a compensation plan based upon the attainment of benchmarks, $250,000 for every $2.5 million raised by the professional I recruited.

    3. I said would not consider asking for a lump sum. I noted that I believed the consultant should not earn as much as the E.D., so I requested a capped annual salary of $50,000. For example, if the fundraiser’s campaign yielded $5 million, I said I would seek an agreement using the above-mentioned benchmarks for 10 years at $50,000 annually; or if his campaign raised $7.5 million, I would request an agreement for 15 years at $50,000 annually.

    4. I said I’d would also agree to cap my total earnings at $750,000, paid over a 15-year period. In other words, all proceeds raised by the fundraiser over $7.5 million would be retained by the organization.

    5. I said If desired, I would be honored to pursue one or two six-figure fundraising events per year, on a volunteer basis, if the organization desired these events, for as long as the famous founder was open to attending them.

    6. I concluded by saying I felt this proposed framework is more than fair, given: a) that I was approached by two board members of the organization and asked to figure out a way to raise $10 million for their mission; b) the retracted job offer that occurred nearly a year after (and despite) my key achievement of identifying and recruiting the professional fundraiser; c) my desire to have the board retain the E.D. of its choice; d) my willingness to cap my annual earnings at $50K, which is one-third less than I would have earned as the E.D.; and e) my offer to have the organization retain all funding over $7.5 million.

    Marc, the question I have for you and your readers is whether I submitted a fair proposal. This has been a awful experience for me…being asked to work as the catalyst for a $10 million campaign, and then putting the wheels in motion within three weeks…only to have my close friend deny along with her fellow board member that I was even offered the E.D. position, despite my written proof to the contrary, in order to keep from being called on the carpet themselves…and then allowing me to work for 10 months with them knowing that I was under the assumption I was the E.D…in addition to them never telling the board the true nature of my involvement, that this wasn’t a volunteer activity on my part, but expressly tied to eventual compensation. I rightly thought I’d landed a stable position (upon the completion of the fundraiser’s 18-month campaign). And now I’ve been out of communication with the organization for nearly two months, which is when I last her from the board chairman. She’s never even acknowledged receipt of my proposal. That could be tied to the board meeting as a whole every two or three months, but still, I think I deserve the courtesy of some type of reply. As friendly as she was in our two-hour call in which I explained everyting to her, my guess is that she forwarded my proposal to the organization’s famous founder and he told her to not even reply to it. Which would be a terrible disappointment to me, given my long rapport with him.

    During our long phone discussion, she suggested a possible solution would be to at least see that I was paid for a year’s work. I said if I’d been asked to devise a way to raise $1 million, then I thought $50-75K would be appropriate. But not for engineering a $10 million campaign. By that logic, if I’d been asked to figure out a way to raise $500 million, I still would’ve been offered the same relatively modest one-year salary. I think that’s absurd. And it’s not as if I was asked to construct a PR campaign or given some other ancillary project not connected to raising meaningful revenue. I can see accepting a $50-75K salary had I executed some non-revenue related assignment. The task given to me, though, was all about funding. So I feel a capped benchmark arrangement is emminently fair, seeing that the E.D. job was offered to me without authorization and eventually retracted, after I’d been allowed to work for nearly a year while believing I was the E.D.

    I feel strongly that the benchmark arrangement cited above, if presented by a consultant to 10 new non-profits who are seeking $10 million, would be readily accepted by all 10 entities, which I would then argue indicates fair market value. I think I’m bending over backwards to be fair, especially in offering to cap the annual salary and total earnings. The idea of having to consider going the legal route is anathema to me, but if I don’t receive a response to a follow-up e-mail I plan on sending next week, I don’t know what else to do. I think the botched job offer is now almost besides the point. The bottom line question appears to be what is the fair market value for someone who is approached and asked to figure out a way to execute a $10 million campaign, and for his then identifying and recruiting a professional fundraiser to undertake the campaign pro bono — as opposed to raising the money myself. Can you or your readers tell me what would be a fair level of compensation, especially under the circumstances, for my professional services in this effort? If pushed, I would consent to a benchmark of $125,000 for every $2.5 million raised, which is half of what I proposed in my letter to the chairman. I saw your earlier post that in which I believe you said you had no experience with benchmark-related compensation, so I realize you may be unable to advise. I greatly appreciate you and your readers taking the time to read this unintended lengthy summary.

    • Wow. Lawrence, I’m so sorry for your experience. You have been treated very poorly be the very people who should be most thankful.

      As for “value,” that is an open question. I like that you cite objective standards and rationale. But I’m not going to “approve” minimums. I know a guy that gets paid 4-5 times what I get to speak. Both are “fair” in the eyes of the respective clients.

      Value in service industries like ours is such a mix of tactical skills, experience overtime, marketing, and whatever issues or desires the client has that I’m not sure it can be boiled down to a commodity like the price of a light bulb.

      I think the way you laid this out is logical. Since you were so trusting in your comment, I’ll value that trust enough to be frank. While I agree that your project is much more important than a one-off PR campaign, I don’t think I’ve ever met a nonprofit board that will pay out over time, especially over 15 years.

      I sincerely hope you at least are able to find some sort of email or other scrap of something in writing to be able to defend yourself should this go to court.

      Thank you for this cautionary tale.

  60. Lawrence Koosman says:

    Marc,

    I greatly appreciate your candid reply, especially since I’m in need of objective perspectives to counter my biased viewpoints. Would you mind elaborating on specifically what you were referring to in my post when you mentioned not approving minimums? (apologies for my denseness on that one).

    I proposed the 15-year payment plan thinking that it would be less onerous for the organization to pay $50K a year over that span than it would be to have the fee paid in one or two large annual sums. No one would need to twist my arm to pay me in that latter fashion, if the goal was to get me off the books ASAP. What I didn’t mention in my first post is that I recruited a different fundraiser three years ago to raise $1 million for the small civic group that was the predecessor of this new organization. And the civic group agreed to her terms — 10% — except it took three weeks for them to meet and relay their answer to me, by which time she received a much more lucrative offer elsewhere, and I was never able to capture her interest again. So there is a precedent here in terms of knowing what the board members of the new organization consider reasonable, in that they mostly comprised the board of the civic group.

    There is one other e-mail of relevance that I have, though I’m not exactly sure of its significance. A few hours after I received the job offer last April, I received an e-mail from the board member who made the offer, in which he said the organization’s founder “directed” that I contact an old friend of the founder who I’d suggested about five years ago would be a possible candidate to serve as a VIP fundraiser for the civic group. My guess is that board member, after meeting with me earlier that day, told the founder I was willing to help, without mentioning the job offer. Although, if the founder thought I was simply volunteering to help figure out a way to raise his organization raise $10 million, you might think he would have “asked” that I contact his friend, rather than “direct” that I do so, which would be a more appropriate command for someone in the organization’s employ. But that’s neither here nor there, since I’m certain the founder didn’t know of the formal offer I’d received earlier that day.

    Value can be described as the best guess as to the worth of a service and the return on the investment. There isn’t a crystal ball that can guarantee how much a speaker’s knowledge and advice will add to a client’s bottom line — and with the mix of skills, experience, etc. being so subjective, it’s no wonder that one speaker will earn X while another earns 5X. Conversely, I know in this case how much my consulting services, via the professional fundraiser working pro bono, will likely add to this organization’s bottom line — $10M+. No guess work there. Which I would think would make it much easier for the organization to determine a fair level of compensation for me in lieu of the retracted job offer.

    You’re right, value in service industries like ours can’t be boiled down to a commodity like the price of a light bulb. However, I think the most precious commodity on Wall Street, in a sense, is the item called certainty, which I’ve indirectly delivered to this organization. They know roughly how much they’re going to receive. And as I said in my first post, there’s little doubt that 10 out of 10 new organizations, if asked beforehand, would have readily agreed to a benchmark arrangment with a consultant who proposed that they retain at least 90% of the funding raised in a $10 million campaign. If there’s virtually unanimous agreement from multiple non-profits on the terms of a proposal, I think that’s one way to derive fair value. What may be more obvious is recognizing unfair value when it’s proposed. such as the chairman’s first thought that one year’s salary, i.e. $75K, would be a fair agreement. In this instance, I think it would be tantamount to someone offering a 75-cent reward for information leading to the return of a $100 bill. A cheap reward can hardly be considered a fair one.

    Many thanks again for your time and insights, Marc.

  61. Lawrence Koosman says:

    …and Happy Father’s Day if it applies.

    • Lawrence,

      Thanks. Father’s Day does apply. :)

      I think your plan sounds reasonable. As with any negotiation, I would ask for the best but have 2 acceptable-to-you fall back options.

      I’m really uncomfortable giving this level of specific, and possibly legal, advice without a contract. As you know, blogs stay up forever.

      There are 70+ comments on this thread alone. Comments that suggest ideas for percentage and non-percentage based compensation. Your thinking seems solid, although as you’ll see from comments above, some very smart people will disagree.

      • Lawrence Koosman says:

        Thanks for your positive feedback, Marc. Having the opportunity to take part in this thread helped clarify my reasoning, as opposed to just churning it over repeatedly in my head. Fall backs options are in place. I’ll try to remain optimistic that reasonable people can arrive at a fair agreement.

  62. Timothy Barksdale says:

    Mr. Koosman,

    Over 40 years ago, in a similar manner/situation I was offered a position by one who did not have the full authority to do so. My sympathy to you. I only labored a few weeks before the situation was revealed, so my losses in time and effort were in no way comparable to yours.

    Board members it seems feel powerful enough to over step their boundaries when boundaries are not clearly defined. Some years later, as Director of Development for an NPO, I became responsible for training board members on how a non-profit should run and balance the staff, board and volunteers.

    Peter Drucker’s outstanding book on managing the non profit became my “bible”.

    I am trying to put numbers and fund-raising into a different situation now – but when you hand the product to a national organization for free, then it seems to return to a non-profit model.

    Mr Benson- who in the world- in this day and age- would find an attorney “ethical”. And 30-40 % may be standard- but I would question the use of the term “ethical” in that application and in any association with attorneys.

    I strongly disagree with Ms. Tanksley’s suggestions. Henry Russo was one of my mentors in fund-raising and I am very proud to have him in my lineage.

  63. Hi Marc:

    Any offering/insight/wisdom that you would have in response would be greatly appreciated!

    As a general performance based business consultant, I charged and earned $225.00 per hour, I am using that same amount as my current rate associated with raising funds for a new start 501 3c. I actually conceived and have done all the required work associated with creating the organization including building a 7-member board of respected individuals from the community that will host the organization. The project focuses on helping children attending the community’s public schools with extremely limited resources with supplemental resources specific to STEM.

    The base hourly rate will be used to calculate the amount owed to me up to the date that the actually fundraising activities begin so there is “back-pay” due when donations are received. But, I will not be paid any additional hourly rate for work following the start of the fundraising segment of the process. Going forward and in addition to the 1,100 hours back-pay associated with the last 18 months of work, I will also receive a bonus of $200, 000.00 per every $10,000,000.00 that I am able to secure in contributors. From the bonus money that I will receive if successful, I will also be responsible for most expenses that will account for approximately 20% to 25% of my bonus payments. The result will be 91% to 93% of every dollar contributed will go towards the project- less that 7% to 9% in total expenses will occur. I assert that I am being under-paid as a result of my own doing but I think it is fair considering that I too want the effort to be successful and as much as possible be directed to making the project produce meaningful results that will positively impact these underserved children.

    Based on this information and my expectations to be successful in reaching the goal, am I aligned with reality from a financial recovery perspective? Thanks for your anticipated insight!!

  64. Clarification appears appropriate. The total expenses will not exceed 7% to 9% with the remaining 91% to 93% going toward the project. Sorry for any confusion, thanks!

    Gee

  65. Lawrence Koosman says:

    Mr. Barksdale,

    My belated thanks for your insights. How I wish you could have trained the board members of the organization I referred to at length in my posts from this past June.

    Marc: It took until mid-August for the board to meet and another three weeks before the chairman replied to my proposal that I submitted back in April. In short, the chairman thanked me for my great “help,” and didn’t even acknowledge my compensation proposal. To review my situation, in April of 2012, at the solicitation of the board’s representative, I attended a meeting with that rep and was asked by him to devise a way to put a $10 million campaign in motion, in whch he offered me the executive director’s job as incentive in a handshake agreement.

    Within a month I performed the transformational achievement for the organization: I recruited a fundraiser, who is an old friend of the organization’s founder, and he graciously agreed to spearhead the campaign pro bono out of affection for the founder. This was tantamount to me finding a needle in a haystack. I then worked with the fundraiser for nine months for no pay in identifying and researching prospective donors of $250K and up.

    And at the end of the nine months I was told by the organization’s rep who hired me that I wasn’t the E.D. after all, but could still apply for the postition, and if I didn’t get it, then “maybe” I could receive “some” contract work. I soon deduced he offered me the position in April 2012 without clearing it first with the organization’s founder. After recovering from the shock of this news, I sent a letter to the board chairman stating I was a team player, and wanted the board to hire whoever they desired, but that I would obviously need to be compensated as a nonprofit consultant.

    After waiting nearly five months, the board said I I knew couldn’t have received an official job offer because the organization’s bylaws state that only the full board shall employ the E.D. And as I said, my consulting proposal was totally ignored. The board actually believes a nonprofit professional who is approached by their own representative to put a $10 million campaign in motion doesn’t need to be compensated after he carries out the assignment given to him and works for another nine months on the project at no pay. I can’t begin to describe the devasting effect this has had on myself and my family. The retraction of a much-needed full-time position was bad enough, but to be offered nothing at all for leading the organization to $10 million seems unconscionable. Thank you for allowing me to vent.

    Best regards,

    Lawrence

  66. I totally agree!! Well said. Sales is sales. And it seems as though whoever came up with the notion that commission based fundraising is unethical probably has a huge budget and doesn’t want to see the playing field leveled.

  67. I bumped into this online and thought I would make a couple of comments. BTW I own a professional fundraising company.

    1. I turn down at least 10 requests by non-profits to come work for them for every group I do go work for.

    2. In most cases I end up finding the groups to work for myself because most groups don’t have a strong enough pull (it is too narrow or specialized to hire a fundraiser)

    3. The value of the professional fundraiser is not the calls or the percentages or the commissions paid. In fact even if I received 100% of the proceeds I would lose money calling for a single group. The professional fundraiser has client base that is interested in giving to the right cause. That is their main value to the efforts of the cause. The percentages are very high to the fundraiser not because they are greedy capitalists trying to take advantage of people but because the costs are so high.

    4. How many charities would actually survive if the government cut them off of their grants?

  68. Gary, very interesting and instructive! Not to dispute anything you said, but could you clarify what costs you’re actually talking about?

    • Well in our case we conduct telemarketing fundraising programs. On the average we pay approximately 45% of the money we raise to payroll for the TSR’s and managers, that number would include payroll taxes. That number would include cold calling, warm calling, and renewals. On cold calling we actually lose money. But it is a necessity to continue to do it to build the customer list. In addition to those costs you have your overhead which would includes mail expenses, bonding, management of and the cost of running automated dialing systems, bookkeeping, rent etc…

      • Really good information. Thank you! Just so you know, I write sales copy, so I’m not looking for proprietary information. I’m just wondering where you get the initial lists to call. Do you rent them?

        • By initial list do you mean a cold list? That can be purchased from multiple sources. You can purchase a good cold list for around 2-5k for a state based on its size. Once you purchase a cold list you own it. Over time it becomes less effective because of disconnects. Typically a cold list is good for one to two years. If you mean non cold it is self generated by internal sales. Trying to purchase lists of “Warm Leads” is not effective. Even if they perform above initial cold calling they will not “Pay” at a typical rate because they are sold to multiple company’s.

          Also I wanted to ad this point. Hiring a professional fundraiser can be effective. Especially for smaller groups of volunteer organizations. We do very well for regional groups such as animal charities. Many of these groups are filled with people with full time jobs and don’t have the proper time and infrastructure to raise effective monies on their own. I work for 5 animal charities. My largest received over $25,000 in net proceeds at no cost or investment of their own money. This type of organization is my favorite to work for. No executive directors taking big salaries.

  69. Hi everyone,

    This thread sure has brought about discussion! In the 2 1/2 years since I posted it, we’ve seen 88 comments. Some for. Some against. Passion on all sides. We’ve seen what I meant (major gift fundraisers) and what others do (direct mail, telephone, etc.)

    I am now closing comments on this thread. I appreciate everyone taking the time to share their point of view. It’ll provide interesting reading for a long time!

    Here’s to a great 2014!