Performance-Based Fund Raising

A Standard Worth Revisiting

I am often asked if Third Sector Innovations will write grants or otherwise provide fund raising assistance for “a percentage of the money we raise.” The answer has always been easy: “Can’t do it. It’s considered unethical. I’m a member of the National Society of Fund Raising Executives (NSFRE) and am thus pledged to not raise funds on a ‘commission’ basis. I can send you a copy of the NSFRE position statement.” (Note: NSFRE has been renamed Association of Fundraising Professionals since this article was published. They may be found on the web at www.afpnet.org)

But the question is getting harder, and although I continue to practice the standard, I am questioning its always-the-same-answer validity.

Here’s why: While I often talk about the unethical nature of raising funds based on “performance,” I constantly teach that fund raising is the sales function of a nonprofit business. “Business” in every sense of its capitalistic meaning: competitive marketplace, supply and demand, yada yada yada.

The fact that an organization is tax exempt in no way implies that it can survive without viable products and/or services, and these products/services must be sold. The only difference for charitable organizations is that, oftentimes, the person “buying” and the person receiving direct benefit are not one in the same. This fact, however, does not change the need to sell the goods.

With an eye to this business approach, let’s look at NSFRE’s position paper:

Charitable mission can become secondary to self-gain.

Business equally worries that the actions of its sales staff may compromise the profit and other goals of the organization. Yet business understands that organizational goals and individual self-gain are not necessarily incompatible interests.

Donor trust can be unalterably damaged. There is incentive for self-dealing to prevail over donors' best interests. Donor interests may not remain paramount.

As consumers, we’ve all experienced “unalterable damage” at the hand of an ineffective salesperson. In business, there are countless examples of self-dealing prevailing over the best interests of customers. There are countless more examples of how good business, which balances the interests of customers with its other objectives, creates an effective long-term ability to meet market needs.

Percentage compensation, however administered, can produce reward without merit.

The business salesperson is one cog in a larger wheel. His or her success is dependent on many variables, including personal performance. Sometimes the sales person “makes more than he deserves,” other times not. The model is equally applicable to the fund raiser within a nonprofit.

Ethical behavior is not limited to the nonprofit sector. And I believe that as our industry becomes increasingly “competitive,” the free market system that watchdogs business will regulate nonprofit fund raising.

Performance-based compensation for the nonprofit “sales person,” or fund raiser, often may be the most appropriate form of compensation. Sales of ads or booth space for a conference, membership development, and the promotion of “fee for service” work all are good examples of where a commission-based compensation structure can bring both incentive and fairness to the development efforts of an organization.

Good business is built on the same premise as good fund raising: retain people of quality to cultivate long-term relationships. For this reason, a variety of compensation options should be considered “ethical” within the growing and changing world of nonprofit business.