Percentage-based remuneration for fundraising: an ethical practice?

Camaleo / Fundraising  / Percentage-based remuneration for fundraising: an ethical practice?

Dollars and scissors isolated on white backgroundIt is more and more usual to see job offers for fundraisers where remuneration is based on a percentage of funds raised. Conditions may vary: it could be a fixed amount plus a variable part depending on results, or a direct percentage of funds raised. This way of paying fundraisers is not new: it is a transposition of a common practice in the private sector, which, in theory, enhances employee motivation and productivity.
However, this model becomes more questionable when it applies to fundraising as practiced by non-profit entities. This is where a heated debate starts, between fierce defenders of the usefulness and efficiency of this system, and frenzy opponents who pull out their hair while denouncing lack of ethics and responsibility.yes no

Personally, I stand at a position of moderate criticism. As a fundraiser, I wouldn’t accept it, even though I have done it in the past, before I had formed a clear opinion on this matter. Yet I do not oppose radically the results-based remuneration. Why?

I perfectly understand the difficult situation met by small organisations with limited budgets, that can’t afford to allocate resources for the salary of a fundraiser, and thus find it challenging to find qualified professionals.

This is a vicious circle: If I don’t have the resources to pay a decent salary, I will never have a stable fundraiser, and if I don’t have someone helping me to raise funds in a professional way, I will constantly lack resources.

In front of this difficult situation, I understand perfectly the temptation to offer a percentage-based remuneration: a predefined part of the funds raised, or by objective: X if Y is raised…

But understanding it does not mean I approve it. As a citizen, professional of the third sector and fundraiser, I find this practice at the very least dangerous.

In the private sector, this practice is common. But the objective of a private company is to make money, and it is free to use these benefits however it wishes: reinvesting them, sharing them among shareholders, raising salaries, giving employees productivity bonuses or distributing percentages.

But when we talk about fundraising, we mean for non-profits. The fundraiser works hard to allow social, cultural or similar projects to exist, which wouldn’t be possible without external contributions. And individuals, companies and donors who bring in funds, or in kind contributions, do so for this reason. And not to pay the fundraiser.

Defenders of result-based remunerations will argue that a certain percentage (which varies according to organisations) of the raised funds are in any case intended to cover functioning costs (salaries, rentals, IT equipments…), which boils down to the same thing.

This point is dangerous and inaccurate. Everyone, including institutional donors, understands that it is impossible to correctly manage funds and projects in a professional and transparent way without these kind of costs. As a matter of fact, almost all institutional donors include in their budgets a certain percentage for administrative costs. This is ethical as long as the donor is informed; I can, let’s say, dedicate 10% of what X company gave me to pay salaries or electricity bills, as long as company X is aware of it. If I told them that ALL of their money was used to buy food, I would be lying, and would certainly not be acting in a professional and transparent way.

pinchoIf company X gave me money for my organisation, without more specifications, I am free to allocate funds wherever I consider it useful, as long as they are used directly to achieve the goals my organisation is aiming at, and that I am capable of explaining to this and other donors how I spent their money, and why I made these choices. This is what we call in the NGO jargon “donor accountability”, topic on which we could write several books the size of an encyclopaedia.

But leaving this argument aside, which could be developed in dozens of blog posts, there is another aspect that bothers me in percentage-based remuneration. Fundraising is hard work, and requires A LOT of planning and analysis in order to be efficient and sustainable. If a fundraiser is paid based on their result, they will dive head-first into fundraising without thinking about the future, and without aligning the organisation’s fundraising strategy with its overall strategy.

A fundraiser is not a beggar, or a sales representative: he’s a researcher, a planner, a strategist, a public relations manager, a trainer… And the percentage based remuneration changes him into an employee who can have short-term results, but who will not contribute to the organisation’s sustainable growth, or help it reach its objectives.

And finally, a more personal perspective. Results-based remuneration is unfair to the fundraiser, because they work in a very complex and competitive environment, in which people are tired of being solicited, and where trust is uncommon. They might accept to work this way and invest all their energy in it, and being conscious of their role, accomplish their tasks in an ethical and responsible way, refusing certain opportunities, planning on the long term… And all this may happen obtaining nothing, or almost nothing, which does not mean they are bad fundraisers.

No, really, I am not in favour of percentage-based remuneration. And this is also the case for the majority of fundraising associations and professional groups. Article 5 of the International Statement of Ethical Principles in Fundraising, published by the Association of Fundraising Professionals, states that:

Fundraisers provide their services either as a volunteer, or on a salaried basis or for pre-determined fees. Fundraisers should not accept commissions or compensation based upon a percentage of the funds raised.

(…)

Criteria that will qualify a fundraiser for performance-based remuneration must be agreed upon beforehand and should not be based on a percentage of the funds raised.

It is clear, we’re not in favour of percentage-based remuneration. But then, what can organisations with limited resources do to access services of a professional fundraiser?

We will try to bring in further posts ideas and solutions to this question, for organisations as well as for fundraisers who encounter this type of situations… The debate remains open.

 

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