Compensating Fundraisers: A Dilemma for the Non-Profit Organization and the Fundraiser

Last week I discussed engaging a professional firm or a professional fundraiser to assist in developing the financial resources of Israeli non-profit organizations. In the posting I identified the options the organizations have for engaging the needed services and the different approaches to compensating professionals who raise funds for non-profit organizations. Interestingly enough my reference to the ethical issues involved in compensating a resource development professional by paying a percentage of the funds raised was understood to be either an objective view by some readers or tacit approval of this approach by other readers.

I would like to focus on the broader issue of how non-profit organizations finance resource development efforts and some of the implications for the organizations. In general, financing fundraising efforts is a very difficult challenge for small and medium size organizations. Donors do not generally want to fund resource development efforts and this has not been seen as an easy product to market.

It is the rare donor who will provide funding to enable an organization to raise funds or who will offer a challenge grant to an agency to come up with half the funding, for a salary, and then the donor will give the other half. One of the rare exceptions was the Avi Chai Foundation’s decision to provide assistance to organizations whose funding was in the process of being phased out. They were offered capacity building assistance to strengthen their efforts to raise funds by providing the directors and staff with mentors who would work with them to develop their fundraising skills.

The difficulty in having the necessary budget for engaging a professional fundraiser or a professional firm is setting aside the funds. Thus the pull to work with a fundraiser on a percentage basis or for minimal commission plus bonuses is very strong. Providing a percentage of the funds raised to the fundraiser as compensation relieves the agency of an additional financial burden. The agency’s director does not have to worry about an additional salary and benefits package, the fundraiser is engaged to “sell” the organization to donors and will be compensated based on their own success.

Often independent fundraisers are engaged by a number of different clients and they do not “represent” one organization in a comprehensive manner. At the same time, they are not fully accountable to any one organization and there are sometimes competing interests. As has been stated last week The Association of Fundraising Professionals maintains “that percentage based fundraising encourages abuses, imperils the integrity of the voluntary sector, and undermines the very philanthropic values on which the voluntary sector is based.”

When the non-profit organization endorses this standard and negotiates with a professional fundraiser there has to be an understanding from both sides that financial resource development is a process. It is more than just waiting for the “funds to roll in.” From the organization’s perspective there is the expectation that they will receive “a return on the investment” they make in the fundraising activities. The fundraiser’s efforts are measured by the results and the length of time it takes to receive the contributions.

Although the primary purpose of engaging a fundraiser is increasing the financial resources of the organization and strengthen its financial sustainability both the agency and the fundraiser have to implement a process that strengthens the organization. This is what distinguishes professional fundraising activity from the caricature of the “schnor” that is focused on the dollar. Financial resource development in the non-profit organization is an aspect professional practice.

The added value of the professional fundraiser is overall impact on the organization and in increasing its capacity to function as an effective non-profit organization. The focus is not only the increasing the financial resources, although this is clearly the primary purpose the person plays in the organization. By assisting the agency in developing a more sophisticated approach to donor development and cultivating the agency’s ability to attract additional supporters will be strengthened.

Compensating the fundraiser is not only based on the funds they bring into the organization and it must be viewed through the lens of the person’s impact on the entire organization. When a decision is made to use “percentage” as the measure it is taking a myopic perspective on the role of the fundraiser. It short changes both the non-profit and the person engaged to work in the area of financial resource development.

The organization must be clear that it wants to simultaneously increase its contributions and strengthen its ability to function. When the professional fundraiser knows the purpose of the role is to focus on both areas then the alignment of their joint goals will be a step in the direction of success. It means that the compensation provided to the professional is based on a clear understanding of what is expected and how it will be implemented for the best interest of the non-profit organization.

Stephen G. Donshik, D.S.W., is a lecturer at Hebrew University’s International Leadership and Philanthropy Program and has a consulting firm focused on strengthening non-profit organizations and their leadership for tomorrow. Stephen is a regular contributor to eJewish Philanthropy.