This is our soapbox

This is our soapbox on philanthropy, fundraising, the charitable sector, and the world. For more information, visit GoalBusters.net or call 888.883.2690.

Friday, December 9, 2011

Commission Does Not Pay: Compensation for Development Professionals

Why is compensation always such a hot button issue in the nonprofit world? On a regular basis, I hear questions (and complaints) about the following:

  • How are we supposed to pay for a fundraiser when we need someone to raise the money to pay for the fundraiser?
  • Can't you just take a percentage of the grant amount when it comes in?
  • Shouldn't you raise the money to pay for yourself?
Dutifully, I point to the Association of Fundraising Professionals (AFP) Code of Ethics and Standards of Professional Practice, to which all AFP members must agree to abide. Standard number 21 states:

Members shall not accept compensation or enter into a contract that is based on a percentage of contributions; nor shall members accept finder’s fees or contingent fees.

There is a white paper on why percentage based compensation is a bad idea for nonprofits, which boils down to two things:
  • Percentage based compensation puts the fundraiser's interests ahead of the organization's, and
  • Percentage based compensation, due to the length of time it may take for a gift to come to fruition, may produce reward without merit. 

I agree with these positions and do my best to comply with the Code of Ethics. I don't fundraise on commission. I don't write grant proposals for a percentage of the grant amount.

In the past, I have accepted bonuses and have done sales work on commission. And over time, I've come up with new reasons to add to why fundraisers should not be paid on commission.

Because working on commission stinks.



I understand why companies, whether for-profit businesses or nonprofit organizations, want to pay on commission. You are paying for performance--you don't have to expend resources until you have them, and the person receiving the commission has control over what they can earn. In theory.

Here's why commissions don't work:

  • Short term effectiveness. Yes, if you're really successful as a commission-based professional, you can make a lot of money. But how sustainable is that performance? Can you hit that every year? Goals are inevitably set higher and higher each year, and as it becomes more and more difficult to reach goals, your income drops. Not motivating!
  • Quick turnaround focus. Higher dollar deals take time to close. You need cultivation, or "get to know you" time, and frequently the decision involves multiple layers of decision makers. If you're working on the higher dollar deal, you can feel like you're being penalized since you're not being compensated as you work on the relationship development. Or, you can be pushed cut corners to close the gift faster.
  • No motivation to work as a team. So who gets the money if you work together on an ask? Is it somehow split? Who gets credit for this? Am I working harder than the other person or people on the team? You become focused on yourself and what others are NOT doing rather than being focused on the right thing for your organization.
  • Little feeling of control. Even though commission-based compensation is supposed to reward highly productive salespeople, there are many things out of your control. Fewer available prospects, smaller deals, reduction in options to offer, change in opinion about your company, etc. all will impact the professional's effectiveness. What you did last year to earn your commission may not work again this year.
  • In a bad year, commission-based compensation can make things worse. Failure is generally not motivating. If you're not successful, then you're not being paid. And if you're not being paid, it's hard to get yourself excited about trying again. Your daily existence becomes more about desperation than motivation.
  • It's a game of numbers. Commission-based professionals, to make a decent wage, need to make as many calls as possible, and the majority of them need to be calls to close. Very few people will have the discipline or the financial cushion to have one big success and then spend months or even years cultivating another. This encourages quick asks that might not be renewable, or lower dollar deals that can close quickly.
  • Lack of genuine appreciation. "Well, you're being paid for your performance, so why do I need to thank you?" As a manager, if you're writing a check when someone closes a deal, you think that's the appreciation. As the person receiving the commission, that's compensation for work done, not appreciation. This gap can lead to resentment and distrust.

Let's face it. Effective fundraising takes time, and it takes money. As much as it is an upfront investment to pay someone a living wage to work in fundraising, in the long run, it should be an investment worth making for your organization to develop long term relationships with your donors and a sustainable source of income for your mission.

Reference materials: 
Association of Fundraising Professionals Position Paper on Professional Compensation (PDF file)
Association of Fundraising Professionals Ethics page


No comments:

Post a Comment

Labels

Alice Ferris (99) Jim Anderson (72) AFP (41) ACFRE (39) goalbusters (33) GoalBusters Consulting (31) CFRE (30) fundraising (30) Training (23) nonprofit (23) 100 days of gratitude (21) Association of Fundraising Professionals (18) Presentations (18) 100 days (17) 2009 (15) 2014 (15) AFP Conference (15) gratitude (15) AFPNAZ (14) Social Media (14) 2010 (13) 2013 (13) philanthropy (13) 2012 (11) Workshop (11) travel (11) 2011 (10) Flagstaff (9) How To (9) KAWC (8) Volunteer (8) arizona (8) thank you (8) 2008 (7) Facebook (7) Marketing (7) YouTube (7) 2017 (6) FAQ (6) Food (6) Public Radio (6) Storytelling (6) Tips (6) Video (6) LinkedIn (5) Lowell Observatory (5) Making the Ask (5) NFCB (5) Planning (5) Social Networking (5) Webinar (5) restaurants (5) rural fundraising (5) 2016 (4) Air Travel (4) Chinese New Year (4) Christmas (4) Donor (4) Hopi (4) KGHR (4) KUYI (4) Major Gifts (4) Native American (4) PBS (4) Planned Giving (4) Pledge Drive (4) Public Broadcasting (4) Public Television (4) SlideShare (4) Special Events (4) Stevenson (4) Video Production (4) board development (4) ethics (4) stewardship (4) 2015 (3) Arizona PBS (3) Brand (3) Canada (3) Capital Campaign (3) Chinese (3) Community (3) Development Staff (3) Donor Acquisition (3) Economy (3) Elf (3) Elves (3) Goals (3) HEEF (3) Haiku Deck (3) Health Care (3) Holiday (3) Jimisms (3) KAWC Colorado River Public Media (3) Manifesto (3) Mission (3) North Country HealthCare (3) Passion (3) Photography (3) Promotion (3) Research (3) Small Shops (3) Wisconsin (3) Year-End Giving (3) customer service (3) diversity (3) phoenix (3) prescott (3) resolutions (3) yuma (3) 2007 (2) 2020 (2) AFP TechKnow (2) Accreditation (2) Advancing Philanthropy (2) Alice's Restaurants (2) Baltimore (2) Books (2) Business Strategy (2) CFRE International (2) Chronicle of Philanthropy (2) Coaches (2) Commentary (2) Communication (2) Conference (2) Congress (2) Dancing (2) Dr. John H. Caskey III (2) Elta Foster (2) Foodspotting (2) Fundraising Campaign (2) Funny (2) Guiding Principles (2) Honor (2) Hopi Education Endowment Fund (2) House of Philanthropy (2) Humor (2) Immigrant (2) Jib Jab (2) KAET (2) NAU (2) Navajo (2) New Orleans (2) Partners (2) Plan (2) Press Release (2) Profile (2) Prospecting (2) Relationships (2) Respect (2) Resume (2) Reviews (2) Sanders (2) Schultz Fire (2) Singing (2) Strategic Planning (2) TechKnow (2) Toronto (2) Trust (2) Twitter (2) VIP (2) Values (2) Velvet Rope (2) Visionary (2) Vora Finacial (2) accountability (2) anniversary (2) appreciation (2) award (2) career satisfaction (2) change (2) checklist (2) code of ethics (2) crisis (2) crisis communication (2) cultivation (2) culture of philanthropy (2) development (2) development cycle (2) diverse communities (2) education (2) goal setting (2) habits (2) introspection (2) jobs (2) lapsed donors (2) las vegas (2) lessons (2) new year (2) personal (2) san diego (2) tripit (2) washington DC (2) 2019 (1) 30 day plan (1) 60 minutes (1) AFP Foundation Canada (1) AFP Meeting (1) AFPeeps (1) ALD (1) AWC (1) African American (1) Alexis de Tocqueville (1) Alpha Lambda Delta (1) Andrew Philips (1) Angry (1) Animoto (1) Anna LaBenz (1) Annagreta Jacobson (1) Apps (1) Arizona Daily Sun (1) Arizona University (1) Arizona Western College (1) Ask the Experts (1) Bequests (1) Bill Ferris (1) Blink (1) Bloomerang (1) Boot Camp (1) Boudros (1) Branding (1) Broadway (1) CAN-SPAM (1) CEO (1) CN Tower EdgeWalk (1) COVID (1) COVID-19 (1) CPB (1) Career Change (1) Case (1) Center on Philanthropy (1) Certified Fund Raising Executive (1) Charity Channel (1) Charlatans (1) Cheerleaders (1) Children (1) Chris Adams (1) Church (1) City Council (1) Cleveland (1) Cold Call (1) Colorado (1) Commission (1) Community Service (1) Compensation (1) Cook (1) Corporate Giving (1) Credential (1) Credentialing (1) Dan Coughlin (1) Data (1) Dating Game (1) Dave Tinker (1) Desert (1) Dharmesh Vora (1) Discovery Channel Telescope (1) Domestic Violence Shelter (1) Donald Sutherland (1) Donation (1) Douglas Adams (1) Downton Abbey (1) Dr. Carl Myers (1) Dr. William J. Rugg (1) EAA (1) Ed Renzi (1) Efficiency (1) Elevator Speech (1) Entrepreneur Magazine (1) Extraordinary Donor Journey (1) FM (1) FTC (1) Family (1) Fan Pages (1) Farm (1) Fast Food Nation (1) Feasibility Study (1) Feedback (1) Fight Club (1) Flagstaff Community Partnership (1) Flagstaff Shelter Services (1) Flood (1) Flowers (1) Food Bank (1) Foundations (1) Founders Medallion (1) Frances McAllister (1) Free (1) Fundraising Effectiveness Project (1) Gallup Q12 (1) Ginny Z. Berson (1) Girl Scouts (1) Giving USA (1) Global Philanthropic (1) Goldilocks Proposals (1) Granite Mountain Hotshots (1) Grant Writing (1) Grants (1) Grants Step by Step (1) Halifax (1) Hash House A Go Go (1) Hawaii (1) Healthcare (1) Hey Eleanor (1) Hiring (1) Hispanic (1) Homeless (1) Hopi Foundation (1) Hospital (1) Houston (1) IAIA (1) ICON (1) Identity (1) Ignorant (1) Immigration (1) In Kind (1) Indiana University (1) JC Patrick (1) JLB Project (1) January (1) Jetpack America (1) Jim Collins (1) Jimmy LaRose (1) KUAT (1) Kaleidoscope (1) Karla Williams (1) Ken Lain (1) KonMari (1) Kristin Taliaferro (1) KristinCoach (1) Latino (1) Lawrence Welk (1) Le Pavillon (1) Legacy (1) Living Social (1) Lodging (1) Los Angeles (1) Lotus of Siam (1) MIP (1) Mabel's on Main (1) Madison (1) Makeover Series (1) Malcolm Brett (1) Malcolm Gladwell (1) Margo Hudson (1) Marshall Rosenberg (1) Mary W. Black (1) Maslow's Hierarchy of Needs (1) McDonalds (1) Meeting Facilitation (1) Methodist (1) Mexican (1) Michael Nilsen (1) Middle East (1) Mike Geiger (1) Montessori in the Park (1) Mr Rogers (1) MySpace (1) NAFB (1) NANOE (1) NPR (1) NSU (1) NaNope (1) Nan Bain (1) Nepal (1) New York (1) News (1) Nietzche (1) Nonviolent Communication (1) Northern Arizona University (1) Organizational Readiness (1) Orlando (1) Oshkosh (1) Ottawa (1) PMDMC (1) PRPD (1) Pacifica (1) Pandemic (1) Parade (1) Partners in Recognition (1) Paul Helford (1) Philanthropist (1) Pittsburgh (1) Plenary Speaker (1) Politics (1) Porgy and Bess (1) Prezi (1) Proposal (1) Publications (1) Quentin Lee (1) Questions (1) Racial Profiling (1) Raku (1) Review (1) Rick Swanson (1) River City Grill (1) Riverwalk (1) Robbe Healey (1) Robert Kiyosaki (1) Ronald McDonald House (1) Rose Marie Ferris (1) SB1070 (1) SEO (1) SWOT (1) San Antonio (1) Saskatoon (1) Scottsdale (1) Service (1) Serving Your Community (1) Shared History (1) Soroptimists (1) Speaker (1) Sponsors (1) Sponsorship (1) Spring (1) Stephen Hawking (1) Stereotypes (1) Strategic Thinking (1) Super Size me (1) Suze Orman (1) Sweets Raku (1) Taco Trucks (1) Target Marketing (1) Team (1) Teamwork (1) Television (1) Teri Sanders (1) Texas (1) Thanksgiving (1) Tim Burcham (1) Timothy Sandoval (1) Toolkit (1) Tough (1) Tough Economy (1) Train (1) Tucson (1) Tweets (1) United President's Club (1) Vernon Kahe (1) WBAI (1) Watters Garden Center (1) Whitney Anderson (1) WikiHow (1) Wills (1) Winnipeg (1) Wisconsin Public Television (1) Women's March on Washington (1) Woodford Reserve (1) Yarnell (1) Yarnell Fire (1) Year in review (1) Year of the Sheep (1) Yellow Pages (1) accidental fundraiser (1) administration (1) adventures (1) assessment (1) astronomy (1) beliefs (1) birthday (1) board of governors (1) board service (1) breaking up (1) brochures (1) budget cuts (1) business practices (1) career (1) career development (1) cats (1) cliques (1) community radio (1) conversations (1) difficult people (1) dinner parties (1) donor focused (1) donor pyramid (1) election 2016 (1) end of relationship (1) essay (1) executive director (1) federal funding (1) firefighters (1) for profit (1) high school (1) hotels (1) ikigai (1) inspiration (1) jetpack (1) job seeking (1) keynote (1) leadership (1) lemons (1) loss (1) mentoring (1) millennials (1) monthly giving (1) motivation (1) multicultural (1) nomination (1) oklahoma city (1) organizational culture (1) outstanding professional (1) peoria (1) personal growth (1) potlucks (1) productivity (1) receptions (1) recognition (1) red flags (1) remembrance (1) sales (1) san francisco (1) scholarships (1) science (1) setbacks (1) star thrower (1) starfish (1) sustaining members (1) tempe (1) thirtysomething (1) three cups of tea (1) to do (1) transformational (1) vlog (1) volunteers (1) wildland fire (1) winslow (1)