Can a Nonprofit Give a Commission?
On the face of it, paying a commission to those in charge of fundraising for your nonprofit might appear an obvious solution to a fundraising dilemma. It insulates the nonprofit against some payroll liability and provides the purest incentive for the employee. Unfortunately, this practice is not as straightforward as it may appear. Though not illegal, the practice is frowned upon by the larger nonprofit community and may hurt the fundraising process in a significant way. Moreover, it is banned by the the national trade organization, the Association of Fundraising Professionals.
The board of trustees of a nonprofit should be one of the dominant methods of securing large donations and endowments. Similarly, as part of their regular duties, members of a board of directors should focus on funding the operations they approve. Beyond these first lines of major fundraising, generating financial support might also fall under the responsibilities of staff members. Introducing commission-based compensation for staff members who fundraise -- many of whom are already stretched thin operationally -- might cause them to focus too much on increasing their income and not enough on other, mission-driven aspects of their duties.
Most professional fundraisers expect fees for their services rather than commissions. Nonprofits with limited resources may be tempted to negotiate a commission-based compensation package as a way of ensuring they get their money's worth from the arrangement. The problem with this, according to fundraising experts such as Tony Poderis of Raise-funds.com and Marc A.Pitman of the fundraising coach, is that paying a commission may subordinate the charitable mission to the economic incentives. Nonprofits do not sell goods and services; they perform a socially relevant function. By incentivizing fundraising, a nonprofit's efforts to raise funds may take on an air of self-interest.
Scrupulous professionals are unlikely to accept percentage based compensation as it conflicts with the standard of professional ethics. The Association of Fundraising Professionals is explicit in its position on commissions. In its Code of Ethical Principles and Standards, the national trade organization bans members from accepting percentage-based fees or flat out commissions. Their concern is to protect the integrity of the profession and to make it harder for the less ethical to succeed. While there may be some professionals who offer this kind of deal, just as in other aspects of business, nonprofits should be suspicious of a something for nothing proposition.
While fundraising commissions are an ill-advised method of compensation, there is no reason an annual review might not take an employee's ability to generate enthusiasm for a cause into account. Built into each year's budget should be the possibility of a bonus or salary increase based on performance. By creating this incentive, a board or an executive gains the ability to reward good all-around performance.
The Fundraising Coach: Should We Hire a Fundraiser and Pay Him a Percentage Raised?