"Why not work on a percentage, bonus or commission for funds raised?" I am often asked. To increasing numbers, that seems to be the new "wave" of things. They suggest that maybe the old practice of working for a salary–one that should be fair and reasonable–is not working anymore. "Times have changed!" they say.
I, however, am never able to agree. When it comes to non-profits, I have long and unyieldingly stood against any form of contingent pay–compensating an organization's development staff based on a percentage of funds raised, a bonus, or a commission.
Such arrangements, or any variations, are denounced by major associations representing professional development officers. They go so far as to state, emphatically, that contingent-pay is unethical.
Most development professionals think it's a bad idea. I would go further than citing high standards and strong ethics as good reasons to have nothing to do with the contingent pay. Very real harm is possible for both individuals and organizations involved in a contingent-pay arrangement. An article I have written on the subject lists a number of very real and damaging consequences.
Several years ago, I found my hard stance against contingent pay bolstered by a personal experience. I had been engaged by a major organization as a fund-raising consultant. During my several months serving the organization, I conceived, developed and produced fund-raising plans where there had been none. Annual, endowment, capital, sponsorship, and underwriting campaigns were all fully developed and were being phased into the duties of the organization's first director of development–a person I had helped recruit and hire.
As I was nearing the end of my consulting relationship, that first-ever director of development was hired for a set annual salary. Soon, the director of development was up and running very well, and I concluded my consulting engagement.
But a check-in phone call some months later to see how that individual was doing made it clear that nearly all of the several key development initiatives I had set out for the organization had seen little progress. Only the annual fund was moving forward at a good clip.
There were no ongoing donor cultivation activities. Recruitment of a volunteer fund-raising team had been abandoned. Nothing had been put in place to assure opportunities for long term funding. What was clear was that the director of development was focused only on meeting the annual-fund goal. Why, what had happened after I walked out the door?
The answer was simple. At some point after I had concluded my involvement, the director of development was incented with the offer of a bonus of $5,000 for meeting the annual-fund goal by the end of the campaign/fiscal year.
Just about all of the warnings against using contingent pay that I cite in my article were at work in this case. Most notably, efforts were being forced toward raising money for the current year at the expense of the future.
Little or no effort was going into thinking or planning for tomorrow. Management, with the offer of a $5,000 bonus, had succeeded in focusing the director of development on an important goal, but at the cost of developing strong and coherent fund-raising operation with multiple streams of contributed income.
This is just one example of the wrong that can befall an organization, or an individual, as a result of contingent pay, but multiply it by all the possibilities and I cannot imagine for the life of me why any organization would want to go that route.
Great article. I'm new to fundraising and this is sound advice.
Tony, I’m requesting your advice? After seven years I’m getting back into the fundraising game and would like to talk to you about transferable skills from being a grant writer, doing customer service, fund raising, some event planning, volunteer work to a Regional Director of Development? I really want this position as it is a dream job, I love event planning and have always been a fundraiser from primarily Foundations and corporate funds. I read your article about some nonprofits just not being right for some Directors of Development. Well that’s how it’s been for me my entire career, small organizations, or boards that would not help raise money and as a grant writer that’s how I became a fundraiser. My interview is next week with a well known organization. Your advice and wonderful articles helped me through many tough situations in the last 15 years, so Thank You very much! Chanel Van Zile