Can’t We Just End the Hypocrisy?
If you’re a charity that does or wants to do cause-related marketing or sponsorship, how do you pay your cause marketers?
For those of you on the corporate side or in agencies, this probably sounds like an easy question. You pay them a base salary plus a percentage-based commission based on how much they raise. No different than paying your top salesperson. It rewards performance and punishes mediocrity. Great cause-marketers should make more money, right?
In fact, for nonprofits it’s fraught with worries, concerns, and ethical dilemmas.
Notice I didn’t say commission-based pay is illegal. So far as I know paying nonprofit fundraisers a commission is not illegal. But you can’t be a member of the prestigious Association of Fundraising Professionals (AFP) if you accept commission-based compensation. And good luck finding a grantwriter who will work on a commission basis.
Here’s why commission-based compensation is frowned upon. In the United States, some donors flat out won’t give you money to pay for overhead like salaries. A number of grant-making foundations won’t allow their money to be used for commission type pay. That's because, the argument goes, personal inurement in a nonprofit setting should always be secondary to furthering the nonprofit's mission. Donor trust can be damaged if fundraiser were commission-based or self-dealing could result.
There's no denying that commission-based pay feels unseemly in a nonprofit setting. It generates images of sales sharks in boiler rooms, ala the 2010 movie Wall Street Money Never Sleeps, with Michael Douglas and Shia LeBeouf.
What can you do to reward especially-effective employees? Well you can give them bonuses and perks. So far as I know the AFP has no problem with paying higher bonuses to the fundraiser who raises more than her peers.
Let me give you an example. I worked at a marketing-driven nonprofit that had a bonus structure for employees who worked in sales-type positions. Meet agreed-upon fundraising goals and you received a bonus.
A colleague did a sponsorship deal worth $1 million a year over three years that was well above and beyond his established fundraising goals. The nonprofit we worked for wouldn’t pay a commission. Instead my colleague and the nonprofit negotiated a bonus that was paid out over the life of the sponsorship. Strictly speaking, there were no percentages involved and so it wasn’t a commission. But for those three years he was one of the highest-paid staffers there.
Moreover, both parties knew that if and when he did more such large-scale deals, he would get another “above and beyond” bonus. It wasn’t a commission, it was a bonus. But with or without the percentage it was a distinction without a difference.
That’s my argument with the anti-commission folks. Top performers end up with compensation schemes that do what commissions do.
There are ways to do this without turning into the nonprofit world into Glengarry Glen Ross. And let's not forget that fraud is illegal, inside or outside of nonprofits. Ethical rules by nonprofit fundraising associations against commission-based schemes are hardly the last bulwark against fraud.
So why continue the hypocrisy?
Labels: Association of Fundraising Professionals, Commission-based pay, Michael Douglas, Shia LeBeouf