Monday, July 16

Canadian newspaper targets charities for alleged "commission" based fundraising

Almost seven months after The Toronto Star took credit for shutting down MADD Canada's fundraising program, the "investigative" newspaper is claiming responsibility for the fact that Sick Kids Foundation and World Vision Canada "have admitted to using a discredited fundraising technique and are moving swiftly to clean up their act."

Both charities have long told the public and the federal regulator that only flat fees were paid to fundraisers who knocked on doors. The Star investigated and found commissions or "success payments" have been paid for years.

Sick Kids and World Vision now say they were duped by a fundraising company that promised it would never pay commissions.
The reporter uses the term "commission" as a rhetorical device to outrage donors. The truth is - there is a difference between a flat fee and a percentage commission. In this case, we're talking about $180 per new monthly donor.

Both charities were using a large, British-based international company called Fundraising Initiatives Inc., which has a client list (past and present) of about 50 Canadian charities. It's not known how many are also paying commissions.

Top executives at Sick Kids and World Vision are blaming FII, saying the contract signed with the fundraiser states that doorknockers are only to be paid either a flat fee for each "presentation" at a home (in Sick Kids' case), or either hourly wages or per presentation (World Vision).

The Star found out that after FII signs its contract with a charity, it then hires subcontractors to knock on doors and pays them only for a successful donor sign-up. A source with intimate knowledge of the FII-subcontractor set-up confirmed this.

If either charity is breaking even on its fundraising costs within 12 months - they are doing better than most. Show me a direct marketing donor acquisition program that is breaking even in less than 12 months (let alone sooner) and I'll show you a fundraiser that deserves a raise.

In fact, I believe the fundraisers at both Sick Kids Foundation and World Vision Canada would be extremely smart to negotiate a contract that fixes a set acquisition cost. Many fundraisers struggle with unpredictable direct mail, special events, or corporate partnership deals. A set commission per donor is a hedge against the risk

Now, I understand that both of these charities say that they agree with Imagine Canada's ethical fundraising code and that AFP also has a similar ban.

Sick Kids has signed Imagine Canada's ethical fundraising code, which bans commission fundraising. World Vision agrees with Imagine Canada's anti-commission fundraising stand but has not yet signed the code. The Association of Fundraising Professionals also has a code against commission fundraising. Sick Kids and World Vision agree with this code, and FII is a member of the fundraising association.
However, I don't think it's splitting hairs to say that if the intent is to protect donors, then I would rather support a group that has managed to contain its fundraising acquisition risk, rather than give to a group that may avoid "commissions," but pays twice as much to acquire a new donor. What do you think?


Steve Bergson said...

However, I don't think it's splitting hairs to say that if the intent is to protect donors, then I would rather support a group that has managed to contain its fundraising acquisition risk, rather than give to a group that may avoid "commissions," but pays twice as much to acquire a new donor. What do you think?

What I think is that even large charities need to try to maximize the number of volunteer cancassers and minimize the number of paid canvassers, whether those paid canvassers are being paid a flat rate or commission.

Administrative & fundraising costs should be kept as low as possible, so that the charities will benefit as much as possible from the donors' generosity.

2 examples :

“The Terry Fox Foundation is the second largest non-governmental funder of cancer research in Canada…87.2 cents of every dollar donated to the Terry Fox Foundation goes directly to cancer research...10 cents go to fundraising costs, and 2.8 cents cover administrative costs, salaries for the 24 foundation employees across Canada.”

an article, which was published in the Toronto Star newspaper. There was specific reference to our association, which stated, “The War Amps, which provides financial and other help to child and adult amputees, devotes 93 cents on the dollar to charitable works.”

Anonymous said...

It seems awfully inconsistent to be incensed about paying door-to-door fundraisers - who are selling a service or vision - commission when door-to-door magazine salespeople are paid commissions.

At the low end of the fundraising food chain, these shock troops help find donors who eventually become major contributors to various organizations.

I have always thought it hypocritical, given the relatively high pay of chief development officers at many nonprofits, for various fundraising professional organizations to label commission, bonus or other incentive payments "unethical."

Incentive is a critical part of the human psyche and has been shown to be over and over again by various scientific studies. Otherwise low-paid fundraisers should receive incentive, it's ethical, it's logical and the result will be more funds raised to fulfill the worthy goals of the organizations who employ them.

Sam in Annapolis

Barry Rueger said...

Although I have never worked on commission, and strongly discourage it, I've always felt that it's a bit much for so many groups to feign indignation at its use.

From the low end of the non-profit pool it often looks as if it's large successful groups that can maintain a fulltime fundraising staff, or hire top notch contractors, that proclaim their moral superiority.

There are small organizations doing equally important work for whom a commission situation looks mighty appealing. When you have only one staff person, or less, the guy that walks in and promises to carry the risk on your behalf looks more like Saviour than a charlatan.

And really, if your staff fund raiser increases your donor revenues by 30 or 40%, there will be an expectation that their salary will also increase. Is that really so different from a commission?

I guess that this feels like a class issue, with those who can afford not to hire on commission looking down their noses at those who can afford no other option.

I don't like commission sales in any setting. I think it brings more problems than it solves.

If we're to ban the use of commission in fund raising let's do so because of solid business considerations, not because of some sketchy notion of fund raising morality.

a fundraiser said...

There is a HUGE difference between presenting an organization's overall fundraising costs (which includes major donors and big grants and as much likley been "allocated") and looking at a specific new donor acqusition program.

There is no way the Terry Fox Foundation spends 10 cents on the dollar when it is bringing in NEW donors.

Anonymous said...

The primary arguments against using commission or performance incentives for door-to-door or other entry level fundraising positions are these:

a) a person working on commission is more likely to push donors into making donations they may later regret. This can damage a charity's reputation.

b) where monthly donations are concerned, the main issue is how long the donors keep giving. Given that the canvassers work remotely, this can result in fuzzy or even fraudulent explanations of how monthly giving works in order to get the donation.

Paying $180 to find a donor who gives an average of $300 over their lifetime is not a better deal than spending $220 to find a donor who gives $900.

The argument that this allows the "shock troops" at "the low end of the fundraising food chain" to earn a better living is largely misplaced. Oh, and a bit disrespectful.

In practice, this generally means that people who fail to do well early in their job simply aren't' paid or are paid obscenely small amounts for their efforts.

That is, the risk taken by charities in finding new donors in other media are passed down to the people who can least afford to absorb that risk.

Most non-fundraisers feel that paying a cut to the fundraiser is the best way to go. When one explores the issues in an operational setting however, it becomes evident that the main party that benefits from this scheme is the vendor who passes on the risk of response to the canvasser and the risk of retention to the charity, while guaranteeing their profit margin.