Commission Based Salaries

Dear Kim:

I’m involved with a youth sports association and we’re hiring a new Executive Director, who will also be our only employee.  We need to raise funds in order to operate.  In the past we had an outside person who we paid to fundraise.  As it turned out that person was ineffective and most of the funds were raised by dedicated volunteers.  Is it wise to give the new Executive Director a base salary and a percent commission on funds raised?

~Making Ends Meet

Dear Meet:

In a short letter you have managed to say a lot, and I particularly want to focus on the phrase, “most of the funds were raised by dedicated volunteers.” This is what you want, and means that your organization knows how to build a fundraising team and how to mobilize people to raise money. The best fundraising program has two things going for it:

  1. The organization raises money from a variety of sources — lots of individual donors who give what they can through special events, mail appeals, your website, etc, plus other strategies such as the United Way or products for sale, or fees for service or grants from foundations, service clubs, houses of worship, corporations, plus in-kind donations, planned gifts and so on.
  2. The organization has as many people as it can manage helping raise this money from this wide variety of sources. This group of people ideally is led by the Board of Directors, but also may include any number of committees or friends of the organization, all working hard in their own ways to build the various income streams.

The role of staff is to help coordinate these efforts, provide some technical expertise such as proposal writing, keep up the database, make sure donors are thanked properly, make sure reports are written and records kept. In addition, this person will probably participate in some solicitations, and may write appeals or publish the newsletter. But with only one staff , that person’s main job is to delegate and organize the volunteer workers.

So, to answer your question, that person should not be paid on commission because that person is not making the “sales.” They should be paid a decent salary and some benefits (at least health care), and, if you think they have done an extraordinary job, then give them a small cash present at the end of the year, like a bonus.

There are many reasons why paying on commission is not a good idea, and I have enumerated them in an article called “Why Good Fundraisers are Never Paid on Commission” (available as a free download here: ).

Mainly, evaluation of their work should depend on how many people they were able to involve in making the fundraising program work, not how much money they were able to raise. Your organization may need to attract a lot of new donors, and those people may give small gifts to start out. If your staff is paid on commission, they will not want to bother with small gifts. Anyone paid on commission is tempted to exaggerate the achievements of the organization in order to get the money, and certainly will not want anyone else visiting the major donors. You can see that commission based fundraising is generally counter-productive. You have already had a bad experience using an outside fundraiser, so don’t repeat that. Look for someone who cares a great deal about your program, and is willing to work, at least at first, for a smaller salary and with some lack of security. As the whole organization raises more money, make bringing the salary to a fair amount and putting some money aside as a top priority. You will have a staff person who loves your program and a group of dedicated volunteers who keep it going.

~Kim Klein