A position paper on

1. Version 1
November 15, 2011
Charity in the 21st Century
For over than 50 years, our company has been the main source of funding research for the
XYZdisease. We have been committed to spend $10 million per year since 2005 in order to cover the
Worldwide Tracking Project. Based on this commitment, a team of three renowned scientists have been
hired to work on this project. Recently, we have witnessed a significant decline in donations due to the
global financial crisis and the remarkable increase in charity organizations competing for donors’ money.
As a result, we have found ourselves unable to raise the necessary funds for this year. For that reason, we
must change our strategy for fundraising, otherwise we will not be able to honour our commitment which
could jeopardize the research program("Does commission based,")
We acknowledge the legitimate concerns with regard to the high cost of fundraisingfirms.
Nonetheless, we want to assure the community that we have done the necessary due diligence to ensure
that this cost is justified. We have considered all options and concluded that this is essential, if we are to
achieve our $10 million target for this year.It is important to realize that the cost increase is inevitable
whether we keep the fundraising function in-house or use an external firm. At this stage, we need to set
the right expectationsand ask ourselves the following question: is it still realistic to expect that 80 per cent
or more of the money donated will go to charity?
Concerns With Regard to Using a Fundraising Firm
Some seefundraising firms as commercial entities aiming at making profit regardless of the
humanitarian cause they are associated with. This may be true in many cases. The same concept is applied
when we hire a professional accountant or go to a physician. Indeed, we will always have to pay for
professional work,unless we entirely rely on volunteers( S h a r p e , 2 0 0 9 ) . We need to accept the fact
thatfundraising firms offer professional services and should be compensated for that.
Some argue that people will always donate for causes they believe in, regardless of fundraising
efforts. Thus, they question the need for the high cost involved in the process. They expect their money
to go to charity, not to fundraisers( S e g u i n , 2 0 0 9 ) . For them, 65 per cent cost of fundraising is
simply unacceptable.
It is correct that people will always donate, but not necessarily for your cause. While big
disasters such as earthquakes enjoy free wide media coverage that raise people’s awareness to almost
100 per cent, causes such as medical research for a rare disease do not have the same advantage. In such
cases, they require a lot of spending to raise awareness to just 10 per cent. Moreover, the management
process of collecting the donations, keeping records, and administration add up to the cost.
There is also a concern about the high salaries of CEOs that can reach $500,000 per
year( " C h i l d r e n c h a r i t i e s : S a l a r i e s , " ) . When we look at this issue we have to know that top-
tier calibers deliver big results. To elaborate on this point, we need to ask these questions: should we
pay a CEO $50,000 and raise $500,000? Or is it better to pay a CEO $300,000 and raise three million
dollars? Of course the latter is better.
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We also need to know that the salaries CEOs receive when they work for not-for-profit
organizationsare significantly lowerthan the ones theyget at the for-profit side. For example, the typical
salary ofa CEO at a multinational company is usually in the range ofthree to four million dollars per
year ( C o v i e l l o , 2 0 0 8 ) .
The Advantages of Using a Fundraising Firm
As mentioned earlier, the increased competition in the charity field made those without a capability to
run sophisticated campaigns left out and neglected( " C h a r i t i e s p a i d $ 7 6 2 m , " 2 0 1 0 ) . Equally
important, when a charity launches a large campaign it puts high pressure on other charities to do the
same, otherwise they will see their donations fall. This has drastically increased the cost of operations,
especially in communication, due to the fragmentation of media. Now it costs more to reach our target
audience as it requires the use of multiple media vehicles.
Moreover, we have to realize that using a specialized fundraising firm would enable us to reach
new segments of donors, raise awareness, change perceptions and attitudes, and establish new beneficial
relationships and partnerships( " C h a r i t i e s p a i d $ 7 6 2 m , " 2 0 1 0 ) . In this context, the cost
incurred should be consideredas an investment that will pay off in the future by lowering fundraising
costs and increasing donations.
In addition, using the external firm wouldsave us the cost of hiring more specialized staff such as
social media strategists and seasoned marketers. It also gives us the flexibility to change our strategy,
when needed, in a very timely fashion by drawing on the external firm’s vast pool of resources. This
flexibility would enable us to hold our strong position against competition.
Furthermore, using the external firm wouldgive us access to international markets. This new
strategy isexpected to increase the donations by at least 200 per cent. Apparently, this factor alone could
be enough to justify our decision to use the firm.
Finally, we have to admit that the rules of the game have changed and that we have to adapt and
be practical, as long as we are not compromising on ethics. We have to be result-oriented. If we need to
raise $10 million and are unable to do that using our in-house function, but can do it by using an outside
firm, then this would be the best option we have.
Corporate Governance
At this stage, our focus should be on the transparency of the fundraising process rather than its
cost. We need to know where every dollar is spent. We have to understand the cost-benefit analysis
behind every decision to spend money in a certain area. One would not expect items such as first class air
tickets and staff retreats at luxury spas to appear on the budget. However, we should expect to see items
such as social media strategy and implementation, fundraising events, and advertising to appear on it. To
make sure that our costs are reasonable, we would consider the current industry standards and benchmark
against other not-for-profit organizations. We would alsouse best practices in all aspects of the
management process including the main functions of general management, accounting, human resources,
marketing, and operations.
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Moreover, we will always ensure transparency by elaborating on the scope of work of each
project managed by the external firm. For that matter, this year’s project would include the
following( K l i e n , 1 9 9 8 ) :
Conduct formative research to gain more understanding of the stakeholders.
Develop strategy and objectives for the organization.
Propose changes in the organizational structure to improve the effectiveness and efficiency of
fundraising activities.
Hire and train staff and volunteers.
Project management and the execution of action plans.
Conclusion
To conclude, the not-for-profit organizations are witnessing a transformation of the way they
operate. It is their responsibility to inform the society about this new way of doing business and deal with
the misconceptions. It is necessary to educate the public about the notion that a 100 per cent can go to
charity is unrealistic and ineffective, thus it has to be discarded. All stakeholders must realize that the
high fundraising costs are necessary to deliver results. We haveto promote the effective operation of not-
for-profit organization and strengthen public trust in them( D r a p e r , 2 0 0 3 ) .
In addition, it might be a good idea to start using a different way of describing fundraising costs
that reflect their true nature. At the moment, using the terms “indirect cost”, “overhead”, and
“administrative expenses” do not express the link between expenses and the quality and quantity of what
the organization delivers. In contrast, we should use the terms “infrastructure expenses”, “core agency
support”, and “organizational investment” to show this relationship (Draper, 2003).
Moving forward, we need tothrow light on the critical role of fundraising costs involved in
charity. We also need toensure full transparency with this regard by explaining the rationale behind each
cost item( " S t a t e m e n t f r o m i m a g i n e , ” ) . All of our communication should reflect this new
approach by clearly stating the percentage allocated for costs for each project. Consequently, we will
eliminate any suspicion surrounding the issue and maintain people’s trust.
References
Charities paid $762m to private fundraisers . (2010, September 22). Retrieved
from http://www.cbc.ca/news/canada/story/2010/09/21/con -charities-
fundraisers.html
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Children charities: Salaries of the executives . (n.d.). Retrieved from
http://www.squidoo.com/child -organizations
Coviello, C. (2008, April 30). Historic CEO compensation. Retrieved from
http://www.forbes.com/2008/04/30/ceo -pay-historic-lead-bestbosses08-
cx_sd_0430flash.html
Does commission based fundraising pose an ethical dilemma ? (n.d.). Retrieved
from http://www.the -cma.org/?WCE=C=47|K=225383
Draper, L. (2003, February). 100% goes to charity? . Retrieved from
http://www.foundationnews.org/CME/article.cfm?ID=2339
Klien, K. (1998, January). Hiring a consultant . Retrieved from
http://www.nhi.org/online/issues/97/fundraising.html
Seguin, R. (2009, April 22). Environmentalism-fundraising is a mega -big
money business industry . Retrieved from
http://canadafreepress.com/index.php/print -friendly/10485
Sharpe, A. (2009, November 23). Don't watch fundraising costs, but cost -
effectiveness. Retrieved from
http://www.charityvillage.com/ cv/research/rfrm33.html
Statement from imagine Canada: CBC news coverage on charity fundraising is
misleading. (n.d.). Retrieved from
http://www.imaginecanada.ca/files/www/en/misc/statement_regarding_cbc_1
0232010.pdf
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