NEW IDEAS: The donor is always right, part 2 – does it lead to donor correctness gone mad?

If it’s beneficiaries, rather than donors, who are actually charities’ ‘consumers’, Ian MacQuillin asks if this changes how fundraising ought to be regulated.

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I opened part 1 of this blog by analysing the comments made recently by Lord Grade, the chair of the Fundraising Regulator, that “donors are also consumers”, saying that there were two ways to interpret this comment.

1. Being a donor is also being a consumer (‘consumer’ and ‘donor’ are essentially same thing, or similar parts of a larger whole).
2. Those people who are donors are also consumers (i.e. ‘donor’ and ‘consumer’ are discrete concepts, as in, ‘donors are also citizens’).

The first of these rest on an assumption that what consumers do almost the same as what donors do. But I argued that consumption and ‘donation’ are two entirely separate processes.

• Consumption is a bilateral exchange whereby people acquire from suppliers commodified goods and services for their own use.
• Donation is a trilateral transfer (rather than an exchange) whereby people voluntarily provide resources to nonprofit organisations so they can be turned into commodified goods for use by those organisations’ beneficiaries. This makes beneficiaries nonprofits’ true consumers.

This distinction between ‘consumption’ and ‘donation’ is important for anyone who thinks that ‘donors are also consumers’ in the first interpretation of Lord Grade’s comment, especially to anyone who thinks that fundraising must be regulated in the same way that it would if donors were simply analogous to consumers.

Because this is the regulatory ethos that has been adopted by the Fundraising Regulator and the Fundraising Standards Board before it. Both organisations see/saw themselves as consumer protection bodies. F-Reg has repeatedly said that its role is to represent the voice of the donor, or to ‘speak up for’ donors, and it has stated that the public will be consulted on changes to the fundraising code of practice.

The Fundraising Regulator, whether consciously or not, whether intentionally or not, is adopting the first interpretation of ‘donors are also consumers’, and regulating fundraising as if it were a bilateral transaction in which the donor is akin to the consumer, and thus needs the same level of protection as would a consumer who buys a faulty washing machine.

And this is hardly surprising as the fundraising profession has been complicit in promoting the idea that donors are consumers. The notion of ‘donorcentrism’ is both a best practice doctrine and a theory of fundraising ethics, as Rogare’s white paper on fundraising ethics, launched this week, spells out. But in the way it reifies donors – borrowing the marketing concepts of ‘consumer sovereignty’ and the ‘consumer is king’ – donorcentrism also displays characteristics of an ideology. When professional doctrines have emphasised, to the point of ideology, the overriding importance of donors (at the expense of the beneficiary), no-one can be too shocked that fundraising’s regulators have opted to regulate on the basis of donor primacy. I’ll explore these ideas further in a separate blog.

Do we need a specialist fundraising regulator?

Last month, David Walwin at telephone fundraising agency Ethicall (one of Rogare’s Associate Members) dropped me an email questioning whether we really need a specialist fundraising regulator, seeing as donors’ interests as consumers are already well represented by a host of other regulatory bodies.

The UK never had a fundraising regulator before the launch of the Fundraising Standards Board in 2006, and one had never seriously been considered until the Cabinet Office proposed it in a white paper in 2002. However, once the FRSB started its operations, I rather took it for granted that self-regulation in the form of something like the FRSB is required, not just to enforce and maintain standards and to protect trust, but to also publicly demonstrate the commitment to do so. (Though we must acknowledge that the Fundraising Regulator is not self-regulation – it is an independent regulator of fundraising. Self-regulation of fundraising in the UK no longer exists now that the fundraising profession neither sets nor enforces its own standards – a situation that is also a hammer blow to fundraising’s pretentions to professionhood.)

But Rogare is all about challenging assumptions, so thank you David for forcing me to question mine.

If the first interpretation of Lord Grade’s comment is right, and donors are nothing more than consumers, then David Walwin is also right – a specialist fundraising regulator simply isn’t needed any more than we need a specialist regulator for PPI sales or companies marketing sports equipment. If donors are nothing more than consumers, F-Reg’s role is totally redundant, as is any fundraising regulator in any country that has effective consumer protection regulation.

I do however think that a specialist fundraising regulator is needed, precisely because donors are not consumers. But that means they ought not be regulated as if they are.

A regulator of the donation process, rather than fundraising

What is needed is a regulator that can and will regulate the process of donation (a transfer between donors and beneficiaries via charities) rather than the process of consumption (donors acquiring, using and disposing of commodified goods – something donors mostly don’t do, and when they do, are covered by existing consumer protection regulation).

To do this, any regulator must abandon the idea that they are a ‘consumer protection’ organisation whose role is to ‘speak for donors’, because the actual consumers are a charity’s beneficiaries.

Fundraisers owe duties to both these groups – their donors and beneficiaries (‘consumers’).

• Their duty to beneficiaries is to ensure a charity has sufficient income to provide the services and products beneficiaries rely on (acquire, use and dispose of).
• Their main duty to donors (and non-donors) is not to subject them to undue pressure to donate (which is currently enshrined in the code of practice – s1.2f; other duties include being honest, etc).

Because beneficiaries and donors have competing interests in the donation transfer process, this can create tensions in how fundraisers try to execute their duties to both their stakeholder groups.

Rogare’s new ethical theory of fundraising presented in our new white paper launched this week – which we call Rights Balancing Fundraising Ethics – aims to describe these duties and outline how any ethical conflict could be resolved by balancing those competing interests to ensure the best overall outcome for both donors and beneficiaries, and ensuring that any resolution doesn’t significantly disadvantage one group vis-à-vis the other.

So not only do fundraisers owe duties to both their donors and their beneficiaries, any organisation set up to regulate the process of donation also owes (or ought to owe) duties to donors and beneficiaries.

But an organisation operating with a consumer protection ethos regulates only half the donation process (the part involving donors and fundraisers), because the other half of the process (involving fundraisers and beneficiaries) is invisible to it. As a result, a consumer protection-based regulator perceives only responsibilities and duties to donors, but none at all to beneficiaries.

Because F-Reg has already announced its policy of acting in the interests of donors (whom they conflate with consumers), they’re pretty much saying that in any such tension, they’ve already identified their preferred outcome as the one that will favour the donor-consumer. This resolution might (though not inevitably) be at the expense of the interest of the beneficiary, because the interest of beneficiaries will not even have been factored into F-Reg’s deliberations.

What’s right for the donor is right for the beneficiary…or is it?

The Fundraising Regulator has attempted to obviate this potential negative outcome to beneficiaries by stating that acting in the interest of the donor will ipso facto result in what is in the best interest of the beneficiary: F-Reg’s ceo Stephen Dunmore said this at the Institute of Fundraising National Convention this year, as did Lucy Caldicott, one of the few fundraisers on F-Reg’s board, in a Guardian article; while Professor Stephen Lee of Cass Business School has said that F-Reg should work with the Advertising Standards Authority to regulate the quantity of poor-quality “formulaic” charity DRTV adverts, “to protect the interests of general public and donors as well as beneficiaries”.

However, it should be obvious that it isn’t necessarily so: it might, for example, be in (some) donors’ interest that F-Reg outlaw a three-stage dropped ask on the telephone, or formulaic TV adverts (though identifying criteria by which you’d categorise ‘formulaic’ would be an interesting process). But this wouldn’t necessarily mean it was in the interests of those beneficiaries who might suffer deterioration in the services they receive as a result of any lost income.

One defence of this argument is that lost short-term income will be more than made up for by an increase in long-term income from the improved public trust resulting from, in this example, banning the third telephone ask. But this argument carries within it all sorts of hidden (and unevidenced) assumptions about the alleged long-term damage caused by three-stage asks, by how much public trust will be improved if they are banned, and how much this will translate into increased donations. If these can’t be evidenced, or the evidence suggests long-term income will actually drop, then the rationale for three-stage asks or rubbish DRTV ads being regulated out of existence is weak under a rights-balancing regulatory ethos, although it is as strong as ever under a consumer protection regulatory ethos.

Arguing that what’s in the interest of the donor is necessarily in the interest of the beneficiary is circular reasoning and question begging of the highest order.

Should fundraisers clean up the mess caused by commercial marketers’?

Consideration of Rights Balancing Fundraising Ethics brings us to the second possible interpretation of Lord Grade’s statement that donors are also consumers. His reason for saying this, as he makes clear in his comments to Civil Society, is because as consumers, people are swamped with marketing of all sorts. He says that fundraisers need to be “sensitive” to this, “understand the environment in which they are operating”, and rein in their own marketing and advertising to compensate for the discomfort caused to consumers by commercial marketers.

So as well as fundraisers having duties to beneficiaries and donors, they also have a third set of duties to general consumers, irrespective of whether they give to charity.

The three duties are:

1. to beneficiaries to raise enough money to provide services
2. to donors not to put them under undue pressure to donate
3. to consumers to reduce the cumulative discomfort they feel from general marketing (this is what Lord Grade appears to be saying).

This third duty makes it fundraisers’ responsibility to compensate for the excesses of commercial marketers, whereas commercial marketers are under no such obligation to moderate their own activity. Irrespective of whether charities have a duty to moderate their own marketing activity to reduce the discomfort this might cause to its recipients, I find it hard to see how charities should be required to reduce their own marketing because commercial marketers are causing discomfort. In this case, doesn’t a principle of fairness simply state that it’s the commercial marketers who should be subject to stricter regulation, not charities?

It more than slightly concerns me that the chair of the independent (and so not answerable or accountable to the fundraising profession – something Lord Grade seems to delight in) regulator of fundraising should seem to think the organisation he fronts ought to regulate charities on such a basis.

It’s donor protection correctness gone mad.

So let’s wind this discussion up

Donors are not consumers. They don’t acquire, use or dispose of commodified goods the way football season ticket holders, rail passengers, and purchases of white goods do. It’s a charity’s beneficiaries who are its real consumers.

What donors do is provide the resources that enable nonprofit organisations to provide commodified goods for acquisition, use and disposal by their beneficiaries.

But fundraising regulation – first by the FRSB and now by the Fundraising Regulator – is based on the assumption that donors are in fact analogous to consumers and require similar levels of consumer protection.

This serves to remove the interests of beneficiaries from the regulator’s deliberations because the sole focus is on what the donor wants, even if this is at odds with and could be injurious to what the beneficiary needs.

Rogare has developed a new theory of normative fundraising ethics that attempts to balance fundraisers’ duties to their donors and beneficiaries. The white paper we published this week is just the start of our review of fundraising’s professional ethics. We hope that our rights balancing approach will have widespread applications throughout fundraising, and we are already setting up working groups to explore how this can be applied to legacy management and how beneficiaries are framed in marketing materials.

As I hope this blog demonstrates, the regulation of fundraising is also amenable to the rights balancing approach, but only if those responsible for regulation divest themselves of the notion that their sole role is to be the ‘voice of the donor’. Their role instead should be to ensure that the process of donation has balanced outcomes for donors and beneficiaries. Most of the time, regulators probably will be speaking up on behalf of donors. Sometimes, however, they might be required to be the ‘voice of the beneficiary’.

• Ian MacQuillin is director of Rogare – The Fundraising Think Tank.

• Find out more about Rogare’s review of fundraising ethics.
• Download Rogare’s evidence to the House of Lord’s Select Committee on Charities enquiry, which employs the distinction bewteen consumption and donation to articulate fundraisers’ accountabilities to donors and beneficaries.

The ideas contained in this blog are not new. I first explored these themes in two blogs on UK Fundraising in 2007, which are available here and here, though they have been considerable developed since then.