Five Types of Ethical Non-profit Incentive Pay Structures for Fundraisers

An excerpt from a lively LinkedIn discussion on incentive pay

An excerpt from a lively LinkedIn discussion on incentive pay

We’ve talked about what we do know about incentive pay in the non-profit fundraising sector. I knew this was a hot topic in our field (hence the desire to discuss). The response online (I regularly post this blog in a few linkedin groups), however, demonstrated just how passionate (and articulate) both sides of the argument are. Many of those who opposed incentive pay showed great concern for bonuses negatively influencing fundraiser motivations and behavior.  An ethical incentive pay structure would need to be aware of and account for that concern.

We have seen non-profits who have successfully used incentive pay as a component of their talent management strategy. In general these organizations have structured bonuses in one or a combination of the following five scenarios:

Development Office-wide Bonuses (1)

Most non-profits try to increase overall giving each year, with many boards setting macro goals that are quite ambitious. In the for-profit world this model is often referred to as “profit-sharing”, where the entire team gets an even (or clearly striated) cut of profit over goal each year. In non-profits this type of bonus is uniform across the full development staff (for example: a $2,000, award which is either paid to all eligible participants or to none). The decision as to whether to pay the bonus at the end of the year is based upon predetermined office-wide criteria and goals. In many cases of this model staff participate in the selection of the relevant goals – one of which is always the comprehensive dollar target for the year. The bonus is paid at the end of the year to all staff without regard to individual performance. Either the entire staff receives the bonus or none receive it.

Individual Bonuses based on metrics and goals (2)

Since so many development shops already devote a lot of time towards fundraising metrics  and goal-setting it follows that those who pay individuals bonuses can use those same metrics to determine incentive pay. In this scenario the most common set-up looks at performance versus original goals in 4-5 categories (major gifts secured, proposals presented solicitations, visits, team work, etc). This system is formula-based, with those fundraisers who reach 100% of or exceed all goals to receive the maximum bonus (most frequently 4-5% of base income) and those who fall below goal receiving a calculated, lower payout.  In some cases manager input and qualitative goals do apply here, but they become very difficult and controversial to measure related to actual income.

Team-based incentive payouts (3)

Many institutions, especially those decentralized amongst units and programs, prefer to structure incentive pay around overall team performance in meeting goals, securing income, and building constituent relationships. In about half of these cases incentive pay is determined  by the unit or program’s leadership, while the remainder still have central control over incentive pay. Bonuses are also often divided in these cases into two categories of staff: fundraisers and support staff.

Superstar individual financial recognition (4)

This model is almost entirely used in conjunction with the other incentive pay systems described above.  Usually modeled extensively towards top talent retention and recruitment this type of bonus pay is used to reward those few individuals whose achievements far exceed those of their peers (reaching 110%+ in all goal categories for example). Qualification for this level of recognition is set and known to all staff members and typically less than 4 individuals at an institution qualify each year. The actual payout of the bonus can vary widely, but usually amounts to an additional 25-30% of the bonus level set up by the base incentive pay system.

Hybrid Incentives with Multi-level Goals (5)

This is perhaps one of the most interesting types of programs one can find in incentive pay.  In order to encourage more teamwork and organizational cohesion while stimulating individual performance several institutions set up a set amount for bonuses that is tiered and divided by several categories of performance. An example of how this would look would be:

  • First, if the development officer fails to meet  its goal all bonuses across the board would be decreased by one third.
  • Second, if the team failed to meet its goal, bonuses for all members of the team would be reduced by one third.
  • Third, if the individual failed to meet personal goals, there would be no bonus for that individual.

 

 

You’ll notice that none of these scenarios tie bonuses directly to a percentage of gift income, much less individual gifts. In many cases any income or pay is coupled with “softer” incentives such as flex-time, vacation, etc.  AFP’s argument against such practices remains widely accepted by the non-profit community, even those who implement incentive pay.

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One thought on “Five Types of Ethical Non-profit Incentive Pay Structures for Fundraisers

  1. Pingback: Six Alternatives to Year-End Bonuses for Rewarding Fundraisers and Development Staff | Targeting Fundraising Talent

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