The Rundown - Bonus Compensation in the Nonprofit Sector - May 12, 2023
In the search for talent, once taboo topics are re-examined
Happy Holidays!
I am probably in the minority. Other than working at the hardware store when I was in high school and college, I have never had a job that paid a year-end or holiday bonus. Back then, at the annual holiday Christmas party, the guys that ran the store would slip in a nice crisp $50 bill for all the employees. Every other job I have had has been in the public sector or the non-profit sector where the idea of the bonus, even for performance, was never even brought up.
So it was with some interest I read the article "Bonuses, When Implemented Correctly, Can Help Nonprofits Stretch Budgets, Retain Fundraisers" by Cody Switzer published in The Chronicle of Philanthropy, that you can find here. Switze’s piece highlights the role of bonuses in retaining fundraising staff and promoting performance excellence. The author posits that bonuses are a crucial tool for nonprofits to compete with the private sector in attracting and retaining top-performing fundraising professionals. Especialy in these times, where the labor market is tight and many of the seasoned professionals of development are retiring, new strategies to bring on talent are being explored. Switzer argues that bonuses can be an effective way to help nonprofits stretch their budgets while ensuring that fundraising staff is well-compensated and incentivized to perform.
The article highlights the benefits of using bonuses as an incentive for fundraising staff. The author notes that fundraising is a particularly challenging area in the nonprofit sector, and that the ability to attract and retain top-performing fundraisers is critical to an organization's success. It’s an assertion that rings true to me. Development directors, even good ones, seem to be chewed up and spit out all the time by non-profit organizations. It takes time to develop a good development program and cultivate giving relationships. Many times, a nonprofit board or executive director has unrealistic expectations that just can’t be met by even the most effective development professional.
Switzer argues that bonuses can be used to incentivize staff to meet or exceed fundraising targets, thereby improving the organization's financial position. Additionally, bonuses can help to reduce staff turnover, which can be costly for nonprofits in terms of recruitment, training, and lost productivity.
The article also explores the challenges of implementing an effective bonus system. Switzer notes that bonuses need to be carefully structured and communicated to ensure that they are perceived as fair and equitable by fundraising staff. He argues that bonuses should be tied to measurable fundraising targets and that staff should have a clear understanding of how they will be evaluated. Switzer suggests that bonuses should be tailored to individual staff members' roles and responsibilities, as well as their performance levels.
The author highlights the need for transparency in the bonus system, arguing that staff should be able to see how bonuses are calculated and how they compare to their colleagues. Switzer notes that transparency is essential to ensure that staff members perceive the system as fair and that it promotes a sense of healthy competition among staff members. Additionally, transparency can help to prevent resentment and misunderstandings, which can erode staff morale and motivation.
While the article highlights the potential benefits of using bonuses as an incentive for fundraising staff, it also acknowledges the potential risks. Switzer notes that poorly structured bonus systems can have negative consequences, such as fostering a culture of competition rather than collaboration, or incentivizing staff to focus solely on short-term fundraising goals at the expense of long-term sustainability. Additionally, poorly structured bonus systems can lead to perceptions of unfairness, which can erode staff morale and motivation.
The article concludes by summarizing the key takeaways for nonprofits looking to implement a bonus system. Switzer suggests that nonprofits should carefully consider the goals and objectives of the bonus system, as well as the roles and responsibilities of individual staff members. He notes that bonuses should be structured in a transparent and equitable manner, with clear performance targets and evaluation criteria. Additionally, Switzer emphasizes the importance of communicating the bonus system effectively to staff members, including how bonuses are calculated and how they compare to their colleagues.
Overall, the author makes a pretty compelling argument for the use of bonuses as an incentive for fundraising staff in the nonprofit sector. Furthermore, Switzer lays down the ground work on how such a system should be developed and the necessary and difficult conversations that need to be had.
The article is well-researched and provides practical advice for nonprofits looking to implement a bonus system. However, the article could benefit from a more critical analysis of the potential risks and challenges of using bonuses as an incentive. For example, the article does not explore the potential negative consequences of a bonus system that focuses solely on fundraising targets, rather than other key performance indicators such as donor retention or long-term sustainability. Additionally, the article does not explore the potential for a bonus system to create disparities in compensation between fundraising staff and other staff members, which could lead to perceptions of unfairness.
The article is definitely worth a read and brings up some important points for nonprofit organizations to consider.
The Weekly Notebook
A quick rundown of what I am seeing and hearing in the nonprofit world….
Now Hiring!
I have a nonprofit in Sidney, Ohio that has reached out to me looking for a new Executive Director. I can tell you that this a very strong organization that needs leadership that has strong entrepreneurial and staff management skills. If you have any interest, please drop me a line at pinnaclestrategiesltd@gmail.com and let’s talk!
The Mosaic Conference is Coming!
We are just a month out from the annual Mosaic Conference put on by the Paul G. Duke Foundation and Edison State Community College as part of their Graduate Academy for Community Leadership.
This year’s event will take place on Wednesday, May 24th and John Carreon, CEO and Partner of Advancement Experts will be keynote speaker.
You can leanr more and register here.
How Can We Work Together?
Did you know that Pinnacle Strategies works individually with nonprofit and public sector leaders to help them solve problems, achieve goals and gain confidence in their roles?
Why?
Because, this work is hard and it’s often a lonely road. Our nonprofit and public sector leaders need people that they can talk to to get solid advice and encouragement to do the work that is in front of them. If you feel that this can be of value to you, or a member of your team, please reach out to pinnaclestrategiesltd@gmail.com and let’s talk.
Ready to Learn Something New?
One of the prettiest cities in the Midwest is Indianapolis and travelling there can open a perfect opportunity to sharpen your skills and meet new professionals in the field. I would encourage you to look at some of the offerings of The Fund Raising School at the Lilly School of Philanthropy at Indiana University’s campus in Indianapolis. The professional development school has great programming both on-line and in-person both in Indianapolis and at other sites across the country. Take a look at their course offerings here!
Online Learning Options from Texas A&M Announced
If travelling for professional development isn’t in the cards (or the budget), the Center for Nonprofits at Texas A&M University has some great offerings! I recently enrolled in one of their certificate programs and really enjoyed the online format and the online discussions that were developed. It was time and money well spent and I would highly recommend this program, especially for early or mid-career professionals. The next session begins in early February and you can learn more here!
Other Ways to Connect
Our coaching practice has openings and it has been a blast working with nonprofit leaders all across the country! If you are interested in working with me to get your nonprofit organization on a track to achieve the big missions you have, please reach out to me at pinnaclestrategiesltd@gmail.com.
Here are some other ways you can keep in contact with Pinnacle Strategies!
Check us out on our LinkedIn Page
Check us out on the Celebrating Leadership Facebook Page.
Want to help support this newsletter?
I hope you have found value in this newsletter. If you have found it valuable and want to help, the best thing you can do is “hit the heart”! By liking this post, you help other people interact with it. Also, sharing and commenting is very helpful as well. Thank you.