Bonuses Can Help Nonprofits Stretch Budgets and Retain Fundraisers
As nonprofits struggle to hire and retain fundraisers, some are turning to performance-based bonuses to entice talented fundraisers. There are plenty of ways to ethically reward hard-working fundraisers — the Association of Fundraising Professionals endorses the practice as long as any incentive compensation adheres to “prevailing practices” at the fundraiser’s employer and is delivered either as a flat fee or a percentage of the fundraiser’s salary —
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As nonprofits struggle to hire and retain fundraisers, some are turning to performance-based bonuses to entice and retain talent. There are plenty of ways to ethically reward hard-working fundraisers — the Association of Fundraising Professionals, for example, endorses bonuses delivered as flat fees or as a percentage of the fundraiser’s salary — but the trust-based nature of philanthropy demands that bonus programs be designed with care and caution.
Experts say commissions — which are common in other relationship-based fields like real estate and financial advising — should be avoided in favor of performance-based incentive pay. That’s because donors assume their gift will advance an organization’s mission, not increase the fundraiser’s paycheck, says fundraising consultant Robbe Healey, who is also a member — and former chair — of AFP’s Ethics Committee.
A donor discussing major giving with an institution, Healy says, assumes “the development officer is representing accurately that the money given will go to the work of the agency and not that it’s going to be something split between the person who’s soliciting the gift and the agency.”
“The motivating factor in charitable behavior is social benefit,” explains the AFP Ethics Committee’s position paper on professional compensation. “There is an inherent conflict of interest between charities founded without intent of profit or private benefit and employees whose compensation and primary motivation are based on personal financial gain.”
AFP prohibits its members from accepting bonuses that come out of the money they raise for their cause, a requirement that Healey says helps nonprofits build trust with the people who support them. “If philanthropy is the missing link in the revenue stream, and philanthropy’s based on trust, and trust is based on ethics, do you really want the headline to say ‘So-and-So Gave $7 Million and Their Lead Fundraiser Got 10 Percent in Their Own Pocket’?" Healey says. “I don’t think you’d want that.”
Still, Healey is quick to add that there are many other ways to structure a performance-based bonus program, and an ethical one can be essential to a “compensation package for staff excellence.”
Bonuses Help ‘Stretch’ Budgets
At the University of New Hampshire, Troy Finn, the deputy chief development officer, is familiar with warnings about the risks of bonus programs. But, like Healey, he says incentive compensation can be a useful tool for leaders trying to build an attractive offer for new staff. His institution is 70 miles north of Boston — an hourlong drive on a good day. Every time the university posts a job description for a new fundraiser, it competes with deep-pocketed charities in Boston. But Finn has a tight budget for staff salaries. He and his team are always asking, “How do we stretch the dollars that we have?”
Incentive compensation is one strategy, and the university tested it during its seven-year, $300 million capital campaign that wrapped up in 2018. The results gave Finn the confidence to integrate it into the university’s compensation package for gift officers. His plan gives teams cash rewards for across-the-board good work with money from the university foundation’s operating budget.
“We designed an incentive system that prioritizes team success over individual success,” Finn wrote in a memo on the incentive-compensation plan. Managers and nonmanagers are measured against a mix of quantitative metrics (such as cash raised for the annual fund, alumni participation, and the number of in-person or virtual donor visits that meet their intended purpose and deepen the relationship with the donor) and qualitative goals (including integrity, collaboration, and self-care).
Gift officers develop targets for each metric and goal, which their managers and Finn will approve. “We don’t dictate goals,” Finn wrote in his memo. “Team members and managers need to own them.”
The plan takes an all-for-one and one-for-all approach to incentive pay. All gift officers must meet or exceed their targets for quantitative metrics and qualitative goals for anyone on the team to receive a payout. Likewise, managers are expected to meet their own personal goals to be eligible for a bonus. But they won’t receive one unless the fundraisers they supervise meet their goals and the whole team hits its fundraising benchmarks. This structure emphasizes the mentorship that managers are expected to offer the fundraisers who report to them — an expectation that begins when they are hired and continues as they acclimate to the university. Managers are expected to spend six months integrating new fundraisers into the team and ensuring they have the skills to succeed in their roles.
The incentive-pay program works because it rewards teams rather than individuals for excellent performance, Finn says. “I believe approaching incentive comp in this more wholistic manner makes it a stronger incentive program, makes the UNH team a stronger team, and leads to higher levels of achievement,” he wrote in an email.
What’s more, cash rewards are just one part of the hiring package Finn needs to attract and retain talented fundraisers. Culture matters, too. In hiring interviews, Finn asks candidates about their approach to self-care, emphasizing its importance to fundraisers at the university. As he’s expanded the number of gift officers from about 18 to 50, he’s also made sure the university stays committed to curtailing evening and weekend work.
The university is also investing in professional development and technology. Managers are expected to coach and mentor the gift officers they supervise, and the university has committed to providing gift officers the cutting-edge technology they need to work fast and well.
Knowing that any candidate who accepts his offer is forfeiting the chance to get paid more in Boston, Finn strives to create a workplace in which fundraisers can do a good job without working round the clock. Incentive compensation alone isn’t enough to attract the talent he’s searching for. “It can’t be done in a vacuum,” he says. “It has to be part of a whole chest of things that you do.”
Combining incentive compensation with a healthy, balanced work culture helps stave off turnover, Finn says. The number of dollars raised, the number of donors visited, and the rate of alumni participation have all reached new heights since the university put its plan in place.
Culture Crucial to Bonus Programs
A focus on a healthy work culture must go hand-in-hand with any incentive-compensation plan, experts say. Leaders who are considering an incentive-pay plan for fundraisers during a capital campaign should first consider how engaged their development team is, says Jodie Miner, associate vice president of proximity at the fundraising consultancy BWF.
“If a disengaged team stays because of bonuses, they are less likely to perform at the top of their abilities, making the bonuses less impactful,” Miner wrote in a piece on incentive pay.
On the other hand, she said during an interview with the Chronicle, layering incentive compensation on top of a workplace where fundraisers feel supported by their colleagues and committed to the mission “just increases the good feelings.” And those good feelings go even further when incentive compensation is awarded teamwide, rather than individually, Miner adds.
“We all know that it’s not just the frontline fundraiser that’s solely to be credited for a gift,” she says. “It takes a team to get a gift.”
Transparency is another essential ingredient of a successful bonus program. HonorHealth Foundation, which raises money for a network of nonprofit hospitals and medical facilities in and around Phoenix, has offered its fundraisers performance-based bonuses for more than 30 years. The foundation’s leaders meet with managers and supervisors every three years to review the bonus program’s structure. “We want to make sure it stays relevant,” says Jared Langkilde, chief executive of HonorHealth Foundation.
Fundraisers’ performances are assessed by their own personal achievement and by how well the foundation and hospital system meets its goals. To earn a bonus, the foundation needs to have achieved its fundraising targets and the hospitals they serve need to have achieved high marks on the Balanced Scorecard, which rates health care facilities on their finances, patient care, operations, and innovation. Additionally, managers assess fundraisers’ capacity for six values that contribute to a positive and supportive culture at the foundation, such as whether they serve on internal committees, work to help their peers succeed, or drive innovation on their team.
When reviewing the bonus policy, Langkilde asks managers whether the foundation needs to edit or augment the values it rewards on its teams. It also gives managers the opportunity to update or revise metrics that aren’t achieving the desired results.
“There’s a lot of people that think culture can be static, but it’s very fluid and very dynamic,” Langkilde says. “Being able to review these frequently allows us to continue to drive the culture of our organization in the direction we want to go.”
Experts encourage leaders to keep equity front and center as they design a bonus plan. Incentive pay awarded as a percentage of a fundraiser’s salary, for example, could benefit fundraisers in the highest salary bands the most. Healey, on AFP’s Ethics Committee, says that’s a risk and “a symptom of compensation over all.” She suggests flat fees and nonmonetary metrics as ways to level the playing field for fundraisers who have lower salaries or have smaller or less-resourced donor portfolios.
“The key to success,” Miner says, “is ensuring that the entire team gets recognized and not just certain members of the team.”