Using Pay for Performance to Motivate and Reward Nonprofit Leaders

Posted on 27. May, 2010 by in Guidance for Good, Nonprofit, Retention

It is essential in today’s marketplace to identify ways to motivate and reward performance through monetary compensation. Although people in the nonprofit sector are not primarily motivated by monetary compensation, they are motivated by other tangible and non-tangible benefits. Some enterprising nonprofits — applying private sector thinking to operations and activities — have taken their lead from the business sector and offer compensation in merit or performance-based bonuses. The key to this shift in motivational leadership is a concept known as pay for performance.

Determining Pay for Performance

Nonprofit executive compensation can be measured by variables such as improved fundraising results or better administrative efficiency. It cannot be based on the amount of money raised or tied to specific increased revenue. The weak pay-for-performance link in many nonprofit organizations may be related to concern about violating the non-distribution constraint in the nonprofit sector, which prohibits the distribution of excess earnings. That is why pay for performance should be based on specific measureable goals tied to a realistic time frame and can include:

  • team motivation
  • talent retention
  • fundraising leadership
  • communication with board
  • financial/program interface
  • board development
  • growth and viability of organization

Performance-based bonuses should be tied to both entrepreneurial Google Play Store Download and social goals, which are based on the organization’s business and strategic planning.

Short-term pay-for-performance contracts are the best way to give talent exactly what they want most — to be paid what they are worth, when they deliver. Many nonprofits find that these short-term results-based work relationships often create a higher level of commitment than long-term relationships.

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