Are Bonuses a Good Idea for #Fundraising Professionals?

Twenty-two percent of American workers surveyed say they expect a holiday bonus, according to a recent report from Bizrate.com. While the report did not breakout the results, I believe that holiday and performance bonuses are I Love Work by elycefeliz via Flickrfar more common in the for-profit sector than in the nonprofit arena. However, should that be the case?

More specifically, should fundraising professionals receive bonuses?

Bonuses for fundraising professionals are not illegal. They’re not even unethical, if the charity adheres to certain guidelines. While the Association of Fundraising Professionals Code of Ethical Standards prohibits fundraisers from accepting compensation based on a percentage of funds raised (Standard 21), fundraising professionals are “permitted to accept performance-based compensation, such as bonuses” (Standard 22). However, bonuses must be “in accord with prevailing practices within the members’ own organizations and [cannot be] based on a percentage of contributions.”

Here are some potential advantages of offering bonuses:

  • Attract fundraisers that are more talented.
  • Retain the most talented fundraising staff members.
  • Reduce the risk when hiring new fundraisers.
  • Inspire fundraisers to give their all toward achieving goals.

Some of the potential problems with offering bonuses include:

  • Donors might be concerned about how their gifts are being spent.
  • Organizations would be less able to predict labor costs.
  • Fundraisers might focus too much on the specific goals related to the bonus while letting other responsibilities slip.

Now, I need to hear from you.

What do you think? Do you receive a bonus? Should fundraising professionals receive bonuses? If so, what should those bonuses look like? What are the pros and cons of offering bonuses?

Please share your thoughts in the comments below.

That’s what Michael Rosen says… What do you say?

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18 Comments to “Are Bonuses a Good Idea for #Fundraising Professionals?”

  1. My first thought is Yuck. I think it’s both from Daniel Pink’s writings on how ineffective they are… but as a fundraising professional, I am compensated, and like to think I do my job because I care about the charity’s mission. This sets fundraisers up to “care more” when gifts are dangled and less when they are not. Seems against what we are trying to do. Total yuck to me in everyway.

    • Joie, how do you really feel? 🙂 Thanks for commenting and being frank. I believe that fundraisers should be focused on the donor and the long-term relationship. Building a bonus plan that embraces that philosophy is tricky, if not impossible. I’d rather see charities pay more appropriate salaries and offer more appropriate benefit packages. While I’m not completely opposed to bonuses, I’d rather keep it simple which I think is likely to be more effective.

      My first question for any organization considering paying bonuses would be: What is your objective? I’m willing to bet that, more often than not, there would be a better way to achieve the objective than offering bonuses.

  2. Thank you, Michael, for raising the issue and defining the pros and cons.

    I’ll add one con: It’s not always clear who should get the credit for charitable gifts. Is it the development officer who has been stewarding the donor? Or the VP of development who put together the plan? Or the CEO who is so inspirational? Or the receptionist who has always greeted the donor in such a personal and warm manner? Development is a team effort, and we in fact talk all the time about creating a “culture of philanthropy,” where everyone is involved in making the organization a good destination for giving. When a bonus goes to only one or two members of the team, that seems inconsistent with that model.

    • Alan, thank you for sharing your insights. Yes, fundraising is definitely a team sport. Gifts are received and lost for many reasons, some of which involve the fundraiser, some of which don’t; usually, it’s a mix. One way to deal with this issue is to offer a team bonus. But, even that type of bonus plan is imperfect.

  3. Who doesn’t love a bonus? Unfortunately, offering them doesn’t always result in raising more money, especially when fundraisers are rewarded for simply shifting a donor’s unrestricted gift to a specific program, thus not bringing in any new money.

    • Fountain, thank you for your comment. You’re right. Bonuses systems can be effective, but they can also fail to achieve what is intended. Worse yet, they can lead to unintended, negative consequences. A personnel consultant once told me to beware of offering bonuses. He said that it will encourage the behavior you incentivize to the detriment of other tasks that might also be very important to the organization. So, even when they work, they could fail.

  4. We do pay a “bonus” that is based on the overall performance of each development staff member. It is not for $ raised although certain donor and prospect goals are included but for meeting the goals set within five criteria: Commit to Christian Living; Display Professional Behavior; Recognize the Value of All; Pursue Excellence; Ongoing Professional Development. A 1, 3 or 5 is set as a goal by the employee in discussion with the supervisor (5 and 3 being met or exceeded expectations; 1 is needs improvement.) Quarterly conversations are held to determine if any needs for additional resources are required or there are obstacles. Annually, the supervisor and employee then determine the final point total. From that total, a set bonus amount (percentage of salary) would be paid to the employee in the fall.

    • John, thank you for commenting and sharing your organization’s bonus model. I like that it incorporates the values of the organization. Any bonus system for any organization should, in one way or another, strengthen the organization’s values rather than detract from them.

  5. Hi Michael,

    Just the other day in a directors staff meeting I made a comment about bonuses, we all laughed because our Higher Ed institution does not give them. The only non-profit employer from which I ever did receive a bonus was an international NGO and there were 2 times in my 11 years with them when we received bonuses, and both times were following a year of extraordinary work responding to extraordinary circumstances where everyone put in time well above and beyond. Everyone who had been with the organization for at least 6 months of that year received a bonus. It was not a huge amount and was based on salary/position rank, but IT WAS WONDERFUL, largely because it was totally unexpected. I do not think bonuses for fundraisers should be a given, but in a year when the organization has done well and attributes it to the work of the staff it is a major boost to morale and loyalty.

    • Patti, thank you for sharing your experiences. Finding creative, meaningful ways to boost staff morale and loyalty are important. Often there are ways to do this that are more effective and less costly than awarding traditional bonuses.

      By the way, one of my concerns about bonuses is that fundraising is a team sport. While a fundraiser obviously controls some of his or her destiny, much also depends on colleagues and management. I’ve worked with any number of charities where the fundraiser’s hands were tied by short-sighted superiors.

  6. I’m conflicted on this one. I don’t see the logic of NPO’s handling out year-end bonuses (as some for-profit companies do) unless some specific target was articulated in the beginning of the year and reached at year end. Bonuses are generated form profits. The company did well and wants to share, in the hopes of engendering employee loyalty. Generally, surpluses in NPO’s should be used to further the mission.

    • Steve, thank you for sharing your thoughts. Like you, I’m conflicted on this one. I can see both sides. My way of dealing with the issue of bonuses is to sidestep it. I’d rather see charities pay competitive salaries and offer competitive benefits packages. That would go a long way toward being able to recruit and retain top talent. Beyond that, there are any number of things that nonprofits can do to inspire and reward employees, many of those won’t even cost a dime. My fear is that those who want to offer bonuses are looking for an easy solution to a complex problem that usually involves weak management.

      Here’s where I lean: Offer truly competitive salaries and benefits. Hire superstars. When they perform well, give them a nice raise and other perks. If they don’t perform well, get rid of them and try again.

  7. In the words of Tom Suddes fundraising guru, “You’re in sales get over it!” The reality is that fundraising is a form of sales. In order to improve our results, we need to be hiring and recruiting people with experience in sales. We need to be attracting people who are driven, competitive and comfortable with performance-based positions – as well as passionate and have a relationship to the cause. They must be people who are driven to call, visit, ask and close. Not all positions are created nor compensated equally. Therefore, I think a bonus that is structured on specific outcomes that can be measured and reported is appropriate. If an organization wants to set overarching goals for which the entire organization can be bonused or rewarded, I am for that, too. Often times development folks make job changes to increase income as well as responsibility. If we created a system whereby successful people can earn more and have a control in how much they earn, perhaps we would have greater retention and less turnover. This work that we do is about saving, changing and improving lives. What is more important than that? We need to compensate well those who are doing well at doing good.

    • Lori, thank you for your comment. I agree with you that fundraising has much in common with traditional sales. However, there are many fundraisers who passionately disagree with us. That’s a shame. Some of the best training I’ve had as a fundraiser came from sales seminars. Now, having said that, I recognize we can’t pay fundraisers the same as one might pay a sales professional. A salesperson can earn a commission while a fundraiser cannot. Nevertheless, both salespeople and fundraisers are most certainly paid for performance. If a fundraiser doesn’t produce, he or she will eventually be fired. While bonuses can provide an incentive, I’d like to see nonprofit organizations do a better job of providing solid base salary and benefits packages that are competitive with the for-profit sector. That would allow charities to recruit and retain top performers.

  8. Bonuses are a double-edged sword. While they may provide an attractive incentive to achieve/exceed goals, they also encourage an “every fundraiser for her/himself” environment, working against the sort of collaboration and communication that characterizes successful fundraising. Also, salaries for many fundraisers in many locales have flattened since the Great Recession. I’d rather see reasonable, attractive salaries in a team environment as the best inducement to recruit and retain talented fundraisers.

    • Susan, thank you for commenting. I agree that bonuses can definitely be a double-edged sword, for many reasons. One of those reasons very well could be that a bonus system could inadvertently encourage an “every fundraiser for her/himself” culture. However, that would depend on the bonus structure. For example, some organizations offer team bonuses rather than individual bonuses for that very reason. In any case, for those organizations that do offer bonuses, it is essential that they remain aware of the Law of Unintended Consequences.

      I also agree with you regarding the need to improve salary levels in the nonprofit sector.

  9. Thanks for this opportunity, Michael. I’ve been doing executive recruiting in the nonprofit sector now for almost five years — after 30 years as a professional fundraiser.

    Without doubt, nonprofit boards and CEOs are asking us questions about compensation plus incentive based on performance. Generally, if there are not opportunities for an incentive program to reach across the entire senior leadership — most stay away from offering it specifically for development professionals. Those that do look at overall organizational performance first, then building a threshold (usually financial) at which incentive programs take affect.

    Most compensation plus incentive programs include benchmarks for organizational management and also take into consideration individual contributor performance measures as well. We have encouraged incentive programs for development professionals to include benchmarks around activity that moves a development program forward more successfully rather than “production.” Those can be qualitative and quantitative measures.

    We also encourage those incentive programs to be negotiated between a direct supervisor and the employee eligible at the beginning of the fiscal year. Those measures should encourage relational vs. transactional fundraising activity with donors.

    I also believe this is a great way for smaller nonprofits to extend total compensation to a candidate — putting less at risk for the organization and more at risk for the candidate being hired. Incentives are just that — ways to promote good and ethical performance.

    • Don, thank you for sharing your terrific insights. I agree that, when well-designed, bonus incentives can be beneficial to both the fundraising professional and the organization. The key is that they must we well-designed to minimize the risk of unintended consequences. While bonuses can be effective, I’d like to see the nonprofit sector offer more competitive base compensation. One of the reasons for the high turn-over rate in the fundraising profession has to do with anemic compensation. More thoughtful, comprehensive compensation strategies are definitely needed in the nonprofit sector.

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