I’ve been thinking a lot recently about our clients who work for nonprofit organizations, whose motivations for working at their organizations are incredibly mission-driven. For the most part, they work long, intense hours trying to solve some of the world’s most pressing problems on behalf of people and communities who do not have the voice or the means to advocate for themselves. In so many nonprofits, schools, and philanthropies, pursuit of a noble cause is the driving force behind the engine of talent.
In my work over the last 15 years, I have seen the average CEO/Executive Director compensation steadily rise at nonprofits, but rarely have I seen the compensation structure for the rest of the team follow suit. In fact, the gap between what top leaders of nonprofit organizations are paid and the next tier of leadership is widening. There are a whole variety of reasons for this, which are important to discuss in a forthcoming blog. But right now, I want to encourage leaders of nonprofit organizations to rethink how you can best compensate and incentivize your best people who are doing the best work. To do this—without inflating or disrupting your salary band structure—I want to encourage nonprofit leaders to build bonus structures into their compensation offerings as a way to demonstrate a commitment and yes, a reward for hard work.
Here are a few ways to think about bonuses and some ways to incorporate them:
Elevate Compensation Competitiveness
In the nonprofit sector, where financial resources may be limited, offering competitive salaries can be challenging. Bonuses serve as a strategic tool to enhance overall compensation packages, allowing nonprofits to remain competitive in attracting top-tier talent. This approach enables organizations to access a broader pool of qualified candidates who may be drawn by the combination of a meaningful mission and competitive compensation.
Recognize Value and Impact to Retain Your Best Talent
Talented individuals contribute significantly to an organization’s impact, whether through program development, strategic planning, or fundraising efforts. By offering performance-based bonuses, nonprofits can express appreciation for the measurable value these professionals add to the organization’s mission. It also motivates people to receive recognition for a job well done, adding to their commitment to their work, their team, and their organization. A well-structured bonus program serves as a powerful tool for retaining key talent. By providing incentives for long-term commitment and sustained high performance, nonprofits can reduce turnover rates and ensure continuity in their mission-driven work.
Customize Your Bonus Structures
Not all nonprofits have the same budget—or the same ability to compensate. Work towards building a culture of bonus structures and remind the board how important this practice is. It is essential to tailor bonus structures to fit the unique needs and capacities of each organization. Most importantly, make sure that performance-based bonuses are clearly communicated, tied to specific achievements, and in alignment with organizational values and goals.
Align Incentives with Organizational Goals
Bonuses provide an opportunity to align individual achievements with broader organizational objectives. Nonprofits can structure bonuses to reward outcomes that directly contribute to the fulfillment of their mission. This alignment ensures that employees are motivated to work towards overarching goals, fostering a sense of purpose and unity within the organization.
Foster a Culture of Excellence
The introduction of bonuses creates a culture that values and rewards excellence. When employees see a direct correlation between their efforts and financial recognition, it instills a sense of pride and motivation. This, in turn, encourages a high-performance culture where individuals are driven to achieve their best for the betterment of the organization.
As you prepare to enter a new budget-building cycle, consider incorporating a bonus structure into your overall compensation. Over the last three years, we’ve helped many nonprofits implement bonus structures and other innovative compensation strategies within their own organizations, and they have been able to realize some or all of the results listed above. Are you motivating, rewarding, and compensating your nonprofit team in a manner that aligns with your work, mission, and values? Let’s find out together. Reach out to us so that we can help you think about strategies and options that work for you and your organization!
