Incentive Pay in a Campaign: Pros, Cons, and Things to Consider

With more organizations than ever before considering campaigns, and with the “Great Resignation” creating a talent crunch across all areas of advancement, many leaders are considering campaign bonuses as a strategy to retain top performers.

Researchers have investigated the impact of bonuses and other incentive programs for decades, and it is clear that there are specific circumstances in which bonuses can be a powerful tool—and times when they can be ineffective or even counter-productive.

Incentive Bonuses During a Campaign: The Pros

The main reason organizations consider incentive bonuses during a campaign is that competition for fundraising staff is fiercer than ever, making it imperative that organizations take steps to retain their top talent. Competitive salaries are often a key retention strategy.

• Even before the “Great Resignation,” organizations were noting that recruitment and retention of top performers was tough. A 2018 report in GuideStar noted that 59 percent of nonprofit organizations were struggling to recruit and retain top talent. A 2019 study conducted by “The Chronicle of Philanthropy” noted that 51 percent of fundraisers expected to leave their jobs within two years. The events of the last two years have only magnified these trends.
• Staff turnover is particularly expensive in advancement teams. The Society for Human Resource Management indicates that losing any employee will cost an organization 90 to 200 percent of that employee’s total compensation. However, “The Chronicle of Philanthropy” has conducted research that shows that losing a productive, long-term fundraiser can cost an organization much more. In 2021, they created a method to measure fundraiser productivity to help capture the cost of high turnover in our field. They noted that fundraisers with longer tenure can be five or more times more productive that newer fundraisers, making their retention that much more important.

Incentive Bonuses During a Campaign: The Cons

Academics who study employee performance and engagement have long noted little correlation among bonuses, performance, and retention. In the classic Harvard Business Review article from 1993 “Why Incentive Plans Cannot Work,” Alfie Kohn lists several reasons why incentive programs sometimes fail to achieve their goals, including:

• Pay is often only #5 or #6 on the list of reasons top performers stay with their jobs. When compensation is close to market rate, far more important motivators are mission alignment and an opportunity to work on a great project or with a great boss or a great team.
• Incentive programs can be difficult to manage and when they are managed poorly, they can actually erode trust and engagement.
• Incentives can mask some of the common conditions that lead top performers to seek other opportunities (e.g., poor management, lack of career opportunities, lack of team cohesion)—making it difficult for teams to implement the changes needed to help everyone perform at their best.

While incentive compensation has certainly become more common since 1993, Kohn’s findings are relevant today. In the 2021 Nonprofit Talent Retention Practices Survey, “compensation and benefits” is still only the fourth most common reason for voluntary employee turnover in the nonprofit sector, behind “better opportunity presented,” “lack of opportunity for upward mobility/career growth,” and “dissatisfaction/disengagement with current organizations/culture.” Multiple studies have shown that career pathways and opportunities for growth are one of the most important factors in employee retention today.

Incentive Bonuses During a Campaign: When to Use Them and When to Seek Other Strategies

There are some clear circumstances in which organizations might want to consider incentive bonuses as they enter a campaign:

• If bonuses are a part of the organizational culture. Some organizations use bonuses across the organization to incentivize high performance. In this case, the advancement team should absolutely offer bonuses as long as leadership can manage the process fairly and transparently. When possible, organizations should consider awarding bonuses for team performance over individual performance.
• If the advancement team has the budget to support higher compensation but is not allowed to offer it. Some large organizations have caps on salary for employees at a certain level—and those caps sometimes don’t align with the market salaries for advancement professionals in the region. Offering a campaign bonus can bring advancement staff to comparable market rates.
• If the other factors that influence retention are in place to maximize the benefit of the bonus. Bonuses can be an effective way to reward good work and retain great employees when engagement is high, leadership has the capacity to manage the process fairly, and appropriate career pathways are established to allow team members to grow their careers within the organization.

Signs an organization should consider other strategies include:

• If employee turnover is high despite competitive salaries, leadership should consider other factors that influence employee engagement (e.g., mission connection, opportunities for career growth, team culture, etc.) and work to make improvements. 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.
• If management lacks the capacity (i.e., time, technology, trust) to manage the bonus process in a way that inspires confidence, it should consider building the systems first and then implementing a bonus. A poorly or “unfairly” implemented bonus process can do more damage than good.
• If the organization’s culture of philanthropy is low or there is low buy-in on the upcoming campaign, leadership should consider the impact of bonuses for the development staff on the morale of employees outside of advancement. Management should be aware of the unintended consequences of incentive compensation and make plans to address potential issues across the organization.

Having top talent contributing their best performance is critical for organizations that are moving into a campaign. When a team is already highly engaged, incentive pay can be a powerful tool to retain talent, but leaders need to manage bonuses carefully to avoid potential pitfalls. Teams with low engagement should first consider other strategies to improve employee retention before considering incentive pay.

At BWF, we work to ensure you’re well positioned for fundraising success, and that includes how best to motivate and retain your fundraising team. We’d welcome the chance to make a difference for your organization. Reach out to Jodie Miner today to learn more.