Many for-profit organizations reward performance with raises and bonuses. For them, the metrics used for performance-based compensation are simple: revenue, profits, and other numbers that are easy to track (and easy to see how they benefit the bottom line).
But when you’re a nonprofit organization, how do you reward high performers? How can you use performance-based awards to aid recruiting and retention? These are some of the best practices.
Step 1: Define High Performers
Every organization is different, of course, but performance should be tied to metrics that benefit the organization and advance its mission. Use these key performance indicators (KPIs) from Salsa Labs as a start. Ideally, organizations should have a broad range of KPIs to identify high performers, based on their roles.
- Gifts secured
- Donation growth
- Average gift size
- Gift growth
- Pledge fulfillment percentage
- Cost per dollar raised
- Online gift percentage
- Percentage of contribution matches through corporate philanthropy
- Donor retention rate
- Donor growth (year over year)
- Recurring gift percentage
- Donor churn or attrition (rate at which donors stop giving)
- Giving capacity (estimate of how much donors can give)
- Conversion rate (number of donors who acted when prompted to do so)
- Open rate (percentage of people who opened an email you sent them)
- Click-through rate (percentage of people who clicked a link)
- Email conversion rate (number of people who take action from an email)
- Opt-out rate (number of people who unsubscribe from emails)
- Outreach Rate (how often you’re getting in touch with donors)
- Amplification rate (ratio of share per post to number of overall followers)
- Applause rate (number of approval actions compared to number of followers)
- Social media conversion rate (number of people who take action on a post after clicking on social media link)
- Landing page conversion rate
- Fundraiser participation rate (how many of your fundraisers are securing donations and the actions they took)
Step 2: Link High Performance to the Mission
The performance goals for each role should be linked to the organization’s overall goals, mission, and values. As the organization’s priorities and strategies change, performance goals should be updated as well and linked to the current goals.
For example, if the organization is focusing on donor engagement, many metrics would apply: fundraising, donor retention, and how donors and prospective donors engage with emails and social media.
Step 3: Determine the Rewards
The knee-jerk reaction is often to think of rewards as financial, but there are many popular perks that employees value, including additional time off, schedule flexibility, the ability to work remotely, public recognition (via an event, email, web announcements), and awards such as gift cards or swag. One way to maximize the value of rewards is to survey employees and ask what they value.
No matter which rewards you choose, make sure that the rewards and how employees qualify for them is completely transparent. The perception of fairness is more important than the reality: for example, a recent survey on salaries conducted by Payscale, a provider of compensation data and software, found that only 23% of employees believed their compensation was determined in a transparent process and only 19% believed they were compensated fairly. The reality was that 90% of those who felt they were earning below market rate were actually making market rate or more. The perception of unfairness or favoritism can undermine the positive qualities of a performance-based rewards program.
Step 4: Refine the Process
Every employee’s performance should be eligible for rewards at least annually, but managers should review performance and track progress towards potential rewards much more often. Employees should never be surprised that they are or aren’t being rewarded.
Organizations should regularly track compensation and other perks to ensure they align with similar organizations and meet IRS requirements that specify compensation should be “reasonable,” not “excessive.” This is especially true for executives: As a best practice, the entire board of directors should be aware of and annually approve the executive director’s and CEO’s compensation, including benefits, paid leave, professional development, etc.
Employees should know that executives are being held to the same standards as they are, and not being rewarded for lackluster performance.
Finally, keep in mind that even the most robust performance-based rewards program is no guarantee that high performers will stay. People leave organizations and jobs for many reasons, and some are outside the organization’s control. But valuing, recognizing, and rewarding high performance can go a long way toward keeping high performers loyal, happy, and productive.
The Lindenberger Group can help organizations design and manage performance-based rewards programs that align with goals and mission. For more information or to discuss your HR needs, please contact us at 609-730-1049 or send us an email.