One of the most debated and controversial topics in the not-for-profit fundraising world is incentives and compensation for Development team members. Should they have only base pay? Should they get commission? Should they be paid bonuses based on performance?
In the for-profit world, performance based compensation and commissions are commonplace and not controversial at all. The biggest debates are around how to structure such plans, not whether those plans should exist in the first place.
The biggest critic of commissions, percentage pay, or bonuses tied directly to amounts raised, is the Association of Fundraising Professionals (AFP), who have issued a variety of statements around what they believe to be ethical problems with certain types of compensation plans. In fact, they will kick you out of their organization if you are paid or are paying commissions for your fundraising outcomes.
Many nonprofits I talk to abide by the AFP principles on the surface, but use subjective or complicated bonus plans to essentially pay development people for raising more money. Ultimately, of course, an unsuccessful development hire will lose their job if they aren't hitting certain thresholds.
The main thrust of the argument is that by compensating development professionals with a percentage of money raised, an organization creates misalignment between personal financial gain, donor expectations of money donated, and organizational mission. This line of thinking is fundamentally flawed for a variety of reasons and is another way in which the nonprofit sector needlessly handicaps itself from achieving maximum impact in the community and from scaling that impact by aligning compensation (personal drivers) with impact (mission).
The idea that financial compensation shouldn't be a driver for employees at nonprofit organizations ignores basic human nature and what drives people to perform at their highest levels. It's this general philosophy that keeps salaries low, and reduces the likelihood that our most talented leaders move into the nonprofit space. Not to mention, it ends up costing our communities countless opportunities for amazing talent, focused on our biggest problems.
In general, Development professionals should be incentivized to out-perform just as any team member should be. The tools an organization has certainly include compensation structures, but also include raises, titles, promotions, scope of responsibility, internal and external recognition and many more.
The important thing to remember is that everyone is driven by the same things: Autonomy, Mastery and Purpose. Focus on those key drivers for your team and make sure your rock stars are well cared for.
Even if your organization feels handicapped by the AFP rules above, take it as an opportunity to get creative with your bonuses, raises and the other tools at your disposal. At the end of the day, it’s your job to ensure your Development team members are rewarded for out-performance and hard work -- it's an incredibly hard job.