Talent

It’s time we got comfortable with a once-taboo subject: providing increased compensation and bonus for the employees of nonprofit organizations based on individual performance.

But to do it, we need to talk about KPIs.

KPI stands for Key Performance Indicators. KPIs drive the underlying business models of countless private sector companies but are too often nonexistent inside nonprofit organizations, and that needs to be fixed if we endeavor to have our nonprofits achieve their missions. I mean, there’s a reason they are so ubiquitous in corporate America – it is because they work.

Different than outcome goals alone, KPIs break down overarching goals into metric segments that indicate one is on the pathway to success. For example, to ensure a program succeeds at helping 100 people be better educated, one could break that down into segments of program development, marketing and awareness-building, implementation, quality assessment, etc. Output (counting) and outcome (impact) metrics are both important to measure. They create accountability and buy-in, like how a recipe helps to create a finished meal.

KPIs are also important if you want to implement any sort of incentivization structure (or pay-for-performance). Without knowing how to measure success, it will be difficult to provide reward with compensation and bonus.

Wait, nonprofits are allowed to do that? Absolutely.

In fact, I’d argue that the absence of incentivization is likely keeping top talent from considering roles in your nonprofit organization, and may be the reason some of your best talent moves on.

Someone along the journey of the social good sector decided to severely limit nonprofits, creating separate rules that govern them that would never fly in the private sector. Imagine telling Bank of America that providing financial incentives for performance is somehow unethical. It is at the heart of capitalism that the best talent is not only well-compensated, but given a clear ladder to understand what they need to achieve to unlock it.

So why should nonprofits be any different?

It is already hard enough to attract the smartest, most capable people to the nonprofit sector. Compensation in general is much lower than in the private sector. The nonprofit business model is a messy one, with so many stakeholders (board members, donors, funders, volunteers, etc) influencing the staff member’s work. And while successes in business are front page news, nonprofits are rarely celebrated in a similar fashion.

Getting creative with compensation is one area nonprofits can level the playing field (a bit).

We have helped nonprofit leaders at the board and Executive Director level create incentivization structures for their organizations that have become critical to getting the strongest applicants for open roles to consider making a move. Considering a CEO/Executive Director search? It is a near-requirement.

For development professionals, this becomes a bit trickier. As a card-carrying member of the Association of Fundraising Professionals, I ascribe to the principle that one’s salary should not be directly tied to how much money is raised. This is considered unethical and for good reasons – it may create twisted incentivizes that promote the wrong thing. But funding raised can definitely be a part of a more multi-faceted set of KPIs that also rewards for other types of outputs and outcomes, e.g. achieving goals set for face-to-face cultivation, flawless execution of an event, number of new donors attracted.

I predict pay-for-performance to become a best practice of nonprofit human resources in the coming years, a recognition of the way technology has driven accountability and assessment for the sector more generally.

Want to learn more? Considering a search and needing help thinking through how best to create an incentivization model? Reach out and let’s talk: search@nextstage-consulting.com

Photo Credit: everythingpossible

by Ellie Pennybacker

As my summer comes to an end, I cannot express my gratitude strongly enough. Josh, Caylin, and the entirety of the Next Stage team have made this experience so enriching. By letting me jump right in, sit in on meetings, and help where I could, they truly made me feel like a part of the team. Though the summer was brief, it was constantly moving with new and exciting projects and opportunities. My fellowship with Next Stage has exceeded my expectations and left me with a growing interest in the nonprofit sector.

While I was in high school, I was deeply invested in my hometown through volunteer commitments, school programming, and the sheer amount of time I spent exploring the city. The joy of moving to Davidson for school allowed me to fulfill my teenage dream of leaving Macon, but after spending some time abroad and exploring more cities through both travel and research, I realized I had an unwavering affinity for my home town. After this summer, however, I have begun to feel that same connection with Charlotte. It might be because of the fantastic food, adventure, and exploring Charlotte social media accounts that I follow, or possibly I have just been spoiled to see the best of Charlotte through our nonprofit leaders. Regardless, the Queen City has given my hometown a run for its money.

The diverse array of responsibilities and opportunities given to me this summer encouraged me to truly invest my attention in the Charlotte community. Through engaging with nonprofit work from a different angle, I feel as though I got to know a generous, provocative, and growing side of Charlotte. These engagements have been truly impactful as I have been challenged to consider what issues facing these nonprofits are specific to the Charlotte community and which are universal in the larger nonprofit sector.

The past eight weeks have brought realizations, thoughts and questions to mind. To name a few:

• The notion that nonprofits can and should model themselves like businesses was a foreign concept to me before this summer. While I had invested time through volunteering with nonprofits before, I had never invested intellectual energy into considering how nonprofits could move beyond filling a need and become sustainable parts of a community. Reimagining nonprofits within a working business model was transformational in how I understand the processes and difficulties of this work.
• The multitude of ways to diversify revenue streams for nonprofits was shocking to me. After being able to be a part of two CULTIVATE workshops and working alongside each impressive participating organization, I was overwhelmed by the numerous ideas discussed to diversify revenue. The shock and worry of knowing there are over 4,000 nonprofits in Charlotte quickly melted away as I witnessed the expansive ideation coming from conversations with these organizations.
• Corporate involvement in the nonprofit sector is much more prominent than I once thought. The interconnectedness of the for-profit and nonprofit sectors beyond monetary and good donations and into the inclusion of sponsorship or company-made foundation grants was previously unimaginable. While I still have a lot to learn about these relationships, and I’m regrettably missing the next CULTIVATE module on sponsorship, I remain interested in the relationships these interactions create across sectors.
• The specific and universal difficulties of nonprofit work has been a recurring question in my mind. In honesty, I think only experience will answer my question. Yet, I like to think that this summer took me leaps forward in beginning to understand the answer. I have greatly enjoyed learning not only how nonprofits can interact, grow, and replicate but specifically how they can do so within Charlotte.

It has been eight fantastic weeks but, alas, I am still only 20 and have much more to do before I discover who I want to be when I grow up. What I do know, is that I am extremely grateful for the experiences I had this summer and will continue to reflect on how Next Stage has shaped my vision of nonprofit work in Charlotte and beyond.

Photo Credits: Eduardo Mayo and Julia Fay Photography