Attracting and hiring great leadership candidates is a constant challenge for the nonprofit industry. Retaining top talent can be even harder and both require creative, strategic solutions.
A recent survey from the National Council on Nonprofits found that 51.7% of nonprofits say they have more job vacancies than before the pandemic, reasons including: budget constraints, stress and burnout, challenges caused by government grants/contracts, and salary competition. Nonprofit salaries, in particular, often lag behind their for-profit counterparts for similar leadership positions and present a recruitment and retention challenge.
In the same report, 72.2% of nonprofits said salary competition affects their ability to recruit and retain team members. Faced with this challenge, many have adapted, leveraging creative solutions to elevate the appeal of their organization and culture. Creative options include flexible work schedules, such as hybrid and remote work, unlimited paid time off, student loan forgiveness, continuing education, professional development, and certificate opportunities.
Among these creative solutions is the use of metrics-driven bonuses to supplement base salary in a compensation package. A number of larger nonprofits have been offering this type of incentive for some time. Many of the nonprofit leaders I have worked with—even at smaller organizations—recognize that even modest bonuses can be an important part of the recruitment conversation if they want to be competitive in this hiring environment.
Five Things to Know Before Using Bonuses in Your Nonprofit Search
- Signing vs. Performance-Based Bonuses – When people hear the word ‘bonus,’ many think of performance bonuses that are in place for senior team members based on meeting individual goals and organizational benchmarks. There is another option – a signing bonus – in the form of a one-time payment to incentivize getting to “yes” with a top candidate. This can be a great way to demonstrate good faith and address a salary expectation without disrupting parity or a salary cap.
- Ethics of Bonuses for Fundraising Leaders – During executive searches for fundraising roles, it’s not uncommon for well-intentioned organizational volunteers to inquire, “Can we offer them a percentage of the funds they raise?” While this is a very natural question, especially coming from individuals who have operated in the for-profit sector, percentage-based bonuses are not in keeping with the established ethics and best practices for fundraising. The alternative to this path is the performance-based bonus, where results are measured and weighted to determine a bonus. This type of system is applicable to both fundraising and non-fundraising leaders, customizable according to the KPIs of the respective role and seniority at an organization. An experienced executive search consultant can help you and your leadership team determine what might be right for both your organization’s culture and operating budget.
- Not a Solution for Mismatched Expectations – Bonuses are a way to help ensure compensation is competitive but should not be considered a solution for mismatched salary expectations long-term. One of the first questions our executive search experts ask when assessing an organization’s needs is: “Do you have the ability to stretch the salary for an exceptional candidate?” Ensuring each party’s expectations are aligned before the final stage of candidate recruitment is key.
- Building Block of DEI – Transparent pay structures are a cornerstone of DEI commitment from an organization, especially when it comes to hiring. Guirlaine Belizaire, Vice President of Diversity, Equity, and Inclusion at Development Guild, reflects, “Salary transparency is a key component of equity in today’s job market and is required in many states. Including salary ranges goes a long way to establishing trust and your organization’s commitment to inclusion with candidates.” The same goes for clear and upfront communication about the ability to supplement compensation packages with bonuses and other creative benefits an organization might offer.
- Budget and Culture Issue – On the surface, implementing a bonus can be a solution for rewarding results while remaining within the parameters of an organization’s budget. Digging a little deeper, incorporating a bonus structure and surfacing it early during the interview process can send a strong message to candidates about how employees and their contributions are valued. Additionally, it can set both candidates and the organization up for success by establishing an accountability structure with mutually agreed-upon goals and milestones.
Our search consultants at Development Guild serve as expert advisors, implementing creative solutions to ensure our partners find and hire candidates who will succeed in their roles and meet the leadership teams’ expectations. Our goal is to help remove barriers so that when there’s an excellent, mutual fit, everyone’s response is a resounding yes—not “I wish we could have made it work.”
If you’re curious to learn more about how leveraging a bonus structure could work for you and your organization, you can schedule a consultation here.
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