Building on outcome-oriented annual incentives

Nonprofit organizations have had to innovative and flexible in tough economic times, and that is no less true in the area of compensation, especially for the top positions. Even in the executive offices, doing more with less has been a recurring theme.

Speaking during the recent American Institute of CPAs (AICPA) Not-for-Profit-Industry Conference, Eddie Adkins said that the new normal for salary increases, at both management and non-management levels, is 3 percent. What is also becoming normal is variable compensation or variable pay, hereby employees are rewarded, sometimes throughout the year and sometimes at the end, for performance above certain expectations.

Adkins said that although a recent survey showed only 17 percent of organizations using variable pay, that number is rising. The trend is especially prevalent in health care, trade organizations and social service.

Adkins said an emerging trend is outcome-oriented annual incentives, with the following objective criteria as best practices:

  • Financial performance. No money, no mission;
  • Resource/expense/financial management. Efficiency management is critical in this day and era of getting more out of less;
  • “Stakeholder” satisfaction. Efficiency and financial performance must coincide with tax-exempt mission;
  • Quality. Outcome, experience; and,
  • Growth (specialty market share, program participation). Strategic growth, based on core services or emerging service lines.