Are bonuses the right fit for this sector?

Some charities dangle the carrot of the bonus, but it's rare and can be a self-defeating way of working

Bonuses are a concept rarely associated with charities, but a look at the latest accounts for Which? show they are present in the sector. Its chief executive, Peter Vicary-Smith, received a bonus of £54,000 and a £125,000 long-term incentive payment as part of an overall salary of £490,000. Large long-term incentive payments were also paid to other Which? senior executives who work on its commercial activities: £151,000 to its managing director and £139,000 to its group finance director.

Which? argues that all of its charitable activity is funded by commercial revenue, so it is vital that it incentivises senior staff "to deliver long-term, sustainable business growth".

Some charities specifically state they do not pay bonuses to staff. Oxfam says in its annual report that it does not pay bonuses or other incentive payments to any employees, with any pay increases subject to good performance.

According a survey of pay for 2014/15 by the charity chief executives body Acevo, most charities do not pay bonuses. Of the chief executives that responded, only 10.9 per cent received a bonus, with 6.9 per cent getting a personal performance-related bonus and 4 per cent an organisational performance-related bonus.

Third Sector approached six charity chiefs to discuss whether they thought bonuses were appropriate in the charity sector, but none was willing to discuss the matter.

David Fielding, managing partner of Attenti Executive Recruitment Services, which recruits senior managers in the voluntary sector, is sceptical about bonuses in the charity sector.

"I am not convinced that attaching a 10 or 15 per cent bonus is going to be significantly motivating or will drive a particular behaviour we want," he says. "If it is a pure numbers game, such as a sales job in the commercial world, yes it does, because you know what their key performance indicators and sales targets looks like. But there is more subtlety in how a charity chief executive does what they do."

Fielding says purely financial bonus targets can lead to the adoption of harmful and short-term behaviour, but they could be implemented as part of a wider strategy to increase productivity. "On its own as a tool, a bonus is not very effective, but as part of a package of measures it can assist," he says. "But we have to be careful about what values and behaviours it drives. I think sometimes people perceive it as an easy tool, but it is not - it can have negative consequences as well as positive ones."

Iona Joy, head of the charity team at the think tank New Philanthropy Capital, says effective management, such as recognition and encouragement of staff and better opportunities for personal development, can motivate employees more effectively. But she says that there are some occasions when bonuses have a positive impact, such as when a charity recruits an expert to deal with a commercial challenge. If it manages a property portfolio, for example, the charity might want to incentivise the recruit based on financial improvements.

A study published by the consultancy nfpSynergy in October found money spent on staff salaries was the second-biggest barrier to people giving to charity; the first was not enough of the money going to the cause. Joe Saxton, co-founder of nfpSynergy, warns that bonuses fit uneasily with the culture of the charity sector. "The sentiment we hear again and again is that people expect those who work for charities to do it for the love of it, for the passion and because they believe in the cause," he says. "I think most people who make donations and support charities would believe bonuses were not needed to make people work in charities."

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