Payment by results should be implemented carefully

Valerie Morton offers advice on how best to use the tool to incentivise staff

Valerie Morton
Valerie Morton

Q. I am considering introducing payment by results for my staff. What are your tips?

A: Payment by results has been used extensively in the corporate sector and increasingly in the voluntary sector. It can be a useful tool for incentivising staff and has the benefit of allowing you to reward, and hopefully to retain, your best performers.

It also helps you to keep a focus on outcomes rather than processes. Historically, many charities have had pay scales linked to the public sector that have brought with them set annual increments and cost-of-living rises.

The obvious result has been that those staff who have been around longest get paid more, regardless of whether they are the most effective. One advantage of the financial crisis is that it has given impetus to more creative thinking - as in your case.

It is probably no surprise to know that the PbR system also comes with potential challenges. The main problem is the unintended consequences that arise when people are driven by the potential rewards.

These include promoting personal rather than corporate interest and focusing on short-term outcomes to the detriment of long-term objectives. Staff can also feel demotivated by their concerns about the fairness of the system - for example, whether it accurately reflects the part other staff have played in someone's success.

It was concern over the mis-selling of financial products that led the Financial Services Authority to say financial advisers would no longer be able to get commission from product providers from the end of next year.

In the voluntary sector, we also have the complexity of managing reputation with a range of stakeholders, such as donors and beneficiaries.

Whereas customers do not mind how salesmen are remunerated so long as they are selling good products with excellent service, donors' relationships with their favourite charities can be quite different.

Of course, some of these issues can be addressed by using innovative incentive packages, but if they end up being exceptionally complex the benefits can be lost.

So here are my top tips. First, think carefully about which PbR mechanisms fit with the culture of your charity. Commission has particular sensitivities in the voluntary sector - if you are involving your fundraising team, the Institute of Fundraising's code of practice Payment of Fundraisers is essential reading.

Second, consider testing the water with simple and easily understood mechanisms, such as three levels of annual percentage increase based on an appraisal scoring. Third, prepare a robust business case that is backed up by stakeholder engagement. Finally, make sure you have thought through all the unintended consequences of your plans.

- Send your questions to

- Valerie Morton is a trainer, fundraiser and consultant

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