​The People Side of Fundraising – Part 2

Well, not surprisingly, that article never did happen because shortly thereafter, the world went topsy-turvy as we all began to grapple with the COVID-19 pandemic. But, in a spirit of ‘better late than never’, we are pleased to circle back and share this second article, which focuses on how recognition, rewards and incentives can play a role in greater retention.

Of course, turnover is not new and we’ve in fact explored this topic in some depth on previous occasions, both through the lens of Retention  as well as Talent Development. But we’re circling back to the topic because, thanks to some recent work by the Research + Analytics team at KCI, we now have some new evidence about the specific types of rewards and recognition that make a positive difference to retaining fundraisers.

And, given the seismic changes that both the pandemic and the growing focus on inclusion will have on Canadian workplaces, the time feels right to shine a light on what organizations can do to ensure some degree of stability in their staff. With respect to the pandemic, it’s unclear what the long-term effects will be, although we are hearing more and more that some employees, particularly women,  are choosing to exit the workforce. Anecdotally, many employees are ‘waiting out’ the pandemic, happy to have remained employed through this time but may be thinking about making a move as things return to ‘normal’. Add to this the growing expectation of employees that their workplaces be safe, supportive and reflective of Canadian society and employers may find the need to ‘up their game’ in order to retain good staff over the coming years. Given these forces as well as the reality that turnover, to a greater or lesser extent, will always be an issue, we hope that the findings from our research can help keep it in the ‘lesser’ category at your organization.

The data sources on which these findings are based can be found in the box How did we generate these insights? We want to extend a very big thank you to all organizations that participated in these various research projects and whose data have, in part, informed our findings. Not only did their participation support their own success by building a deeper understanding of their particular situations they have also been invaluable in building and deepening our knowledge and understanding of the sector and our craft.

The Challenge of Turnover

If you doubt that turnover of fundraising staff is an ongoing issue, we’ll start by saying that, based on our research, the average amount of time that Development Officers and Coordinators stay in these roles at hospital foundations in Canada is 1.8 years, and the average tenure at the employer overall, including position changes within the organization, is just over 3 years.

It is important to acknowledge that some turnover is healthy for organizations, as new team members can often bring diverse knowledge and experiences as well as fresh energy for looking at problems in new ways or spurring innovations, but the challenge is to ‘walk the line’ and find the right balance between excessive turnover and stagnation. And average duration of 1.8 years in a role doesn’t feel like we’ve successfully found that balance.

Before we answer that, let’s pause to remind ourselves of the hard costs of turnover. We know that staff turnover in and of itself has a cost in the time spent recruiting, hiring and training new staff, as well as the work required to cover for the vacancy in the interim and manage the transition. While there is no single industry standard used to accurately measure the full cost of employee turnover, The Society for Human Resource Management’s 2016 Human Capital Benchmarking Report indicates that it takes an average of 42 days (two months) to fill an open position. The Retention Report: Trends, Reasons & A Call to Action by Work Institute in 2019 suggests that the estimates that the average total cost for turnover in the US is $15,000/employee. On top of that, it’s important to factor in the lost opportunity costs associated with staffing turnover, as changes affect the continuity of relationships with donors and volunteers, as well as teamwork and staff effectiveness.

But, going back to the ‘does retention link to effectiveness’ question, the data says it does. Drawn from our 2019 Hospital Foundation Compensation Benchmarking study, an analysis of the average total fundraising revenue per Fundraising FTE (Principal, Major and Annual Giving) by the average number of years staff had been at the foundation shows a general trend upward over time. Note that this analysis looks at the time people have actually been in their current positions, not just at the foundation.

The ‘sweet spot’ for maximizing fundraising success is if fundraising staff remain in their current roles for an average of about six years.

The key finding is that there is a correlation between longer tenure of fundraisers and a foundation’s fundraising efficiency per fundraiser FTE, which appears to peak at about six years. In other words, the ‘sweet spot’ for maximizing fundraising success is if fundraising staff remain in their current roles for an average of about six years. Interestingly, beyond that point efficiency actually begins to decline, potentially due to lack of career progression and engagement if there is no opportunity to grow.

TENURE DOES MATTER, SO WHAT CAN ORGANIZATIONS DO TO RETAIN FUNDRAISERS?

Charities are using a variety of approaches and tools to both attract and retain staff. It’s important to note that the reasons people join, stay, or leave particular organizations go far beyond individual factors and include things like organizational culture, management styles, organizational mission, and employee inclusion (among others).

In this article, however, our focus is on the programs or tools organizations can utilize at the individual level, rather than at the organizational level (i.e. programs available to all staff, such as pensions, for example).

These elements include financial rewards specific to individuals, such as:

• Competitive compensation compared to peers
• Funding for professional development, coaching, or tuition for education or programs such as management training and leadership development
• Paid memberships for professional organizations
• Incentive compensation / pay (i.e. lump-sum bonuses)
• Merit-based raises based as well as or instead of those based on time in the job
• Retention or project/campaign completion bonuses

Non-financial rewards (although they do entail costs for the organization) are also important, including:

• Flexible work environments, including working from home options or flexible schedules
• Quality equipment, tools, and resources to do their jobs
• Increased vacation, sabbaticals, and other leave options
• Internal promotions, lateral moves, and cross-training to enable skill-building and career growth
• Coaching, mentoring, and deployment on special projects to build skills and career

Using our 2019 hospital foundation data, we analyzed a number of these factors to identify the ones that aligned most with longer staff tenure. In doing that analysis, we looked at total time at the organization rather than time in the current position only for two reasons. First, having an individual progress through the ranks is generally considered a successful outcome of retention efforts; and second, some of the participating foundations could only provide this metric due to many internal promotions and shifts in people’s roles over time.

In examining which factors correlated with organization with longer total average tenure, it was interesting to see those that made a difference and those that seemed not to. (Reminder, the average time individuals currently working at a hospital foundation in our study was 5.1 years for all positions).

WHAT DOESN’T MATTER:
Factors not correlated with Longer Average Tenure

1. Competitive compensation at the Foundation level: Foundations that paid higher salaries for their positions relative to their respective benchmarks did not necessarily have longer staff tenure.  And, among those offering incentive pay, the relative levels did not appear to impact tenure, although there are relatively few positions in some categories to analyze.

2. The relative amount of salary increase, through merit or other means.  At the foundation level, the presence or absence of a performance-based process to review performance and recognize accordingly appeared to be the key difference, rather than the actual size of that increase for specific positions or foundation average.

3. Cell phones or other equipment available.  Here, we just didn’t have enough data to analyze the implications of this form of recognition.  However, it is important to note that having ‘the tools to do the job’ is frequently cited as a key factor by employees when surveyed about their job performance and satisfaction.

It’s important to stress that while we found correlation between these tactics or offerings and longer staff tenures, they are certainly not the only driving factors. For instance, organizations with strong benefits packages likely have other factors that affect employee retention – such as greater emphasis on professional human resource management practices, a positive workplace culture, inclusive leadership and an overall orientation that values its employees. As well, stability of senior leadership is important for employee retention, as leadership turnover can result in a cascading turnover effect throughout the affected teams.

Benefits, Perks, and Incentive Pay

In considering these findings, it is important to remember that the hospital foundations included in much of this research are a relatively similar group, and all offer roughly comparable benefits, which may be distinguishing factors when compared to charities in other sub-sectors. For example, essentially all of the hospital foundations in the study offered the following benefits:

• Defined-benefit pension plan or comparable retirement savings program
• Extended Health and Dental benefits
• Long-term disability and life insurance
• Short-term disability coverage and/or adequate sick time provisions
• Vacation Benefits, with at least three weeks of vacation leave to start and typically an additional week of vacation for management staff

We highlight this to flag that, while our focus in this article is on individual level rewards, you may find that not offering a pension (or the other basic benefits listed) might matter a lot more to retention than some of the factors we’ve noted above.

The final area we want to explore is a hot topic in compensation and retention – incentive compensation, otherwise known as ‘bonuses’. Incentive compensation is not the same as a ‘commission’ or an award tied directly to the amount of funds raised, which is not in keeping with either professional standards or Codes of Ethics from organizations like the Association of Fundraising Professionals, or guidance from the Canada Revenue Agency (see Incentive Compensation – Ethical Guidelines and Discussion for further details). Rather, incentive compensation is typically a modest amount of potential ‘bonus’ tied to individual or team activities and fundraising achievement. Metrics used to measure performance can include personal visits, solicitations, new donors acquired, donor upgrades, and so forth.

Traditionally, this type of recognition and incentive was only in place for an organization’s most senior fundraisers and/or executives. However, our benchmarking reveals an emerging trend of organizations shifting to an ‘all in it together’ approach with respect to incentive compensation for staff – where there is either no incentive compensation for anyone, or a team-wide approach to some or all of the potential incentive pay. Organizational leaders who have shifted to this model indicated this was a deliberate strategy to build team camaraderie, support a collaborative culture, and create a focus on overall foundational goals.

We examined average tenure based on whether incentive compensation was available to all staff, some staff or none. Interestingly, we found there was relatively little difference in retention between foundations where all staff were eligible for incentive pay and those where no one received incentive compensation (5.4 years vs. 5.5 years). However, foundations where some positions were but not others had an average tenure at the foundation of only 4.3 years. This group include a broad range of scenarios, from only the CEO being eligible for incentive pay, to others where only organization executive or executives and fundraisers were eligible for incentive compensation.

The bottom line is that it appears that equity matters when it comes to incentive compensation.

These results tell us that employee retention is highest at hospital foundations where either no one is eligible for incentive pay, or everyone is eligible. In other words, “we’re all in this together”.

One note of caution is that these findings are based on a relatively small sample set of 37 Canadian hospital foundations and implies correlation not causality. There are undoubtedly other factors that contribute to the differences between these foundations. Regardless, the finding is interesting, and should be considered by leaders that are thinking about implementing or adjusting an existing incentive compensation program.

Implications for your organization

Recognizing that how you recognize and reward your staff does have an impact on retention, keep the following points in mind when designing your activities:

• Flexibility and choice are important. Organizations offering flexible work schedules or even the option of compressed work weeks had slightly higher retention, as did those that offered flexible Health Care Spending Accounts to all staff. We believe these are examples of a broader trend where employees appreciate having the choice to spend their time and benefits in ways that suit them best. In addition to these specific benefits, consider other ways in which you can implement flexibility and choice into your workplace. As we continue to navigate the pandemic, and even as we move past it, anticipate that employees will continue to value choice in their employment relationship.
• Equity matters. It was also notable that when we analyzed specific benefits like Health Care Spending Accounts and Incentive Pay, the highest average employee tenure was found at foundations that offered the programs to all staff, rather than only for selected positions. This focus on equity and team consistency may be why we have seen a trend of many foundations moving in this direction.
• Personal appraisal and recognition a must. In our analysis of retention and the correlation with salary increases based on performance, the presence or absence of a performance-based process to review and recognize individual performance appeared to be more important than the actual size of that increase for specific positions or foundation average. In other words, there is no substitute for ensuring that staff receive a chance to discuss their performance and be personally recognized for their contributions by their manager in a tangible way, at least annually if not more frequently.
• Size of organization not a factor. Everything explored here is possible regardless of organization size. Smaller organizations can be challenged to retain employees over the long term, due to limited opportunities for title, career, and salary progression. However, small organizations can have an advantage in offering flexibility, developing a caring, cohesive, and inclusive team culture, and providing personalized feedback and recognition to employees.

And finally, we’ll end by highlighting what is likely the most important point of all…

Which is that there is absolutely no substitute for creating a healthy working environment and culture. None of these tactics will be effective if the organizational culture is toxic, employees don’t feel supported and valued or if management and leadership is lacking. Rather, they can only be used to their maximum effect in instances where there is a positive organizational culture rooted in competent management and leadership, a strong sense of team camaraderie, sound HR practices and a philosophy that genuinely values employees and the critical role they play in the organization’s success.

– Celeste Bannon Waterman, KCI Partner / Lead, Research + Analytics. Author

– Tara George, KCI Partner / Partner / Lead, Search + Talent. Co-author