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.
How did we generate these insights?
While the findings shared in this article are drawn from a variety of input sources, they have been particularly informed by our 2019 KCI Hospital Foundation Benchmarking Study. Conducted every three years, it brings together Canadian hospital and healthcare foundations in order to better understand compensation levels and practices and to establish sector-specific benchmarks and salary ranges. The insights gleaned from the Study not only inform organizational best practice related to compensation and staff allocation, but when compared over time yield rich insights into the shifting nature of the industry.
In 2019, 37 foundations participated in the Study, representing a diverse range of foundation size, type, and geography. The participating foundations provided the data related to the following:
- The institution they support, and the reciprocal support it provides the Foundation;
- Campaign status, goal and progress;
- Foundation revenue and donor counts;
- Details for ALL positions in the foundation, including responsibility allocation, supervisor, tenure of incumbent, management responsibilities and more; and
- Compensation details for each position, including base salary amounts + incentive compensation (if applicable), benefits and perquisites.
As with all our studies, organizations provided the data confidentially, and KCI analyzed and categorized the information to produce detailed benchmarking results. In particular, we coded and classified foundations and positions to ensure comparisons were fair and appropriate, and that findings remain confidential when presented. Each foundation received a 100+ page report with summary-level findings and insights, and a detailed benchmarking section that shows exactly how their foundation and position compensation ranks against peers while preserving participant confidentiality.
Our findings have been further informed by insights from numerous other sources, all of which have been factored into the conclusions and insights being shared in this Series:
- KCI’s Executive Search + Talent practice, which has worked with over 500 charities over the past decade.
- Customized compensation reviews conducted for over 40 senior fundraising and leadership positions in 2018 and 2019.
- The 2018 KCI Leading Indicators & Activity Metrics benchmarking study.
- KCI’s benchmarking studies in the Canadian higher education sector.
- Our work with clients across Canada on campaign studies, revenue generation plans, and capacity assessments in particular.
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.
Why People Leave
- Over 77% of voluntary turnover is preventable and includes push factors such as career development opportunities, work environment, management behavior, job characteristics, compensations and benefits, and work-life balance. 24
- A negative workplace culture can contribute to employee turnover, with three-quarters of workers surveyed saying management is responsible for setting the tone.
- Dissatisfaction with pay or benefits (43%), not enough advancement opportunities (35%), and lack of learning and development (28%) are the top three reasons people leave their jobs. Career development (22%) and work-life balance (12%) are also often cited reasons for leaving a job, and these numbers are on the rise. 25
- Employees are at a high risk for turnover their first year. Over a third (38.6%) of turnover in 2018 was due to employees leaving in their first year. Almost half (43%) of new employees who left did so within their first 90 days. 29
- People of color who experience microaggressions in the workplace are more likely to quit. In the United States and Canada, workers of color who reported feeling highly on-guard due to workplace biases were more likely to quit than those who reported lower levels of feeling on-guard.
- Inclusive Leadership Can Reduce Turnover. High feelings of employee belonging have been linked to a 50% drop in turnover risk. Inclusive leaders can increase employees’ experiences of being valued, authentic, trusted, and psychologically safe.
- Employees who lack access to flex work are twice as likely to say they are dissatisfied.
- Stressed employees are three times more likely to quit
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).
Factors Correlated with Longer Average Tenure
1. Flexible Work Schedules. The majority of foundations, 84%, reported that employees have flexibility around their workday schedules, within reason and as appropriate for their role. Those who did not allow flexible work schedules, however, had an average staff tenure of only 4.4 years. A smaller group offered compressed work weeks (i.e. compressing the hours worked into 4 days, or over 9 days every two weeks), but those who did had slightly higher average tenure of 5.3 years overall.
Given that this survey was undertake pre-pandemic, it is hard to imagine that the importance of a flexible work schedule has not grown significantly, and very likely will be something expected by employees as we emerge into a post-pandemic reality.
2. Paid professional memberships. 78% of foundations reported they offer paid professional memberships to all staff positions, as relevant to their role, and these had an average tenure of 5.4 years. The remaining 22% only offered paid memberships to Executive or management staff, and those foundations had an average tenure of only 4.1 years.
3. Health Care Spending Accounts. Distinct from standard extended health and dental benefits, HCSAs provide staff with a budgeted amount in an ‘account’ that they can use for a variety of specific health care benefits. This option can be simpler for organizations to manage and budget and offers employees flexibility to use the budgeted amount for.
32% of foundations reported offering HCSAs to all or most of their staff, and for them the average tenure was 5.7 years. Those who offered it to their Executive team members only had an average tenure of 5.1 years, but those who did not offer this benefit had average tenure of only 4.6 years.
4. Self-funded leaves. This benefit, wherein an employee typically ‘banks’ a portion of their salary for a period of time and then continues to be paid during a period of leave, and critically still receives benefits and pays into pensions if applicable, etc., was offered by a small portion of foundations in the study (16%). Average tenure for those foundations was 6.2 years.
5. Increases to Salary based on Performance (Merit). Just over two-thirds of the foundations provided increases to salaries in the past year based in whole or in part on the individual’s performance. These organizations saw a slight increase in average tenure to 5.2 years, while the remaining foundations had average employee tenure of 4.8 years. It is important to note that foundations that do not provide merit-based raises typically still give annual raises, but they are based on other factors like time in the job only (step increases) or across-the-board salary increases based on inflation or other factors.
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.
Incentive Compensation – Ethical Guidelines & Discussion
Important to remember, however, that the incentive in itself does not lead people or teams to achieve outcomes which they are incapable of achieving due to lack of resources, capacity of the donor and prospect base, or skills or competence. Therefore, incentive pay is not a substitute for good management and coaching, appropriate training, and clear direction and articulation of expectations.
The primary challenge with incentive pay is to ensure the goal requirements to award incentive pay are fair and achievable, consistent across the organization, and in keeping with the ethical standards of the profession. Specifically, the Association of Fundraising Professionals (AFP) prohibits members from tying incentive compensation to fundraising performance because such arrangements can encourage fundraisers to put personal gains ahead of the best interests and needs of the organization and donors. According to the AFP Code of Ethical Standards, members shall:
- 21. not accept compensation or enter into a contract that is based on a percentage of contributions; nor shall members accept finder’s fees or contingent fees.
- 22. be permitted to accept performance-based compensation, such as bonuses, only if such bonuses are in accord with prevailing practices within the members’ own organizations and are not based on a percentage of contributions.
In addition, on April 20, 2012 the Canada Revenue Agency (CRA) issued Guidance CG-013 Fundraising by Registered Charities (replacing the previous version of Guidance CPS-028, Fundraising by Registered Charities). According to this guidance, when evaluating a charity’s fundraising activities, the CRA will consider a range of indicators and factors, including the commission-based fundraiser remuneration or payment of fundraisers based on the amount or number of donations.
- 145. A charity should establish accountability processes for the supervision and evaluation of in-house fundraising personnel. A charity should be cautious of putting performance evaluations in place based solely or excessively on fundraising performance or results achieved (for example, bonuses or incentives exclusively tied to the number or amount of donations).
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.
|INCENTIVE COMPENSATION PHILOSOPHY||Avg Tenure at Foundation
|No Incentive Pay for any staff||5.5|
|Incentive pay for CEO only, Executive team, or Executive + fundraisers||4.3|
|All Staff have the potential to earn Incentive Compensation (although amount varies by position level)||5.4|
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
Celeste Bannon Waterman, KCI Partner / Lead, Research + Analytics
Tara George, KCI Partner / Partner / Lead, Search + Talent