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Tracking incentive pay trends.

Nonprofit organizations have begun shifting to more formalized incentive plans, incorporating measures of specific performance targets to be achieved by staff at all levels. These targets are being established before, or near, the beginning of the fiscal year and potential payout levels are being tied to specific results.

Determining appropriateness. Organizations interested in exploring incentive pay need to assess their operating environments, cultures, and values to determine whether such a move is appropriate. Here are some questions to help you make that assessment.

* Can you define results or behaviors that will demonstrably advance organizational mission, increase operational effectiveness, or enhance financial results?

* How easily can those results or behaviors be measured? What criteria will you use?

* Would incentives conflict with your stated mission? Or, would incentives that reward advancement of operational or program effectiveness support your mission?

* Can you articulate a rationale for incentive pay that volunteer leaders, constituents, and funders will support?

* Are resources available and systems (e.g., strategic planning, performance evaluation) in place to support an incentive plan?

A case study. A national association that develops and promotes educational programs and services includes among its constituencies academic institutions; corporate employers; and federal, state, and local governments. Because of the specialized content expertise required to develop programs and services, business acumen needed to achieve aggressive growth goals, and leadership skills to create a more entrepreneurial work environment, the association has adopted a compensation strategy of paying somewhat higher than market value for professional and managerial staff. Goals of a five-year strategic plan are revisited at the beginning of each year to assess progress and modify expectations. Goals and objectives are clearly communicated to staff within each department, along with expectations of what they will contribute toward the goals. Performance appraisals include evaluation of results achieved in relation to goals, as well as some key behavioral characteristics aligned to the association's culture. Primary sources of funding are fees for programs and services, in-kind donations, and corporate sponsorships.

Diagnosis. This association has the elements necessary to support implementation of a formal incentive plan: Performance goals are linked to organizational success; an appraisal system is in place to assess individual results; and funding sources rely on increased sales of programs and services and provide an appropriate way to determine results.

Incentive plans can stimulate productivity, promote teamwork, and enhance performance in cost-effective ways. After developing incentives and communicating them to staff, monitor the effectiveness of your incentive plan to ensure that it reinforces individual and organizational performance excellence.

Submitted by Larry F. Beers, lead consultant, James E. Rocco Associates, Inc. (, Rye, New York. E-mail:
COPYRIGHT 2003 American Society of Association Executives
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Title Annotation:Human Resources
Author:Beers, Larry F.
Publication:Association Management
Geographic Code:1USA
Date:Sep 1, 2003
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