Comments
This is an intriguing idea, and I'm all for experimentation in nonprofits generally and with compensation specifically. I also find nonprofit performance incentives potentially valuable and interesting.
One problem I see is lots of funders would hate this: from their perspective it creates a sort of tax on their donation. Instead of the whole donation going to whatever new thing they'd want to fund, a percentage gets set aside for current employees. I think this is part of the reason (per Jared's smart reply) that grantwriting commissions are looked down upon in the industry.
Another problem could be that lots of donors want to feel like nonprofit employees are not motivated by money, and implying otherwise could make the nonprofit unatttractive.
I think the broader principle-agent issue is that funding and results are orthogonal to one another (probably the central problem for nonprofits generally), so compensating based on funding raised incentivizes employees to pursue flashy or unfairly charismatic projects, overpromise, and embellish or lie about results. (Though to be clear, nonprofits/nonprofit fundraisers already face these incentives).
One analogous idea I've noodled around with a bit is results-based bonuses where you set a goal, a probability of success, and a dollar figure for achieving the goal, and you set aside a pool of money where if the employee achieves the result they receive the amount it's worth divided by the estimated probability of success. If my job were an example, this would look something like if 1Day Sooner's goal is to have a 50% chance of our work being the but-for cause of saving ~4 million DALYs by 2030, you could set aside $100K of my compensation each year and if we achieved the goal, I'd receive 2x that. one problem is a lot of results take a long-term to materialize (and are hard to prove/calculate reliably), and you might have to pay too many premiums (to adjust for risk + time value of money) to make it worth it.
FWIW: in the 2010s I remember being surprised to learn that the Association of Fundraising Professionals opposed percentage-based compensation for full-time nonprofit fundraisers.
I don't have a refined view on pros/cons of variable compensation structures like this in certain nonprofit contexts, but am sharing this primary document in case valuable as food for thought. Some excerpts are below.
Thanks, that's interesting. I think some of their reasoning seems reflexive: in particular their first and third stated reasons only state possible downsides without weighing them against the comparable upsides of incentivising work that supports the charity's outputs.
The rest doesn't seem like it would apply to the model we're thinking of, in which all staff would receive a percentage of all donations. Eg:
This doesn't seem to apply if it's not just the fundraising staff (and to be clear, we don't have anyone for whom fundraising is more than a tiny fraction of their role).
And
This doesn't seem to apply if staff were getting a percentage of all donations.
Their fourth point - that nonprofits do better when they 'actively involve' volunteers is unsubstantiated and, IMO for most nonprofits, false. See eg these discussions on the subject.
On their last remaining reason:
That's part of what I hoped to find out by posting here. I would hope that specifically EA donors would be actively in favour of the idea if it seemed to improve incentives, though if the discussion around the question so far is representative it seems not...
Yeah, I was similarly uncertain about how much AFP’s policy serves to “defend the 20th century status quo of nonprofit operations” (which much of EA is challenging, for good reason) versus good-faith efforts to make the field operate well — putting aside fundraisers’ personal economic interests. The balance is a bit murky…
Do you think there are good arguments against this kind of compensation even within an EA context?