We (CEEALAR) have been talking to our paid staff about the idea of doing something like 'annual compensation of $x plus y% of any funding the organisation receives' - the idea being to try and emulate the incentives behind the stock-based compensation that startup employees receive.
I'm surprised that on reflection I haven't heard of other EA orgs trying something like this. Does it seem like a reasonable idea? Are there hidden pitfalls - or upsides? Are there more nuanced ways of doing something like this that might work better?
A couple of concerns with the initial idea:
- An employee of a for-profit gets to keep their stock even after they leave, so long-term benefits they bring to the org would still be rewarded in expectation, which wouldn't apply in this approach. Perhaps we could make the per-instance value of y lower, but commit to 'paying' them a gradually decreasing percentage of donations even after they leave?
- Unlike a for-profit we're not trying to maximise income - the ideal would presumably be that we stabilise long-term at maybe a couple of years runway, or a single year, but with a stream of reliable regular donations coming in. So as long as the organisation keeps operating, y would end up being a constant, rather than the variable with unlimited upside that stock would be. Maybe this is just fine, though? The better work the staff do, the more likely the org is to keep operating, and the value of y in that scenario could just be 'something slightly higher than a simple salary would have been' - without the huge potential payoff, but still aligning incentives pretty well.
ETA: To clarify based on comments, the idea is not that staff would necessarily be involved with fundraising, any more than startup employees are expected to promote the stock price. The idea is that 'nonprofit staff doing a good job overall' is to EA funding as 'for-profit staff doing a good job overall' is to stock price: a noisy signal, but more encompassing than perhaps any other.
I'm much more excited about results-based compensation than funding-based compensation, for nonprofit employees.
Some quick points: