Performance Related Pay in the Charity Sector - does it work?

As part of our ongoing programme of topical debates with HR leaders from across the Charity world, Oakleaf Partnership today had the pleasure of welcoming Directors and Heads from some of the country's leading Charity brands to engage in a lively discussion around the thorny subject of performance related pay within the Charity sector. From the views and experiences shared by the group it was clear that PRP in the context and confines of the Charity sector is, in the main, felt to be a pretty ineffective tool in terms of driving improved performance. And the feeling in the room today was that this is the case at both an individual and organisational level.  Key points raised today included:

• The importance of performance related reward to be both meaningful and timely to the individual and organisation 
• Managers within the charity sector often struggle with having difficult conversations with their staff around performance
• The role of formal performance appraisals as a medium for measuring performance is increasingly felt to be outdated and ineffective
• The impact of formal and informal spot recognition awards can be more meaningful than PRP – size doesn't necessarily always matter (An argument I've been personally championing for years!)
• Are Charities setting the bar of acceptable individual performance high enough in the first place? Are staff being rewarded for performance simply doing what it says in their job description or should there be more consideration given to individual contribution to organisation objectives
• Rather than rely on PRP awards, organisations paying lower quartile salaries in relation to competitors should think about increasing their pay levels to market rate to attract and retain higher level performers
• PRP can be effective when differentiated for individual business unit but are Charities prepared to differentiate within their workforce?   
• Should there be more reliance on discretionary evidence or does the need for regulation trump this?

The question of how to recognise and effectively reward performance in the context of non-profit making organisations clearly remains a complex challenge for many. With the appropriation of income coming under ever increasing scrutiny, this is a debate that will no doubt continue to rage on for some time. One organisation in attendance today had identified that attrition rates peaked within a particular age range demographic and that talent was consistently being lost to larger charity brands where salaries in the upper quartile for the sector were on offer. Could this type of challenge possibly benefit from a more creative and flexible approach to structuring reward and incentives that appeal particularly to the demographic in question? Could smaller Charities pool resources and work collaboratively to employ the creative expertise that may help develop solutions to common issues? In previous sessions we have looked at how organisations in the Charity sector have collaborated successfully to overcome common challenges and realise shared benefits that have offered genuine gain. However, even in seemingly win-win scenarios there were in fact winners and losers, with degrees of benefit relative to aspects such brand strength and income levels.

Hmmm.....maybe size may matter after all?       

#HRCharity #HRCharitynetworking