Financial reward can be a powerful motivator. The potential for personal profit can provide intense focus and efficiency to almost anyone. Indeed, incentives drive entrepreneurs in their relentless search for success, overcoming obstacles along the way. Money might not be their only motivator, but dollars (the kind they get to keep) are always their favorite measure of success.
That’s mostly missing for most nonprofit social enterprisers. Why? Many folks in the nonprofit sector believe that incentives are not permitted by the IRS. In fact, if structured properly, incentives will not put your tax exempt status at risk. Sales people can receive part of their compensation through commissions; and managers can be incentivized as well — as long as it’s “reasonable.” (Caveat: I am not a lawyer; be sure to discuss with counsel.) Secondly, many nonprofits believe that making a difference in the world is all the motivation that’s needed to get the most from people.
Fair enough, but the fact of the matter is that incentives work. In public radio, where I worked for many years as an executive and now as a consultant, an important source of revenue comes from underwriting. Underwriting is a kinder and gentler form of on-air advertising that public radio stations are allowed to “sell” to companies that want listeners to hear their messages. Some stations incentivize their underwriting staff, others do not. Guess which stations tend to do a better (in fact much better) job of generating revenue to support the station?
I’m confident that many social enterprises would be more successful if they structured incentives that line up with their priorities. Don’t miss out on an important tool that firms in the for-profit sector never ignore.
Consider making greed part of your social enterprise creed. It works.
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Copyright © 2010 Rolfe Larson Associates – Fifteenth Anniversary, 1995 – 2010
Author of Venture Forth! Endorsed by the late Paul Newman of Newman’s Own
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Rolfe Larson provides consulting and training in areas such as strategic planning, market research, feasibility analysis, business planning, marketing and implementation strategies.