Rewards within purpose-driven organisations
This is the second article in our ‘What’s the problem?’ series that explores problems and challenges faced by purpose-driven organisations. Purpose-driven organisations include any start-ups, small businesses, not-for-profits, NGOs, social enterprises, charities and foundations that are working towards making positive social and environmental impact.
Rewards
“We’re not in it for the money. We’re here to make a difference.” -- Sandy (1)
As we have discussed in our profile of people working for a purpose, the standard person attracted to for-purpose work is there to affect positive change, rather than to make money. Powered by ideals, missions and the possibility of changing the world, this sector is very attractive for young professionals. It is therefore an incredibly competitive sector, despite consistently poor reward practices. Even with low salaries and brittle reward mechanisms, chances are that you will find plenty of talented individuals who are willing to work for you. So, then, what’s the problem with rewards?
The problem
For myself and former colleagues, the main attractions for joining a for-purpose organisation have been a strong connection to the mission, and the possibility to contribute in exciting and meaningful ways. Rewards are not a key factor in this initial match - it is between person and purpose, not remuneration. However, while rewards might not be necessary to attract us to these jobs, they are key to keeping us there.
In one study, close to half of those in for-purpose work say compensation was one of the reasons for considering quitting (2). While people may initially be satisfied with their work-reward balance, this satisfaction is challenged by the bumps in the road that come with any long-term relationship. We inevitably run into problems, be it struggling with the direction of the organisation, believing wholeheartedly in the mission, or feeling constrained by limited opportunities for growth and development. It is in these situations, when the going gets tough, that how we are treated matters. And how we are treated in this case means tangible rewards, not airy promises or feelings.
It is easier to be resilient with the challenges of the workplace when you can go back at night to your own apartment to cook nice food, listen to music, recharge, and refocus. It is much harder when, after leaving work late (as you often do), you must face a 90-minute commute to return to a stranger’s living room, which is the only place you can afford to lay your head. When the going gets tough, you can bet that anyone in this position will be looking at opportunities to leave. This problem of retention is so widespread that, rather than focusing on the human cost of poor reward practices, high turnover is simply viewed as normal, or even inevitable.
There are obvious drawbacks to ignoring this issue. In order to achieve the mission of the organisation, willing, passionate staff are crucial (3). Furthermore, the financial and human cost involved in recruiting, hiring, and training can take a significant toll, both on the team and the overall mission of the organisation.
Four mindsets: redux
Understorey has led structured conversations and research with for-purpose organisations, and through this work we have identified four key mindsets around rewards that we believe contribute to poor reward practices.
The “plenty of fish” mindset: Since there is no shortage of willing prospective employees, organisations rarely have to dig deep to retain their workers, or critically examine their retention practices. The parting of ways is, while lamentable, another chance to bring in fresh talent. With a plentiful supply of fish in the sea, it is easy to think that there is no problem, and that retention problems are simply a “necessary evil” in the sector.
The “moral compass” mindset: For-purpose organisations are admirably mission focused. As we have discussed previously, this focus allows organisations to achieve amazing things for culture, for our communities, and for the environment. However, the flip side is that these organisations have a much harder time justifying (both to themselves and others) the spending of money and time on their people.
The “empty coffer” mindset: There is a common belief in the for-purpose sector that we cannot compete financially with the public and for-profit sectors. This is particularly so in smaller social enterprises, start-ups, or non-profits, who may be waiting on customers to materialise or grants to be won. Given these financial constraints, it is considered completely understandable and acceptable that salaries be low and contracts short-term. However, research has shown that even when there is more money to go around, for example in more established larger organisations, low rewards practices are persistent (4).
The “bleeding heart” mindset: A final common belief is that for-purpose work on its own is compensation enough - that the honour of “working for a cause” means you should expect to accept less money (5). In other words, this means that employees must pay twofold for the privilege of working in such organisations: first with their time and commitment (which is often overtaxed), and once again with their pocketbooks! Personally, I find it amazing how absolutely widespread this belief is among employees in for-purpose organisations.
To sum it up simply: There’s no problem so we don’t need to spend the money on rewards, we shouldn’t spend the money on rewards, we don’t have the money to spend on rewards, and why should we spend the money on rewards?
The road ahead
As always, the first step is awareness. Let’s reflect on the four common mentalities - plenty of fish, moral compass, empty coffer, and bleeding heart - and see how they speak to our experiences. How do these often-hidden mindsets illuminate the challenges we’ve faced in our own for-purpose workplace?
For me, it took a startling assertion from my colleague to shake my views that for-purpose employees could also be paid well. She simply said, “maybe we should be getting paid more because we work for the greater good!”
Secondly, let’s think laterally. Many of you may agree with the idea of richer rewards in theory, but think, I literally cannot afford to pay more. This may especially be the case with smaller organisations on tighter budgets. And so, if we cannot compete financially, then it’s time to get creative! Financial compensation is not the only way to reward our employees.
For-purpose organisations are inherently creative - we seek out solutions to some of the world’s most complex and messy problems. As such, we already have much of the imagination and inspiration we need to move beyond uninspired, copy-paste solutions for HR challenges like rewards. Why should we have to copy the reward practices of for-profit sectors?
We need to capitalise on our huge advantage, of being able to attract talented people, who are happy to work for a good cause, for limited compensation. We know that for many people who work with us, factors like faith in the mission, participation in decision making, and opportunities for growth are more important than money:
This is why we believe rephrasing salary or compensation to rewards can be so powerful. It can allow us to think more broadly, regardless of our ability to compensate financially. If we realise that people work for much more than money, then we can offer them a far broader array of rewards to suit their needs.
… and, a word of caution
Our words of optimism now lend themselves to a few of caution - we must be careful about exactly how we choose to implement rewards practices. We have an obligation to ensure that these are applied as fairly as possible across our teams.
Relative wealth and reward are extremely strong psychological factors, potentially more so than just the financial compensation itself. Studies suggest that how our rewards compare with others in our organisation is up to five times more important for employees than the basic sum they receive (6,7). Feelings of injustice are closely linked to demotivation and turnover.
With these words of caution in mind, then, let’s look more bravely at these haunting words: compensation, salary, remuneration, benefits, perks. Instead of facing them with a grimace, wry smile or sigh, or throwing up our hands, let’s look at how we as for-purpose organisations, especially not-for-profits, charities and social enterprises, can take care of our teams both within and beyond financial means.
For-purpose organisations must think bigger, and better, at how we reward our employees. Because although rewards are not the most important thing, they matter a lot.
Understorey envisions a world where purpose-driven organisations achieve and exceed their goals for social and environmental impact.
If you would like to learn more about how we can help, or just chat about some of the challenges you and/or your organisation may be facing, feel free to contact us at hello@understorey.co or through our contact form.
