Should nonprofit pay be based on performance? No, says leading expert.

“If  Supreme court judges were to be paid for their ‘performance’ then we would surely have a higher conviction rate. The same can be said of institutions of education where incentives are given purely on ‘results'” pointed out Prof. Burton Weisbrod, during the plenary session of ARNOVA ‘s 2015 Annual conference, held at the historic Palmer Hotel in Chicago. As the ‘go to’ conference of its kind in the U.S., ARNOVA brings together about 800-1000 top researchers in the field of nonprofit and voluntary sector studies ( or third-sector) as it is commonly known. Weisbrod_Burton

More than answering any questions authoritatively, Weisbrod sought to ask provocative questions, all relating to whether ‘strong rewards can be used to motivate performance.’ His work examines how ‘mixed industries’ such as hospitals, schools – where government, private sector and others come together to offer solutions. Speaking of the challenges of rewarding performance, he suggested that it is very ‘hard to measure things in an unbiased manner.’ For example, how do you know if the hospital gave 2 aspirins to a patient or 4 out of a bottle of 50 – while billing the government for the whole bottle?  It would be inefficient incentive to justify a smaller number of units used, to get compensated; he argued.

Incentivising performance in public oriented systems can distort the system and lead to organizations ‘gaming’ the system – showing inflated graduation rates, greater resources used etc. all in an effort to receive greater ‘rewards’ or revenues from the government. This logic of the private sector can not hold well in the non-profit sector, or the government; which by nature are meant to benefit the underdog and serve those who cannot afford the services of the ‘for-profit’ sector. Similar arguments have been made by other scholars and practitioners – and the crux of this argument is that money, rather than professional judgment is driving these incentives, and it is not good for the profession.

While the U.S. is coming to terms with inequality, race-relations, tensions around the world; and also how the idea of ‘community’ and ‘belonging’ are being re-shaped, Burton’s call is a reminder that there are no clear-cut answers. Relying purely on empirical results and simple numbers to tell the story of performance is fool-hardy, it seems. Similarly, in this interesting talk, Weisbrod suggests that there is a very little understanding among people about how these institutions work.

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