How Fairness Drives Motivation in Nonprofits

Keeping teams motivated can be challenging in the nonprofit sector, where resources are often limited and demands are high. Yet, motivation is crucial for driving results, achieving goals, and fulfilling your organization’s mission. Equity Theory offers a practical framework for understanding what drives employee motivation and how fairness plays a critical role in employee satisfaction.

What is Equity Theory?

Equity Theory, developed by J. Stacey Adams, suggests that fairness motivates people. Yep, it’s that simple… really! But yet, somehow, this is difficult for many nonprofits to implement within their agencies.

When it comes to that whole fairness thing, it all boils down to an internal calculation that we all do when it comes to our station within our organizations. Specifically, individuals compare their input-output ratio to that of others in the organization. That’s a fancy way of saying that we gauge when we put in to the job versus what we get out of it.

• Inputs: These are the contributions an employee makes, including their time, effort, skills, and loyalty.
• Outputs: These are the rewards employees receive in return, such as salary, recognition, benefits, and growth opportunities.

According to Equity Theory, employees measure fairness by comparing their own input-output ratio to that of their peers. They may feel undervalued and demotivated if they perceive that their inputs exceed their outputs—compared to others. However, when employees believe that they are being treated fairly and that their contributions are rewarded appropriately, they are more likely to be satisfied and motivated to continue working hard.

Why Nonprofits Need Equity Theory

While Equity Theory applies to all organizations, it is especially relevant for nonprofits. Nonprofit employees often take on demanding roles for lower pay than their for-profit counterparts because they believe in the mission. However, when the scales of fairness tip, even the most mission-driven individuals can lose motivation.

Here are some common ways that equity imbalances might occur in nonprofits:

• Unequal Recognition: If only a select few employees receive praise or acknowledgment for their work, others may feel that their contributions are being overlooked, even if they work just as hard.
• Unbalanced Workloads: Nonprofit teams often have to wear multiple hats. However, if some employees feel they are doing more than their fair share without appropriate compensation or recognition, they may become frustrated.
• Limited Opportunities for Advancement: Nonprofits sometimes have flat organizational structures with fewer promotion opportunities. When advancement opportunities are scarce, perceived inequalities in growth opportunities can demotivate staff.

These challenges make it all the more important for nonprofit leaders to ensure a sense of fairness across their organization.

Applying Equity Theory in Nonprofit Organizations

Now that we understand the basics of Equity Theory, let’s discuss how nonprofit leaders can apply this theory in practice to motivate their teams.

1. Conduct a Fairness Audit

The first step in applying Equity Theory is assessing the current state of fairness within your organization. This can be done through a fairness audit—a structured approach to understanding how employees perceive equity in the workplace. Here’s how to conduct a fairness audit:

• Survey Your Team: Send out anonymous surveys that ask employees to assess their perceptions of fairness regarding workload, compensation, recognition, and growth opportunities. Include open-ended questions to gather deeper insights.
• Hold One-on-One Meetings: Take the time to meet individually with employees to discuss how they feel about their contributions and the rewards they receive. These conversations can uncover hidden frustrations that might not come up in group settings.
• Analyze Pay and Benefits: Compare your organization’s compensation packages to industry benchmarks. Even if you can’t match corporate salaries, it’s crucial to ensure that your team is fairly compensated compared to other nonprofits in your sector and that employees in your organization are receiving equitable compensation relative to one another.

After gathering this information, analyze the data to identify any areas where employees might perceive imbalances.

2. Address Imbalances in Compensation and Recognition

Once you’ve conducted a fairness audit, the next step is to address any imbalances in how your team is compensated and recognized for their efforts. This is not just the right thing to do, but it’s also demonstrative of integrity, an element essential for leaders to bolster trustworthiness.

• Review Compensation Practices: If there are gaps between effort and reward, consider how to make adjustments, even if financial resources are limited. For example, while you may be unable to raise salaries, you could offer other benefits like flexible work schedules, additional vacation time, or professional development opportunities.
• Standardize Recognition: If some employees feel overlooked, create a system for regularly recognizing team members. This could be as simple as establishing a “team member of the month” program, giving shout-outs in meetings, or publicly acknowledging accomplishments in newsletters or social media.
• Equalize Workloads: If certain employees are consistently shouldering more work than others, redistribute responsibilities more evenly. Ensure that tasks are assigned based on capability and available time, and communicate clearly to all employees about how decisions are made.

3. Be Transparent About Decision-Making

In nonprofits, transparency is critical for ensuring that employees feel treated fairly. A lack of transparency can lead to misunderstandings, which in turn can create perceptions of unfairness.

• Explain the “Why”: Whenever you make decisions about promotions, pay raises, or rewards, take the time to explain your reasoning (this is what we call Procedural Justice in Organizational Behavior). Let your team know what factors were considered and why the decision was made. This transparency fosters trust and ensures that people don’t perceive inequity where none exists.
• Set Clear Criteria: Clear criteria ensure everyone knows how decisions are made regarding raises, promotions, or recognition. For example, if raises are based on performance, outline the specific metrics or achievements to be evaluated. Following Goal-Setting Theory is one way to do this.
• Involve Employees in Decision-Making: Give employees a voice in organizational decisions whenever possible. Whether through team meetings, suggestion boxes, or anonymous feedback systems, allowing employees to contribute to decisions that affect them increases their sense of fairness.

4. Create Growth Opportunities for All

Like those in any other sector, nonprofit employees want to feel that their careers are progressing. Motivation can drop when opportunities for growth are limited or perceived to be unfairly distributed.

• Offer Professional Development: Even if your nonprofit has a flat structure with limited room for promotions, offering professional development can give employees a sense of growth. Consider providing training, mentorship programs, or opportunities for employees to attend industry conferences or pursue professional credentials, such as the CFRE for development staff.
• Encourage Cross-Training: Giving employees the chance to learn new skills by taking on responsibilities in different departments can help them feel valued and invested in the organization’s success. It also shows that the organization is committed to their professional growth.
• Recognize Non-Traditional Growth: Growth doesn’t always mean a promotion, especially in nonprofits, where opportunities are often more limited than in the corporate sector. Recognize and reward other forms of personal and professional development, such as taking on leadership roles in projects or becoming a subject matter expert within the organization.

5. Regularly Reassess Equity

Equity isn’t a one-time fix. As your organization evolves, so will your team’s perceptions of fairness. It’s important to regularly reassess your approach to equity and make adjustments as needed.

• Conduct Annual Fairness Audits: Revisit your fairness audit each year to ensure that any changes made have the desired impact. Stay proactive in addressing emerging equity concerns.
• Create Feedback Loops: Build regular feedback mechanisms into your organization’s culture. Whether through quarterly surveys or bi-weekly check-ins, gathering employee feedback consistently helps identify potential issues before they escalate.
• Adapt to Organizational Growth: As your nonprofit grows, make sure your equity practices evolve. A system that worked when your organization was small might not be as effective as it is as you scale up.

Conclusion: Building a Fair and Motivated Nonprofit Workforce

Equity Theory provides nonprofit leaders with a powerful framework for understanding how fairness—or the lack of it—impacts employee motivation and satisfaction. By actively promoting fairness in compensation, recognition, decision-making, and growth opportunities, nonprofit leaders can create a more engaged, motivated, and high-performing team.

Remember, when employees feel their efforts are valued and rewarded fairly, they are more likely to stay committed to your organization’s mission. Maintaining a fair and equitable workplace can make a difference in achieving long-term success in a sector where passion is a driving force. It’s not only the right thing to do but ensuring an equitable environment can also help nonprofits avoid legal issues.

Learn more about motivation and management psychology in the FREE Leadership Bootcamp for Nonprofits course.