An examination of incentives in a not-for-profit organisation

The purpose of this study is to ask whether it is appropriate to use a business sector approach to management in a Not-For-Profit (NFP) organization. In this case the use of an extrinsic reward, a cash bonus, to improve performance in a NFP that provides services to the disabled. Agency theory is seen as providing an explanation of motivation in the business sector however we argue that the different cultural and organisational conditions weaken the explanatory power of agency theory in the NFP sector. However, stewardship theory may provide a more complete explanation of motivation for third sector organizations. In pursuing this investigation, we were mindful of Brinberg's (2009) encouragement for a more outward-looking approach to management accounting issues and to allow practice to inform theory. A survey was given to staff of a NFP organisation to gauge the impact of the introduction of a bonus scheme. The staff were asked to respond to a number of statements that centred on the motivation of staff and the culture of the organisation. Staff were asked to the statements using a five point lickert scale. Analysis of survey data has shown that a stewardship theory best explains motivation of employees in the NFP sector. The introduction of a bonus scheme had little or no impact on staff behaviour -- staff camaraderie, the relationship of trust between management and staff, and the maintenance of an attitude of service to clients. This finding has important implications for the management of NFPs. To maintain and improve motivation, management needs to look to the goals or mission of the organisation -- in particular, to see that the goals include care of and service to clients. The originality and value of this paper stems from the fact that the data was gathered in a NFP organisation that had introduced an extrinsic reward system.