Company Experiments With Tying Employee Pay to Grantees’ Feedback

It was an innovative, even shocking, idea: Use the feedback from grantees to help determine the year-end

bonuses earned by employees of a corporation’s grant-making department. But one California company gave it a try for three years — before abandoning the experiment as too cumbersome to continue.

Larry Goldzband, manager of charitable contributions at the Pacific Gas and Electric Company, in San Francisco, says the idea of using grantee feedback to determine compensation “didn’t raise an eyebrow” at the company, because its management routinely looks for tangible evidence of the difference it makes.

By contrast, he recalls, when he brought up the idea at a conference of other corporate grant makers, “there were audible gasps in the room.”

Although the practice of asking grant seekers for their opinions has gained popularity among foundations, critics of Pacific Gas’s idea say the use of reactions from charities could muddy what should be the primary focus of corporate grant makers, which is how their work advances the interests of their companies.

They also say that such evaluations could prove unreliable, if grant seekers know that their responses will affect the pay of those who support their projects.

Five to 20 percent of the annual bonuses of Pacific Gas and Electric Company workers depend upon the achievements of their department, with the remainder dependent upon the company’s performance.

The grant-seeker survey that determined a portion of employees’ bonuses was in use from 2003 to 2006, and asked grant seekers to rate the charitable-giving staff’s customer service in areas such as communication and fairness. The survey results determined 8 percent of each worker’s annual bonus, but participants in the survey were not told that their responses would have an impact on the employees’ pay.

“We’d heard of one or two corporate foundations that did surveys and thought it sounded like a good idea, that we’d talk to people who requested money from us and ask how we did in responding to requests from a customer-service point of view,” says Dan Quigley, the company’s director of community investment, whose department provides support for economic-development, educational, emergency-preparedness, and environmental causes.

The survey asked whether the utility company’s staff members were willing to answer questions about applications and the grant-making process; whether they responded to applications in a timely manner; whether reasons stated for approving or declining requests were clear; and whether decisions made on grant prosposals were fair. The survey also asked for grant seekers’ overall satisfaction with the corporate philanthropy’s customer service.

Respondents were asked to rank their satisfaction from one to five on various issues, says Mr. Quigley, “with one meaning we don’t know customer service from a hole in the wall, to five, meaning we’re the best thing since sliced bread.”

Anonymous Responses

The survey was developed as a measure of a group of workers’ performance, not as a test of individual merit, says Mr. Quigley. Workers’ bonuses depended on the survey’s evidence that the department was increasing the overall satisfaction of grant seekers.

“We sent it out to everyone who applied for a grant and those who were seriously considered for a grant,” says Mr. Goldzband, who created and oversaw the survey. From 300 to 400 questionnaires were sent out each year, with approximately 100 to 170 returned by grant seekers.

The surveys were completed anonymously. Because the staff members anticipated that those turned down for grants would feel more negatively toward the charitable-giving program than those who received support, their questionnaires were sent on different colored paper — grantees’ surveys were white, rejected applicants’ were yellow — and their results were calculated separately.

The survey was produced and tabulated by the company’s employees with the help of a temporary worker, so costs were nominal, according to Mr. Goldzband.

The survey wasn’t scientific, says Mr. Goldzband. But the results could serve as a telling snapshot of the company’s interaction with charities. If, he suggests, “about 50 percent of grantees said the staffers were unfair and 80 percent of those who didn’t get grants said the same thing, we’d really need to rethink how we made decisions.”

To determine the amount of their year-end bonuses garnered from the survey, the department provided company directors an average of the scores from one to five assigned by both grantees and rejected grant seekers on their overall satisfaction with the grant-making program.

The first year’s target was an average response of four, Mr. Goldzband says: “We felt that that was a ‘B’ and if we couldn’t reach that, we had no business doing what we were doing.”

In 2006, the last year a portion of an employees’ bonuses were based on the survey, the department’s target was 4.2, and the score it received was 4.19, so the company rounded up and gave employees nearly all of the 8 percent of their bonuses the survey was meant to determine.

But as time passed, says Mr. Quigley, the survey’s limitations revealed themselves.

“There is a company-wide team of high-level directors who assessed the results of these kinds of measurements and then summarized them into global numbers that affected each department’s pay,” he says. “The process was extraordinarily cumbersome for the company.”

In the beginning of 2006, the company changed the way it calculated employee bonuses, in an effort to be more consistent across all departments, Mr. Quigley says. But grant seekers are still asked to complete the survey annually, so staff members have a sense of how well they are serving charities.

Two of the company’s grant recipients — who were unaware of Pacific Gas and Electric’s practice until they were interviewed for this article — said they think using reaction from charities in such a way raises the level of the relationship between the grant maker and its beneficiaries.

“A lot of the focus of the survey was how well the folks at Pacific Gas and Electric treated us, and its customer service to us,” says Gregory A. Smith, chief public-support officer of the American Red Cross Bay Area Chapter, in San Francisco. “To me, the survey was trying to reinforce behavior that takes them out of the role of just doling out money, but doing it in a way that reinforces a partnership, and engages the grantee and makes them feel valued as more than just a recipient of a check.”

Elizabeth Goldstein, president of the California State Parks Foundation, in Kentfield, echoes Mr. Smith’s thoughts: “If the result of a process like this is a kind of attention to detail and a willingness to engage, it’s great.”

However, some philanthropy observers doubt the value of a customer-service survey for corporate donors.

The Association of Corporate Contribution Professionals, in Mt. Pleasant, S.C., tries to remind corporate grant makers that “their primary responsibility is to the company they work for,” says Curt Weeden, who served as the group’s leader until this month. “They are fiduciaries of the corporation’s resources, cash, products, and employee time and they should be evaluated on their performance according to business objectives first — how they are lining up and advancing the interests and concerns of the corporation. On a secondary base, you can ask the community how [the grant maker] is performing.”

Mr. Quigley responds that each Pacific Gas and Electric staff member has a yearly plan that includes receiving feedback internally about the effectiveness of his or her work in carrying out the company’s mission.

“Improving customer service is a primary company goal and every interaction with customers contributes to that progress,” he adds.

Bradley K. Googins, executive director of the Boston College Center for Corporate Citizenship, says companies “get a better sense of business and social issues in your community by communicating with grant seekers. By narrowing it too much to just customer service would diminish the focus you have on that.”

He adds that surveys can also be gamed a bit, even if done anonymously: “If you know who gives you money and their salary is based upon that, would you want to give them bad feedback?”

But what strikes Mr. Googins most about Pacific Gas and Electric’s use of grantee feedback is that it shows an attempt to measure results.

He notes, “Companies are obviously increasingly searching for ways to determine their impact as responsible corporate citizens and seeking the role of philanthropy in that, and are trying to be innovative about it.”