Promotions and Incentives in Nonprofit and For-Profit Organizations

Jed DeVaro, Cornell University
Dana Brookshire, Bank of America

Article comments

Suggested Citation
DeVaro, J., & Brookshire, D. (2007). Promotions and incentives in nonprofit and for-profit organizations [Electronic version]. Industrial and Labor Relations Review, 60, 311-339.

Required Publisher Statement
Copyright by Cornell University.

Abstract

[Excerpt] Using data from the 1992–95 Multi-City Study of Urban Inequality, an employer survey, the authors document a new empirical finding that workers are less likely to receive promotions in nonprofit organizations than in for-profit firms. The study also uncovers evidence that wage increases associated with promotion were of comparable magnitudes in the two sectors, as was the potential for within-job wage growth; nonprofits were less likely than for-profits to base promotions on job performance or merit; nonprofits were less likely to use output-contingent incentive contracts to motivate workers; and the observed difference in promotion rates between the nonprofit and for-profit sectors was more pronounced for high-skilled than for low-skilled workers. The authors also propose a theory, based on the idea that nonprofit workers are intrinsically motivated to a greater extent than are for-profit workers, that potentially explains the broad pattern of evidence they uncover.