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Pay Your Staff... or Pay the Price

Pay Your Staff... or Pay the Price

The Nonprofit Partnership recently conducted an unscientific (though still enlightening) survey of salary and benefit information at nonprofits in the northwestern Pennsylvania region. There are many things to learn from this survey but perhaps the number one is this: nonprofits do not pay their people enough!

Some interesting information from the survey to inform this discussion:

  • Regardless of their organization’s annual operating budget, 53% of respondents indicated a salary of $39,000 or less 
  • For a medium-sized budget ($1 million to $4.9 million), the most reported salary bracket reported was $30,000 to $39,000 at 34%
  • 38% of CEOs and EDs reported earning under $39,000 (although some of those were part time)

There is a lot more survey information which you can delve into here

Think about this. We are asking nonprofit staff to do things like feed the homeless, care for our children, and prevent illness and disease – and we aren’t paying them a competitive wage. Our nonprofit staff members are doing life-saving and life-changing work, yet aren’t being recognized for that work through competitive compensation. Of course, this is a national problem that has historical roots. But perhaps the main problem is that nonprofits have bought into it. Instead of pushing back against the overhead myth, we embrace it. 

Nonprofits focus on overhead and how low we can keep it. We compare our meager budgets and overhead numbers with one another. We celebrate how little it costs us to run our organizations. Just think about how this would translate to the for-profit sector or, better yet, how it doesn’t. A tech company would never boast about how cheaply their phones are made. A car company would never rejoice at how little it costs to install their airbags. An airline would never advertise that they sought out the lowest possible price for the engines they use. And yet we as nonprofits seem to eagerly embrace the notion that we should spend as little as possible to do things like saving lives or educating children. 

And unlike a tech company or a car company or an airline, most of our investment isn’t in equipment, materials, and facilities. Most of our investment is in people. So we celebrate the overhead myth while sacrificing the only assets we really have — our staff. 

So, I suggest you do two things:

  • 1. Start paying your staff more. I often hear organizations talk about not having the money for investments in staff. And then I watch them pay for things like consultants or unnecessary facilities or outmoded advertising. I’d suggest we be a little more honest and admit that often we do have the money to pay staff but we choose to prioritize other expenditures. 

I know what you’re saying — easier said than done. That is true. But again, make it a priority.  Perhaps you strip down your annual budget well before the new fiscal year and look at it through the prism of making compensation a priority. Or maybe you establish a compensation committee of staff, Board, and others with the goal of introducing higher wages into your organization, even if it takes a few years. Regardless of how you approach it, make it a priority. 

  • 2. Tie compensation, bonuses, raises, etc., to performance and productivity. Only 36% of respondents to the survey indicated that salary increases were based on merit.  Many organizations are hesitant to make compensation decisions based on merit with the fear of being perceived as unfair. Well, here’s a little secret. The people who perceive it to be unfair are usually the low performers. 

The thing is, if your compensation is tied into things like performance and productivity, you will see better performance and more productivity. And greater performance and productivity equals greater revenue. 

But poor pay was not the only disturbing trend identified. A subset of respondents in the compensation section of the survey indicated that bonus or salary increase decisions at their organizations were granted A.) only if the organization had extra money available at the end of the fiscal year and B.) at the discretion of the Board.

This implies two things. The first is that raises and bonuses at these organizations are not being budgeted for but are instead an afterthought. Salary increases should be accounted for as a part of the budgeting process and planned well before the end of the year. (Of course, adjustments to a budget are necessary and sometimes organizations go through unexpected difficult periods when belts need to be tightened. But this should be the exception and not the rule.)  

The second is that the Board is too focused on operations. Boards approve budgets. Budgets should include appropriate compensation. The CEO and other staff are then responsible for the management of those budgets and setting compensation levels, not the Board. Of course, the Board has a responsibility to provide oversight, but the CEO should not be looking to the Board to approve raises or bonuses if the Board has already approved the budget. 

With this in mind, let’s work to make competitive compensation a priority. Because when our organizations pay staff well, we’re able to attract the best and brightest in the sector. But when we fail to do so, our most talented staff will leave for another organization – or the private sector.

 

Interested in delving into the 2018 NWPA Nonprofit Salary Survey deeper? Click here to access reports and findings. 

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