In the nonprofit world, salary is always a touchy subject. For a variety of reasons we all know too well, there are rarely enough resources to pay people on par with the for-profit world. We also see a very stark trade off between compensation and mission. All too often, I’ve seen nonprofit leaders weigh providing more or better service to families versus increasing compensation for their staff.
Though most employees in the nonprofit world consider part of their compensation the fulfillment of their organization’s mission, often that’s not enough. There are still college loans to pay off, other bills to pay, and savings to accumulate for a rainy day. Also more basically, there’s a desire to know that they are providing value in a key way, and for today’s society, that value is shown through compensation.
The compensation challenge in the nonprofit world is bad enough when one considers the paucity of resources. But compounding this difficulty is when salary is not even on par with the market. That is, you under-compensate in relation to other similar organizations.
Under compensation can have ripple effects throughout your organization. That position with an under-market salary doesn’t get filled. In turn, your team has to work harder, risking burnout. That star performer gets wooed away to another agency, setting you up to not only search for but then develop new talent.
However, if you compensate higher than market, you can accrue different problems. Yes, you will fill that open position pretty quickly, but if the new hires are paid at a higher rate relative to your existing employees, you could see wage compression and a new challenge: some of your long-standing and most experienced talent feeling unfairly treated.
Why Is It So Hard?
In the Human Resources field, you’re told the best way to prevent compensation issues is to align salaries with the rates for your field though surveys conducted by consultancies or the government. There are many, many salary surveys available for free or a fee, and they may work for some of your positions. For example, maybe you run a revenue-generating enterprise that essentially functions as a for-profit, providing the same service or product as a for-profit would. Or you could have a lower-compensated position such as a warehouse worker, which may pay the prevailing rate for that job, regardless of sector.
However, in most cases, nonprofit positions are more specialized and don’t have a direct link to jobs in the for-profit world. For example, one could argue that, on some level, resource development work is similar to sales positions in the for-profit sector. But in today’s terms or activity, they are substantially different and not comparable. And certainly, the ability to compensate a top seller is much higher in the for-profit sector.
This may lead you to focus on nonprofit sector salary studies. But they have issues, too; they typically lump different organizations together. That means that the fundraising job at the large, well-resourced private college in your community is included in the benchmark for an average salary along with a position at the local Y or homeless services organization. The result is that most nonprofits are referencing salary studies that are inherently flawed and skewed, again not helping you understand what is market rate compensation.
A Way That Makes All the Difference
The result is that the lack of appropriate compensation studies drives nonprofit leaders to conduct their own research. Usually, these are informal, as simple as calling a couple of other CEOs or Executive Directors. This informal approach can work when there’s little scrutiny, but I’ve seen time and again that when a nonprofit leader has to take this method as justification to their board or HR department (assuming they have one), it quickly comes under fire as being too simplistic.
There are alternatives to just making some calls and taking a more measured approach. Over the years, my firm has created a simple approach that we share freely (Salary Benchmarking Resource).
Our approach offers two advantages beyond being free. First, it’s not only easy to implement but also allows you to systematically collect data. Second, it gives you a process to defend your findings. As one executive director told me, “When I presented the data to my board, it wasn’t based on a couple of calls I made. I was able to say we used an independent process developed by experts in the field. That made all the difference in the discussion.”
Over the years, we have created our own system for benchmarking salaries—giving you the simplicity of the informal approach as well as relevant data that is systematically collected. Additionally, since it’s a system we developed, nonprofit leaders can tell their boards that they used a process rather than an ad hoc approach.
It’s easy to do and can be undertaken by any nonprofit. Not sure if you can do it? Take a look—it’s absolutely free:
(Click here for: salary benchmarking by Civitas Strategies).
Not Just for Your Team
One last thought: as you use our process, know that it isn’t just for a nonprofit leader’s HR professional to use—you can also use it for yourself. Many times, people aren’t sure how their own compensation fits with the market, so they can use the same methods to ensure they are being compensated fairly. And again, by showing their board that they used an independent process, nonprofit leaders have found greater leverage negotiating for fair compensation.
What do you think? Feel free to leave a comment below.
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