This document discusses compensation in the nonprofit sector. It begins with an overview of the speaker's background and qualifications. It then reviews trends in nonprofit compensation, including that it has traditionally lagged the for-profit sector, especially at higher levels. The document outlines how the economic downturn has impacted nonprofit pay and benefits in recent years, with cuts, freezes and limited growth. It predicts upcoming challenges and changes, such as increasing scrutiny of executive pay and demands for competitive wages. The speaker provides recommendations for nonprofits, including assessing compensation policies and market competitiveness, strengthening performance management, and using total rewards to inform funding requests.

1. Compensation in the Nonprofit Sector
2010 Nonprofit Executive & Emerging Leaders Certificate Program
Executive Track
November 3, 2010
Joe Brown
sloperesources.com
Pay for Today (and Tomorrow)
SOME RIGHTS RESERVED

2.  Founded Slope Resources in 1998
 Human resources and organization management
consulting services for nonprofits
 Compensation and performance management
 “Big firm” background
 Blog: Done by People
Who am I?

3. A bit of philosophy…
“This is not charity. This is business.
Business with a social objective…”
--Muhammad Yunus

4. …leads to three principles
 Market
 Equity
 Performance

5. Executive pay…

6. …versus employee pay

7.  Where have we been?
 Where are we now?
 What’s next?
 What to do?
 Questions and discussion
This afternoon…

8. Where we have been?
 Nonprofit compensation has traditionally lagged
behind for-profit sector
 But difference varies by level
Nonprofit
For-profit
Job "size"
Totalcompensation

9. Where we have been?
 Nonprofit compensation has traditionally lagged
behind for-profit sector
 Difference also varies by function
 Market comes into play
 “Nonprofit” jobs versus “regular” jobs
 e.g. development, program vs. IT, finance
 Differences even within “nonprofit” jobs
 e.g. direct service vs. program development

10. Where we have been?
 Year-to-year salary increases have generally
tracked for-profit practices
 “Four percent world”
 But, increases have tended to be more
homogenous
 Across-the-board, COLA
 Rather than performance-based
 Entitlement mentality

11. Where we have been?
 S l o w shift to performance-based (“merit”) pay
 Pay levels, increases, staffing levels, even job
titles often limited by grant budgets, etc.

12. Where we have been?
 Bonuses Incentive compensation
 Prevalent but limited
 For many organizations, not the answer
 Perception, complexity, ROI
 Instead…
 Get the basics right!

13. Where are we now?
“It’s the economy, stupid.”
--Bill Clinton, 1992

14.  Well-documented (and experienced) impacts
 Decreased funding from all sources
 Closures
 Layoffs, furloughs, salary freezes, salary cuts
Where are we now?
?
How many of your
organizations have not
experienced any of these in
the last three years?

15.  All compensation growth limited
 Now a “zero to two or three percent world”
 More difficult to offer “rich” benefits
 Greater differences in demand within nonprofit
sector
 e.g., development vs. program
Where are we now?

16.  Greater access to general market talent
 e.g., IT positions
 Caveat emptor!
 Increased demand for performance and
accountability
 Funders, public
 Emphasis on evaluation and measurement
 Has to translate to employee performance!
Where are we now?

17.  Increasing need to compete for talent
 Most bang for the buck
 Labor shortage (!)
 New sectors
 e.g., social enterprise, B-corporations
What’s next?

18.  Generational forces
 Demand for competitive – or at least living –
wages
 Shifting benefit needs/desires
What’s next?

19.  Public, government, and funder scrutiny
 May spread to non-executive levels
 Increased compression
 Also, focus on low end
 Increasing professionalization of nonprofit sector
What’s next?

20.  Increased recognition of the need for broader
organizational support
 “Administrative”, “overhead”, “indirect costs”
and organization development
 GAO report recognized differences in federal
grants
 Growing recognition and support in
philanthropic community
What’s next?

21.  There is a silver lining to the times:
 “Pause” in the compensation market
 Limited expectations
What to do?

22.  Assess your organization’s current compensation
practices
 Do you have comprehensive formalized
compensation structures and policies?
 Assess internal equity – the relationship
between job size and current compensation
What to do?
$0
$20
$40
$60
$80
$100
Job Size
Compensation

23.  Assess your organization’s current compensation
practices
 Assess market competitiveness
 What market(s)?
 Benchmark data
 Understand what is important to employees
 Targeted research or component of broader
culture/opinion assessment
What to do?

24.  Develop a compensation philosophy
 What do we pay for?
 What market(s) are important to compete with?
 At what level?
 Are there differences by function or level that
we will reflect in our policies and practices?
 How will we assess and manage compensation
over time?
What to do?

25.  Enhance linkage between compensation and
performance
 Ensure comprehensive performance
management program is in place
 Pitfalls:
 Focus only on evaluation, not
management
 Measuring the wrong things
What to do?

26.  Enhance linkage between compensation and
performance
 Ensure comprehensive performance
management program is in place
 Pitfalls:
 Focus only on evaluation, not
management
 Measuring the wrong things
 Unclear/diluted/nonexistent relationship
between compensation and performance
management programs
What to do?

27.  Enhance linkage between compensation and
performance
 Measure skills, competencies, results, goal
achievement
 Break entitlement mentality if it exists
 Help employees understand and accept
compensation and performance realities
What to do?

28. What to do?
Reward
opportunity
Compensation program
Internal equity
Market competitiveness
Performance management program
Individual/team contribution
Base salary
Incentive compensation$Actual
rewards
Performance

29. What to do?
Strategic
planning
Non-cash
rewards
Professional
development
Career
development
Succession
planning

30.  Use compensation program to inform funding
requests
 Look beyond the paycheck
 Assess currency, competitiveness, and value of
traditional benefits
 Explore low-cost/no-cost options
 Recognition
 Flexibility of time and place
 Lifestyle perks
What to do?

31. Questions and discussion

32. Joe Brown
jbrown@sloperesources.com
908 241-8592
sloperesources.com
twitter.com/joe_brown
Thank you!