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EDITORIAL: The State of Nonprofit Pay

Study Examines Compensation for Local Social Good Staff Leaders

by Josh Jacobson on September 16, 2020

What should someone who leads a Charlotte-based nonprofit organization earn as a salary? As you contemplate that question, what thoughts are coming to mind?

For some, there is some sort of threshold of what seems “appropriate” for a nonprofit leader. After all, your financial contributions as gifts to the organization are in part fueling that nonprofit’s business model.

And yet, we are tasking these nonprofit leaders with some of the most difficult challenges our community faces: solving homelessness, fixing access to healthcare, ensuring clean drinking water, jumpstarting economic development, etc. By comparison, private sector companies selling goods and services have it relatively easy and few take them to task for expecting increased compensation for a job well done.

Exploring this dynamic further inspired our firm, Next Stage, to get actionable. This year, we undertook an effort to answer these questions and more. We recently published the Charlotte-Mecklenburg Nonprofit Executive Compensation Study, and the findings were very interesting:

Demographic breakdown of the nonprofit executives who participated in the survey – CLICK TO ENLARGE

The vast majority (92.7%) of organizations surveyed note that base compensation is important to their overall job satisfaction.

That this needed to be stated is one of the challenges faced by nonprofit executives. A volunteer board of directors is in charge of setting compensation for an executive director and they may too often bring a “charity mindset” to that task.

As volunteers called to a mission, these board members can make the mistake of believing that all involved in the effort are similarly motivated, including the professional staff. But, as evidenced by our study, compensation still matters to staff leaders.

Benefits are also important, and they are being offered to just 60% of executives of the largest 155 nonprofits in Charlotte.

A surprising finding is how many executives are either not offered or are electing not to receive health care and other benefits from their nonprofit employers.

For many, this is a result of the organization not offering them, but based on interviews, there are also those who elect not to take them as they receive better benefits through their spouse’s private-sector employer.

This revealed a larger challenge for nonprofits who struggle to provide competitive benefits, particularly health benefits, and how that impacts those without other options.

Less than 40% of the organizations surveyed offer a pay-for-performance or bonus structure for chief executives.

As nonprofits continue to struggle to source and retain high-quality talent for their nonprofit roles, it was surprising to see so few organizations have adopted this common practice from the private sector. And yes, nonprofits are allowed to create bonus structures just like their for-profit counterparts.

This was a frequent comment in the survey — many volunteer leaders misunderstand and misinterpret perceived legal and ethical barriers to incentivization in social good.

We have been champions of its use as a means to increase compensation for chief executives while creating positive outcomes in service to a mission.

What’s next for Next Stage?

The nonprofit business model is a very complicated one with many stakeholders, management challenges and barriers to success.

As evidenced by our study, the boards of area nonprofits can do a better job of understanding the trends impacting the sector as they approach the setting of executive compensation. It was the reason Next Stage elected to produce this study without compensation or sponsorship.

As a social enterprise company, we believe strongly that the strategic plans we help organizations develop are only as useful as the leadership that is in place to turn them into reality. We intend to produce this study every three years to help hold our community accountable and increase dialogue about the important role chief executive play in advancing social good.

About the Author

Josh Jacobson is the founder and managing director of Next Stage, a Charlotte company that works with nonprofit organizations to develop game-changing strategies and strengthened operations in service to mission and long-range vision. Josh often joins The Biscuit as a guest contributor. Read Josh’s last editorial about Glenda Bernhardt of Freedom School Partners.