wait, they pay people?: compensation in the nonprofit sector (rutgers)

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This presentation from Rutgers Business School's 2010 Nonprofit Leadership Certificate program, offers emerging nonprofit leaders an overview of compensation practices and trends in the nonprofit sector. The presentation begins with a brief overview of executive compensation, followed by explorations of the past, present, and future of nonprofit pay, and closes with a primer on pay for performance approaches.


  • Compensation in the Nonprofit Sector2010 Nonprofit Executive & Emerging Leaders Certificate Program Emerging Leaders TrackNovember 3, 2010Joe Brownsloperesources.comWait, They Pay People?

  • Founded Slope Resources in 1998Human resources and organization management consulting services for nonprofitsCompensation and performance managementBig firm backgroundBlog: Done by People Who am I?

  • Executive payWhere have we been?Where are we now?Whats next?Pay for performanceQuestions and discussion

    This afternoon

  • Executive pay

  • Increasing scrutiny of nonprofit executive compensationGovernmentMediaPublic

    Executive pay

  • Internal Revenue Service serves as nonprofit fiscal watchdogOrganizations tax-exempt status is at stakeIntermediate sanctions executives and board members personally liableIRS strengthening enforcement 155 new employees focused on nonprofits in 2009Organizations can establish rebuttable presumption that their executive compensation is reasonable

    Executive pay

  • IRS Form 990 Return of Organization Exempt from Income Tax2008: Redesigned to enhance transparency, promote compliance, reduce filing burden2009: Further changes and clarifications

    Executive pay

  • Executive pay

  • Executive pay

  • 27% of nonprofit organizations have no formal executive compensation policy!Schedule J provides a blueprint:Board compensation committeeIndependent compensation consultantOther organizations Form 990sWritten employee contractCompensation surveys/studies

    Executive pay

  • versus employee pay

  • A bit of philosophyThis is not charity. This is business. Business with a social objective--Muhammad Yunus

  • leads to three principlesMarketEquityPerformance

  • Where we have been?Nonprofit compensation has traditionally lagged behind for-profit sectorBut difference varies by level

  • Where we have been?Nonprofit compensation has traditionally lagged behind for-profit sectorDifference also varies by functionMarket comes into playNonprofit jobs versus regular jobse.g. development, program vs. IT, financeDifferences even within nonprofit jobse.g. direct service vs. program development

  • Where we have been?Year-to-year salary increases have generally tracked for-profit practicesFour percent worldBut, increases have tended to be more homogenousAcross-the-board, COLARather than performance-basedEntitlement mentality

  • Where we have been?S l o w shift to performance-based (merit) payPay levels, increases, staffing levels, even job titles often limited by grant budgets, etc.

  • Where we have been?Bonuses Incentive compensationPrevalent but limitedFor many organizations, not the answerPerception, complexity, ROIInstead

  • Where we have been?Bonuses Incentive compensationPrevalent but limitedFor many organizations, not the answerPerception, complexity, ROIInsteadGet the basics right!

  • Where are we now?Its the economy, stupid.--Bill Clinton, 1992

  • Well-documented (and experienced) impactsDecreased funding from all sourcesClosuresLayoffs, furloughs, salary freezes, salary cutsWhere are we now??How many of your organizations have not experienced any of these in the last three years?

  • All compensation growth limitedNow a zero to two or three percent worldMore difficult to offer rich benefitsGreater differences in demand within nonprofit sectore.g., development vs. programWhere are we now?

  • Greater access to general market talente.g., IT positionsCaveat emptor!Increased demand for performance and accountabilityFunders, publicEmphasis on evaluation and measurementHas to translate to employee performance!Where are we now?

  • Increasing need to compete for talentMost bang for the buckLabor shortage (!)New sectorse.g., social enterprise, B-corporationsWhats next?

  • Generational forcesDemand for competitive or at least living wagesShifting benefit needs/desiresWhats next?

  • Public, government, and funder scrutinyMay spread to non-executive levelsIncreased compressionAlso, focus on low endIncreasing professionalization of nonprofit sector

    Whats next?

  • Increased recognition of the need for broader organizational supportAdministrative, overhead, indirect costs and organization developmentGAO report recognized differences in federal grantsGrowing recognition and support in philanthropic community

    Whats next?

  • Building blocksReward opportunityCompensation programInternal equityMarket competitivenessPerformance management programIndividual/team contributionActual rewardsPerformance

  • Performance management program should focus on:What: job responsibilities, goalsHow: competencies, expectationsManagement not evaluation or ratingCommunication not the form!Pay for performance

  • Pay for performanceCompensation program development:Communication and inputJob descriptionsGrouping/gradesInternal equity assessment

  • Pay for performanceCompensation program development (continued)Market competitiveness assessmentCompensation philosophy developmentSalary policy (e.g., median of metro organizations with budgets under $10 million)

  • Pay for performanceCompensation program development (continued)Salary ranges

  • Pay for performanceCompensation program development (continued)Salary administration guidelinesImplementationCommunication

  • Pay for performance

  • and beyondStrategic planningNon-cash rewards Professional development Career development Succession planning

  • Questions and discussion

  • Joe Brown

    jbrown@sloperesources.com 908 241-8592sloperesources.comtwitter.com/joe_brownThank you!