PLEASE VISIT OUR SPONSORS

Compensation & Benefits

Published June 2008

Transitioning to a New Era: C&B at Nonprofits

Lindsay Edmonds Wickman

How can nonprofits consider raising salaries when their mission is to fight world hunger? How can they pay for medical benefits when those dollars could help millions of people with AIDS? It seems contradictory to talk about compensation and benefits in the nonprofit sector, but nonprofits are required to address these issues if they want to attract the best and brightest talent — employees who will fight for causes and use their capabilities to effect social change.

To secure this talent, some nonprofits are moving away from the dated compensation and benefits package in which medical and retirement benefits are generous and salaries lacking. Talent shortages have compelled nonprofits to raise salaries using nonprofit peer data, just as for-profit companies have.

"In terms of compensation, nonprofits are still operating out of the late 1980s, early 1990s," said John Palien, a director in global development at ORC Worldwide, an international human resources consulting firm. "They've got to bring themselves up to today's compensation plans and programs and be much more creative, much more open to different types of compensation and employment practices."

Developing a competitive compensation and benefits package may not be an easy road, though. Raising salaries may mean less money for programming, which can frustrate donors and cause them to withdraw funding. To navigate this tenuous balance between programming and administrative costs, nonprofits should cultivate donor partnerships.

"Over the past 10 to 15 years, [there's] been an increased expectation of the professionalism of nonprofit organizations on the part of funders," said Curtis Grund, vice president of global development at ORC Worldwide. "It's fair then for organizations to turn around and say, 'OK, if we're expected to deliver measurable return and professional results, I need to pay much more than I am paying now in order to get top-quality staff to deliver this.'"

The Rise of Incentive Compensation

The Gordon and Betty Moore Foundation, which is dedicated to advancing environmental conservation and scientific research in the San Francisco Bay Area, is one of a growing number of nonprofits using incentive compensation as a recruiting strategy.

At the foundation, each position is compensated according to the median salary for the same job role in similar nonprofits and only changes if the market changes. If an employee is promoted, the salary will rise as the median rises. Because there are no merit increases on salary, all employees are eligible for incentive compensation that is awarded based on performance.

"[It's] a way for us to manage our costs," said Saul Macias, associate director of human resources at the Gordon and Betty Moore Foundation. "If we have a particularly productive year, we're happy to provide additional incentives. If we have a year that's not particularly productive, salaries are maintained at the median, and our incentive compensation works as a way to maintain our costs."