If Nonprofits Can Pay More, Why Don’t They?

Nonprofit professionals aren’t as smart or as educated as people in the corporate world. They work in nonprofits because they don’t have what it takes to make it at a “real job.” If they work at a nonprofit, they should expect to be poor. They definitely aren’t forward-thinking or entrepreneurial.

What, you don’t think these statements are true? I had a feeling you wouldn’t, and I agree completely. They are utter B.S.

The nonprofit sector doesn’t have a problem with the education level, talent, creativity or ability of its workforce. What it has is an image problem and, in some cases, outdated leadership philosophies that thrive on a poverty mentality, leading to low compensation and a perceived lack of prestige surrounding positions in the sector.  

These are the issues we must address.

Time to Reshape Operational Strategy

Some newer nonprofit organizations are built on a tech start-up model, taking advantage of business incubators or accelerators that allow them from the outset to learn and employ business models that thrive on talent, ingenuity, creativity, up-to-date technology and even a certain level of risk-taking. Individuals and partnerships with the private industry may view them as innovators worthy of investment. Such organizations are created with very specific plans for social impact, sometimes even with the aim of “fixing” a problem that has been ill-addressed by government.

But what about other nonprofit organizations? The ones who are more established and are not riding the popular wave of the social-impact model, and the funding that comes along with it?

I asked John Annis, Senior VP of Collaboration and Impact at the Charles & Margery Barancik Foundation and Ascend Fellow of the Aspen Institute for his thoughts. John said:

“In the many years I have been involved with nonprofit organizations, I have had the opportunity to meet hundreds of loyal, talented and passionate individuals. These dedicated, problem-solving employees are making a difference in communities across the country every single day. Far too often, they have something else in common—they are being woefully underpaid. Their hearts are full because of the impactful work they are doing, but a full heart doesn’t pay the bills.

Sadly, this problem isn’t new to our sector. Some progress is being made, but in a growing economy, we are on the verge of losing some incredible people because they literally can’t afford to stay with us. We might retain some with small pay increases, but a closer look at total compensation is required.

We could spend lots of time assigning blame—because there’s plenty to go around.  Funders, philanthropists and government contracts are part of the problem and can be part of the solution, but the conversation has to start today at the executive director/board level.”

To John’s point, it is time for boards of directors and nonprofit executives to reshape their operational strategy. It is time for the shoestring mentality to go. Time for the habit of going from putting out one fire to another, while begging for emergency funding, to ride off into the sunset. And it is time to retire the haphazard way nonprofit organizations determine their employee compensation, training opportunities, paths for advancement and other employment policies.

One organization that has embarked upon this type of employee-focused growth is the Humane Society of Manatee County in Florida. Executive director Rick Yocum said:

“I firmly believe that nonprofits need to work on offering compensation packages to employees that are at least reasonably competitive with for-profit businesses.  Every day, nonprofits lose competent, qualified staff who are leaving in an effort to simply receive a ‘living wage.’

I also believe in offering reasonably competitive health benefits packages, which is a good investment, as well as unique perks like reduced or at cost service fees for staff to use our services. I am hopeful that moving forward a tuition reimbursement program will be made possible at Humane Society of Manatee County.”

These are significant steps. Rick has been with the Humane Society of Manatee County three years and it has taken most of that time to slowly turn the tides of the organization—to create and operate under a leadership philosophy that focuses on running “like a business” and not under the “poverty is a virtue” model. Poverty isn’t a virtue; it is a hindrance. Nonprofit organizations must able to fund staffing appropriately to be able to carry out their missions of helping people in real poverty, or bringing art to the community, or helping children in foster care. Whatever the mission, it is worth investing in the infrastructure to support it.

Competitive Employee Compensation

Drilling down one step further, it is important that when creating hiring and employment practices enabling employees to make a competitive living wage, implementation must be across all levels of the organization. Over the years I have encountered a number of organizations that pay their executive/leadership staff appropriately or even generously, but pay their program and support staff well below average for their job functions.

Here again I feel it appropriate to call B.S. All that this compensation model does is create an us-and-them environment among the staff. There are different ways that employees gauge the level of happiness with their compensation. One way is purely practical: “Am I making enough money with the appropriate benefits to lively reasonably without excessive financial worry?” Another gauge is referred to as “equity theory.” Equity theory is the idea that employees evaluate the fairness of their situations by comparing them with other people. There is external equity, where employees compare their salary, compensation and job function to those in corresponding positions at similar organizations. Internal equity is when employees compare themselves with how others inside the organization are compensated.

It is reasonable that compensation levels vary depending on area of expertise, job function, education level and any other number of qualifiers. But it does not make sense to overpay people in leadership positions while paying program-delivery and support staff so poorly that they need to hold down two or three jobs just to make ends meet. I find it ironic when organizations that have a mission to help people climb out of poverty and are paying wages to at least some of their staff that leave the employees in situations similar those of the people they are serving. It is my belief that when we are molding new models of employee compensation, we must consider internal equity as well as external equity. The impact it will have on turnover will be worth the effort.

Nonprofit missions deal with every conceivable facet of life, from the arts, to health, food insecurity, development or physical (dis)abilities, social (in)justice, LGBTQ+, environment, foster care, animal welfare, human trafficking and exploitation, law enforcement, employment, veterans, race and gender equity, and almost anything else you can think of. Nonprofits are part of what makes the world turn. According to Guidestar, there are currently more than 1.8 million operating nonprofit organizations nationwide.

If nonprofit organizations have such tremendous responsibility and represent a large employment sector, doesn’t it make sense for them to operate in a way that enables them to recruit and retain the best talent available? I believe the missions they deliver are worth it.