pay for today (and tomorrow): compensation in the nonprofit sector (rutgers)

Compensation in the Nonprofit Sector

2010 Nonprofit Executive & Emerging Leaders Certificate ProgramExecutive Track

November 3, 2010

Joe Brown

sloperesources.com

Pay for Today (and Tomorrow)

SOME RIGHTS RESERVED

Founded Slope Resources in 1998

Human resources and organization managementconsulting services for nonprofits

Compensation and performance management

“Big firm” background

Blog: Done by People

Who am I?

A bit of philosophy…

“This is not charity. This is business.Business with a social objective…”

--Muhammad Yunus

…leads to three principles

Market

Equity

Performance

Executive pay…

…versus employee pay

Where have we been?

Where are we now?

What’s next?

What to do?

Questions and discussion

This afternoon…

Where we have been?

Nonprofit compensation has traditionally lagged behind for-profit sector

But difference varies by level

Nonprofit

For-profit

Job "size"

To

tal

com

pen

sati

on

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

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

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.

Where we have been?

Bonuses Incentive compensation

Prevalent but limited

For many organizations, not the answer

Perception, complexity, ROI

Instead…

Get the basics right!

Where are we now?

“It’s the economy, stupid.”

--Bill Clinton, 1992

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?

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?

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?

Increasing need to compete for talent

Most bang for the buck

Labor shortage (!)

New sectors

e.g., social enterprise, B-corporations

What’s next?

Generational forces

Demand for competitive – or at least living – wages

Shifting benefit needs/desires

What’s next?

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?

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?

There is a silver lining to the times:

“Pause” in the compensation market

Limited expectations

What to do?

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

Co

mp

ensa

tio

n

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?

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?

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?

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?

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?

What to do?

Rewardopportunity

Compensation program

Internal equity

Market competitiveness

Performance management program

Individual/team contribution

Base salary

Incentive compensation$Actualrewards

Performance

What to do?

Strategicplanning

Non-cashrewards

Professional development

Career development

Succession planning

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?

Questions and discussion

Joe Brown

jbrown@sloperesources.com

908 241-8592

sloperesources.com

twitter.com/joe_brown

Thank you!