32 Theses About Nonprofit Compensation

  1. Nonprofit work is hard work. It is complex, adaptive work where the answers are not known in advance — we have to invent them as we go. Most nonprofits are tackling huge problems with few resources and many face deep-pocketed opposition.
  2. Nonprofit work is long-term work. The problems we’re working on — climate change, inequality and injustice — didn’t emerge overnight, and we’re not going to solve them in a couple of years.
  3. Because nonprofit work is hard, long-term work, the nonprofit sector needs to attract the most talented people we’ve got — and keep them around long enough for them to become wise and masterful practitioners.
  4. The skills and talent nonprofits need to solve big social problems are complex . We need to be able to draw in people with a broad range of experiences, skills and talents. Failure to do this not only hurts us tactically, it limits us strategically.
  5. Right now, access to wealth — inherited wealth, earned wealth from a prior career or spouses/partners who are the primary breadwinners in their households — is often an implicit filtering criterion for long-term nonprofit employment. This perpetuates and deepens the structural racism and inequity in our society, even as we say we are working to eliminate it.
  6. The student debt crisis is a huge, largely unacknowledged talent problem in the making for the nonprofit sector. While many millennials are drawn to mission-based work, their student debt will prevent them from entering the sector, or ensure that their stay here is short.
  7. The skills that it takes to build and sustain a successful and effective nonprofit are becoming more varied.
  8. Because of the explosion of nonprofits — and the immediate accessibility of a global audience afforded by the internet — nonprofits must not only be skillful at more things, they must be relatively more skillful at more things if they want to break away from the pack. The bar for success is, paradoxically, rising, even as the barriers to starting a nonprofit are falling.
  9. The skills that nonprofits must master to succeed in the twenty-first century are rapidly converging with the skills that organizations in other sectors must master to succeed.
  10. We can see this most clearly in the area of technology. But it’s not just technology, it’s also finance, leadership, marketing and more.
  11. The rise of mission-based “social enterprise” businesses and B-Corps further exacerbates the nonprofit’s sector’s intensity of competition for talented, mission-minded people.
  12. Nonprofits are therefore competing beyond the sector for talent more directly than ever before and the intensity of this competition is only going to continue to increase.
  13. Nobody expects (or deserves) to get rich working for a nonprofit.
  14. Many nonprofits are (or can be) amazing places to work. People will sacrifice some amount of money for challenge, meaning, flexibility and autonomy.
  15. Despite this, we should not expect nonprofit workers to forgo home ownership, children and a secure retirement in order to work in the sector.
  16. If nonprofits want to successfully compete for talent — and keep good people around for the long haul, they need to pay enough so that money isn’t an issue, then out-compete other employers on meaning, relationships, autonomy and opportunity.
  17. The amount of money that makes “money not be an issue” for the diverse, talented people we need to attract and retain is often more than the median nonprofit is paying right now.
  18. The amount of money that makes “money not be an issue” for the diverse, talented people we need to attract and retain is not insanely large. People who are drawn to and can succeed at the complex, adaptive challenges of nonprofit work tend to have strong intrinsic motivation and are rarely highly materialistic.
  19. There are many roles in nonprofits for which it is believed to be difficult to objectively and fairly evaluate employee performance and/or contribution to either the organization’s bottom line or its mission impact.
  20. Nonprofits rarely cut low performing staff.
  21. Nonprofits rarely if ever pay their top performers significantly more than their median or low performers.
  22. Most nonprofits would rather spend additional dollars growing their team or launching new programs and accept turnover as a “fact of  life” than invest in retaining their best people for the long haul.
  23. Nonprofits rarely account for the full costs of turnover: lost relationships, lost knowledge, lost productivity, damage to morale, etc.
  24. Many of the nonprofit sector’s most highly skilled people eventually are forced to leave the sector entirely or go into private practice as consultants in order to meet their financial needs.
  25. The “consultant-ization” of the nonprofit sector has some benefits (e.g. rapid, flexible team formation, deep specialization, diffusion of knowledge, etc.) but also considerable costs.
  26. While nonprofit culture and management practices contribute to some of the sector’s dysfunctions around compensation, nonprofit board members, donors and funders play a significant role in shaping the sector’s culture and determining how it allocates resources.
  27. The overhead myth, preferences for new programs over proven effectiveness, underinvestment in leadership development, failure to admit and embrace failure — these phenomena all contribute to unhealthy ideologies about compensation in the nonprofit sector.
  28. Nonprofit boards rarely involve themselves in staff salary structures or policies, restricting themselves to setting CEO compensation and perhaps approving incremental increases to the overall salary pool during the budgeting process.
  29. Foundation program officer salaries often serve as an effective upper bound on nonprofit CEO compensation.
  30. Funders rarely reward their highest-performing grantees with game-changing infusions of general support dollars — and even more rarely do they cut their low-performing grantees to free up resources for their high performers.
  31. Many funders are happy to reward effort rather than results. This is closely tied to risk aversion, because big results require big risks and it is often hard to claim credit for long-term success.
  32. There is no silver bullet solution to these challenges, but the nonprofit and philanthropic sectors must work together to open a more courageous conversation if we are to make progress.

12 thoughts on “32 Theses About Nonprofit Compensation”

    1. Nonprofits are susceptible to the same biased employment practices against women, minorities, people with disabilities, age and LGBT people as the rest of society. If they would move to higher ground they would have access to a wealth of talent that is currently being squandered.
  1. And, sometimes non-profits are founded as second careers, so founders have other income or savings… or exist by hiring people who have partners with income, and for awhile on volunteers. Moving from a small non-profit run by volunteers, it is hard to jump to reasonable compensation.
    And, overhead is hard to justify when it is donation money being depended on. Donors want their money to go to the programs.

  2. Insightful, undeniably accurate. The million-dollar question is: How do we drive solutions to this very serious set of challenges? When will we get tired enough to create the change we so desperately need?

  3. Jon,
    i think only a few of these are unique to non-profits, try the following exercise. go back to Word, open the document you created, substitute “start-up” for “non profit” or put “start up” in front of Funder and see which ones don’t make sense (hint they are non-profit specific)

    I think 31 is a big part of the problem and this is closely tied to 26, 19, 20 and 21 all of which I suspect are on the list from the substitution exercise above.

    We need to think about non profits as risker endeavors, changing the world, is hard, the problem is non-profits don’t management themselves likely risky start ups. They leave programs running way to long, they fail slowly, they very reluctantly push internal change, staff or program (much like calcified companies in the for profit world…)

  4. Rob, I totally agree, especially with the notion that nonprofits need to manage themselves for more risk, but since about 98% of my work experience is with nonprofits, I felt most comfortable writing about what I know. Would live to see the startup-centric version of this, though.

  5. Audrey Watson, you’ve succinctly restated two of the problems we are up against.

    Do we REALLY want to limit ourselves to people who can afford to be paid very low wages?

    As for overhead, yes we know that donors don’t want any of their money “wasted” on overhead. And that’s one of the ways that donors shape the culture. But, realistically speaking, how do you run programs if you don’t have the “overhead” of producing payroll checks – and making sure that all applicable employment, tax, and non-discrimination laws are complied with in the process, or making sure that necessary purchases are made and that bills are paid correctly, and that all relevant laws are being complied with in the process? I could go on about all of the other “overhead” items people complain about, but the reality is that all of these activities are absolutely necessary for the conduct of these programs that the donors want their dollars to support.

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