Episode 40: Salaries and Benefits for Non-Profits

Welcome to another edition of “Around with Randall;” Your weekly podcast on making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy, Randall Hallett. 

I always appreciate your time when you join me here on “Around with Randall”, today's conversation is a little bit about compensation and some of the things that I'm just seeing as a consultant, seeing raised by others in our industry. I thought it was worth a little bit of time today to talk about what we see, what we hear, and maybe some things you can do regarding changing the conversation around salary and benefits in the nonprofit world.

So, where did all this come from? Well, actually from multiple sources, interestingly enough. Number one, I have a number of clients who I work with and a couple of circumstances have developed. One, had a major gift officer who was looking for a well-justified raise and was trying to figure out how to best position the conversation. I have a couple of organizations that I work with that are looking for major gift officers and are really struggling to find them. Then on top of that, I also do some work with CFRE, which is the certification international organization that handles or credits fundraisers. I'm a moderator on a chat and it's come up there as well. Then I started seeing some articles about compensation issues. One of which was the IRS is finalizing what they're calling an excise tax for nonprofits if they pay their people above a million dollars. In addition, Florida’s State Attorney General has made public comments and we'll leave it at that about salaries of nonprofit leaders. All of this kind of brought me into the thought process of where are we at with all of this. Interestingly enough, it's worthy of a conversation. 

So, historically nonprofits have seen, and there are statistics and data out there if you have a generally like position skillset, see lower salary than the for-profit world. In fact, I read somewhere here recently that one person classified non-profit work, at least the perception of nonprofit work in the general community as like the Junior Varsity for the for-profit world or the kiddy version of the for-profit world, those who are trying to make a profit. I've also seen a great deal of discussion around the thought process that only anyone who gets into this profession is doing it for altruistic reasons and we shouldn't pay them. 

I've had personal experience with this as well, more on the hiring side. When I was at the. Nebraska Medical Centers, the Chief Development Officer, trying to build a staff. We were looking to hire major gift officers. I sat down with HR to work through the process, and they gave me a range and I said, that's not even in the ballpark of what we're going to be able to do. They said, well, we have done the skills and responsibility assessment, and this is kind of the range that this job fills or can be paid. I said, walk me through the methodology that you used so that I can better understand that. What they basically did was they looked at skills and they looked at responsibilities and they said, this is basically a Nurse Manager position or equivalent thereof in a hospital. And I said, no, it's not. This is the equivalent of a surgeon and they just didn't comprehend that. I had to work very hard to explain that for a major gift officer position, eventually a principal gift officer position, while there are a lot of metrics and responsibilities that go into the job the primary outcome is revenue much like a surgeon is viewed. That they do so many surgeries. We charge so much for those surgeries and obviously all of the other billing that goes along with it and that brings us a revenue line and based on that, we make compensation decisions. While I'm not equating the importance, I am equating the process, the methodology in that. That changed the way in which we looked at fundraising. 

In this CFRE chat that I mentioned earlier, there were a number of very distraught professionals who were concerned about the entire conversation that people don't understand what non-profit work is and how important it is to compensate people appropriately. I'll give you another example. I worked as many the Nebraska Medical Center and as a nonprofit, we had a CEO.

This is a multi-billion-dollar organization, and his salary was public information. There were a number of them times where I had to have very hard conversations with prospects and donors to better explain why he was paid, what he was paid. So, let me put a couple of provisos in, and then I'll kind of get into that which will lead us maybe into the tactical pieces of today's conversation.

Number one, I don't think anyone would disagree that frontline employees in a nonprofit, if you're working in a soup kitchen, those cooking, if they're not volunteers or nurses, if you're in a healthcare environment, so many people are underpaid. I don't have the ability nor the data to support how much or where, so I'm going to confine my comments a little bit to the nonprofit world within philanthropy or fundraising activities, or that they're connected to that.

So, with that, those conversations I had to have regarding the CEO salary sounded something like comparisons to a for-profit company that any for-profit company, the CEO of a multi-billion-dollar organization would be earning 10 times what my boss was raising or receiving and there'd be no question about it or a lot less questions about it. He had the same challenges that any CEO of a multi-billion-dollar corporation would have legal issues, HR issues, finance issues, compliance issues, regulation issues. In some ways, because of healthcare, they might even be more profound than a multi-billion-dollar corporation who doesn't have all the regulations that come from the federal government through CMS. When I explained that in those comparisons, what we got to was more of a conversation about why they believed our nonprofit was going to be a good place for their investment and why salaries are important to get the very best people. And that part of the reason the Medical Center, a large part of the reason the Medical Center was successful was he was a phenomenal leader producing great value as a nonprofit to better the community of Omaha, Nebraska. Growth, better services, better results, better outcomes for patients, better research that that has value. So, it was a challenge, but to change that direction in some pretty profound ways. 

On a personal note. I experienced this challenge when I was approached in the middle of my term or tenure at the Medical Center with a kind of an unsolicited job opportunity. Not that I was looking to leave, but I was like, well, I'll be glad to sit down and at least have an initial conversation and we weren't even close in terms of salary. They wanted me to take a dramatic pay cut, but yet expected to see the two, three, four, five times increase in fundraising in a fairly decent size non-profit that was kind of a regional non-profit and it was a hard conversation.

Finally, they said, you know, we just can't do that because it's not ethical. And I said, well, at the end of the day, I'm altruistic, I think most people in non-profit world are, they want good, but we also have houses to pay for and kids to put through college and other bills to pay like anybody else. If we don't change the conversation, we're going to do what Dan Polenta has talked about for almost a decade now, in terms of the difference between non-profit and for-profit worlds, we're going to brain drain the nonprofit world because people at a certain point will say, I can make five times more money in the for-profit world. Give huge sums of money to non-profits, be seen as a Board Member/Philanthropist, be elevated in the community and yet not work within that nonprofit because they can make more money elsewhere and they can do tons of good things by doing that. 

It's such a hard disservice to our industry in this particular area that people think, well, it's a non-profit we shouldn't pay. My comment is you pay for talent. You pay for direction/leadership and those skills are just as valuable in the for-profit industry as they are in the nonprofit. And so, in some ways, the competition for talent, isn't just between nonprofits in your community, but for people's ability to make more money in the for-profit world. That's going to leave, if we don't figure this out, to a real struggle, to find great talented people who can help drive nonprofit direction. What are the tactical things? So, let me do it in two forms. One is the leader, you are maybe trying to figure out how to find talent and attract it and the other is the employee trying to figure out well, how do I create a fairness of pay, of compensation. 

I'll start with kind of the leader side of this so number one is always to start with data. There are some great opportunities to grab data from several salary surveys, whether it's inside the industry like AHP. AFP does a wonderful job. The Nonprofit News does a very good one about every two to three years. Getting some context for your area, for your job responsibility and what you're looking for is really important. I also would challenge you inside the organization, particularly if you have an HR department and by the way, HR departments jobs are to do the analysis. It's just to be candid many times, they don't understand what we do. So, you might have to challenge the way they look at a salary structure and say, well, you're as mentioned like that Nurse Manager or some other area of the hospital that doesn't have the same actual outcome responsibilities, Challenge that! If you're in education, frankly, they're more like a frontline fundraiser in terms of a major gift or principal gift officers, more like a faculty member. There are so many students in the class generating so many dollars in tuition and we pay that professor X. There's an ROI. If it's in healthcare, it's like the surgeon. Maybe another area -- maybe you have some type of business development function, particularly I think of like healthcare where they're trying to build out partnerships with physician groups. Looking at it in a different way and helping HR to see that can be incredibly helpful to get to some salary ranges. Always work with that concept of outcome or ROI. I'm asking this person to generate X millions of dollars a year.

I also, I think it's important to help your organization better understand that at least in my opinion, skills are more important than years of experience. I'm not saying you should eliminate years of experience, but HR doesn't understand that if someone's been doing it for 20 years, and then you look at that resume, and they've had seven or eight jobs in those 20 years. Your radar goes off -- going well, they might have had experience in the profession, but did they have actual accomplishment in the profession? This is where skills are so important: communication relationship building opportunities, the ability to build rapport and the ability to make phone calls. And as I talk about it, like water running off of a Duck's back when rejection occurs, they're not bothered by it. They just keep moving through it. The ability to make a formalized solicitation or ask, to look someone across the table and ask them for $50,000, $100,000, $250,000. Those skills to me are more valuable than just seeing a 20-year run. You can see the skills in success within that experience, meaning they can demonstrate that they've raised hundreds of millions of dollars. Then they have the skills, but HR sometimes doesn't understand that. Those skills are critically important, like that surgeon, like that great faculty member to teach or to do the surgery. To be effective at it is more important than just showing up and doing it. 

If you're the major gift officer, data is also important. The neat things about some of those surveys that I was speaking of, the salary surveys, is that they are regionalized, and they have by job title, you can get some decent information. I would encourage you, number one, to be reasonable. If you're thinking, you're trying to compare this to having an ownership stake in a small for-profit company, that's in IT. You're not going to get that. You're never going to get that kind of compensation, but I think you can be fair and reasonable. I think the other thing is to look at the entire package. Are there ways to do bonus structures? Either annually based on performance and not just about money raised, but the total package, we want to stay ethical within what our ethical parameters or principles are-- not a percentage. You don't get a commission, but is there a bonus structure? I have built many where gift officers, when they did well, could earn a wonderful bonus based on performance. Or a signing bonus, sometimes it's easier for HR and organization to approve that than it is actually an annual higher level.

Also, I would encourage you if it's a larger organization, not just to spend all your time with HR, they're doing their job. Sometimes you need to get to the places that actually can be decision-makers. I had more abilities as a Chief Development Officer in every one of the jobs I've ever had to move salary lines more than anybody and I always had kind of an HR office mate. It was a business office, but there was someone who was kind of the front door. I always had the ability to say yes that line that we put there is not actually there. We need this person. They're worthy of additional compensation. So, know who you're dealing with and what level of responsibility or authority they have to make that possible in terms of a higher salary.

In the end, we're going to have to change the paradigm in this conversation, or particularly as we come out of COVID. I think a lot of jobs are beginning to open up. We're just going to have job openings and people who are in the nonprofit world will leave for the highest paid jobs in non-profit or they'll leave nonprofit altogether and jump into the for-profit world and we'll lose talent. In the end, what that means is we're going to lose nonprofits effectiveness in serving our own communities. It's a hard conversation. It's a tough conversation and society necessarily doesn't always agree with this conversation, but it's one we can't run from. We have to effectively get to the point of saying this is a worthy profession. It is a profession, and we need great people to serve it.

As always just a couple of reminders. Please check out the blogs. I'm posting two or three a week, 90-second reads. If you'd like to get a hold of me about this podcast, if you'd like to comment reeks if you disagree, reeks@hallettphilanthropy.com. If you have a subject matter, you'd like to bring up that's podcast@hallettphilanthropy.com. Please, like, share, subscribe, all the different ways in which you can grab this information. I really do look at this as the 21st century classroom. I don't talk much about what I do as much as I do the things, I see that are important in our community.

Hey, don't forget, what you're doing every day is critical. You are serving a bigger purpose. You're making a difference and. My all-time favorite saying, “Some people make things happen. Some people watch things happen. Then there are those who wondered what happened.” If you're in this profession, you're someone who wants to make something happen for somebody who's wondering what happened. In the end, that makes you an important member, a leader of your community. I thank you for it and you are most likely not in my community, but I know how important that role is. So, thank you for what you do. Don't lose sight of the bigger picture of helping others and know that you are part of that help. I appreciate your time today. Thank you for joining me here on “Around with Randall”. I'll look forward to seeing you next time right here, and don't forget, make it a great day.