We Don’t Have the Money

Posted by Laura Otten, Ph.D., Director on March 16th, 2012 in Articles, Thoughts & Commentary

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I was never a big fan of the circus, and it had nothing to do with the clowns.  It was the tightrope walkers that caused me angst.  While, everyone was looking up, and I’d be looking at my shoes.

Today, many of my peers are sharing my angst over tightrope walkers, but they are the ones on the rope.   The economy of the last three years has thrown into vivid relief the paucity of most nonprofit salaries.  Not that it was hard to see this before.  But when nonprofit employees by the dozens have to go out and get second jobs just to cover basic expenses, the perils are getting out of control.

I had a heart wrenching conversation on this topic with a very thoughtful executive director of a social justice organization.  She wanted, desperately, to pay her employees a more competitive wage, but she knew that in order to do that, she’d need to cut back on the scope of programming.  What’s an executive director to do:  pay employees what their skill and experience should demand and reduce the number of clients served and the depth and breadth of an organization’s impact or continue to treat nonprofit employees as second class citizens in order to maintain the broadest impact for the mission?  I feel vertigo coming on.

The truth is, this isn’t a philosophical dilemma that should only be keeping the executive director up at night.  This is a dilemma with which the board should be grappling—along with the executive director.  It is the executive director’s job, as part of her/his human resources responsibilities, to be the advocate for his/her employees, and to make the case for improved salaries (and benefits, if needed, though I’m increasingly pleased with the scope of benefits I see nonprofits providing these days).

It is the executive director’s job to present this tension between just compensation and scope of services, otherwise it is the knee-jerk reaction of too many boards to simply say, “We don’t have the money,” and move on to the next item on the agenda.  It is the executive director’s job, because most boards simply won’t do it on their own, to hold board members’ feet to the fire, and take up the cause of the employees.  As executive directors, we cannot let the well being of our staff take a back seat to the lassitude, at worse, or exhaustion, at best, of board members.

It is, however, hard to be the advocate for improved compensation for staff if your own salary is seriously out of line with the rest of the employees.  For example, I recently looked at the 990 of an unnamed organization; according to the 2010 990, the CEO made $551,00 in total compensation.  All told, there were nine senior managers making over $100,000 each in total compensation, but the senior manager immediately under the CEO made $167,000 less than she did.  Given that this is a very young organization, no one has been there long enough for tenure to explain that big a discrepancy.  Putting aside (most of) my socialist leanings, as they simply don’t fly even in the preponderance of the nonprofit sector, I cannot help but be aghast that the leader of a nonprofit, and the board of a nonprofit, would allow such an imbalanced compensation structure.

For most organizations, it is, ultimately, a zero sum game when it comes to the monies available to support the mission work:  more money for programs means less money for salaries; more money for one employee means less for others.  But what those monies are, how they will be gotten and how they will be distributed, (e.g., programs, salaries, equipment, etc.) is never a done deal until after the goals are set and the sources of money identified.  Until that point, the philosophy is totally in the control of the board, to be influenced by the executive director.  We know the chances of success in writing a grant to pay for an increase in salaries.  We know that to increase salaries an organization needs to have unrestricted income, which is least likely to come from a foundation or corporation, and most likely to be gotten in one of three ways:  fees for services, individual gifts or income from a social enterprise.  What do these three sources of income have in common? The board needs to play a key role in each.  The board must tackle that philosophical question of whether to charge for services or not; board members must cultivate relationships with individual donors and build their sense of loyalty and commitment to the organization so that they will want to pay staff decent salaries in order to attract the best qualified to deliver the best for the mission; and boards must determine whether the organization can take that calculated risk to invest money in a social venture in order to reap returns—and improved salaries—down the road.  The executive director, no matter how much of a “superperson” s/he is, cannot do this alone.

But before a board is willing to do any of this, it has to understand that nonprofit employees deserve market-based wages, deserve to be compensated for their knowledge, experience and wisdom and deserve the respect that comes from being able to live a comfortable life on the salary the organization pays.  It is the executive director’s job to do this convincing.  Then, together, the board and executive director must decide how this goal will be achieved.





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