Posts tagged ‘Maclean’s’

June 11, 2019

4 Major Problems with Nonprofit Compensation

Salaries are a big problem for nonprofit organizations. However, the problem, or rather problems, might not be what you think they are.

Let’s look at just four major issues:

1. Nonprofit staff earns too much money. The mainstream media regularly trumpet the high salaries that some nonprofit executives receive. Through their selective reporting, many in the media advance a narrative that suggests nonprofit professionals earn too much money. As a result, donors focus frequently on charity overhead, including salaries, rather than program and service outcomes when evaluating charitable organizations.

2. Nonprofit staff earns too little money. Simply put, many people working for nonprofit organizations are grotesquely underpaid. For example, I recently came across an advertisement for a nonprofit Administrative Manager and Marketing Associate in Washington, DC. The charity requires candidates to have a college degree and an automobile. The organization offers an annual salary of just $35,000. Take a moment and think about that. The job pays $35,000 a year in Washington, DC! In case you don’t know, Washington, DC is the fifth most expensive city in the US, according to Kiplinger.

Yes, some charity executives are overpaid. However, many high-paid nonprofit employees are worth every dollar because of their skills and proven results. Geographical cost of living is another reason some nonprofit professionals earn higher salaries. On the other hand, the story that the media seldom cover is that of underpaid nonprofit staff. The failure to provide a competitive salary, or even a salary someone can live on reasonably, makes it difficult for charities to attract and retain talented staff.

Maclean’s examined nearly 600 charities in Canada with gross revenue of over $2 million (Canadian $). The publication found charities that significantly overpaid or underpaid chief executives, relative to peer organizations, were less likely to be transparent or efficient. “Analysis of charity data suggests extremely high compensation is linked to poor results for charities. But intriguingly, so is extremely low compensation,” according to the report. “High salaries receive the most attention, but Maclean’s found a stronger correlation with poor performance at charities that underpay their staff or have no staff at all.”

Ideally, nonprofit organization would provide employees with competitive compensation packages taking into account the type and size of organization, the job position, and geographic area. Compensation does not have to be precisely average; it can be high or low though it should be within the average range. Compensation that is excessively high or low can be directly problematic and could be a symptom of other problems at the organization.

This brings me to a third compensation problem:

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