Non-Profit Pay Scales: Getting What We Deserve

Our society claims to value the work done in behalf of people in need. But that appreciation seldom has translated into an acceptance of paying high salaries to those who work at non-profit organizations. Doing good works, it generally has been assumed — even by those in the field — should somehow be compensation enough.

For most non-profit professionals and staff members, that thinking, unfortunately, has meant condemning themselves and their families to lives of extremely limited economic means, and for many it has historically meant forgoing any real claim of economic security. What’s more, it has prevented non-profit groups from recruiting the best army possible to wage our war on poverty, illiteracy, and other social ills.

Slowly, a movement is afoot to challenge the prevailing notion about wages at non-profit organizations. Many non-profit groups, even down to the level of grassroots homeless shelters, are seeing their workers begin to organize in behalf of increased wages and the improvement of overall compensation packages. And there is a growing, if grudging, acceptance that people who manage large non-profit organizations with scores of employees and multimillion-dollar budgets should earn salaries equivalent to what their peers in the corporate world earn.

However, before non-profit staff members and administrators across the country crusade for higher salaries, they should be aware that with the advocacy of increased compensation comes something else from the for-profit world: increased accountability. One reason senior and mid-level managers of large corporations can justify their larger compensation packages is that their efforts can be directly tied to their creation of greater value in the marketplace, as reflected in such areas as increased productivity, market share, and profits. If non-profit workers are going to demand greater financial compensation, they must then be open to holding themselves to stricter measures of the increased value they bring to their own efforts — whether in education, health care, or community services.

That is the greatest sticking point for many non-profit workers. Most charitable organizations measure the value of their work based on their programs’ worthy goals, or number of people served, not on the degree to which the provision of services generates real, personal change among clients. If we are to successfully argue to boards, donors, and the public for higher wage scales, we must also be able to demonstrate the added value of placing resources in one set of practitioners as opposed to another. Without the ability to link cause and effect, non-profit groups will be in no position to argue in favor of increasing wages and philanthropic investments in community or other programs.

It is embarrassing to say, however, that many non-profit groups today have virtually no management-information systems in place to track or lay claim to their added value. Instead, those organizations come to compete based primarily upon politics, public perception, and persuasion. And while foundations have long advocated the institution of more-effective evaluation tools, on the whole they have not also been willing to make the necessary investment in increasing the non-profit world’s capacity to develop and manage such systems. Indeed, the current interest that foundations have in so-called outcome funding and other strategies for quantifying the results of the projects they support reflects grant makers’ own historic failure to support the creation of meaningful measures of success.

However, that too is changing. The Roberts Foundation, my employer, is working with the organizations it supports, as well as with other grant makers, to create systems that will increasingly enable us to talk in terms of “social return on investment” relative to the programs we support. And we are not alone. While still relatively few in number, other foundations and non-profit groups across the country are working together to develop new approaches for measuring the value of charitable support. Although questions remain — such as how to value an increase in self-esteem in the people served by a program — these approaches lay the groundwork for a whole new movement in non-profit compensation that may directly tie managerial and staff compensation to the work of individual organizations, rewarding the degree to which they affect a given community or challenge.

As evidenced by the recent public outrage regarding the compensation package provided to the financial managers of Minnesota Public Radio, however, our society still has a long way to go before accepting such a notion. In that case, the management team earned in excess of $7-million after the sale of a for-profit subsidiary. That sale generated well over $100-million in profit for the parent non-profit corporation — funds that will now go to help insure the long-term future of public radio and television in Minnesota for years to come.

Yet the people who worked to build that “community wealth” were roundly condemned in the press for their supposed windfall. Although they had developed the core business idea and nurtured its creation, the managers were expected simply to be satisfied with the knowledge that they had contributed to the public welfare, with little expectation that their labors should also benefit themselves. Had the managers taken their skills to the for-profit world, however, they no doubt would have earned significantly more as the owners of their own businesses — and public radio would have been substantially less well off.

To my way of thinking, the managers’ compensation package did not go far enough. Instead, the successful subsidiary and other similar ventures should have been used to increase the base pay scale of all employees in the public-radio corporation, perhaps through an employee stock-ownership plan or similar vehicle.

Indeed, additional creativity in non-profit compensation is called for. Public-school systems, perhaps under greater pressure than charities to adopt the tactics of the for-profit marketplace due to “threats” of privatization, are ahead of many in the non-profit sector in this regard. In Maryland, Massachusetts, and Texas, school districts are adopting policies that permit the use of signing bonuses and other financial incentives to secure the best and the brightest teaching candidates and to adequately compensate school personnel who demonstrate superior skill at their craft. Such efforts can only increase the base pay of all teachers.

As institutions throughout our society, both for-profit and non-profit, undergo cost-cutting measures, the movement toward increased pay and competition for top employees will build. After all, it requires talented staff members to extract the most for each dollar invested in education, social welfare, and community programs. The non-profit world currently benefits from the presence of many talented managers. Still, we need more.

But for that to happen, there needs to be a change in society’s attitude — as well as in the attitude of those who work in the non-profit world — toward appropriate compensation. Indeed, many non-profit workers seem to have mixed feelings about money. Many tend to wear their second-class wage scale like a badge of honor that says to all who would care to listen: We are more righteous than those who spend their lives simply pursuing the dollar.

At the same time, many non-profit workers also believe that they are underpaid for their efforts. And they are.

We live in a capitalist society that measures one’s relative value in fundamentally financial terms. A commitment to community and economic justice should not mean a willingness to be paid substantially less than those who do similar work at for-profit companies. The time has come to surrender the notion of the glamour of poverty that we have held so long.

As better evaluation methods are developed, the future may well hold a day when the added value of non-profit organizations will ultimately be measured in terms that any financial manager can understand. And while the notion may send many people into orbit, one can even project a time when non-profit shares are traded based upon both the perceived and real socioeconomic value that charities bring to society as a whole — and when managers are compensated based on their groups’ return to their shareholders: the community, foundations, and individual donors.

But for today, it is enough to say that before we rush to condemn the golden packages of the few, we should stop to reassess our values about appropriate compensation and how we measure the relative worth of non-profit managers and staff members. If we want what we feel we deserve, we should be able to receive compensation adequate to our value. But if we are paying for the best, we must be able to document that they are, in fact, giving us what we pay for.

Jed Emerson is executive director of the Roberts Enterprise Development Fund, a program of the Roberts Foundation, in San Francisco.