How Much Should You Pay Your Nonprofit Executive Director?

Lately at Spokes, we’ve received a lot of questions about nonprofit executive compensation.  Many nonprofits are planning and budgeting to hire their first-ever executive directors in 2016.  Others, unfortunately, have suffered some turn-over in their executive positions.

So, how does a nonprofit that is hiring a new executive director – either for the first time or to replace a previous one – decide what to offer to attract and retain the best person for the job?   How does a nonprofit compete with increasing employment opportunities in all sectors of our economy?  How does a nonprofit balance its fundraising obligations with its desire to retain good employees?

The answer is complicated. And, there is no one solution for all organizations.  As with all nonprofit management issues, there is quite a bit of art mixed in with the science of budgeting and managing employees.

First, visit Spokes!  We have purchased the most recent Compensation and Benefits Survey for Southern & Central California Nonprofit Organizations.  Published by the Center for Nonprofit Management, the survey provides detailed compensation information from 509 participating nonprofits for every staff position, including executive director, bookkeeper, administrative assistant, program officer, volunteer coordinator, development manager, counselor, receptionist, gardener, case worker, activity director, thrift store clerk, network technician and many more.  We have only one reference copy available in our library, so you’ll need to visit us to view the survey. Members, however, may also call us to request scanned copies of portions of the report.

One of our favorite educational resources, Blue Avocado, recently published an article that offers some concrete steps boards can take to better inform their compensation discussions and decisions. Highlights include:

1. Consider the value the individual brings to your organization.  Salaries are paid for the work to be done.  What would it cost to recruit and hire someone else to meet your goals for next year?  If your expectations are escalating, perhaps your salary budget needs to grow as well.
2. Ask other nonprofits what they pay their executives. If there are not enough local comparisons, consider similar positions in same-size organizations in the for-profit or government sectors to establish a benchmark that’s in line with your community’s cost-of-living.  Remember, salaries within the same sector can vary widely throughout the country.
3. Consider what benefits you are offering.  Retirement and health benefits can add thousands of dollars to the overall compensation package.  More and more employee candidates are more interested in benefits than salary, especially with escalating healthcare costs and concerns over the future of social security.  If you don’t offer benefits, the salary may need to be higher to allow the employee to purchase/invest independently.

For many of us, a new fiscal year and budget will be here before we know it.  Start planning now by scheduling time on your next board meeting agenda to discuss your process for evaluating the executive director, ensuring that other employees are being evaluated and defining a strategy or policy to guide your salary and budgeting discussions.  As always, please let Spokes know if we can assist you as you move through your process. We’re here to help!

Blue Avocado article link: http://www.blueavocado.org/content/how-much-pay-executive-director