Written by: Tanya Varanelli

Even in times of uncertainty, it’s important to ensure nonprofit leaders and staff are compensated fairly. Our current circumstances require so much from our nonprofit leaders to achieve growth and impact in their mission. Clearly aligning success for the organization and chief executive will influence desired outcomes.

In 2020, Next Stage produced the first-ever Charlotte-Mecklenburg Nonprofit Executive Compensation Study. The study is an in-depth look at the compensation practices of local nonprofits — highlighting trends and challenges in compensating nonprofit leadership across organizations of every size, budget, and mission focus.

A few notable insights:

  • While nonprofit leaders pursue a cause that is meaningful to them, over 92% surveyed in the local market note that base compensation is important to their overall job satisfaction
  • Only 78% are satisfied with their current level of compensation

Nonprofit leaders have chosen to pursue a role that unites their passion and executive skills, and we have to make sure they are not underpaid for the value brought to the role. If your nonprofit is ready to assess its executive compensation package, we suggest the following steps and best practices.

Step 1: Benchmark Executive Compensation 

Understand how your chief administrator’s salary compares in the local market to gauge competitiveness. Take into account base salary and other compensation (i.e. benefits and bonus potential) as components of the total compensation package. Compare your nonprofit to other peer organizations with similar revenue size, mission focus and staff size.

Step 2: Sync the Executive Assessment to the Strategic Plan

The organization’s strategic plan should capture current goals and objectives across programming, operations and resource development with measurable targets. Many organizations do not have a rigorous executive assessment process tied to the organization’s goals and objectives. When metrics are based directly on the strategic plan, there is a clear understanding of how the CEO achieves the desired outcomes and creates positive, measurable impact in their role. With a strong assessment process in place for other staff members as well, your organization will benefit by maintaining consistent goals and objectives across all levels of the organization.

Pay-for-performance bonuses should be also considered by nonprofit boards, as long as the Key Performance Indicators (KPIs) are thoughtfully constructed. Less than 40% of organizations surveyed last year offer a pay-for-performance or bonus structure to their chief executives. These incentive plans can lead to greater satisfaction and an informed path for the executive to lead the organization to meet and exceed desired outcomes.

Step 3: Reach Agreement on Goals and Compensation Structure

This undertaking should be led by the board chair and executive committee or a compensation task force. A formal vote and board approval will ensure agreement on the measurable goals and incentivization plan as components of the executive compensation package.

As we reflect on a tumultuous year and look ahead to the end of the fiscal year, executive compensation is only one of the many areas nonprofits are required to reimagine and innovate. The pandemic has increased the community need for support provided by many nonprofits, oftentimes with reduced resources. This requires innovation, resiliency and leadership expertise for our nonprofits more than ever before.

If your nonprofit is interested in learning more about benchmark compensation studies, structuring an incentivization plan, or developing KPIs contact us.