The world of social good is a bit upside down right now. The federal spending freeze announced early last week set in motion a flurry of communications from current and past Next Stage clients, all seeking clarity on what it meant and how to navigate it. While the Office of Management and Budget ultimately rescinded the proposed payments pause, the writing is firmly on the wall—be prepared.
These conversations reminded us yet again how challenging the role of executive leadership in the nonprofit sector is today. The COVID-19 pandemic had a beleaguering effect on administrators who needed to care for their staff members and volunteers while keeping their mission focus alive. And now, just as the world seemed to be getting back to normal, new federal policy directions are throwing them another massive curveball.
We feel for these leaders and want to recognize their importance at this critical juncture in history.
Retention Strategies in Times of Stress
Once upon a time, Next Stage offered executive search as a core service line, conducting as many executive searches as strategic planning efforts. This has since moved to more of a “secret menu item” for client engagements where we’re more deeply involved (like our recent sourcing of Kristine Urrutia as Catawba Nation Foundation’s inaugural Executive Director).
But through our extensive experience in executive search, we identified a significant gap in local data around executive compensation for nonprofit leaders. In response, we created an in-depth community report in 2020 to help address this issue.
The Charlotte-Mecklenburg Nonprofit Executive Compensation Study provided detailed insight into compensation by sector, revenue size, and number of employees, offering key data on base compensation, benefits, and pay-for-performance. While information like this existed at the statewide and national levels, no one had done a deep dive into the data on a local level.
In the years since the report’s release, we’ve received regular inquiries from board chairs and nonprofit leaders about its findings. This ongoing need for local and organization-specific data led us to launch an Executive Compensation Study service line. Through this offering, we provide custom recommendations and analysis for organizations looking to design an executive director retention strategy.
We’re reminded of this work now as nonprofit leaders face an uncertain future. We feel strongly that they deserve our advocacy at a time when they would have us focus instead on the people their organizations serve.
Read on to learn more about retention strategies your organization can implement to help support your leadership during turbulent times.
Nonprofit Leadership in Times of Crisis
Nonprofit executives are navigating a landscape of increasing complexity, where economic uncertainty, shifting public policy, and evolving donor expectations place extraordinary demands on their leadership. These professionals must balance mission-driven work with operational sustainability, all while ensuring their organizations remain resilient in the face of external pressures.
As these challenges mount, so does the need for organizations to examine how they can best support and retain their leaders.
Avoid Self-Advocacy in the Budgeting Process
Nonprofit CEOs often face the difficult position of advocating for their own compensation while balancing other organizational needs. This challenge is exacerbated when the budgeting process begins with the CEO, who submits an initial draft to the Executive Committee of the Board of Directors.
The need for transparency and fairness in executive compensation is more urgent than ever. Selflessness is in the nonprofit DNA, with leaders putting the needs of others ahead of their own. This frequently manifests in CEOs prioritizing salary increases for staff over their own compensation, leading to long-term retention challenges. We’ve seen time and again how nonprofit administrators sacrifice personal financial security in favor of sustaining their teams—an expectation that’s neither sustainable nor fair.
A recent article by the Maine Association of Nonprofits emphasizes developing a transparent compensation philosophy. Such a philosophy not only demonstrates the critical role of staff retention in advancing the organization’s mission but also holds decision-makers accountable to guidelines grounded in organizational values, rather than market data alone. This approach equips staff with information that supports self-advocacy and broader organizational accountability.
Sync Executive Assessment to a Strategic Plan
How is your organization’s chief administrator performing? Our take on this hasn’t changed: nonprofit boards lacking strong executive assessment methodology struggle to set compensation fairly, tending to “keep up with the Joneses” rather than compensate for outstanding performance.
Aligning the executive assessment process with the organization’s strategic plan is essential for ensuring leadership efforts directly contribute to overarching goals. A quality strategic plan will outline objectives across programming, operations, and resource development, complete with measurable targets. By basing executive assessment metrics directly on the strategic plan, there’s a clear understanding of how the CEO achieves desired outcomes and creates measurable impact in their role. This must be adjusted during times of crisis, revisiting these goals against the backdrop of change.
Nonprofit boards should also consider incorporating pay-for-performance bonuses. According to a survey by BDO USA, 42% of nonprofit organizations now include annual incentives or bonuses as part of their compensation packages for executive directors—a statistic that matches Next Stage’s local findings of 39% back in 2020. This marks a continued shift toward performance-based compensation, reflecting a desire to align executive pay more closely with organizational goals and outcomes.
Scrutiny from the Outside
Media interest in nonprofit salaries tends to be cyclical, often producing sensationalist headlines that frame executive compensation as excessive. A recent Charlotte Observer article (“See who is making millions at 15 top nonprofits”) exemplifies this trend, highlighting salaries without broader context about the complexity of nonprofit leadership. While transparency is critical, these stories often reinforce the false narrative that nonprofits should underpay their leaders—despite the immense responsibility they carry in ensuring organizational success, financial sustainability, and impact.
It has always baffled me that leaders working to make the world a better place are penalized for earning fair compensation while corporate executives are encouraged to earn millions—even when their work sometimes runs counter to social good. This dynamic not only affects how the public perceives nonprofit executives but also discourages top talent from pursuing or remaining in leadership roles.
Instead of perpetuating these misleading narratives, we should advocate for fair compensation structures that recognize the expertise, dedication, and leadership required to sustain mission-driven organizations.
A Call for Change
Nonprofit leaders are at the center of social impact, yet they continue to navigate an uphill battle when it comes to fair compensation. As we look ahead, we must address this imbalance head-on, ensuring that executive compensation for nonprofit leaders reflects the value these individuals bring to their organizations and communities.
This is particularly true now as we face an uncertain future and what will likely be years of policy shifts that impact the nonprofit business model.
For board members and stakeholders invested in organizational sustainability, the conversation about retention must include compensation. Now more than ever, it’s time to advocate for the leaders who dedicate their careers to building a better world.
Interested in a custom executive compensation study for your organization? Schedule a free consultation today to discuss your nonprofit’s unique needs.
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