Talent

For many nonprofits, June brings the end of the organization’s fiscal year. It’s a time when organizational leaders are deep in the process of approving budgets, planning summer retreats, and preparing for a new set of challenges in the year to come. 

This season also serves to activate the annual reset of board rosters and committee assignments. For nonprofits that follow a calendar-year nomination process, summer is the time to assess who will be leaving and what gaps will need to be filled. And that task seems to be getting more difficult.

At Next Stage, we’re digging into this governance challenge as part of our broader nonprofit leader listening series. Our current survey focuses on board engagement, and we’re eager to hear from both executive teams and board leaders. Please consider sharing your perspective and forwarding the survey to your governance committee or board chair to help ensure the findings are grounded in a diversity of voices.

But before diving into the data, it’s important to set the stage. Because we’re observing how leadership is evolving in real time, shaped by growing uncertainty and mounting pressure on the systems designed to support sound decision-making.

The Challenge of Recruitment

Serving on a nonprofit board has never been an easy ask. It requires a commitment of time, energy, and personal capital; the kind of service that doesn’t always show up on a résumé or come with applause. And yet, it’s long been a vital part of the social contract for those in positions of influence and capacity. It’s a way to contribute to the greater good by providing oversight and strategic guidance to institutions that serve the public.

Lately, though, the pool of people willing to take on that responsibility seems to be shrinking. Nominating committees are spending more time recruiting. Executive directors are voicing concern about lagging engagement and unclear expectations. And in some cases, boards are operating well below their full complement; not by choice, but by default.

What’s driving this shift? Part of it may simply be math. Each year, thousands of new nonprofits are launched across the country, and each one requires at least a handful of board members to satisfy basic IRS requirements. Add to that the growing number of advisory councils, task forces, homeowner associations, PTAs, and professional associations — each with its own board, its own meetings, its own call for service — and you begin to understand the larger context. We’re drawing from the same well of talent, but more buckets are being dipped.

At the same time, people are recalibrating how and where they spend their time. The post-pandemic world has prompted a new clarity around bandwidth. A growing number of would-be board members are either stretched too thin or opting out altogether, choosing more flexible forms of volunteerism or simply declining the request when it comes. 

This has also gotten worse in recent months, as people who would normally lean into community needs are instead sitting this moment out. The politicized environment, coupled with real concerns for the economy, is having a chilling effect on civic engagement. It’s reflected in diminished audiences for cultural institutions, lower-than-expected attendance at fundraising events, and sluggish response rates to digital calls-to-action. A general malaise has settled into social good, and it spells trouble given the enormity of the task ahead.

What’s at Stake

This would all be less concerning if boards were being asked to do less. But in fact, the opposite is true. The road ahead for nonprofit organizations is full of complexity, and boards will play a central role in navigating it.

We believe three key issues will dominate nonprofit boardrooms in the months ahead:

• Budget Shortfalls. First and foremost, revenue uncertainty is real. While it may still feel like the early click-clack of a wooden roller coaster climbing the first hill, the signals of an impending plunge are hard to ignore. Pandemic-era funding is drying up. Major donors are re-evaluating their portfolios. State and local governments are signaling pullbacks and reprioritization as a result of federal policy changes. For many nonprofits, this will be the first real budget reckoning in years, and boards will be tasked with making sense of it all. That includes recalibrating fundraising strategies, reviewing reserve policies, and approving cuts that will impact the communities they serve.
• Leadership Transitions. Executive turnover is an inevitable part of organizational life, but it can feel more disruptive when layered on top of other changes. The executive turnover that was predicted five years ago is beginning to show up in practice. Executive directors and CEOs who led organizations through the pandemic are stepping away. Burnout is real, and for some, the time has come to pass the baton. In those moments, the board must be ready to not only hire a new leader but to stabilize the organization during a period of change, reassure staff and donors, and provide vision and clarity amid transition.
• Strategic Integrations. We’re hearing more and more interest in integration, including collaborative ventures, shared back-office services, co-location strategies, and full-on mergers. These ideas require careful consideration, risk assessment, and a vision for what could be gained or lost. Board members will be asked to engage in that ambiguity, serving on working groups that require extra meetings and reflective critical thinking. That’s a tall order for even the most committed volunteers, especially while their own sectors and industries wrestle with the impact of tariffs and policy change.

The Skills That Matter Now

Board service has always called for dedication. But what’s needed now is something more. We need board members who have the time to meaningfully engage, who bring expertise in finance, strategy, fundraising, and organizational health. We need board members who lead with empathy, who understand the real impact of their decisions, and who are willing to show up during difficult seasons.

Above all, we need board members who care. 

These skills are available. The people who can lead nonprofits through these challenges are out there, but they must be cultivated, invited, supported, and equipped. This work takes time and requires a strong board culture, clear expectations, and a governance committee that takes its charge seriously.

What Comes Next

If this all sounds like a big ask, that’s because it is. But the alternative is to let boards drift toward ineffectiveness at a time when organizations need them most.

Next month, we’ll publish the findings from our current survey on board engagement, along with actionable recommendations for strengthening your own board.

Please consider completing the survey if you haven’t already. Your experience matters, and your response will help shape the future of nonprofit governance.

Take the 2-minute survey now.

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Next Stage CEO Josh Jacobson launched Next Stage as a social enterprise in 2014, bridging his professional experiences as a nonprofit practitioner with his consulting expertise. He has led Next Stage’s work with 225+ clients, including nonprofits, private-sector companies, municipalities, faith institutions, philanthropies, and community-based organizations. Josh’s skills in strategic positioning and tactical design help clients achieve their goals. He guides Next Stage’s work in strategic planning and collaboration management and is a major contributor to the company’s thought leadership efforts.

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See a comprehensive report of our previous nonprofit leader survey results here, and follow us on social media to stay in the loop on future findings.

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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.

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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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