Research Friday: "Executive Compensation"
Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.
Oh, the high-wire balancing act of nonprofit CEO compensation. Pay your CEO too little, and you won’t attract a skilled leader. Pay too much, and you’ll raise the eyebrows (or ire) of donors, clients, volunteers, and anyone else who looks up your 990 in one keystroke. And should a nonprofit really go over the top with CEO pay, the IRS will come knocking at the door.
What’s an impact-driven nonprofit organization to do? Two things come to mind. First, consult the research and data available on nonprofit CEO compensation. Comparable compensation data helps recruitment and hiring, and protects against excessive compensation claims. For nonprofits in Maricopa and Pima counties, the latest issue of Nonprofit Research Abridged details CEO compensation across budget size and type.
Second, and perhaps more importantly, join in on the conversation about CEO compensation. What are your thoughts on this issue? What has your organization experienced? Did a raise or a bonus help retain an effective CEO? Did you lose a successful CEO to another organization, or another sector, because of compensation? What benefits and perks are important to recruiting and retaining an effective CEO?
These are important questions. We are, after all, asking our nonprofit CEOs to take on enormous tasks: things like, "can you and your organization feed the hungry?—oh and while you're at it, can you please end all hunger everywhere?" Or, "Please give this family a place to stay for the night; and why don't you see if you can eliminate homelessness in the meantime?" Or, how about this one: "Make sure these kids stay busy and have fun; but what we really need is for them to be successful in school, contribute at home, and work effectively with people from different cultures towards a better world."
As I'm sure you know, I am not exaggerating by much! With goals like this, the leader at the helm is incredibly important, and his or her job satisfaction—including her or his feelings about compensation—is crucial.
One of my favorite research reports is Daring to Lead, published by CompassPoint and the Meyer Foundation. The report details the challenges and perspectives of nonprofit CEOs in an elegant blend of statistical findings and personal voices. Everyone that works with a nonprofit CEO should read this report. And those of you who are nonprofit CEOs are sure to find some kindred voices there!
When it comes to compensation, most CEOs feel they are making significant financial sacrifices to lead their nonprofit. However, only 26% of them have ever negotiated a raise—mostly due to their acute awareness of the organization’s financial constraints. And yet, approximately nine percent of nonprofit CEOs leave their organizations each year—many of them for better paying jobs, often in philanthropy or consulting.
I was pleased to learn that Daring to Lead will be published again this year, drawing on data that was collected from thousands of nonprofit CEOs across the country in the fall of 2010. We will alert you when this study is available.