Monday, October 14, 2013

Charity Navigator's 2013 Nonprofit Salary Study Findings Got A Gawker Writer 'Shot' When Really, Nonprofit Employees Should Insist Nonprofit Leaders Attract and Retain Employees By Operating and Fundraising Better

Charity Navigator, "America's largest independent charity evaluator, provides free ratings of the Financial Health and Accountability & Transparency of thousands of nonprofits..." (as stated by Charity Navigator's website) has just released the findings from the 2013 edition of their annual Nonprofit CEO Compensation Study.  See it at 2013 CEO Compensation Study Final.

Social and cultural phenom website, Gawker, whose tag line is, "Today's gossip is tomorrow's news." posted the article, Here Are the Most Overpaid Charity CEO's in America today about Charity Navigator's 2013 findings.  The title of this article sounds editorial until you go to Charity Navigator's page two of the actual Study's .PDF (See page two of the link, at the end of the first paragraph, above). His article simple summarizes Charity Navigator's study's findings and here is what Charity Navigator's findings report's authors said, themselves (as the Gawker article quotes),

"This report offers insight into how a charity’s mission, size, and location impact its CEO’s sala-
ry. It also highlights some questionable salaries, such as those that approach and exceed a mil-
lion dollars, and suspect compensation policies, such as charities that have multiple highly-paid
family members on staff. We round out the report by offering advice for judging the appropri-
ateness of a nonprofit executive’s pay." [Charity Navigator]

The Gawker article's author, Hamilton Nolan, appears to have enjoyed looking over the comments under his salaries recap as much I have.

As of the time that I am writing this blog post, today, he has responded twice to comments relating to his blog post/article.  He responds to a portion of a comment first, and the comment snippet is,""You know, there's this misconception that people who work at nonprofits should essentially accept being paid less than market value for their skillset.""

Nolan responds by pointing out, in his words, "On the contrary, this study is all about market value. It surveys the market—in this case, nonprofit organizations.  It surveys the market—in this case, nonprofit organizations. The salaries listed are in the top 1/3 of 1% of "market value" in their market. That is, in my mind (and in the mind of a typical corporate compensation committee), a strong indication of overpayment. If you'd like to be more specific in your objections, I'm all ears."

His second response (thus far, anyway) he further explains his point of view (based on the study's findings) thus,  "I'm not saying that employees of nonprofits should be poorly paid. I'm saying that the CEOs of nonprofits should not be paid grossly outsized salaries. I also believe this for private companies, though the justification is somewhat different."

I know it is really uncommon for people who comment online to read the entire article, from start to end, that they comment on (whether or not that is what has occurred here or not - I do no know); so, I imagine it is even less likely that the folks who have commented on Nolan's story also read the actual study's findings.  Had they, they might understand that Nolan, himself, was not editorializing in his Gawker post, but rather re-stating Charity Navigator's own findings.

It is a bit interesting that the messenger got shot.

We nonprofit types get our nose bent out of joint (especially those of us who are employed as paid staff by nonprofit organizations who are not making over $1 million) when we read (or partially read, as the case may be) anything sounding remotely like, "...people who work at nonprofits should... accept being paid less than... for their skill set..." (the editing of the original Gawker comment is mine not theirs' or Nolan's).  I know why it annoys us.  I've been paid nonprofit staff, I've volunteered for others, and I've consulted for still other organizations.  I've written blog posts, here, on this topic.  Not only should nonprofit staff be paid according to a fair market value of their expertise, knowledge, reputation, and so on - they should also receive reasonable benefits.

The study's findings would be a far more interesting topic for nonprofit staffers to have commented about and reacted to rather than reacting to an assumed bias which was misplaced at the feet of the Gawker article's author.  There was no bias - the article reiterated a study's findings - and the author didn't write the article based on his opinion (of which he explained later happens to be that nonprofit staff should not be paid poorly).  Here's why:

Charity Navigator's study was done with a pretty representative sample of the American nonprofit sector.  They wishes to find, in part, among other findings, which nonprofit executives are the most highly paid.  (See the study to read how Charity Navigator selected their sample group, and why they chose those organizations, which types of nonprofits they excluded and why, and how they carried out their analysis to arrive at their findings).

As we are so touchy about the topic, nonprofit employees, in particular, should consider the study and its findings because it gives us information about which organizations get that we are valuable and treat us as such.

To Charity Navigator's (and arguably Nolan's) point(s), donors, should be taking note of the study's findings and those organizations that pay their executives in (according to the nonprofit sector's own market) extremely above average salaries.  Beginning on Charity Navigator's findings report's .PDF's page 13 they, in the report, recommend how donors can further consider or research Charity Navigator's findings to determine how, for themselves, a donor feels about let's say one of that donor's favorite charities which is perhaps over-compensating their executive (or not).

On page 14, the report then gives nonprofit organizations, themselves, some advice based on the findings and possible concerns the findings could raise for the people and entities that support a given nonprofit.

The public may read Mr. Nolan's article and just get upset thinking, 'I gave X charity $100 or Y organization $1,000 last month.  Is 70% of each of those dollars going to some executive's salary?!'  If donors do get their hackles up - then good!  Asking a question is the first step to getting an answer.  Donors should learn that Charity Navigator exists to provide the public (for free) with data that can assist them in determining whether a given nonprofit is doing the work of its mission statement, if it achieves mission success regularly and often, how much of each dollar raised recently went to the mission/work, and whether it is run professionally and ethically. 

The public may think, 'well, all nonprofits should be operated by volunteers because then less of each dollar the charity raises goes to overhead or operating costs'.  Then the public ought to volunteer and see for themselves what work goes into all aspects of nonprofit operations (from providing programs, to raising funds and volunteers, to overseeing/planning operations and mission based growth, to public outreach, and so on).

The public, too, ought to consider that the nonprofit sector both provides support to (in services and programs often at lower or no costs to clients), and nonprofits inject money into local economies.  A segment of the American public would be out of work if suddenly all nonprofits no longer employed people.  That would drag on our economy and on each nonprofit's ability to provide their programs and services.  There is no industry that does not benefit from talented, knowledgeable, skilled employees.  It is no different in the nonprofit sector as it is in the for-profit sector.  Why does, for example, IBM pay its executives what it does?  Why does IBM charge what it does for its products and services?  Because the market both provides salary and product/services context, financially, for what is acceptable; and the marketplace also reacts to these costs and prices, over time.  Well, it's the same in the nonprofit sector, too.

Charity Navigator, though, doesn't state anything in their report to nonprofit employees.

Those of us that are working in the sector, especially those of us who are not making $1,000,000 or more a year - don't seem to be of consequence.  But we are.  We are 99% of Americans employed by nonprofit organization.  We should be vigilant for our salaries, benefits, and career opportunities and expect the best.

We, who get tired of careers in a sector that itself sometimes under-values employees by offering  working-poor salaries with no or little benefits, need to take our umbrage with those who are actually responsible for these hiring decisions - the boards, executive committees, and executive directors of the nonprofits in our geographic regions.  Are nonprofit leaders unable to hope to attract the best talent and keep it?  Do they not know how to plan?  No budgeting knowledge?  No fundraising experience or success?  If not - they shouldn't be leadership.  Nonprofit leaders should not just be concerned about what their potential supporters think of a salary study's findings, but too, they should seriously consider what their current employees and potential hires think of their futures in the sector.

Nonprofits operate best with educated, current, credentialed, talented, reputable hires who hopefully stick around (so the organization does not burn through money and resources, unnecessarily due to a high turnover rate).  Nonprofits, then, need to both be able to attract the best but also retain the best of the talent pool.

No one who works in the nonprofit sector should seek positions with any nonprofit other than the organizations that in their recent history demonstrate they value employees by paying competitive wages and benefit packages and are providing excellent career growth opportunities.  Cities, Tribes, and states should also encourage nonprofits to attract and hire talent so that their communities are earning and spending more in their locales.

Nonprofit leaders should realize that if they wish to be able to recruit the best and then retain them, they must offer competitive pay with competitive benefits packages, just like any other industry.  It costs less for them, over time, to not have to pay for high turn over rates or incompetence.  Nonprofits need, too, to work with employees to determine excellent human resource management and career growth opportunities to retain talent.  How, then, should a nonprofit afford or raise the funds to employ talent?  How should nonprofits raise funds for overhead so that the public (donors or volunteers) gets it and thinks it worth a portion of each dollar or hour they give?

I think that this is the real question eating at nonprofit leaders, employees, and supporters.  To all of you I submit that (just as is required to raise money for any nonprofit operation) to raise overhead the organization has to demonstrate its programs success rate, that its operations are ethical/professional operations, demonstrate its dedication to its mission, and demonstrate the need for the organization to do what it uniquely does in its community; and then it has to demonstrate why however much it spends on overhead costs (such as salary, rent, office supplies) is worth overhead's percentage of the total operations budget.  If a nonprofit, of each dollar it raises, spends 85%  on programs and services (or the mission) and 15% on overhead, the operation is operating ethically according to the nonprofit sector's own professional best practices, the IRS, and Congress.  Probably according to all states' governments, too.

Overhead, as a portion of the operations budget, should not be feared.  Overhead operational cost is a reality of any entity's day to day business.  All nonprofits that are successful have and are raising overhead funds right now.  It is indeed possible.

If a nonprofit makes the case to its current and potential supporters (donors, volunteers, or community partners) that for example, "Until our nonprofit hired a credentialed Early Childhood Education teacher with a masters and successful program designing experience elsewhere, we were not creating effective and efficient programming.  Steve Rolland, our new teacher, evaluated and then re-designed our Early Childhood Education services so that in one year our success rate doubled, we reached more children in the target population than ever before, and we provided all of this at a lower services cost than we had been operating at over the past three years." then its ability now and its potential for the next goals are very compelling to those potential donors or other supporters.  Real, clear, quantifiable benefits have been incurred.  Nonprofits must make the case.  They do so by providing pertinent succinct information to the public that is the truth and compelling.

Where do I get the data I need to provide an accurate and compelling case?

Nonprofits must be operating competently and professionally by keeping honest and detailed books, being up on the latest in professional nonprofit best practices for each and every nonprofit operation and the latest best practices in whichever professional sector that pertains to their mission, by tabulating service statistics (always for each service and program), by planning and including expected outcomes in those plans and then following through once a service or program has completed and tabulating benefactors' feedback and recommendations so the organization: a) knows if it achieved its outcome, b) what it could do better, and c) what the benefactor's real needs are or what needs of theirs' have not yet been alleviated (that pertain to your organization's mission).  Programming should be based on the benefactor's real but as yet unmet needs that pertain to a given nonprofit's mission statement. A nonprofit's programs and services must be pertinent, current, and meeting a real need effectively and efficiently to consider itself successful.  A nonprofit must have truthful data (that can be audited) about its work and successes and then it must inform the public, its supporters, and its potential supporters of its successes.  It has to inform everyone of what it is accomplishing and how efficiently, professionally, and ethically it is accomplishing everything.  The community then understands the value of the nonprofit (and its employees) by virtue of what it accomplishes in that community efficiently.  Then, donors feel compelled and confident giving to the nonprofit that makes its case, and are also more likely to give again (even if a portion of each dollar given goes to overhead costs).


joseph levinson said...

In my own little way of extending my gratitude and recognition to your life-saving work around the world, thanks
Joseph Levinson

Arlene M. Spencer said...

I am grateful for your very kind comment. Thank you (and thanks for continuing to read).

Best, Arlene