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Low Nonprofit Salaries Are Costing You Money

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Published May 2, 2016 Reading Time: 4 minutes

Washington Nationals outfielder and standout hitter Bryce Harper will make $5 million this year, a salary that is only expected to increase in coming years. The 23-year-old is one of the best players in baseball, the national pastime and center of much nostalgia and sentiment. But nobody asks why he doesn’t simply play “for the love of the game.”

This is essentially what we ask of many nonprofit professionals, banking on their love and commitment to the cause to make up for low salaries and long hours. It’s no wonder the nonprofit sector has higher turnover rates than other fields. The 2015 Nonprofit Employment Practices Survey found that turnover increased from 16 percent in 2013 to 19 percent in 2014, with an increase in voluntary turnover (resignations and retirements) specifically.

When asked about their greatest staff retention challenges, the top two issues cited were “inability to pay competitively” (27 percent) and “inability to promote” (20 percent). Unfortunately, the use of the word “inability” only reinforces the impression that this is how the sector must operate. Organizations do have a choice in whether they prioritize staffing and retention, and ignoring these issues is already costing nonprofits money and impact.

The sector cannot attract and retain the talent it needs to solve huge social problems without investing in nonprofit salaries. Like a Major League team, you can’t hope to compete (both with other employers and the social problems you contend with) without spending money on your team members.

Value Your Team, or Someone Else Will

The work of social impact organizations is important. It matters. Bryce Harper does contribute to sports and culture, but if society values his work at $5 million, I think it’s safe to say that Sally, who works to keep kids in school and out of the criminal justice system, should be able to pay the rent on her apartment. While the disparity shrinks at lower-level positions, data from 2007 showed that a manager at a large nonprofit could expect to be paid $22,000 less than at a for-profit.

As Vu Le says on his blog, “Our sector is sustained by idealists who chose to do this work, who will work for much lower salaries than they could get elsewhere… [but] We start pining for things like a decent used car with brakes and mufflers that actually work.” Sooner or later, your employees may ask just how much more comfortable life would be if they got a higher-paying job. Nonprofit professionals are willing to make sacrifices, but if you ask your team to be martyrs, what you’ll get is burnout, resignation letters, and an office culture as fun as jury duty.

Because the “bare bones” mindset is so common in the social sector, it’s easy to normalize low nonprofit salaries and compensation packages. “This is what it’s like at all nonprofits,” some organizations think. But it’s important to remember that you’re not just competing with other nonprofits for talented, hardworking people. You’re competing with for-profit businesses and government agencies.

The skills and experience of work in the social sector is very transferrable to the private sector, and with more and more businesses making corporate social responsibility a priority, the pull of a for-profit job that pays more can become even more enticing for your staff.

Turnover Is Costing You Money

While many nonprofit organizations pay low salaries because they want to save money, poor compensation and working conditions can lead to high turnover. This isn’t just frustrating and detrimental to organizational morale, it’s expensive.

Just think of all the time and money that goes into filling just one vacated position: redistributing responsibilities during the transition; revising, posting, and promoting a job listing; interviewing candidates over the phone and in person; and training and orienting your new hire. It will also take time to get your new team member working at a similar level as your old employee (if you are able to find someone as capable). If you are replacing someone in development or donor relations, you also run the risk of neglecting or damaging important connections with donors or sponsors, which can directly impact your revenue flow.

A report from the Center for American Progress estimated that to refill most positions, it costs organizations 20 percent of the job’s salary. As the Center for Nonprofit Management points out, this means it could cost you $8,000 to fill a $40,000 position. Meanwhile, a five percent raise might have been enough to keep your experienced employee on your team.

The lost productivity and recruiting costs can easily add up to the kind of money that would have made your old employee happy to stay. Of course, there are many factors that lead to someone leaving your organization, but it’s important to weigh the cost of turnover when determining whether you can afford a better salary or benefits.

Communicate Investment to Donors

When it comes to compensation and investing in your team, one of the biggest concerns for nonprofits is justifying overhead to their donors and board. Although there is a lot of pressure on social impact organizations to keep operating expenses low, the key is to lean into the value of your team and communicate its direct impact on your overall work. Board members specifically should understand that your team of nonprofit professionals are the key to achieving your mission.

Most organizations have a section on their website introducing their leadership or staff. This is where you should emphasize the qualifications and experience that make your employees so well-suited to achieve your mission. You don’t need to directly address employee compensation with donors, but showing pride in your team will help to convey that the people behind your work are important assets to your organization.

Members of your team are able to give their best to the cause when they know they are valued and compensated fairly. Nonprofits must remember that they are competing with government agencies and the for-profit sector for talented employees, and all the time and money spent on recruiting and training replacements could be better used to hold onto your best team members. Selling your team short is a one-way train to burnout, high turnover, and lost impact. You can’t afford to not invest in your nonprofit’s team.

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