May 19, 2009
Low Salaries Hold Charities Back, Author Argues
During graduation season, commencement speakers like Michelle Obama exhort young people to give back and change the world, but the reality is that they face a stark career choice, Dan Pallotta writes on Free the Nonprofits, a blog on Harvard Business Publishing’s Web site.
New graduates can dedicate themselves to charity or work for their own financial security, but they can’t do both, he argues.
“We say to students who choose charity, You must watch your classmates who chose the for-profit sector pass you by on the economic highway — buy homes in better neighborhoods, send their kids to better schools, drive safer cars, take better care of their aging parents, indeed serve on the boards of and direct the very charities that employ you,” writes Mr. Pallotta, the author of Uncharitable: How Restraints on Nonprofits Undermine their Potential. “But you, because you have chosen to help the indigent, you must sacrifice — you can have none of this power, none of this security.”
He cites a Business Week survey conducted several years ago of Harvard MBA’s 10 years out of business school that found their median annual compensation was $380,000. At the same time, says Mr. Pallotta, the average compensation of a chief executive of a hunger charity was $84,000.
“We’re not going to get many people with a $380,000 annual earning potential to make a $296,000 annual sacrifice to run a hunger charity,” he writes. “It’s cheaper for them to donate $100,000 a year to the hunger charity, get a $50,000 tax savings, still be ahead by $246,000 a year, and have a lifetime of huge earning potential still awaiting them.”
For the nonprofit world to be able to attract top talent, it need to narrow the gap between nonprofit and for-profit salaries, Mr. Pallotta argues. “It is time that our vision of change incorporated a vision of a whole person,” he writes. “We must allow those who dream a dream for others to dream a dream for themselves as well.”
What do you think? Are low salaries holding nonprofit organizations back? Are there other obstacles charities face as they try to attract highly skilled employees?
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Amen to Dan. I’ll add that people working in the for-profit world may also look down on their former counterparts in the non-profit realm, since our society equates higher pay with higher ability. In their viewpoint “If you’re not making big bucks, you’re an inferior, lower-skilled worker.”
— Beau May 19, 02:45 PM #
At the risk of starting another argument with Dan, whom I have grown to respect, I must respectfully jump in. I am a hunger charity exec who makes $85K. But you know what…I own a house in the amazing Mt. Pleasant neighborhood in DC, sent my daughter to a great school, drive a good car and enjoy champagne with my wife every Friday night. We hosted my wife’s aging parents before they passed here at home and even have a modest sum tucked away for our looming old age. The best part—everyday at the DC Central Kitchen, I get those well paid CEO’s (who are here volunteering) telling me how cool it is that I have a job like this, and how they are considering chucking it all aside to join the ranks for those of us who go home at night content that we rocked our communities. I agree with Dan that the stupidest thing we do in America is tell new grads that they must choose between doing good or making money—to be a .com or a .org. But I will always disagree when it is suggested that making cash like a bank CEO is the grail, or that we are the lesser for (happily) making do with less than100K. The only caveat I would add—I would never say that somebody cannot make this kind of salary, if they choose and can raise it. I’m only suggesting that while a fat salary may allow you to bring home more bacon, it won’t necessarily make you as happy as a pig in….er, charity.
— robert egger May 19, 02:47 PM #
Dan is 100% right on target. I join him in stressing the need to start looking at charities and non-profits in terms of “effectiveness” and “return on charitable investment”, instead of only on “efficiency” measures, which result in drastically lower salaries than is required to successfully address the problems that non-profits strive to solve. Along these lines, why do so many non-profit professionals leave to go work for for-profit consulting firms that assist the non-profit organizations? I would love to work with Dan to figure out how to educate donors so that they are willing to invest the amount needed to attract top talent and the brightest, highest-potential team to work for their causes.
— Jeff Swan May 19, 02:48 PM #
Mr. Pallotta’s point highlighted in this comment is generally accurate and useful. The gap between income earned in the corporate sector and income earned in the nonprofit sector for the same skill set, pressure, and commitment is a kind of “fulfillment earnings.” Assuming two equal positions, one in the corporate sector and one in the nonprofit sector, employees tend to work for less financial compensation in the corporate position in light of the greater fulfillment derived from working in the nonprofit sector. This gap is a structural feature of capitalism—those consumers demanding the services of hunger relief agencies, including those in poverty directly and government and philanthropic grantmakers indirectly, cannot pay for the inherent value of the services provided. It is also a feature of the labor market—nonprofit employers can pay less because someone with the needed skills will take the job for less income. It is important that graduates making career decisions understand this.
— Steven May 19, 02:49 PM #
I agree 100% with Robert Egger. I’ve worked as a nonprofit professional since 1985. From 1992-2006 my wife took on the role of full-time mother. We own a nice home in a nice neighborhood and pay cash for safe, reliable (albeit used) cars. Corporate executives who make $380K can be just as broke as nonprofit executives who make <$100K – what matters is a commitment to live within your means.
— richard May 19, 03:03 PM #
The problem is not with the relatively lower nonprofit executive salary, it is with exhorbitant corporate salaries that are so ridiculously beyond the level of human need. Level the playing field and let both executives take home $148,000. This salary would still be thirteen times the Federal Poverty Level for an individual and three times that of an entire eight-person family. We have lost all sense of proportion and I am most concerned that the issue even had to be raised.
— Katherine May 19, 03:09 PM #
I 100% agree with this argument. I am currently working in non-profit for a human services org. that provides assistance to individuals disabled by autism, and I love my job, but I am looking at possibly moving into the for-profit sector following this job due to the financial constraints I face with the current salary levels of people in my field in non-profits (I am in communications/pr). I have student loans that I can barely pay and while I love working in the non-profit sector, I can’t imagine continuing to struggle like this for the rest of my life. It’s incredibly unfortunate that there is such a disparity in salaries- I think it makes it harder not only to attract valuable talent but also to retain that talent.
— Ashley May 19, 03:36 PM #
I very much appreciate Robert Egger’s and Katherine’s counterarguments. I would add that Mr. Pallotta’s argument seems to assume that people who choose to work in nonprofits for lower wages are NOT top talent, and that people with $380K wages undoubtedly are. I would highly disagree with this leap of logic, particularly given the talented, smart, creative people I work with at my .org every day.
— kate May 19, 03:54 PM #
I’m sick of hearing people say that no one with higher earning potential would be willing to work for less! This assumes that anyone with the brains to be a corporate CEO would choose to be one. This simply isn’t true. While those corporate CEOs may not want to believe it, not everyone makes their education and career decisions based on the desire for money.
And in a nation where the average income is only around $45,000, $85,000 is more than enough.
— kg May 19, 04:17 PM #
I completely agree with Mr. Pallotta. Even only 2 years into my career I’m already discovering my equally talented former classmates are making $10K more annually and I have every confidence that the gap will continue to increase. As Ashley mentioned, student loans specifically add to the challenge. The new law that forgives federal loans after 10 years with a np is a good beginning but it hardly helps those of us 2 and 3 years into payments. Loans aside, I also look forward to a day when I can work for the cause I am most dedicated to and support my biggest passion – my family. I hope my husband and I are able to save for our children to have the benefits that our for-profit working parents were able to give us.
— Cheryl May 19, 04:24 PM #
As a non-profit professional who spent the majority of my career in the for-profit world, I believe this debate doesn’t have a right or wrong answer. For me, it was simply about a calling to servant leadership. I have the pleasure of working with the most dedicated and mission-driven staff on the planet. Their career choices were made with the knowledge that large financial rewards would never be part of the equation. Once a person makes this conscious choice, it frees them to give 110% to their chosen cause and the rewards it DOES bring rather than the rewards they will never reap. Do we wish the financial rewards were higher? Of course. Would I trade my current career for my previous job? Never.
— Linda May 19, 04:28 PM #
Working in the non-profit sector has always been an act of servant leadership. And as public citizens under greater scrutiny than privately held and until recently public corporations, stewardship of donor dollars is the reputation by which a non-profit sinks or swims.
Mr. Pallotta learned this first hand when some state Attorney Generals sued for bad fundraising practices on his AIDS Rides.
AFP is looking at fundraising effectiveness and how we measure it. We know a blanket no more than 25% on overhead does not work universally and is/can be creatively accounted for. So measure of impacts and outcomes is how we need to determine success and salaries.
However, if money is what you seek in a career, the non-profit field will always lag behind the for-profit work. I don’t think it is hurting our field. There are many, many, many talented individuals working in the independent sector and some from for-profit coming in as well.
For colleagues who move jobs for better salary not mission, they keep moving, grass is always greener, but not more fulfilling.
Has this latest economic recession taught us nothing about those who had so much and now don’t? Money is not everything, never has and never will be.
If it’s all about money in your pocket…go seek it somewhere else. If you have a passion, commitment to others before self, come join us.
— Barbara May 19, 04:53 PM #
It sucks that the profit world makes more money, but that is what non-profit is all about. ie money goes to services, etc. If corporations were not around non-profits would not be either. It is a give and take. Many Executives who leave the profit world are financially secure or kids are gone etc so the lower pay is not a problem. Volunteering is a way for all of us to contribute. There is nothing wrong with volunteering/donating and working making big money some where else. This is the American Dream or did it change? But taking the tax benefits away from donating would lead to horrible problems for non-profits, esp in this economy. Just remember it is not Us versus Them. We both need each other.
— Kimberly Linford May 19, 05:17 PM #
Having experienced Mr. Pallotta’s approach to nonprofit marketing firsthand (vis a vis the very expensive “I’m Possible” Pallotta Teamworks campaigns in early 2000), I respectfully suggest that he still doesn’t get it.
Nonprofits are not in business to make their employees rich. For someone whose primary goal is to make as much money as possible, then a career in nonprofit is very likely not the right choice. To suggest, however, that the best and brightest are attracted only by high salaries (and therefore nonprofits are unable to attract the best and brightest) is a complete fallacy.
Take a look at almost any nonprofit and you’ll find brilliant servant leaders who could make significantly more money on the other side. They choose not to and they adjust their lives to fit their career choices.
— Leann May 19, 05:24 PM #
I totally disagree that low salaries aren’t hurting the nonprofit sector. While yes, we can idealize and say that anyone who wants to work in nonprofit is doing it not for the money but for the cause, I think that is naive. While yes, there may be many people out there who think that way, for most of us in a nonprofit, we want to do good AND be able to support ourselves. We want to be fairly compensated for the hard work that we do, and for the level of skills that we possess. It’s only human nature to look around you and see that others are getting more for the same work and feel unfairly treated.
While those we serve obviously can’t pay enough to support our salaries, everyone in the community should understand that we are doing them a service and support us enough so that we can be fairly paid for our work. And we shouldn’t be chastized for asking.
I currently work for a nonprofit that is notorious for underpaying its employees. I have seen firsthand how this affects the ability of an organization to grow dedicated leaders, to plan for succession, to provide quality services, and the list goes on.
If we want our donors’ dollars to really mean something, than focusing on how well nonprofits are managed is the answer, not just how many loaves of bread we can distribute. Plus, I guarantee that it is the top executives at nonprofits, who are making somewhat comfortable salaries, who will say that there isn’t a problem. It’s those of us in the lower and middle management ranks (those you want to keep around and foster growth with) that will say we aren’t being paid enough. The difference between trying to survive on $30k a year and comfortabley meeting all your basic needs with $85k is a pretty big one.
— jenelle May 19, 05:27 PM #
I think the debate about CEO salaries too narrowly defines the topic. I manage IT at a nonprofit, and I see a huge problem with paying $45k to a Systems Administrator who can make $70k at a similarly-sized for profit. The damage I see is that you get huge turnover in NPO IT staff and costly instability in your infrastructure when you constantly devalue this staff, which, face it, is critical for any org with 25 or more employees and complex to maintain. The low wages have insured that a lot of IT staff are low commitment, half volunteers, either there for a short stay or not giving it serious effort. Orgs both benefit and suffer from the availability of non-breadwinners who can afford to work at these wages, but rarely evaluate it strategically. NPO wages can be less than for-profit; they even should be; but the gap should not be so large as to cripple the organization. In many cases, today, it is.
— Peter Campbell May 19, 05:34 PM #
I think Peter and Jenelle make the most compelling arguments—it’s really about rank and file staff, and the ability to attract younger leaders who can take the mission forward by introducing new tactics and strategies. Good groups develop donors who understand that you HAVE to be competative, but make sure that there is little disparity between top and bottom salaries. Smarter still are groups that balance it all out with solid benefits like healthcare, matching retirement, family leave and ongoing education grants for EVERY employee. If you match that with a solid mission, then young leaders will jump to work with you. Another small point I’d make while I’m here…while nobody at DCCK makes over 105K, there are others here who make more than I do (and I’m the founder/president). I leveled out at 85K a few years back and stay here for my own reasons. I would not want to limit others in the organization, or limit our ability to hire folks who have different needs that I do.
— robert egger May 19, 06:05 PM #
I just graduated from Arizona State University on Friday with a degree in Nonprofit Management. This has been a debate among students and professionals as long as I can remember, and its very relevant to be reading at this time, since I am currently looking to begin my career in the nonprofit sector. Mr. Egger – I’m very thrilled to see that you are posting away! I remember your keynote address at the American Humanics Management Institute this past January, and I very much appreciate your passion and drive! I was supposed to email you about the cool things us ASU kids are doing, and of course forgot. In any case, I’m keeping the faith that it won’t be so bad, and as long as I find a job I’m going to be thrilled :)
— Jenna Schaefer May 19, 07:03 PM #
Just look at the millions we are paying to those who have brought not only the US economy but virtually the world economy to its knees. I’m not sure this represents “the brightest and best” of our society. When I started in the nonprofit field in 1971, I had a choice of going to work for the March of Dimes organizing walk-a-thons or going to work for a major life insurance company. I sometimes wish I were making more money—I’ve never made more than $65k/year in almost 40 years in the field—but I have never regretted the decision I made because it reflected—and continues to—values that are very important to me and more important than participating at the highest levels of our consumption-driven society.
— Philanthro Joe May 19, 09:32 PM #
After more than 30 yrs in non-profits working in direct service, administration and management, it is shamefully and undeniably true that there are typically staggering (and I would pose unethical – most donors would be shocked and outraged) pay disparities between “executive / leadership” and the rest of the organizational structure. Directors, CFOs, EDs, Presidents and CEOs are typically able to negotiate very lucrative compensation packages, often approaching the for-profit arena that Boards approve and even endorse. The excesses in non-profit executive/leadership level salaries should be scrutinized at a time when so many direct service positions and project budgets are being cut. Non-profits succeed on the backs of staff barely earning a livable wage. It is unconscionable that those trying to solve our most pressing social problems cannot do so without living a comparatively subsistence existence that makes it impossible to take responsibility for their own financial future.
— MKScott May 20, 01:47 PM #
It would seem to me that when discussing the proposition that “low salaries hold charities back,” we need to define exactly whose low salaries we’re discussing. I worked for a small, social services nonprofit for eight years and was quite disillusioned by the huge (bordering on obscene) discrepancies between the rank-and-file compensation (minimum wage) and the very lucrative pay packages of the upper-level management (with outrageous perks and very limited accountability due to “the old boy” network in play on the Board). I’m currently pursuing a master’s degree in nonprofit studies and nonprofit accountability and management practices are the core of my research. The continuing commercialization of the nonprofit sector is advancing a third sector organizational evolution that is encompassing all of the aberrant ethical behavior germane to the private sector. I now have stockpiled more articles and reference material on nonprofit scandals (just in the last 18 months) than I’ll ever be able to wade through. I’ve read thousands of online comments from the public, and there is genuine and ferocious anger when the pay levels of nonprofit executives are revealed. (Some of whom would rather cut services than take even a token reduction in their own compensation.)
This argument that nonprofit leadership pay scales should be on par with the private sector is grounded in exactly the kind of mindset to which the third sector should be diametrically opposed — placing the acquisition of material wealth over (or on equal footing with) the expression of humanitarian values . I find Mr. Pallotta’s viewpoint disheartenly familiar in today’s ego laden marketplace, echoing the greed-driven ethos that helps nurture the seemingly unending parade of scandals that waltz through the for-profit and nonprofit sectors alike. You know what – if you can’t live comfortably on $85,000 a year, go somewhere else. The nonprofit sector DOES NOT need you!
— Benton Carson May 20, 01:59 PM #
When I chose to leave my corporate executive position to become a development professional I could take a large cut in compensation because I had had substantial earnings and savings. Now that I manage fund raisers I find the retention of talented young professionals a challenge that is immediate and pressing. Undeniably, compensation is a critical component in this equation.
— Jon May 20, 02:09 PM #
Mr Egger missed the point of Dans commentary. Dan is not debating whether low paid executives in charity are happily fulfilled, meeting their financial needs or settling in comfortably after retirement. Nor is his comment aimed at the personal rewards of being the low paid charity worker vs the high paid executive volunteer. His commentary focused solely on the disparity in the pay scale and the need to make amends to continue to attract top notch talent and remain competitive in the market.
Too often we interpret commiseration over low pay with dissatisfaction about our own state of affairs. Nothing could be further from the truth.
When my young Mom fought for womens rights in the 50’s, 60’s and 70’s, she was far from announcing that she was doing so becasue she was not happy with her life or lifestyle. Her fight was for parity, for equality and for justice.
Just because Mr Eggers cannot dispute the charges Dan has leveled against the industry does not form a reason to change the subject.
— sondra May 20, 02:21 PM #
I recommend you all buy Dan’s book and read it and then form your own conclusion. Understanding the roots of American philanthropy and how we got to where we are is important to know as fund raising professionals. That said, I am relatively new to non-profit after several years in private sector – I am still pretty young – and I question whether the same motivations that brought me to this work will ultimately drive me away. That’s up to the sector ultimately.
— Matt May 20, 02:26 PM #
One of the reasons that nonprofit salaries lag behind for-profit salaries is simple supply and demand. Assuming that the same number of people are interested in each equivalent position in the for-profit and nonprofit sectors, people will accept less monetary compensation for every additional dose of non-monetary compensation they receive. For example, people get satisfaction working for causes and organizations they are passionate about and are willing to work for fewer dollars. Sometimes that’s at Microsoft. But it’s more prevalent in nonprofits and thus this pushes the average salary down. Volunteerism is a great example of very low compensation that is a consequence of non-monetary benefits derived from the activity.
Another reason that nonprofits appear not to pay as well as for-profits is that we often don’t compare apples to oranges. You can’t compare a nonprofit consisting of 500 people to a for-profit made up of 10,000 workers. Scale brings added complexity and the need and added benefit of more specialized expertise in each function area. Size also means economies of scale: the cost of expensive management, for example, can be spread across an organization more easily in larger organizations. And non-profits are on average smaller than for-profits, especially the for-profits generally used as comparisons.
Finally, I think it’s important to note that one of the distinguishing features of nonprofit organizations is that they are, in general, delivering on products and services whose quality is difficult for the purchaser to assess. This creates the potential for cheating by the sellers of those products and services and so as a society we’ve allowed some organizations to forego the profit motive to increase trust between the organization and the purchaser of the product or service. The fact that the non-profit organization then no longer answers to a clear bottom line (i.e. profit) means they are organizations in which effectiveness is much more difficult to measure—though the products and services are no less important. When the effectiveness of an organization is more difficult to assess, it’s also harder to evaluate the quality of management, and to justify higher levels of compensation. I would suspect that in nonprofit industries where the end-purchaser has a clearer signal or assurance of service quality (e.g., hospitals), you’ll see nonprofits and for-profits competing side-by-side, and you’ll see higher and more equal pay scales for equivalent positions.
— Chris H May 20, 02:27 PM #
I was in a for-profit company. I did not make 300,000 but did make more than I do in a college development division. When I got laid off by the for-profit I did some real soul searching and decided that for my family and myself security and various benefits (including slightly less pressure) made up for the cut in salary. I also can get on board with the overall mission of a college more than the corporate mission of profit at all costs. It’s all perspective.
— j May 20, 03:26 PM #
I think a lot of value judgment can be subtracted out of this debate if the ultimate goal is beneficiary impact. Yes, overall, we do live in an over-consumptive world, and most people (myself included) should be less concerned with our salaries and more concerned with more important things. But we can put aside the debate about whether nonprofit workers, executives or otherwise, are receiving a fair wage or not, or whether they should be satisfied or not with lower wages. What we really care about is whether or not a non-profit is able to achieve its goals, what the impacts are for the beneficiaries. As others have mentioned above, the lower a wage you pay, the higher turnover you’ll have in an organization, and, to some degree the lower quality an output you’ll be able to achieve. Then again, the more you pay, the less money will be available to fund the programs of the nonprofit. So really, the question is: about how much should nonprofits be paying, in order to make the best use of its money to achieve its goals? Should they pay lower, the same, or higher than comparable for-profit jobs to achieve this? Or, is it a situation where generalizing is not helpful, and optimal pays would be very different for different organizations, jobs, etc?
This is ultimately an empirical question. It depends a lot on how sensitive skill and ability is to higher wages in the nonprofit sector. This probably varies a lot from person to person, but a nonprofit manager still needs to make decisions about where he’ll set his wages. Of course, it would be best if we had empirical data to base this on — does anyone have a link to a study on this?
However, without evidence, what kind of judgment would you make? I would hypothesize that, in leadership, management, and other positions where candidates may have a great range of ability, most nonprofits would accomplish more if employees were payed better. It is common for people to lament the lack of skilled management in nonprofits, and retention problems abound. Sure, skilled managers who have retired from other professions become nonprofit managers. But wouldn’t they be all the more effective if, rather than having a for-profit career and switching over, they gained experience and knowledge of on-the-ground program implementation early in their careers, and joined management positions not from another sector, but from years of experience working in a nonprofit? And if the top management of a nonprofit only requires 10% of it’s funding currently, then wages could be raised 100% while only reducing money going to programs by 11% — which doesn’t say much on its own, but when one considers the prevalence of nonprofit programs that falter and fail to meet expectations, it leads one to wonder how many mistakes could be reduced from having a more experienced, skillful leadership in the nonprofit field. Further, if a non-profit employee felt that they should be receiving less, they could always donate back to their cause. I would suspect that many non-profit employees, given a higher wage, would be more likely to donate to their cause: we all get attached to our work and want to see our personal projects succeed. We all remember schoolteachers who went out and bought supplies on their own money when they couldn’t get the materials they needed from the school, and we have much more emotional imputes to give when we can see the impacts of a nonprofit’s efforts right in front of us.
I could very well be mistaken; my experience in the nonprofit sector is still limited, and I’m without a shred of empirical evidence that median nonprofit salaries are too low to achieve as much as they should. However, I do know that saying that nonprofit workers should be fine with lower wages (however true or untrue that may be) does not solve the problem, because if that were enough for people to keep the jobs, then we wouldn’t observe the retention problems that are so endemic in the nonprofit sector. In the end, is it really that important if a non-profit’s nutritionist or IT specialist or CFO is a person who seeks the highest paying job vs a person who seeks a position where they can impact lives, or is it more important to know that that person is going to provide the maximum impact for the beneficiaries of the organization?
— Brian May 20, 03:36 PM #
One issue of Dan’s that seems to be missed is that of the donor’s intent. The idea is to question whether the donors who are actually paying the expenses of a non-profit organization are maximizing their own effectiveness in achieving their societal goals by not paying enough to attract the absolute top talent. It’s not that the people who receive the charitable services cannot pay for them – that’s a given. But the donors should also be considered equal “customers”. Are they getting what they want, really? That’s what Dan is asking: If a donor wants to solve a social problem, would they be better served if they developed a strategy to hire more talented people?
Why is it that a top-tier consulting firm such as McKinsey & Co. only hires the absolute brightest graduates of the top ten to fifteen MBA programs each year? It’s because they have found they get better results, and the results are worth it to the partners and clients. I remember when McKinsey interviewed on my MBA campus, and I don’t think any of my fellow students would disagree that they hired one of the top two or three students in our entire class. She was very smart, very quick to analyze situations, very strategic, skilled, entrepreneurial, well-travelled, very good people skills, etc. Most of us would love to have people like her lead our organizations. We would like to work with and learn from people like her in our daily work, and we would all be sharper and brighter if there were more people like her around us.
If you required heart surgery, wouldn’t you want the absolute best surgeon to perform your operation? The question is, Will non-profit Boards and philanthropists decide that solving the social problems they are most passionate about is worth what it takes to solve them, and then make the investments required to attract the most talented strategic thinkers, leaders, entrepreneurs, technical geniuses, and marketing experts, not to mention fundraisers?
— Jeff Swan May 20, 03:44 PM #
As someone who is actively trying to make the transition to the non-profit world after spending the last 25 years working in the US, Europe and Asia I have another thread of thought for consideration.
From my experience the wealth accumulation fantasy is more addicting than narcotics or cigarettes. You can never get enough nor ever be fully satiated.
I ask you in the non-profit world to also check yourselves out as there is a bias against or discrimination of people who’ve made significantly more than the available jobs.
Many of the $85K managers can’t envision or appreciate that people can really want to make less for the reward of making a difference/contribution.
So, open your eyes to the virtues of hiring people from all backgrounds and businesses -including those with for profit experience – and realize that it’s all about finding the right talent, passion and fit. And, not all about obsessing on a person’s previous earnings!
— Jim L May 20, 03:50 PM #
Geez. $85k sure would be nice.
I’m guessing there are a slew of NP managers who make half that or less. Any fool with $85k should be able to swing the finances.
The brain drain is going to happen at the bottom, ladies and germs – at the entry-level jobs, support staff, and smaller NPs where the management is actually forgoing safety, sanity, and long-term financial security.
— Chris Casquilho May 20, 04:07 PM #
Do high for-profit salaries benefit our economy and our society? Or do high salaries increase the bottom line costs of our products and services which in-turn increases inflation.
It’s not just about whether or not a person works in the for-profit field and focuses on making money or the non-profit field and focus on giving back – it’s about what type of economic system we feel is most beneficial to our society.
How do we decide when enough is enough? How do we create competitive marketplaces, utilize the skills and talents of all our workers, and create communities that we can be proud of?
The proceeding conversation is a good start, but let’s not forget the larger questions.
— Renee May 20, 04:42 PM #
Great discussion. I posted on this subject last month over at my blog:
http://createquity.blogspot.com/2009/03/compensation-in-nonprofit-sector.html
http://createquity.blogspot.com/2009/03/nonprofit-compensation-follow-up.html
http://createquity.blogspot.com/2009/04/compensation-of-support-employees-in.html
The short version is that I think the issue of executive compensation in the nonprofit sector is a very different issue than that of compensation for rank-and-file employees. Pallotta seems very focused on the executive part of the equation, which in my view is a mistake. There’s a big difference between being forced to work in the private sector because you can’t afford the alternative, and choosing to work in the private sector just because you feel like making more money. I would argue that the nonprofit sector might be better off without the latter types, or at least no worse off. Nonprofits would be better served by working harder to develop talent internally and support the younger/lower-level employees who will be the sector leaders of the future.
— Ian David Moss May 20, 05:31 PM #
Jim Ryan, the founder of Ryland Homes, once scolded a group of nonprofit executives who ran psychiatric rehab programs and clinics for allowing society to pay us (mostly social workers)so little for taking care of work that was so important. I was motivated to seek an adequate salary for myself and for my workers. The operative word is adequate.
Later in my MBA program I challenged the class to realize that money is not the only motivation for someone to work hard and seek excellence.
I have no difficulty with doing well while doing good. I continue to work at increasing compensation for excellent employees. We must pay adequate salaries to front line workers if we value the work that we ask them to do for our clients/customers.
— John Herron May 20, 07:53 PM #
I’ve worked in non-profits for about four years. I’m out of college for three years and and working towards a career in fundraising.
I live in a large city and while I’m at the “bottom” of the development hierarchy where I work now, I know for a fact that if I didn’t live at home, it would be very hard to live alone.Alot of people my age (mid 20’s) live with roommates just so they aren’t literally living paycheck to paycheck.
I love the career I’ve chosen, I love where I work and the experience I’ve gained so far. I don’t mind putting in extra hours (typically I work 45 hours or more), and I don’t mind “pitching in” and working outside of my job description.
It becomes draining to do so much for so long, and while I love it, it’s disheartening to feel like I couldn’t live on my own if I had to.
I’m even pretty low maintence when it comes to my expenses. I don’t go out during the week, I don’t buy lunch or really any other things involving disposable income. I don’t think the movies or going out to eat at someplace slightly above McDonald’s really qualifies as extravagant.
Is living paycheck to paycheck what I have to look forward to in the coming years?
What happens when I do live on my own and I have to seriously think about if I can afford shoes or work clothes?
What happens when I have a spouse or children?
— Danielle May 20, 07:58 PM #
Very interesting to read this article and all these comments, especially considering I am about to go back to graduate school for Arts Management at American University.
After having graduated 4 years ago with my undergraduate degree and working the last 4 years in the for-profit world, I’m doing the opposite. I’ve decided to go back and pursue what actually makes me happy; the arts.
Although, I must admit the idea of having to one day pay off tens of thousands of dollars in student loans on non-profit salary kind of scares me. The cost of school is the one worrisome issue for me. If I didn’t have to worry about paying that off, I would be completely content making 60k-80k per year. Hell, I’ve done pretty well on my current salary, and I can assure you its nowhere near those amounts.
Leveling the playing field, i.e., lowering for-profit salaries to be more equal to the average American’s salary may scream socialism to many. I’m not sure that is the best or most effective way to get a pay increase on .org salaries.
A big part of the problem, I think, has to do with the culture of this country. We don’t necessarily teach our youth that charity and helping others, the importance of community, etc., are important and valuable things. Our culture teaches that making the most money one can and having the most fame one can are the most important things. This is reflected in pop music, television, and in the salaries of those that partake in the creation of it. Its just not “cool” to be a director of a food bank. And until its taught that it is okay and “cool” to follow what you are passionate about and NOT what will make you the most popular or the most money, then jobs in the non-profit world will continue to receive the unpopular salaries.
— Zack Hayhurst May 20, 09:49 PM #
“The difference between trying to survive on $30k a year and comfortabley meeting all your basic needs with $85k is a pretty big one.” – Jenelle
“And until its taught that it is okay and “cool” to follow what you are passionate about and NOT what will make you the most popular or the most money, then jobs in the non-profit world will continue to receive the unpopular salaries.” – Z. Hayhurst
I completely agree with Zack & Jenelle. I’ve been in the nonprofit sector since college and I will say that trying to survive on my own in the nonprofit sector is harder than trying to survive in college with no parental support and minimal financial aid. I’m nearly 30 years old, with almost 10 years of experience and I’ve never made more than $39K. I even had an $150K/yr ED refuse to offer me more than $28K to be her EA. Nevermind that I put in 50+ hours/week as her intern.
The unfortunate reality that I think workers face in both sectors is that employers look at salary history more than they look at experience and skills gained. Sure, $28K was the highest salary I earned at that point in my life, but what about all the event planning I learned in the 5 years since? What about my ability to connect with youth in ways no one else has been able to? What about all the executive management skills I gained in establishing service organizations on campus and advocating for constituent rights?
I also think that funders and donors are a bit delusional with their expectations of what nonprofits should pay their staff. Like so many others have said, our goal is to provide services to our clients, not to get rich. At the same time, how much good can I do if I’m exhausted from working 2 or 3 jobs just to make ends (sometimes) meet? Unfortunately, funders don’t want to see a whole lot of money going to staff salaries. I wish they would get more specific & not agree to fund an ED’s $150K (or even $85K) salary when the bulk of the workers are only earning $25-35K.
I think funders are stuck in the mentality that committing to a life of service is equivalent to taking a vow of poverty. Like Zack mentions, it’s not “cool” to work in non-profit, so everyone (including our “supporters”) thinks we should be content in our poverty. Cows aren’t the only beings who produce better when they’re happy.
— Amanda May 20, 11:29 PM #
During my ten years with the dying, I knew I would never leave the nonprofit sector. I received a free ride at Notre Dame to do my Masters Degree for Nonprofit Managers where I graduated with honors, represented Congressman Mel Watt at the 1995 Conference on Aging, danced with Senators, Governors and foreign diplomats and been places people wish they could go. Now 6 years into the loss of my husband and his 6 figure pay check-I live well enough, drive a 4 year old Hyundai, live in a double-wide mobile home in a park for 55+, work in a construction site trailer (and hurricane season is less than 2 weeks away) and care for an aging parent who lives independently about 5 miles from me.
I do not regret a thing. A car is a car, a roof over your head does not need to cost hundreds of thousands and right now in Florida you can pick up million dollar homes for ½ their value. So what do you end up with in the end? That is the scale on which I have weighed my choices. I know my rewards, friendships and people who admire my work far outweighs being seen in a Mercedes outside a house too big in which to find my dog.
Thirty years ago if someone had told me-you are going to end up alone in a “trailer” with a dog and a bird, I would have laughed myself silly. But, I have and believe I did the right thing. I SLEEP VERY WELL AT NIGHT and have no fear of death. I entered the nonprofit sector for the RIGHT reasons not a big pay check and those who do-well, they are doomed to fail or be horribly criticized. Plus they would have to raise even more money.
Daily I ask myself, did no one learn from the Great Depression an 12 subsequent recessions. I tell students, worry more about your feelings at the end of the work day-not your wallet. A clean conscience and warm heart are priceless. President Obama said it best in his first press conference while discussing caps on charitable gift deductions-what is the real reason you are giving?
The Funding Muse
Robin W. Kaercher, MSA, C,.G.
— Robin Kaercher May 21, 11:22 AM #
The problem with Dan’s argument is that he places the starting line at a position where wants are more important than needs. This is an attitude that is unattractive and nonproductive in CEO’s of non-profit organizations. This is the kind of thing that fosters distrust among private citizens. What should be paramount is meeting society’s needs before securing your own future. $300K would go a long way toward helping move along a vaccine that can potentially cure hundreds of thousands of people. Having your own needs met in the process is important, sure, but don’t confuse those needs with wants and desires. Besides, whatever happened to proving yourself, anyway? When did we get away from that, and haven’t we figured out by now that it isn’t working out like we had planned?
— christi glaser Jun 2, 12:56 PM #
For-profit compensation has become scandalous — AIG executive pay and bonuses? – but no mention of that in the article. The disparity should be addressed from the other side — no one deserves 380K a year for financial shell games with little or no social benefit. A CEO of a company that makes things? Sure. This is not economic naivete, the disparity between executive compensation and average worker pay has shifted greatly over the decades, and not as a correlate of prosperity. So there is no economic, market rule that dictates soaring business pay (or housing values), it is cultural, and so we can change it.
— Chris Perrius Jun 2, 01:05 PM #
There are so many valuable comments on this post and one of the number one take-aways I get is that people are very passionate about this topic. Thankfully so. I have worked in the nonprofit sector for a few years now and with much hesitancy I am leaning towards making the switch. Contrary to some posts that those who leave are just not “commited enough” I beg to differ. Bumping into the walls of my studio apartment and carrying a $50,000 student debt for my MSW can lead to a few bruises in more ways than one. I have seen a single mother Case Manager at my org in tears because she didn’t have enough bus fare to get back to work the next day. I know this person was also living on food stamps. Yet,my org is constantly touting the way we uphold human rights. Ahem….is someone not looking in their own backyard. What I ask for is not gold and riches…but a liveable wage. A middle management position in the low 30’s in metro Chicago does not classify as such. So many of my middle management nonprofit peers make the same salaries. And yes…many of these brilliant and talented people are leaving… to start families, go to law school, or work for consultants—-they are giving up on any dreams of hitting nonprofit CEO/COO ceilings.
— Lorena R. Jun 2, 02:02 PM #
OK, can’t resist commenting.
1. I want Robert Egger to be my new financial advisor if he can do all that on 85k a year (And I don’t disbelieve him). :)
2. Benton Carson: “if you can’t live comfortably on $85,000 a year, go somewhere else. The nonprofit sector DOES NOT need you!” Oh really? The sector doesn’t need them? They’re the ones who fund the sector. What is it – they’re not welcome for employment but they’re welcome to sit on the board and donate millions to fund the employment of others? Your implication is that people who want to make money don’t have a heart – Gates, Bono, Buffet, and every major donor whose name sits on top of a cancer research lab, a hospital, an AIDS clinic. Best re-think that one. It belies a kind of arrogance; a holier-than-thou-ness correlated to self-deprivation.
3. I want to see the ability to pay higher salaries for one reason and one reason only – not to make people rich, as Leann says – but to open up the playing field far and wide so we get the very best working on these problems. People who take offense at that, because they feel that I’m saying we might not have the very best, ought to put their feelings second to what’s at stake. I’ve seen some amazing, super-talented people in the for-profit sector. I’d like to have them working with us. It’s the prohibition on compensation that keeps them away. That ‘s not a good thing for the people we want to serve.
— Dan Pallotta Jun 10, 04:32 PM #
No offense to Barbara when she quipps “Money is not everything, never has and never will be.”
Barbara…why don’t you work for free then?
A good college degree usually results in $90K in student bills. A skilled professional is probably looking for ways to pay off a car loan, student loan, and rent. Pallotta makes a strong case that if you want to attract QUALIFIED people (people with credentials, certifications, and deep experience…something the average charity has a hard time recruiting for on a shoestring stipend.) How many MBA’s, CPA’s, and MDs are willing to work at a charity who isn’t willing to compensate for their talents?
Pallotta’s arguing for FAIR compensation for all nonprofits at wages that WILL attract the best and the brightest. With competitive salaries, you can bet more MBA’s, MDs, CPA’s and people with real graduate degrees will be bringing in their deep experience to the table. These MDs, CPAs, and MBAs have huge student loans to pay off. They have lives to live. Mortgages to pay. Families to raise. Let’s be real.
The sad reality is…charities that rely on underpaid workers aren’t picking people from the deepest part of the talent pool.
— Max Jun 10, 05:15 PM #
The Bottom Line: Working for gratitude doesn’t pay the rent.
Also…paying a high salary would put an incredibly high pressure for the staffer to produce results that justify that pay in a short time horizon. It might inspire out of the box thinking knowing there’s big competition to save that job.
Conversely, paying people low salaries only demoralizes them and glorifies mediocrity. Hence the problem with underperforming charities wondering why nothing gets done or their work doesn’t produce the results they dreamed of.
— Joseph Jun 10, 05:28 PM #