Nonprofit Management Articles from the Nonprofit Doctor

I've always thought of myself as a "crazy idea" thinker. The following are some of my most successful "crazy ideas", often conceived in collaboration with others:

The following two articles present more of my crazy ideas and I'm hard at work on more:

Could conducting a nonprofit compensation and benefits survey in your community help you get larger nonprofit organizations invested in your management support organization or statewide association? I say yes and tell you both why and how to do it in this new and provocative article.

Are nonprofit compensation and benefit surveys and the way information from them is reported in mainstream newspapers giving the nonprofit sector a black eye? I say yes and have ways to prevent it in this second article.

A Nonprofit Compensation and Benefits Survey In Your Community: A Mutually Beneficial Way To Get Larger Nonprofit Organizations Invested In Your Management Support Organization or Statewide Association

A great deal of my work in the past 37 years has been with nonprofit management support organizations (MSO’s) and statewide associations of nonprofit organizations. In my view, one of the biggest challenges the two face is the need to get larger nonprofit organizations involved with them as members, clients and purchasers of their services.

MSO’s are a pretty modern invention. I had the honor of co-founding one of the first – the Support Center, now CompassPoint Nonprofit Services – 37 years ago.

It was never the intention of us MSO pioneers to serve larger nonprofits because they already had access to, and the financial resources to pay, private consultants. We wanted to help the smaller nonprofits that could not afford to engage private consultants. With the proliferation of MSO’s over the past four decades (nationally, there are now hundreds), this has changed somewhat. There has been a service shift to more medium-sized nonprofits, probably because of their better ability to pay for the services they receive. But still, most MSO’s I know don’t get that many employees from larger nonprofits attending their trainings and especially don’t have very many hiring them as consultants.

I have seen the above phenomenon up close in my work with my business partner, Rita Haronian, in producing compensation and benefits surveys for sponsoring MSO’s in northern California, southern California, southwestern Pennsylvania and central Florida. Typically, larger nonprofits don’t participate in these surveys. This point was brought home to us recently when several partners in a CPA firm that financially sponsors one of our surveys pointed out that “we’re glad to support the survey, but it is of little use to most of our clients, who are larger nonprofits and don’t participate in it”. The reason: the CEO doesn’t see it as a priority for their organization and the human resources director thinks it’s too much work.

The nonprofit state-wide association “movement” followed closely on the heels of the MSO “movement”. There are now more than 30 of these nonprofit associations. Make no mistake about it, virtually all of the pioneers in this “movement” were “social change” leaders from smaller nonprofits. Look at the membership of any statewide association today and you will find few larger nonprofit organizations.

So why are so few larger nonprofits members and clients of, or even involved in, MSO’s and statewide associations?

As stated above, CEO’s of larger nonprofits were not involved historically in establishing MSO’s and statewide associations.
Larger nonprofits (hospitals are a prime example) already have their own regional and national industry-specific associations.
CEO’s of larger organizations relate more readily to CEO’s of major corporations than to executive directors of smaller nonprofits. In my experience, in the rare case that I have seen CEO’s of larger organizations involved with MSO’s or statewide associations, it has been because they are professionally motivated to “give something back,” not because they think they or their organization would benefit greatly from their involvement.
Larger nonprofits have the financial resources to hire private consulting firms (McKinsey & Co. or the Boston Consulting Group for example).
CEO’s of larger nonprofits do not relate readily to the “social change” agendas of the executive directors of smaller nonprofits.

MSO’s and statewide organizations, like all other nonprofits today, are struggling heroically to raise needed funds. We all know about the challenges of foundation and corporate fundraising these days. MSO’s and statewide associations are also a hard sell to individuals because they don’t provide direct services to those who need them.

One of the most obvious avenues of financial support is to increase MSO and statewide association income from consulting, training and membership fees. The biggest untapped source of this revenue is larger nonprofits. But how can you get to them?

The answer to the above question is self-interest and it came to me recently as I was perusing the Chronicle of Philanthropy’s 2009 “Survey of Nonprofit Executive Compensation” in its October 1, 2009 issue. I said to myself, “How on earth will the boards of directors of these organizations justify the very high salaries they are paying their CEO’s and other top employees?” A partial answer is a compensation and benefits survey, in which their organization participates, that is sponsored by an MSO or statewide organization in their community or region. Many such surveys currently exist, the four I mentioned above, plus surveys in Colorado, Louisiana, Maine, Michigan, Minnesota, New Jersey, South Carolina, Utah, Vermont, Seattle, WA, Dallas, TX, Louisville, KY, New York State, New York City and Phoenix, AZ (partial list).

We who produce compensation and benefit surveys already know they are good for nonprofits in our community. It helps them:

Set fair salaries and benefits that attract and retain the best employees
Evaluate industry standards for compensation for a range of positions
Budget and plan for the cost of adding new staff members
Analyze their own jobs and compensation
Stand up to the scrutiny of an increasingly skeptical public
Compare their salaries and benefits with others in their community, not with organizations totally out of their local economic market.

A pitch to the CEO of a larger nonprofit to participate in a compensation and benefits survey is a bit more self-serving and goes something like this:

“Your organization’s participation in our community’s compensation and benefits survey will benefit your organization in particular.

Since 2001 the IRS has encouraged charities to go through a set of steps to ensure that executive compensation is set appropriately. On the new form 990, the IRS has standardized reporting to make comparing salaries easier and is requiring charities to provide information about the process they use to set the salaries of employees who receive $150,000 or more in total compensation.

Your agency’s participations in this survey will help you navigate through this new process and will be a primary tool to help your board of directors document the rationale they use to set the salaries they pay their executives.

Conducting your agency’s own compensation and benefits survey to satisfy IRS requirements would cost you a small fortune. A much better alternative would be for all of you larger nonprofits to all agree to participate in your local or regional compensation and benefits survey.

The above appeal cannot be made effectively through mailings or emails. It must be made directly to the CEO’s of these larger nonprofits, preferably in person (one-on-one or in presentations at meetings of their industry-related associations or a special meeting you convene to make this pitch to them).

If you decide to convene a meeting to make a presentation to the CEO’s of larger nonprofits, recruit several CEO leaders from this group to issue the invite, host and, perhaps chair, the event. Another great strategy would be to get larger nonprofit CEO’s to directly contact a number of their peers directly to solicit their participation in your survey.

Here is a second idea. Why not get industry-specific nonprofit organization groups (animal welfare organizations, as in the example below), in which the CEO's of larger nonprofits are involved, to all participate in the survey, for mutual benefit?

This idea is based on a real-life example. Several years ago the executive director of the Oakland, California SPCA complained to us that there were not enough Bay Area animal welfare organizations participating in the annual Compensation and Benefits Survey of Northern California Nonprofit Organizations. We replied “why don’t you help us get more of them to participate?” He and the CEO’s of several other Bay Area animal welfare organizations did just that, the number of animal welfare organizations participating in the survey went up and the survey became even more useful to all of them (at their suggestion, we even added some new animal welfare organization-specific job titles). The result: those organizations got useful wage and benefits information about their specific industry at a fraction of what it would have cost for them to have gotten it in any other way.

In the survey work that Rita and I do, the above scheme can be even more useful to industry-specific nonprofits as we have the capability, at minimal costs to the nonprofits, to produce special reports from the survey utilizing their information only. In short, they get their own mini-survey without paying an arm and a leg.

If you could get more larger nonprofits to participate in your compensation and benefits survey, they next might:

Become a member of your statewide association
Send their employees to your MSO’s trainings
Hire your MSO as a consultant
Join the board of directors of your MSO or statewide association
Become a financial sponsor of one of your projects or programs
Above all, become invested in your organization and its mission in your community.

All of the above will result in more program-related income for your organization, just the financial shot-in-the-arm you need in these tight financial times.

Bob Orser is the Nonprofit Doctor, a consultant who, with his business partner, Rita Haronian, produces regional nonprofit organization compensation and benefits surveys and in-house surveys for national or regional organizations with multiple offices or chapters. Bob and Rita are co-producers of Fair Pay Northern California Nonprofits: the 2010 Compensation and Benefits Survey, and the region’s 32nd annual survey, to be published in late April. For more information about this survey, visit www.nonprofitcomp.com.

Bob was co-founder and executive director of three of the most successful nonprofit management support organizations – The Support Center in Washington, D.C. in 1972, the San Francisco Support Center (now CompassPoint Nonprofit Services) in 1975 and the Management Center in San Francisco in 1977. He now resides in Taos, New Mexico. Visit his website at www.nonprofitdoctor.com.

Are We Shooting Ourselves in the Foot? A Closer Look at Nonprofit CEO Compensation Studies

There’s no other way to say it. As a result of the over-hyped reporting on the proliferation of information about nonprofit organization compensation and benefits, we are shooting ourselves in the collective foot.

By proliferation, I mean the increasing number of nonprofit agency compensation and benefits surveys that are being produced all across the land, ranging from the Chronicle of Philanthropy’s recent “2009 Survey of Nonprofit Compensation”
[http://philanthropy.com/premium/stats/salary/] to numerous local and regional studies being produced by management support organizations, statewide associations and others.

By reporting, I mean how the USA Today, Wall Street Journal, Associated Press or your local newspaper translates this information to a public unfamiliar with the nuances of statistical analysis. And in the main, they do so because the information is alarming, not truth seeking.

By shooting ourselves in the collective foot, I mean the extent to which this reporting gives the public extremely negative perceptions of what nonprofit workers earn.

Let’s first take a closer look at the Chronicle of Philanthropy’s recent survey, which they have done annually for the past 17 years. On the face of it, there’s nothing particularly wrong with the survey, which analyzes the total compensation of the 325 highest paid nonprofit CEO’s in America. I do wonder why the Chronicle conducts this survey. It could be an exposé (featuring the $2,729,076 paid to James J. Morgan, chief executive at Partners Healthcare System in Boston, or the $467,252 paid to Gail J. McGovern, chief executive of the American Red Cross in Washington, D.C. for little more than six months of work in 2008). But if it is an exposé (and I think it isn’t), it’s a weak one.

The real problem occurs when the Chronicle survey is picked up and reported on by other media, as this story was, by the USA Today in a September 28, 2009 article entitled “Nonprofit Execs Make Millions: Big Organizations Have Highly Paid Leaders”
[www.usatoday.com/money/companies/management/2009-09-27-nonprofit-executive-compensation_N.htm]. Perhaps oversimplifying and providing little context, the USA Today quoted the Chronicle survey as stating that the median 2008 compensation among all chief executives in the survey was $361,538. This is a true fact, but the average American reading this immediately assumes that all CEO’s of American nonprofits make exorbitant salaries and says to him or herself, “I don’t make anything like that, so these people must be crooks so I won’t contribute financially to their charity, or to any other charity for that matter.”

Here are just three of the hundreds of reader responses to the USA Today article. And I know some readers’ comments fall off the rails, but this sampling is illustrative of common thinking:

“Well duh. Non profits get to keep a full 30% of donated funds. My opinion is that most “non profits” are run by greedy scum-bags cashing in on the good will of the people.”

“Non profits are just a way to avoid taxes… If Americans can find a way to be fraudulent they will.”

Maybe those of us who produce these surveys use too many terms that are not commonly understood, “median salary” being chief among them.

Not everyone knows what “median” really means (by definition 50% of the respondents make more and 50% make less). A colleague of mine in another city told me recently that their local compensation and benefits survey showed that the median salary of an executive director in their community is almost $100,000, as reported in their local newspaper. He added “The average person in our community might see that as high, since it’s probably more than they, themselves, make in a year.” Readers aren’t stupid, but it’s very easy to get lost in the numbers.

And let’s not forget that other misunderstood term, “average” salary (defined as the total paid to all respondents divided by the number of respondents). When used broadly, like “the average salary for a nonprofit executive director nationally is $X”, it is a totally meaningless statistic for two reasons:

The most useful compensation and benefits surveys are those that encompass specific geographic economies (Southwestern Pennsylvania, Central Florida, etc.) and break down the data every which way you could imagine. It should come as no surprise that I have produced surveys of this sort for the past 31 years, beginning with the first survey of Northern California nonprofits in 1978.

It’s not that the sector shouldn’t be self-critical. Studies like the one done by the Chronicle need to see the light of day. Sunlight is the best disinfectant as one Supreme Court Justice famously said.

But I firmly believe that people who work for nonprofits are anything but over compensated, receive minimal benefits and do marvelous work. That is the message that we need the public to get. And it’s up to us to make that happen.

Bob Orser is the Nonprofit Doctor, a consultant who, with his business partner, Rita Haronian, produces regional nonprofit organization compensation and benefits surveys and in-house surveys for national or regional organizations with multiple offices or chapters. Bob and Rita are co-producers of “Fair Pay for Northern California Nonprofits: the 2010 Compensation and Benefits Survey”, the region’s 32nd annual survey, to be published in late April.

Bob was co-founder and executive director of three of the most successful nonprofit management support organizations – The Support Center in Washington, D.C. in 1972, The San Francisco Support Center (now CompassPoint Nonprofit Services) in 1975 and the Management Center in San Francisco in 1977. Visit his website at www.nonprofitdoctor.com.