Nonprofit Insurance Program

Meeting Compensation Challenges

By Alexa Connelly
August 26, 2011

How do you meet the challenges of retaining your key people and filling vacancies when salary budgets are stretched impossibly thin? Here are several ideas to think about:

  • Retaining the key people
    If there is no money, think of other rewards. Salaries for jobs are very important, but there is a component of personal need for challenge, growth, and satisfaction with contributing toward completion of the mission. Is it possible to make hours more flexible, encourage work at home, or provide more positive feedback (letter of appreciation, reward of a lunch or dinner, etc.)? Try to think of employee needs that could be met with low-cost solutions.
  • Filling vacancies
    Be sure to look internally for candidates. Those already on staff are already committed to the organization and understand its culture—and there will be no search costs and perhaps no relocation expenses. When a job is available now, there will probably be interest from those who have been laid off from for-profit jobs, but consider possible candidates carefully. Is there evidence of commitment to the mission, or will they leave the nonprofit sector when the economy recovers? Is there a cultural fit?
  • Succession planning and contingency planning
    Develop some ideas on what staff and program adjustments would be needed at various projected revenue levels, that is, if the big grant doesn’t come through or a program is no longer funded by a government contract. Plan for a variety of contingencies, including personnel changes. Think about who would be available on staff to step into key positions, and whether additional training might be needed for them.
  • Review of the entire compensation system
    Consider if the need to control the fixed costs of salaries calls for more focus on variable rewards based on performance goals. Many nonprofits tend to be more egalitarian, but pressure to reward the top performers and widen pay gaps grows when resources are scarce. Such a system requires metrics that include the financial (obviously, the organization must have the money to pay the incentives) but should also add some measures that relate to the mission. Many organizations are moving toward this approach as their supporters demand more accountability and evidence of program effectiveness.

Whatever compensation decisions are made, nonprofits need to make sure that best practices are followed—collect the appropriate data and use them to make defensible decisions that reflect the organization’s compensation philosophy. Nonprofit resources need to be spent right—enough for compensation to attract, retain, and motivate the staff, while leaving sufficient dollars to achieve the organizational mission. And that becomes even more challenging in difficult economic times.

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