Due to technological innovations, outsourcing, and globalization, there’s undoubtedly been a drive to lower employee salaries and fees to consultants. It’s not an understatement to say that workers feel fortunate to have any income. However, in the nonprofit sector, there’s an ongoing problem. Many nonprofits don’t invest in staff—from assistants to executive directors.
A Sector Stuck in the Past of Nonprofit Pay Failure
In the United States, approximately 94% of all nonprofit organizations operate with revenue below $1 million. One of the reasons is that many find themselves not growing much from year to year. Still, they continue to do things as they did 5 years ago. In turn, they don’t pay teams a competitive salary. And the nonprofit pay failure continues.
The Culture of Underpaying: Expectations Versus Reality
As a matter of course, nonprofits typically pay below corporations for the same job. Nonprofit revenue comes from supporters who want their money to primarily go directly to programs. So, that’s affected nonprofit staff at all levels. The idea of not paying teams well is ingrained in nonprofits. But, leaders should inform donors what it takes to complete a mission.
I’ve heard countless times from nonprofit consultants asked to provide their expert services free of charge. In the culture, there’s a ready expectation that no one wants to pay for employment or professional services. It’s truly pervasive within the sector. Still, it’s on leaders to help explain why starving nonprofits don’t bring systemic change.
Real-Life Consequences of Volunteerism
Not too long ago, I heard about a nonprofit executive director who was asked to volunteer. The idea was that they would pay for themselves when they raised their fees. Two years have passed. What started as a temporary part-time arrangement became an obligation. And, of course, there’s no pay since the goalpost keeps moving. Sure, the executive director can leave—but they care about the mission.
However, at times, it’s brought resentment and anger. I tend to think that even if that person brought in money, they wouldn’t get paid. Why pay when something’s come for free for so long? The organization claims this person has the relationships and they don’t. They can’t do it alone. So, it continues.But, needless to say, it’s not a healthy relationship.
Transparency Misinterpreted: The Excuse to Underpay
Speak to any consultant with several years in the business, particularly fundraisers. You will hear many stories. Often, they’re about how nonprofit organizations swarm them. The consultants take the time to prepare comprehensive proposals. After reviewing the proposals, the organizations say they can’t possibly afford to pay. How about working on commission?
This approach is a mistake. Yes, nonprofits should be transparent. That’s especially true for the government, the community, and their donors. There should always be transparency in finances and how donations get spent. But, many nonprofits and board members have step back. Transparency doesn’t mean not paying a competitive salary. It doesn’t mean not paying people for their work and talent.
Viewing Staff as Investments
This issue rarely occurs in the business world. For-profit companies value competitive salaries and fees. These costs are investments driving innovation in technology and the economy. Many nonprofits hire staff and consultants at the lowest price. This fosters high turnover as professionals leave for better opportunities. These organizations often fail to grow, expand services, or scale effectively over time.
More nonprofit leaders should view teams as a strategic investment. And of course, if they hire consultants, they should pay them for their time. When organizations do it, they’re rewarded. In other words, they retain top talent. And they have a group of people who want to innovate and have motivation. In turn, that’s a big win for the organization—and the sector.
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