(Image: PP Photography)
No matter what the current workforce trends may be, or the particular appeal of your mission and culture, salary and wages are always top-of-mind for employees and jobseekers.
But competitive salaries don’t just happen, especially in the purpose-driven sector, where boards and funders need to be educated regarding any budgeting changes. Fortunately, nonprofit leaders can make the case for investing more in our employees with the right data and planning – in particular, the real costs of your work, the market price for talent, and a strategic approach to aligning them.
By following these steps, in collaboration with a dedicated board committee, you can develop a comprehensive, convincing plan for boosting salaries that will pay off in retention and recruitment.
- Establish a clear objective. Begin by determining the percentile at which your current employee salaries stand. Utilize employee surveys (typically available for $500 or less) to gauge where your salaries rank compared to the market. With this data in hand, set a target percentile that aligns with your goals for attracting and retaining top talent. For example, if your salaries average in the 40th percentile, aim for the 60th percentile to ensure competitiveness and employee satisfaction. Consider incorporating employee benefits into your calculations and adjust your target percentile accordingly, especially if your organization cannot match the benefits offered by larger entities.
- Assess the full cost of operations. To make a case that’s financially sound, it’s essential to account for all expenses associated with every aspect of your organization’s activities, including salaries. Once you’ve calculated the total cost of running a particular program, identify a suitable measure (such as the number of client visits) to determine the true “unit” cost. Presenting this data to funders demonstrates the financial requirements for delivering quality programs effectively.
- Plan incremental salary increases. Reaching your target percentile will be a gradual process. Outline annual increments necessary to achieve your goal and integrate these increases into your strategic plan. Emphasize to stakeholders that these increases are integral to achieving organizational objectives. For instance, if it will take five years to elevate most employees from the 40th to the 60th salary percentile, include this timeline in your strategic plan with yearly objectives for salary adjustments.
- Secure the board’s endorsement. Ensure the board comprehends the importance of salary increases in fulfilling the organization’s mission and strategic objectives. Present data-driven arguments, including unit-cost information, salary benchmarks, turnover rates, and associated costs. Quantify the impact of turnover by calculating hiring time and lost productivity due to vacancies. Additionally, highlight the correlation between financial stress and job satisfaction, referencing relevant survey data to underscore the significance of competitive compensation.
Once approved, be sure to inform your employees about the plan to increase your investment in them, and don’t forget to highlight your newly competitive pay ranges in every one of your job listings. As you probably know, the days when jobseekers are willing to apply for a position without knowing what kind of compensation to expect are rapidly coming to an end. (It’s even required by law in several states!)
You can learn more about the power of pay transparency here, and check out our latest tips for effective job postings.
Mary Hughes is a nonprofit consultant specializing in executive search and succession planning.
This article was fact-checked and updated in February 2024.
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