The compensation question
By Andy Levy-Ajzenkopf
May 10, 2010
Everyone wants to get paid.
Whether one works in the for-profit or nonprofit sector, compensation is part of any job. But what's enough? What's needed for an employee or for that matter, an organization, in order to ensure a fruitful work environment and a sense of fair recompense on both sides?
According to sector experts, while money has a lot to do with the answer, it's far from everything. And employers should be ready with strategic compensation plans to promote successful hiring and employee retention.
The best things in life are free...
Ask Amanda Hudson, HR advisor for the HR Council for the Nonprofit Sector in Ottawa, what a fair compensation plan is and she offers up a two-pronged response. First, an organization should settle on a best practices compensation plan and "stick with it". Second, reviews for external and internal equity should be mandatory and done on an annual basis.
Regarding her first point, Hudson says executives and managers should understand how their compensation model "will affect recruitment, retention, and motivation of employees. By methodically thinking through and setting compensation strategy, which you stick to, you won't have to worry about whether you are compensating staff fairly."
She advises that the kinds of questions to ask in this regard could include:
- Will compensation be tied to performance?
- Do you want to put a greater emphasis on group benefits or top salaries?
- What are the components of the compensation package? Do you rely heavily on direct pay, or do you use other benefits to attract workers?
Speaking to her second point, the internal and external equity balance, Hudson counsels that "internal equity ensures that [staff members] in your organization are being paid fairly compared to one another. This can be done through evaluating the value of the job to the organization, then relative to one another. A good test of internal equity is to ask, 'If suddenly everyone knew each others' salary how upset would people be?'"
On external equity — meaning the organization pays fairly compared to other organizations — Hudson says this information "can be harder to get" and is often done through compensation surveys. But if such surveys are hard to come by for whatever reason, she says "sometimes poking around the web and seeing a trend in salary levels for certain jobs can give you some idea if you are in an appropriate range. Looking at other job postings for similar jobs and seeing what others are offering is one way to start thinking about the external equity issue."
Make use of what's already out there
Over in Calgary, Ross Marsh, principal of fundraising consulting firm Ross W Marsh and Associates Inc., says sector managers and leaders would be wise to take stock of the myriad sources of information waiting to be tapped.
"There is a wealth of information available to charities in Canada on this subject. Imagine Canada, The Association of Fundraising Professionals, the Muttart Foundation, and the Calgary Chamber for Voluntary Organizations all publish regular or occasional research on compensation in the sector, as do others. As such, there really is no reason that organizations should not be able to avail themselves of good baseline information in this realm," he says.
However, a one-size-fits-all approach to compensation strategy is not something Marsh recommends.
"There is no way that a major gifts officer at a university, who is expected to raise $1 million per year, would have the same expectations or compensation level or structure as a major gifts person, at, for example, a small-town humane society or social services organization." |
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"There is no way that a major gifts officer at a university, who is expected to raise $1 million per year, would have the same expectations or compensation level or structure as a major gifts person, at, for example, a small-town humane society or social services organization," he says. "Though they have the same titles, they are different roles with different expectations, different requirements in terms of educational pre-requisites, etc."
Marsh says the smart organizations realize these differences and will vary compensation accordingly. To make matters slightly more complex, compensation levels also vary across national regions. According to his findings, salaries are, on average, "starting to run higher in Calgary than they are in Toronto due to simple supply and demand economics."
Do pay fair
Asked to define what "fair" compensation is for charitable sector employees, Hudson and Marsh have similar yet slightly different takes.
"'Fair' means fair in any organization, whether it's the charitable sector or a business running for profit. Employees should be compensated fairly based on the value of work they are contributing to the organization. If you compensate based on the value of work, [then] compensation should be fair," Hudson says.
For his part, Marsh takes the question a little further and dives headlong into the debate now raging in the country over executive compensation.
"This is a tricky one. Benchmarking against sector data and averages might be one starting point, but I think that is only a starting point. I am of the opinion that people generally ought to be compensated in relation to the value they deliver to their organizations. So, for example, there have been on-again, off-again debates or controversies about compensation paid to fundraisers over the years — whether it was the one a few years back about the university VP of advancement earning more than the president of the institution, or the more recent one about a Toronto hospital foundation CEO earning what many felt was an inappropriate salary," he says.
"I tend to approach it this way: if the previous chief fundraiser earned $100,000 per year and drove $4 million, net of all expenses, to the bottom line for use in that organization's mission, and he or she was replaced by a more highly-skilled individual earning $200,000 per year but driving $5 million, net of all expenses, to the bottom line, isn't that a good deal? And isn't that the right thing to do in order to advance the organization's mission? It also stuns me that this isn't even worthy of a conversation in the private sector because it is such a no-brainer. But in the charitable sector, it is the subject of ongoing hand-wringing and torturous debate. It seems very simple to me that more money for organizational mission should be the primary driver in considerations of compensation. Sadly, it rarely is in this country."
What works and what doesn't
Some quick do's and don'ts about compensation strategy. Hudson advises all managers and executive-level staff never to think they can get away with an "unfair" compensation package. She warns that employees will always find out if this is the case.
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"Compensation extends far beyond what an employee gets paid. The most successful organizations understand that they can compensate employees without paying them more money. Compensation can be indirect, like challenging work projects or paid time off to attend training," she says. "Organizations need to understand that while compensation is obviously a factor in deciding about whether or not an employee would work for their organization, it only plays a small role. After a certain basic level of compensation is established, other factors play a much larger role."
For Hudson, some examples of the above include, but are not limited to, manager involvement and feedback; who the other members of the team are; the challenge of the role; training and growth opportunities; and the mission of a nonprofit organization or charity. All these can be "much larger drivers when employees are considering taking a job or not."
It's a more straightforward answer for Marsh: is the new employer offering more than the last place a potential employee worked?
That being said, there are some other points for sector employers to consider when pursuing new hires, Marsh counsels.
"You must be prepared to compensate good people well, or someone else will come along and do it instead of you. Along with competitive compensation should come competitive expectations of performance — and these expectations should be spelled out up front in an employment agreement or contract," he says. "If an organization is going to pay well then they need to be able to hold people's feet to the fire in terms of performance. Organizations must remember that job performance in fund development, or even overall departmental performance, is not solely a factor of compensation; there are other factors that are largely beyond the control of the fundraisers that can impact their performance, such as overall organizational health and planning, track records, scandal (or lack of), organizational leadership and vision."
NOTE: You can find read more about fundraising salaries, and how they increased in Canada last year, in this press release by the Association of Fundraising Professionals.
Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at andy@wordlaunch.com.
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