Tips for Developing a Values-Based Compensation Structure

There is no single right way to develop compensation practices. But clearly articulating organizational values related to compensation and benefits, and describing the ways in which they are reflected by practice, assures staff and stakeholders that compensation decisions are systematic and fair. And when employees feel they are being treated fairly, even if they wish that they earned more money or paid time off, morale, productivity, and impact are likely to be high.

TSNE MissionWorks recently published its 2017 Valuing Our Nonprofit Workforce compensation and benefits report which includes compensation and benefits data representing 171 positions from 342 organizations reporting on nearly 35,000 individual salaries. You'll find the report a wealth of information to  use in your review of your organization’s compensation practices.

There is no single right way to develop compensation practices. But clearly articulating organizational values related to compensation and benefits, and describing the ways in which they are reflected by practice, assures staff and stakeholders that compensation decisions are systematic and fair. And when employees feel they are being treated fairly, even if they wish that they earned more money or paid time off, morale, productivity, and impact are likely to be high.

Here are some helpful tips that can get you started thinking about your practices. 

Understand how your organizational values are reflected in your policies and practices. Mission-based organizations often have an inspirational vision for the world they are trying to create. A world free of poverty or a place where all children can succeed, for example. Be intentional about aligning your compensation structure with that vision. If your vision is a world free of poverty, you might intentionally set minimum salaries at something considered an affordable wage for your geographic area.

Pay attention to external equity (the market) and internal equity (how you pay people in relationship to one another).  Benchmarking salaries to market data can help you hire and retain the best and the brightest in the field. At the same time, it is important to pay staff fairly and consistently across the organization. Try not to put too much weight into market data or you might find yourself paying brand new employees significantly more than people with similar levels of responsibility who have dedicated many years to your organization. At the same time, focusing solely on paying people fairly in relationship to one another may mean that that you can’t compete with other employers.

Figure out how to compare apples to oranges. Most nonprofits have a small staff of people wearing multiple hats. Often no two jobs are alike. So figuring out how to pay people fairly in relationship to one another can be a little like comparing apples and oranges.  There are some obvious ways to distinguish jobs: whether they have budgetary responsibility, supervise staff or make certain kinds of decisions independently. But there may be less obvious ways that might even be specific to your organization, as well. Do some staff see such a steady stream of clients they barely have time to breathe while others have more control of their time and can take breaks as needed rather than when assigned?  Are there jobs that require long hours as well as weekends and evenings and others that can be clocked in and out of pretty regularly? Do some people need to explain highly complex technical content while others simply need to speak in generalities? Once you are able to identify what makes each job unique, you can determine what is important to the organization and ensure those characteristics are reflected through compensation.

Attend to the leadership pipeline. Alarm has been raised for over a decade about the impending Baby Boom retirement wave. At times this cry has felt like much to do about nothing. But this massive leadership transition in the nonprofit sector has most certainly begun. As senior leaders retire in increasing numbers, it is more important than ever to ensure that a nonprofit career path is a viable option for emerging leaders at all stages of their professional life.  Funding is always a limiting factor, but paying a truly livable wage is one of the most fundamental things we can do to ensure our we have the staff and leadership necessary to thrive and succeed in the face of potentially growing challenges.

Remember that benefits—formal and informal—matter. Some benefits like health insurance translate easily into compensation. It is always worth reminding employees that many of their benefits have a cash value. While other benefits, generous leave time policies and casual work environments for example, don’t translate quite as easily, they do contribute significantly to employees’ overall workplace satisfaction. So ask people what matters to them and develop meaningful practices in response.

Lyn Freundlich is a practice leader in human resources consulting for TSNE MissionWorks. Her decades- long experience as a practitioner and consultant includes delivering human resources training to thousands of nonprofit professionals, numerous speaking engagement at many professional conferences and the publication of three Valuing Our Nonprofit Workforce reports in 2010, 2014, and 2017. 

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