Earlier this fall, Soapbox highlighted the
economic impact that nonprofits make in the Greater Cincinnati area. The macro-level financial influence that 501(c)(3) organizations are certainly an important metric for gauging the vitality of the sector, but, at the grassroots level, it’s also important that organizations remain competitive in hiring well qualified talent to help them fulfill their mission.
Beth Benson, the executive director for the
Leadership Council for Nonprofits, provides insights into what organizations need for competitive recruiting and retaining team members, and the challenges that face the entire nonprofit landscape and require proactive, intentional planning.
To inform her discussion about the compensation tendencies, Benson cites three reports: The 2023 Barnes Dennig and Hauser Nonprofit Compensation & Benchmarking Study, the 2023 Candid U.S. Nonprofit Compensation Report, and the 2024 Ohio Association of Nonprofit Organizations (OANO) Compensation and Benefit Survey Report. And, of course, there’s her decades of experience: she’s worked exclusively in the nonprofit world for 35 years, and has helmed the Leadership Council, which has 230 members and another 100 nonprofits that engage with Leadership Council programs, for two years.
“The Council’s role is to help our member and other organizations provide their employees with access to training and professional development, as well as helping 501(c)(3) entities develop capacity that strengthen their ability to focus on their mission. Our first priority is providing value through goods and services that save them money. An organization’s greatest need is funds. We don’t help them procure this directly, but we help them optimize their resources.”
She said one of Leadership Council’s most essential functions is peer support. Many nonprofits operate on a comparatively shoestring budget, requiring that executives wear many hats and lack the ability to access feedback from colleagues. With this in mind, Leadership Council provides monthly peer roundtables that facilitate valuable feedback that helps nonprofit leaders refine their plans, pitches and bottom line.
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Leadership Council for Nonprofits Beth Benson, Executive DirectorBenson notes that during her tenure there has been considerable volatility, some brought on by larger economic challenges such as The Great Recession, others brought on by circumstances unique to this sector, such as after the 9/11 attacks, when a monumental groundswell of donations given to relieve a national tragedy created the unintended consequences of reduced donations to unrelated nonprofits. Nonprofit donations may be perceived as discretionary donations, and giving withheld can adversely affect nonprofit budgeting.
“From a competitive labor market standpoint, nonprofits feel the affects,” she said. “Every business needs to control costs, but nonprofits are less able to be flexible and adapt to salary competition in the event of a labor shortage, or a surge in retirement or workers who enter the gig economy, which may impact their ability to make donations. Nonprofits have a challenge in being nimble to immediately change pay structures to make them competitive. Wages are better than people think for nonprofits, but it can be hard to pivot.”
Another intrinsic hurdle nonprofits face is the distinction between restricted and unrestricted funds that can pigeonhole donations to specific uses only. Benson refers to the “overhead myth,” wherein donors stipulate that gifts only be used for specific purposes, rather than offsetting routine expenses organizations of any type face. She noted the double standard that exists between for-profit and nonprofit entities.
“People expect for-profit companies to conduct R and D to enhance their products and services,” she said. “Nonprofits have similar needs, but donors sometimes think that’s not part of ‘the mission’ support. When a person goes to a restaurant, you’re not asking what percentage of the bill will be paid to the company, the worker or the supplier, etc.”
Given the volatility of nonprofits and the often chronic needs that the populations they serve face, fulfilling day-to-day requirements can make it difficult to establish and maintain a detailed strategic plan. “It’s uniquely challenging as this sector exists because services that business and government can’t or won’t provide, and its workers are undervalued and undercompensated.”
Although some large organizations such as The Red Cross, The Salvation Army or the Freestore Foodbank locally, maintain high profiles and a broad donor base, most nonprofits are small. According to the Barnes Dennig and Hauser report, 62% of the organizations surveyed generate less than $5 million annually in revenue, and 48% have 20 or fewer employees. Only 17% exceeded $10 million in annual revenue, with a mere 5% exceeding 200 employees.
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Attendees at the 2024 Securing our Future Conference.
Since the introduction of the Form 990-EZ, a simplified form that nonprofits with less than $200,000 in annual revenue and $500,000 in assets can file in lieu of the more complex Form 990, Benson noted the lower barrier to entry for nascent organizations, but said that, as with any enterprise, the focus should be less on aspiration and more on preparation.
“Someone may have a great passion for a cause, but they may not be connected to the nonprofit world, and their organizational goals may already be served by one or more organizations,” she said. “You’re going to need a sustainable business model and a board of directors. The business doesn’t belong to you; it belongs to the public. My message to anyone with this goal is to build relationships and investigate community nonprofits to make sure your goals aren’t redundant.”
Benson noted that the Leadership Council used to solely comprise human service organizations, and that these still represent the largest cohort of nonprofits. However, she also noted that the sector responds to emerging societal needs, such as environmentally oriented organizations that combat climate change, and healthcare nonprofits that serve an aging Baby Boomer population and other vulnerable communities.
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Leadership Council provides monthly peer roundtables that facilitate valuable feedback that helps nonprofit leaders refine their plans, pitches and bottom line.
As the roles nonprofits fulfill evolve, the recruitment of a properly trained workforce remains a challenge. Benson said that, as with traditional workplaces, the default tactic is to pursue candidates with four-year degrees, but a traditional college education often doesn’t mesh with what an organization needs: “It’s something that our sector as a whole is working through. For a lot of roles, it’s more advantageous to begin recruiting at the high-school level, or candidates with vocational or technical training that fills a need.”
Benson said that, like traditional companies, turnover provides a significant challenge, so many organizations are incorporating retention bonuses for staying in the role for a specific number of months or years. And, when salaries aren’t always comparable to private-sector jobs, insurance benefits and quality-of-life measures are sometimes implemented to leverage nonprofits as a viable alternative.
“Being fiscally competitive and fulfilling an organization’s mission requires a balancing act,” she said. “People aren’t going to work for an organization just out of love. You need a quality labor force to fulfill the mission. Transparency and partnership are key to every aspect of a nonprofit’s success, including hiring the right people for the roles you need. Suppressing wages makes it harder to do our jobs.”
Although there may be considerable uncertainty or anxiety given the incoming federal administration, the actions by state and local governments generate far greater impact: “Regardless of any election, changes bring uncertainty, moreso for nonprofits. We know what people say in campaigns can be different than reality. A new governor, city council or county leaders can sway the support an organization receives. Federally allocated funds aren’t disbursed at that level; it’s how state and local leaders direct them.”
She noted the divergent paths that local governments’ usage of ARPA funds as a prime case in point that, ultimately, “all politics is local.” And, the only constant is change.
Within the context of Benson’s comments about the employment landscape nonprofits are navigating, here are several key data points:- According to the Barnes Dennig and Hauser, 62% of 97 nonprofits surveyed offered 3-4% pay increases in the last fiscal year; 20% 5-8%; 12% 0-2% and 6% more than 8%.
- CEO/executive director compensation averaged more than $236,000 for organizations with more than $10 million in annual revenue; $190,000 for $5-10 million; $134,000 for $2.5-5 million and $102,000 for organizations under $2.5 million.
- Group health insurance is the most widely offered benefit, with 82% of organizations providing it (with 18% fully employer-paid); 71% offer group life insurance, with nearly 90% of those offering it covering the full cost.
- 83% of organizations surveyed responded that offering competitive benefits as moderately or very important, and 42% said benefits offered were better than the for-profit sector.
- On average, companies surveyed offer an average of 18 personal and sick days after one year of service, 24 days after five years of service and 28 after 10 years.
- Seventy-five percent offer contributions 401(k) and 403(b) investment accounts.
- According to the Candid report, based on the collection of more than 125,000 Form 990 and 990-EZ, median executive compensation has grown from $110,000 in 2017 to $129,000 in 2021.
- Science and technology institutes and services provided the highest median compensation at $194,000, whereas religious and spiritual development organization provided the lowest at $65,000.
- For the Greater Cincinnati area, CEO and executive director median compensation varied from $47,350 for family services organizations to $474,000 for rehabilitation and health services.
- The OANO Report, which aggregated data from more than 200 Ohio organizations, with 50% comprised of health and human services agencies, 24% other, 10% education, 9% arts and culture, 4% membership and trade associations, and 3% environment.
- Fifty-one percent maintain an annual operation budget between $250,000 and $2.5 million.
- Sixty-eight percent employ 25 or fewer workers.
- Seventy-three percent of organizations offer health insurance to employees, 69% offer dental insurance and 64% provide vision insurance.
- Sixty-eight percent of organizations offer retirement plans, with 43% offering 403(b) and 39% offering 401(k) plans
- The average organization turnover was 16.9% in 2023, an increase from 15.9% the prior year. By comparison, the median private-sector turnover rate in 2023 was 41%, according to the Bureau of Labor Statistics.
Members of Leadership Council for Nonprofits Cincinnati, as well as non-members, may purchase the full Nonprofit Compensation & Benefits Study here.