Should a Nonprofit Splurge on Management?

somehow there are always excuses and reasons for paying people at the top big, tall. piles of money, and paying people who are not at the top far, far less

While I support the notion that non-profit leaders should be invested enough in their organization's mission to sacrifice some salary, the comments that imply that talented individuals with good skills should not be well compensated for their work simply because they are employed in the non-profit sector are galling. I want our non-profit organizations to be well-run. There should be an acknowledgement that running a non-profit is as challenging and difficult as leading a similarly-sized for-profit company. The most vulnerable people in our society depend on the just, efficient, and effective administration of charitable organizations: deciding that those leading or working in those organizations should be compensated significantly less than their for-profit peers is both arbitrary and obtuse.

I spent nearly 20 years working my way up in the nonprofit sector. In pursuit of my longtime goal of becoming an Executive Director, I paid for a master's degree program and a host of other industry-specific professional development. I have always loved my work and its impact, but I was 30 before I made more than $50k in a year, even while raising millions for my organizations. In the Bay Area, that is barely enough to live on, let alone repay student loans or save for any sort of future (retirement plans are not standard at small NPOs.) I am now well qualified to be a nonprofit leader, but I have seen far more vacancies for ED jobs that pay ridiculously low salaries (ranging from unpaid to $40k) to than ridiculously high ones. As much as I scoff at the idea of any executive making a salary expressed in millions of dollars, I do think it is perfectly reasonable to pay a talented and productive executive a salary in the low six figures, and more for a very large or complex organization. If a Google developer straight out of school can make $80k, why shouldn't a dedicated nonprofit manager? Not only should we reward people for being good at solving society's problems, but there should be a light at the end of the tunnel for people who have already sacrificed pay for their entire careers. Otherwise, they go where I and many others have: to support social and artistic missions in the private sector, where our contributions are appropriately valued.

My sense is that some/many/most nonprofit leaders are paid more for their fund raising abilities than their management skills. Sort of a commission. If a CEO or college president is bringing in extra millions does it make sense to give them a cut of the action? Maybe...

As others have commented, charitynavigator. org is a great resource for learning how much of your donation actually funds the work of a nonprofit.

Well for one thing I do vote with my money. I refuse to give more than nominal amounts to non-profits who pay their executives a salary that is far beyond upper middle class level. Why? I simply do not believe that you get better people by paying more; what you get is greedier people. At the same time, everybody, including non-profits, should pay a living wage. Charitynavigator has information on compensation. Or you can usually find the 990 forms online.

Re: pay inequity at nonprofits, until recently I worked at a large arts organization that pays its talent TRULY outrageous salaries while in the midst of a long-term financial crisis. Shortly after I left my job there, they laid off more than 10% of the staff, over a dozen people. The nonprofit world is always stuck in a dilemma between paying good, experienced, qualified staff the salaries they deserve and need to take the jobs in the first place, vs. pretending that administrative costs can be only a tiny fraction of your budget because that makes people outside your organization feel better somehow. It’s grotesque. But then you have the situation I was in, where one set of employees - absolutely necessary employees, who are uniquely qualified etc - make fabulous six figure salaries while the org can’t balance its budget. This is a dilemma that truly has no easy answers.

I remember how I felt when I learned the CEO of my public radio station was getting paid 500K a year. Whenever I hear one of their incessant membership drives going on, I think they should announce that the first 5000 listeners who each donate $100 will be doing nothing but paying her salary - that should really drum up support!

Go work for Catholic nuns. They truly make silk purses out of a sow's ear. Many of those Sisters in leadership positions don't have fancy cars or take exotic trips because they have modest salaries turned over to their Religious Orders. When I worked for them, I was astounded at how much they accomplished to make others' lives better on very little funding.

In addition to the many suggestions about being able to see the organization's Form 990 which shows the compensation of the top 5 employees, all 501(c)(3)'s are also required to have a written, board-approved executive compensation policy on file, precisely to allay the kinds of concerns in this letter.

This one is close to my heart, as I recently resigned from the Board of a non-profit for similar reasons. This non-profit was very small and there were no paid staff, but there was a practice of leadership going out to very expensive restaurants and staying in posh hotels when attending meetings; the president felt that we deserved to "treat ourselves for all our hard work" as we were unpaid. Even though technically not illegal, I am quite certain that the ordinary people who donated money did not expect it to be used this way, and I certainly didn't approve of people "treating themselves" from tax-exempt donations. I'm a lot more careful when I make donations now.

L1: I 'm worried about the fact that the writer works in a not-for-profit and does not know that the financials are public. Many not-for-profits publish an annual report every year that includes those details. I'm also worried that the writer has left out a lot of details that could state their case better. Is the budget of the organization $1, 10, or 100 million? So 25% means very different things. Is this 25% split between 2 people or 8 people? There is no acknowledgment that maybe these people have decades more experience than our writer as well as special skills needed to run the organization. Getting comparable pay rates for the size of your organization is easy: look at job boards, salary surveys exists. About the rate for the consultant, again no qualifying details. Compared to an hourly rate or salary, consultant rates can look high as the consultant has different expenses: marketing, taxes, insurance, etc. Lawyers, accountants, IT specialists all have hourly rates well above a salary. Now, my other worry is about our Ethicist who seems to believe that all executives are worth...more. There is a real buy in that the guys at the top are worth the most. Not-for-profits tend to fall into 2 categories: genuinely well intentioned people or total ego trips. It is common for an executive director to stack a board in their favor. If that has happened here that could lead to overpaying staff.

“The inequality in rewards between top and bottom is ultimately a structural problem that requires structural solutions.” This is simply apathy, the excuse to do nothing. Each of us has to follow our own ethical standards. Most people will simply put convenience over that. Brave people make a statement, and inspire others to do the same.

As much as I understand the rationale behind paying nonprofit senior staff market or closer to market rates, I don't agree. It has been bandied around enough to have become included in the litany of 'best practices,' that are the supposed guides to stewardship of nonprofits. These businesses, however, according to law, serve the public good, and so are given a pass on taxes. I agree with this 'pass,' and think that as a nation (not a community or society, but as the official entity of our nation), we should do more. That said, this pass is given specifically to allow these organizations to operate outside of the market - because they serve the public good. As a leader of such an organization, your compensation is also outside of the market. You are a leader, in all ways. If you are leading in all ways except this one, then you are failing, not just your staff, but the fundamental legal, ethical and moral pretexts under which your organization operates. To give senior staff a pass because of the 'demands of the market' and not to do so with the rest of the staff is a top-down betrayal of the idea and ideals of the nonprofit. It is a failure on the part of the senior staff and board to put the interests, reputation and well-being of the organization at the center of their duties and decisions. Nonprofits working according to the demands of the markets are not nonprofits.

Before contributing to charities, I check with the website CHARITY NAVIGATOR. It lists Executive remuneration and the actual percent of donations that reach the intended targets of the charity. To the question of providing competitive salaries with non-charitable industries: when someone is motivated by material wealth how committed can they be to those whom they profess to serve?

HIgh management salaries for struggling nonprofits makes no sense. The "we've got to compete with the for-profit sector" is a poor excuse. Solution: Ditch the high-priced management and promote from within. You've likely already got: (1) Knowledgable people dedicated to the mission; and (2) People who are not motivated primarily by the money.

I was an employee in and, later, a consultant and trainer to NFPs for 36 yrs. and I never knew anyone working in these agencies who signed up to wear sack-cloth and ashes or eat ramen exclusively. LW#1 needs to get all the facts straight before "exposing" what she perceives as inequity within tbe organization which she describes as "cutting about a quarter" of the work-force, amounting to the loss of "dozens of direct-service jobs." If accurate, that would make this a huge organization in the world of NFPs where the average organization has one, or fewer, employees and runs on a budget of $100,000 or less. Additionally, for the LW's claims to be true, this organization would have to have an annual budget of many, many millions, pay an experienced leader well over six figures, and, yes, a car could very well be an appropriate perk for the Executive Director whose responsibilities include lots of "facetime" with donors and potential donors -- in short, lots of CEO-level schmoozing to bring in the big bucks. A car probably makes a lot more sense than mileage reimbursement. In addition to looking up income and expense on the required Form 990 IRS filing, LW#1 should also check the online sites for the Chronicle of Philanthropy and professional associations like the Association of Fundraising Professionals, or the National Council of Nonprofits which regularly report salries throughout the field.

As others have noted, non profit financial statements (IRS Form 990) are available to the public, and they contain top compensation amounts for highest paid directors, employees and independent contractors (Part VII). One can request the annual forms directly from the nonprofit or retrieve them through a search of the online IRS Tax Exempt Organizations database. 990s (though not always the most recent forms) can also be found online at guidestar.org.

I’ve been in the nonprofit industry for more than 14 years and I think the scrutiny for budgetary practices at NGOs - as in, they should be frugal to the point of monkish austerity - is fraught with emotional expectations and can be a wildly unhelpful way to assess impact or administrative management. Nonprofits are still businesses and like any other business, they are prone to making both good but also stupid financial decisions that not everyone agrees with or understands. That said, this place sounds like there’s been trouble brewing for awhile and for that I am sorry for the letter writer. I think it’s time to look for a new job. As a side note and FYI, all nonprofits are required to publicly disclose their highest paid employees in their tax documents (990s). Several years of tax information should be available on their website or through a google search. ALWAYS look at the 990s! You can learn a lot about the priorities and nimbleness of an organization from the last three or so years of tax documents. It should not be a “shock” that these leadership level positions were being compensated so highly - I suspect the info has been out there on the internet for a long time.

Do the Girl Scouts still have their headquarters in downtown Manhattan?

I volunteered at Habitat for Humanity thrift store a few years ago. I went in every other day, sweating copiously in open-air warehouse to mark dishes a dime or quarter. Eventually I realized the same 2 cars were there every day- a Mercedes and a Land Rover. Nice cars. So I looked up the salaries of local Habitat execs. I thought Habitat was one of the good guys. Well, I never went back.

Our society pays too much for leadership. It's a job description, and good leaders should be well compensated, but we've got into this mindset that they are worth many times more than other people. Perhaps that's because leadership compensation is a feedback loop accelerated by the fact that leaders have an outsized say in who gets paid what. A board made up of C-suite types gives their CEO a raise, and suddenly the cost of leadership goes up. Now other companies have to pony up more money for their leaders to keep their salaries competitive. This effect spreads to city governments and to nonprofits. Before too long, leaders are in a class of their own, and if you aren't a leader or a star specialist, you are a peasant. This causes people to muscle their way into leadership positions for the wrong reasons. If you aren't a genius scientist of engineer, and you want to have more than other people, it's the obvious path.

Tell the press. It is scandalous that non-profit "charities" pay their managers millions (my university chancellor gets more than $2 million a year in various guises) while putting their hands out for donations, mostly from people whose incomes are a tiny fraction of the managers'. This borders on fraud, in which the "non-profit" exists only to enrich its managers.

I worked at a non profit and, in that particular case, it was painful to see how top heavy the management was. It fostered an environment where they, aware of how expendable they actually were, all looked out for each other’s jobs. Everyone knew half the admin hall could disappear and no one would know the difference.

One thing that all non-profits have in common is a large pool of young idealists coming out of school every year looking for a job that has some meaning besides a paycheck. Non-profit employers who take advantage of that labor market often have low wages and poor working conditions, at least in part so they can pay good salaries to management. It seems likely to me that LW1 may simply have found out the true nature of her employer. In that case, it would be time to leave, but quitting "on principle" is unlikely to have an impact on the organization, and it could hurt LW1's chances of getting another job.

"Splurge" was an eye catching, but misleading headline. The discussion was far more reasonable in acknowledging the need for competitive salaries to attract the talent to effectively meet a nonprofit organization's mission and goals. It is sad that anyone thinks accepting leadership roles in nonprofits or government requires also taking vows of poverty. While some positions in public service have limited subsidies to retire student loan debt, most do not. Programs to reduce housing costs in high priced areas also give scant assistance to the majority working for social goods instead of private profits. In the present instance, looking at a single measure of salaries as a percentage of the budget is not useful. If the annual budget is even $1,000,000 with even a staff of five, 25% for salaries is an average of $50,000 per employee. Maybe a partially retired Certified Public Accountant with the 20 years of experience required for a fully qualified CFO is available for that kind of money. It should not be the expectation to hire high level skills for low end journeyman pay. As a rule presidents and CEOs expect to make more than the CFO. From an ethical standpoint, I think it is better for the writer to raise concerns about how the organization's budget is structured in a direct manner. If the organization's culture does not support this, it has bigger problems than its budget.

1) Non Profit Employee How would you feel if your position and that of most of your colleagues were eliminated and you were all replaced by computers that could do all of your jobs via artificial intelligence? It would save the organization all of your salaries while continuing to help those you profess to serve. My guess is you'd complain that that was unethical too. Most employees feel like they are indispensable. The reality is they are not. Most employees think the boss is overpaid. Most employees think the boss does nothing while they do all the work. Most employees are wrong. You are correct to assume the board would not support you. They are the ones who signed off on compensation and staffing needs. You need to find another job. 2) Study Abroad The ethical question here is not about your choice. It's about the institution and how they treat their students. You had a family emergency. Tell the school. If they have an ounce of empathy they will let you re-take the course at no extra charge. Obviously, any expenses such as housing and travel can't be waived. If they don't allow you to re-take the course they are morally bankrupt. You're probably better off transferring somewhere else. Consider sharing your story with anyone else contemplating receiving an education at that institution.

Prof Appiah posts a correction today about a 1 word error / misquote from a philosopher. But NEVER has he posted a correction re blatantly false medical, legal, et al information that has guided his advice in this column. I suppose then, he actually “stays in his lane” when it comes to corrections.

Although it would not surprise me that non-profit is operating the way ex-employee states, LW in fact, does not know this is the case. It seems to me the first step is to verify information, not run to the news outlets.

Non-profits must produce annual reports and tax filings available to the public. So, no one should be surprised at the salary structure thereof. In order to attract top talent to the Non-profit sector, they must offer competitive wages similar to, if not always as high, as salaries at comparable level positions in the private sector. None of this is secret either. You seem to think that in order to work for a non-profit organization, you should take a vow of poverty. Nope. Anyone donating to any public charity can look up the financials of that organization and decided for themselves whether they support the charity’s mission, its percentages of funds disbursement, and its salary structure. A well-run charity is a gift to its cause and to its employees.

LW #2: you’re playing into the stereotype of a young adult who cares too much about what other people think.

#1 sorry your idealism is shattered by this but I hate to say that this is pretty much par for the course at most non-profits if you think you can do some good working there great; if not find somewhere else to work that you think will forward your goals #2 just don't bemoan what you gave up; especially not in front of your partner who does not need and additional load of guilt while dealing with an extremely ill parent there is nothing more annoying than a saint who has to constantly get praised for their sainthood

The recruiting firm Professionals for Nonprofits conducts an annual salary survey in New York and Washington, DC. It categorizes the nonprofits by sector (arts and culture, health, etc.) and budget size (less than $1 million, more than $30 million, etc.) Request a copy and see what the ranges in the appropriate category and budget are before deeming an executive’s salary as excessive. https://pnpstaffinggroup.com/salary-survey-report/

I was touched by your nuanced response the young writer struggling to balance taking care of oneself and the obligations of love. There is so much power in the humility of withholding judgement. It seems to be undervalued, both in public and in private, lost to our facebook-page presentation and under-justified posts and re-posts. It's wonderful to see it demonstrated so clearly. To the writer: Resist the urge to turn the generosity of those accustomed to taking care of you into guilt over your choice to give to another. Try not to judge the decision you made too soon. And remember this feeling when those you care for start making choices to give rather than receive.

I think the column failed to answer the question as fully as it could have. In my opinion, resigning from an organization in protest is ethically permissible, but not required when an employee feels that the organization is mismanaged. Employees can, by drastic action, demonstrate their convictions that the organization is flawed beyond their power to improve it any other way. Such employees risk being dismissed as "disgruntled," but they can maintain their own dedication to principle. It would be prudent for an employee who is so frustrated to secure another job with a better organization before quitting. On the other hand, employees who feel that they are doing some good within a flawed organization may ethically remain there. Changing the broader social framework, which Dr. Appiah opined on, is not an ethical obligation—again, in my opinion. People who do so are often called heroes or saints.

I’m amazed that someone is asking a stranger, even if he carries the title of newspaper ethicist, if he did the right thing. Maybe get input from your father and your professors but the only person who knows if you did the right thing is YOU! It may take time and reflection but only YOU can determine the impact of your actions and decide if you did the right thing for YOU.

Letter # 1 -- If the writer is experiencing a real ethical dilemma after discovering the extreme salary disparity between management and employees - there's a very simple method to alleviating the issue -- Quit your job at that company and find a job at another altruistic not-for-profit company which supports equanimity in its salary structure -- Letter # 2 -- " I made good on that promise, but I feel incredibly guilty. I feel guilty [...] but I still feel anxious." -- Why is it - week after week - we are presented with letters in this column from people who are trying to relieve their FEELINGS of guilt, discomfort and anxiety -- and how does any of that play into the topic of ethics -? If you think about it - it's certainly possible to make the obvious ethical choice for a particular issue -- and still end up "feeling bad" as a result -- And -- Guilt and anxiety are toxic and negative emotions which are never reliable resources in making fair, balanced and - ethical - decisions...

A good answer from the ethicist. The worker at the non-profit does not know all the facts & needs more information before making a judgement.

The idea that only a highly-paid, pampered individual can be a good leader is false. I've seen many an incompetent get accepted into the bosses' "club" and ride on others' labor while raking off top dollar for little value. A hard-working person who believes in your organization's mission enough to do with less will do fine. And what kind of leadership is bringing your organization to a point that workers are being laid off and the budget stripped? Leave and tell, so that people who want to donate to causes other than the bosses' welfare can do so. As to LW2, be with your partner while you can. There will be other scholarship and work opportunities, but the days you can spend with your beloved are short. Never mind the naysayers. You know what is right, and will live with your decision for the rest of your life. Don't make it one you'll regret--and you know which one that is.

To prioritize the people you love is never a bad thing. When LW2 is at the other end of life and has lost many around him or her, LW2 will understand more why LW2’s father is completely fine with the decision.

CEOs and top executives make decisions hourly, large and small, that affect the well being of many others. Some are customers, share-holders, employees, insurees, retirees, patent holders, refugees, investment bankers, foreign entities, charitable organizations. Hence our economic system rewards with high salaries, and stock options, which may not be available to non-profit leaders, many of whom bear similar responsibilities. A car and similar perks seem reasonable in that context. However, if you disagree, or believe it is excessive for your particular organization, then work within toward greater transparency and change. Why quit unless you have something that better satisfies your personal needs—presumably a mix of self respect, esteem, perks, money, and daily job satisfaction? Will resigning in protest change the organization? And for you; what next? I would be interested to know what your laid off former colleague would advise.

Mr. Appiah, a non-profit has a duty to provide services--and to ensure that the majority (at least 2/3) of funds raise go to direct services--not executive compensation, swag, or buildings. Non-profits are required by law to provide their yearly audited tax statements to the state. These audited tax statements are available to the public, by request. At no cost. All the writer has to do is write and request these tax statements and analyze them--what percentage goes to services, what percentages went to executive compensation. If at least 60% of the funds do not go to direct services---then you have a cause to complain. Whether or not complaining to the media is better than complaining to the attorney general is not up to me. Follow the money and get the statements. Don't bother with hearsay and innuendo.

Depending on what the non-profit does and where they do it, a company car may be a responsible purchase, for instance in visiting far-flung branches and teaching. Similarly, a former employee acting as a consultant may be sensible because of institutional memory or particular skills. OR, they may be terrible grifters, people looting the treasury and indifferent to the success of the non-profit. Since our writer doesn't know, I would recommend contacting a newspaper, or depending on the territory, an ADA, inspector general, The United Fund, etc. Terrible management is not necessarily illegal. (see: Hewlett-Packard.) This is not a cross the writer can carry effectively, but pretty much everybody answers to somebody, so go get some help. If the writer is wrong about these impressions it will be great good news. If malfeasance is afoot, the sooner it is stopped, the better. Sadly, it's probably a good time to bulk-mail some resumes because it is terrible to spend time at a place which you've come to hate.

First of all, company cars are often leased and not that expensive — particularly if that individual has a lot of travel on behalf of the company it can be cheaper (you must reimburse personal car use). I have been one of those “exorbitantly paid” consultants at a non-profit. If you look at a pure hourly rate, yes it seems like a lot.. except you have to personally pay for: all sick days and holidays (no work: no pay), health insurance, other types of liability insurance (you are working as a representative of that company), home office costs, 401k or other retirement costs, etc. A good rule of thumb is take is that full costs of employees are about 1.5 the amount of a salary. Not to mention that you are often paid on a project basis Rather than full-time ongoing....

A non profit has to file a return called a "form 990" with the IRS that is publicly available - divulging income, expenses, head count, volunteer and paid, and the compensation of the top five employees. Just review the company's returns and compare with similar NFPs.

My experience with non-profits is that they are run either like family farms or ATM machines. Of the many that I have been involved with, about half either broke laws directly or circumvented them in ways that benefitted the top person. Non- profits can do great work, but there is a lack of oversight that is shocking. CEO compensation is just part of the problem.

I could not disagree more with Dr. Appiah. While logically sound (and proudly capitalist) the argument lacks human empathy. There is an inherent acceptance of the devaluing of human beings based on the corporate hierarchy. When employees put in years for a company, sometimes many more years than management, for lower rates and benefits they are still make vital contributions to the success of the company as well as the success of the leaders and management. To suddenly discard them and then expect the government rather than the corporation itself to be concerned with their well being again exonerates the system from any ethical obligations to its employees whereas higher level management and corporate leadership negotiate and contractually get gigantic undeserved severance packages even when they are removed for poor performance. This aspect of corporate capitalism is to me is the definition of unethical.

The analysis is heartfelt however I believe much too soft on top management. Pay for C.E.O.s. in both profit and nonprofit sectors is based on results. Securing income for a nonprofit is in almost all cases the responsibility of top management. That top management lost a “chunk of our annual budget” and did not have a reserve to soften the unexpected, seriously challenges the belief that they have competitive value. Retaining current top management [and possibly the consultant] may be reasonable, if the board has strict income results defined for the next three years tied to their compensation. And the Board should have a replacement in waiting. Note: Non-profit budgets can be found through the IRS form 990.

I did stints temping at non-profits during college. Although I didn't see leadership salaries I quickly figured out management was well compensated beyond what I deemed reasonable amounts. My number one takeaway from the experience was that some of the young people come in amped to tackle the world's problems yet leave these organizations disillusioned once seeing management largess and compensation. Kinda hard to be motivated after spending an entire career eating ramen noodles, living with umpteen roommates and constantly fearing for your financial viability while joe executive is living like a king.

I must compliment Dr. Appiah on his thoughtful analysis of the non-profit. I'd like some more information about the organization to put a couple of points in proper perspective. First, what portion of the headcount are the senior managers which make up a quarter of the budget (payroll budget or overall?)? That's kind of an important detail. Second, does the president travel frequently on behalf of the organization? At my company, many people have company cars because they frequently travel to meetings, job sites, etc. (and part of it is indeed a perk). The cost of that car/value to the president is part of the compensation package, just like regular money. I, for one, am not necessarily convinced of the value of high-paid management and the importance of the individual, but I'll at least consider that those making the payment decisions are not complete fools and have an idea what they're doing (not that every penny is warranted, though). That said, it is the duty of the directors of the organization to act in a way that is best for the organization (or at least is thought to be best). In the case of this particular non-profit, I would assume this means advancing the mission of the organization. Where it gets tricky is in determining what is best. Is the high-priced management worth more than low-priced management with more staff? It obviously depends on the mission, but the only way to know for the not-so-obvious cases is to try both (hypothetically, of course).

“....changing federal policies “ suggests a taxpayer-funded source of revenue had been lost. Whenever public money is a funding source there’s a question of appropriateness. An automobile for the use of the entire management team might be appropriate but an automobile for only the president? I agree that issues about the appropriate use of funds, transparency, and accountability are not unique to just that one organization. Don’t quit. Instead look for another job in an organization with a management team whose values are in line with yours and their stated mission. The non-profits that manage to survive “changing federal policies” will be worthy of your time and commitment to the individuals they exist to serve.

Regarding the company car, it's not as expensive as it seems. For the business, it's leased and tax deductible. For the recipient, it engenders strong loyalty to the company, in part because it saved him or her haggling sessions with a car dealership.