Three Tips on Nonprofit Job Pricing Plus a Few on Benefits, Too!

"This is not a scientific sampling from which conclusions can be drawn . . ." How many of you would think of using a compensation survey that describes itself this way?

I don't see a lot of hands waving over the cubicle walls out there, but walk out into the neighborhoods to chat up colleagues at nonprofits and you'll find out that they use these types of reports far more often than they'd like.

They have good reasons. HR responsibilities tagged onto Operating, Financial or Strategy job descriptions. Negligible budgets for commercial surveys. A unique Mission, wide catchment area and specialized staff that make pay comparisons uncomfortable. Few or no competitors in their geographic area but many small employers with similar staffing models. And that's just for starters.

However, many nonprofits who work for social justice and the expansion of a living wage bring their principles to employee compensation decisions. They are diligent in their quest to understand what to pay their staff.

They need this commitment given the complex judgments that can be involved. While corporate compensation departments work with multiple but relatively clear-cut job families, nonprofit staffing can be quite diverse even when they have 30 or fewer employees. One non-profit I know pays wranglers (yep, we're talking steer), PhDs and TV directors. Other organizations that I've worked with are as complicated, if less flamboyant.

So how can nonprofits avoid comparing apples and oranges (without noticing), and make pay judgements with confidence? Here are three tips that should help.

• Recognize that you may have a different staffing strategy for each job. For example, while office administrators are often hired from a local talent pool that staffs both profit and nonprofit positions, those who are drawn to your organization may prefer working in a smaller workplace and contributing to a social purpose. If so, your compensation target need not be equivalent to what a commercial survey tags for a business with hundreds or thousands of employees. It certainly is helpful reference information if you can get it, but a "good enough" place to start is data on what is happening in the nonprofit arena even if it isn't coming from a scientific sampling. (But keep looking for other sources of data so you're not relying on just that source.)
• Professional positions may or may not be filled by talent who could be employed in a corporate setting. Either way, if there are universities in your area, make sure you know what they are paying for comparable jobs (which is easy to find online). And don't kid yourself. If your incumbents can or should come with corporate experience, get yourself some solid commercial survey data. If your professionals don't need corporate experience, odds are their entry level salary could or should be lower than someone in business.
• If you are using a local report on nonprofit compensation practices, make sure you read the introductory explanation of how the data was collected. Don't ever mistakenly assure your Director or Board that you have "data" when what you have is an overview of the practices of some organizations (who may not even have reported the data in a standardized way). BTW, you should read the data collection explanation on all surveys you use, including commercial surveys, so you can make thoughtful judgments on the reliable application of the data to your jobs.

One last thought for nonprofits. Survey "data" on benefit practices is a far different matter. I put data in quotes because the information can be quite questionable from a measurement standpoint.

For example, most retirement plans and medical plans are unique to an organization in one way or another, so they are not good candidates for aggregated data. A PPO provided by Blue Cross can be very different in design and administration from one provided by Aetna, even though many surveys consider them equivalent.

Even employee contribution levels can be misleading since you don't know the types of plans to which they apply. Of course some medical premiums are much lower if they apply to low subsidy plans that your organization would not even consider offering employees. Combining those numbers with premium costs for traditional medical plans will tell you little worth knowing. And don't even try to compare defined benefit retirement plans unless you have payout projections provided for multiple employment scenarios that you can compare.

If you must compare benefit data, stick with the one data point that is most telling (and valid for comparison) -- an organization's benefit contributions divided by number of employees.

Skipping compensation communications because it's the "soft stuff?" Prepare to change your mind when you see the data in the  popular ebook, Everything You Do (in Compensation) Is Communication @ www.everythingiscommunication.com. Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to create this DIY guide to compensation leadership. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, communications and leadership to topics like the CEO Pay Ratio and performance management discussions at the Café. Before founding re:Think Consulting, Margaret was a Principal at Willis Towers Watson.