Myth Busting: Nonprofit executive salaries

Most young nonprofit professionals are not yet executive directors, but the policies and attitudes around nonprofit executive salaries already affect us. Negative perceptions and underpaid talent devalue our entire sector and make it an undesirable place to devote one’s career.

Recent data from the 2011 Daring to Lead report supports the sentiment that most executives are underpaid: the median nonprofit CEO salary falls between $50,000 and $75,000 a year, an average of 20–40 percent less than his or her foundation/government/business sector counterpart.

At the same time, there’s an unhealthy obsession outside the sector about nonprofit salaries. The Trust and Charitable Giving in Minnesota survey conducted by the Charities Review Council in 2007 reports that almost half of the Minnesotans surveyed believe nonprofit staff should make less than their for-profit counterparts. Media exposés often ask “how much is too much?” for a nonprofit executive director to make, focusing on rare cases of overpay. 

It’s time to bust the myth that paying for salary hurts a nonprofit’s potential to provide more services or detracts from important programs. Moving public perception requires each of us to step up when we hear these sentiments from strangers, friends, and family.

MYTH: “I don’t want my donations paying for nonprofit executives’ salaries.”

BUSTED: Yes, it’s important for a nonprofit to efficiently and effectively use funds to achieve its mission, but the most crucial aspect of that is hiring experienced, competent staff to oversee and implement the organization’s programs. Expecting a donation to be effective without going toward salary is naïve. While 65 percent of a donation might go toward a nonprofit’s programs, the other 35 percent going toward administration and fundraising is critical for an organization to best fulfill its mission and be sustainable.

MYTH: “Nonprofits should be run by volunteers after they retire from the for-profit sector.”

BUSTED: It’s surprisingly common to find individuals who believe execuitve directors should work for less than their for-profit counterparts—or even for free. These opinions are rooted in the misconception that nonprofits are not businesses worthy of paid staff. Leading a nonprofit isn’t a hobby. It’s a real job with real responsibilities, like managing a 10 million dollar operating budget and overseeing dozens or hundreds of staff. Nonprofits are important economic engines that require competent, experienced leaders with market-sensitive pay.

MYTH: “If a nonprofit CEO gets a big salary, then not as many needed services will be provided.”

BUSTED: Nonprofits produce a social return—a return that benefits our communities. Most wouldn’t blink an eye at a for-profit trying to hire the best CEO it can find, at the most competitive salary it can afford, in exchange for the CEO leading the company to increased profits. Why should a nonprofit be any different? Is the importance of social return and betterment of our communities less critical than monetary return? (Not to mention the real monetary impact improved communities have on our society.) If a board of directors is able to hire the best executive director with aggressive compensation, and they produce an increase in financialand social profit for the organization, then it was well worth the investment. 

As my own executive director says, “We all benefit when good leaders are attracted to oversee nonprofits that improve the lives of individuals and the community.” Instances of overpay are bad, but underpay is the chronic condition holding the nonprofit sector back. By confronting these misconceptions head-on, young nonprofit professionals can strengthen the value and respect of our sector.

photo credit (dare you to buy this shirt)

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