By Paul Clolery

The sky didn’t fall for the Year 2000 and neither did nonprofit salaries, according to a new study of readers of The NonProfit Times. A booming economy in most of the nation has workers in short supply. The market is tight even in areas that are not doing as well economically.

A survey form was sent to a cross section of NPT readers for this 12th annual study of paychecks. The results are based on nearly 300 responses. The responses showed boards scrambling to make organizational efficiencies to pay for salaries.

Chief executives will earn a projected 3 percent more in fiscal 2000 and chief financial officers’ pay will remain flat at roughly $56,033.

Program officers can also expect a 3 percent raise to $54,311 and volunteer directors a scant 1 percent, averaging $36,042.

The hot areas are those that bring in the money. Major gifts officers can expect a 9 percent raise to approximately $64,928. Planned giving officers are right behind them at 8 percent, but that’s softened by the fact they already make more at $66,115. Development directors are projected to receive a 5 percent bump up for an average paycheck of $54,371. The chief of direct marketing can expect a 7 percent hike to an average $52,780.

The percent increase for the money people is significantly more than the organizations were projecting a year ago for this time period. For example, last year’s NPT study showed projections for planned giving officers being only 0.33 percent, compared to the actual 8 percent. The chief of direct marketing position was only projected to increase 4.5 percent, compared to the actual 7 percent.

Extreme competition for good executives is forcing salaries upward, said Larry Morgan, senior manager, and director of compensation consulting for national accounting and management firm Grant Thornton. Morgan is based in Madison, Wis. "Nonprofits are faced with greater competition with the private sector that’s unparalleled to anything they’ve seen before. That’s especially true at the executive management level," said Morgan.

The strong economy and fewer new entrants into the labor force are putting additional pressure on employers to recruit and retain talent. "In part, this is driving wage rates up at a much higher rate than before," said Morgan.

But inflation is flat, according the federal government. How can wages be raging and inflation stay in check? Morgan said efficiency is the answer.

In nonprofit salaries, apparently size does matter, as does type of organization. The larger organizations pay exponentially more than smaller counterparts.

If you’re the boss at a foundation, you’re sitting pretty at an average $106,352 salary. The boss at an organization generating $50 million or more in annual revenue boasts an average salary of $165,627. At between $10 million and $49.9 million, that average salary dips to $143,475. From there it drops like a penny off the roof of the Sears Tower in Chicago. Organizations generating between $1 million and $9.9 million pay an average $80,351 and groups with income of between $500,000 and $999,999 pay $58,003, on average, for the top job.

The trend toward flattening organization’s structure is also keeping costs in check. "There used to be a lot of layers and one person had a greater span of control. Now people are working more autonomously in clusters or cells thus resulting in a middle management level of certain ranks begin to be cut out," said Morgan.

Organizations are starting to pay performance bonuses more often, but 20 percent of organizations responded that such bonuses are part of executive compensation. The average bonus reported was 7.8 percent of salary for the top position, 5.76 percent for the chief financial officer; program director, 5.65 percent; planned giving officer 4.3 percent; development director 9.5 percent; major gifts officer, 3.63 percent; chief of direct marketing, 3.47 percent and director of volunteers, 3.1 percent.

When it comes to staff salaries, 11.4 percent of responders said that non-exempt pay is growing 73 percent faster than anticipated.

Just 30 percent of chief executives have employment contracts. However, of those organizations that do not, 35.7 percent said a contract would be worked out if the recruit wanted one.

A small 16.9 percent of organizations reported that they would pay a one-time bonus when recruiting a new chief executive.

Nonprofits are seeking managers who are more flexible with an adaptive skill set. A greater ability to have flexible schedules is a competitive advantage organizations should tout.

"Use mission as key selling point. Nonprofits may have trouble competing on the compensation side, but generally have pretty good benefits," said.

In fact, NPT readers reported health insurance rates will increase an average 12.98 percent and 51.2 percent of responders said the nonprofit it footing the entire increase. Only 19.1 percent passed at least some of the savings on to staff. Some groups shopped for new providers while others made changes in benefit levels.

Of organizations that require employees to contribute to health plans, the pay 69.02 percent of the premium.

"In the private sector, the trend is to more cost sharing with employees," said Morgan. He anticipates actual costs to increase as much as 15 percent.

Nonprofits are missing a key opportunity if not fully leveraging their benefit programs, educating and communicating and using them as a selling point with employees, said Morgan.

Go Getters, Inc. in Salisbury, Md., has a self-funded health insurance plan, explained Richard Bearman, the organization’s executive director. "We have a policy with a very large deductible on each individual and family member who is covered. We pay the first $15,000 in claims. There is a back-up policy that pays for catastrophic illness. There’s also an individual stop loss and an aggregate stop loss. It won’t exceed a negotiated figure," he said.

A third-party administrator handles all of the claims, and there are fire walls to protect the employee from management knowing details about claims. "We are doing exactly what Blue Cross was doing when we had it. They had a reinsurer," said Bearman.

There have been good years and bad years for the plan. "We made a promise to staff to keep coverage at the same level as they had with Blue Cross and Blue Shield," said Bearman. In fact, the coverage got slightly better, he said. "We were in our fifth year before our premiums reached the level when we left Blue Cross and Blue Shield."

Go Getters also has a bonus share system for performance. For three years there were no raises. All money went into the bonus pool with the average annual bonus being $3,500. The total amount paid out last year was $180,000.

The bonus is not based on percentage of salary, Bearman explained. It’s based on the number of quarters an employee is on track. There’s a formal performance review every quarter. During the review, the goals set in the previous quarter are reviewed to determine if a staff member is on track or needs improvement.

For being on track in a quarter an employee gets one share. The number of shares held by employees is then divided through the amount of bonus money available to get a share value. The employee then gets that amount times the number of shares.

He said between 85 and 95 percent of employee are on track in a given quarter. "It’s an extremely effective way of getting their attention," if they are not performing to standard.

At Boys’ Village in Smithville, Ohio, staff are eligible for longevity bonuses, explained William R. Schultz, Jr. LISW.

"We’ve always believed it’s important to have long-term, experienced staff," he said. The longevity bonus kicks in at the sixth year, increasing $25 annually to a maximum of 12 years. Add another $100 to the bonus annually after 12 years.

"It can amount to a large sum after a while. It’s the same bonus regardless of position in the organization. The organization’s staff of 150 has an average longevity of 6.2 year, said Schultz. Roughly one-third of employees qualify for the bonus, he said. The top of the line for the organization is one employee who has been there 35 years.

Rhode Island Meals On Wheels has a bank of sick days employees can use, said Sandy Centazzo, the group’s president and executive director. Staff earn one day of sick time each month. At end of year’s end they can donate up to one-third of unusual time into the sick bank.

"We recently had a person with breast cancer. She could borrow up to three weeks. The stress is taken off them if they don’t have sick time," said Centazzo.

Each person has a sick bank of his or her own. That must be depleted before using the community bank. Once days are donated into the community bank, an employee can not get them back, she explained.

The program started as an incentive because of one staffer who became sick. Centazzo explained there is a cap on the number of days because of the liability that must be carried on the organization’s balance sheet.

Morgan said that the current employment situation will continue for some time to come. And, when an employee gets an offer, it may be cheaper to match it or attempt to do so if you want to retain that worker.

"The lesson here, is often organizations find out too late that they’re compensation is not competitive. Only after an executive leaves and you go to attract the talent (the organization) wants, they learn they have to pay a lot more money. It might have been very happy keeping the people on board."

Employees are generally leaving for increases in the 10 to 25 percent range. Transition in middle levels has been about 15 percent, said Morgan, with information technology people turning over at a 25 percent rate. Morgan said the technology transition should calm down now that computers didn’t meltdown on New Year’s day.

But, you still have to pay competitively. "You still have to be in the ball park with compensation plus or minus 10 percent," he said.

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