This is an excerpt from “The Little Book of Nonprofit Leadership: An Executive Director’s Handbook for Small (and Very Small) Nonprofits.” The book gives an overview of the job of ED, core responsibilities, and board relations. To help make the concepts clearer, the book sometimes follows a fictional ED—Linda of the Smallville Historical Society.
Chapter 7: Asking Your Board for a Raise
After three years on the job, and after her hard work to increase the budget of the Historical Society by more than forty percent, Linda started to realize that she wanted to make more too. She wanted to buy a new home. She wanted to afford a long vacation somewhere hot and relaxing. She wanted some nicer things around the house.
And she realized that, in some subtle way, she wasn’t feeling valued by her board anymore. A few weeks before, a job at the state historical society opened up that Linda was easily qualified for. The pay was $20,000 more a year than Linda made now! Sure, some of that was because it was in the big city where salaries were always higher than in Smallville. But the nonprofit wasn’t substantially bigger than the Smallville Historical Society and if Linda were willing to commute forty minutes each way, it would be a huge financial win for her.
Except she didn’t want to commute, that’s why she took the job at the Smallville Historical Society in the first place. She wanted to stay in her community. She just wanted to earn more money. It didn’t have to be $20,000 more (it almost certainly wouldn’t be) but earning something closer to that would be meaningful.
So how to go about asking? Would the board be angry that she asked? Could the Smallville Historical Society even afford a raise? Linda wasn’t sure where to start. Before working in nonprofits, she had worked at an insurance company. While there, she’d asked for (and gotten) two raises. But that felt different than this problem. It had been hard enough to get just one boss to approve a raise, but now she had eleven people who would have to agree. It seemed too daunting.
After thinking about it for a while, she realized there was even a downside to getting a raise. It was weird to think that there was a downside to making more money, but it was true: the board had hired Linda to manage the budget. If they gave her a raise it was just going to add to the expense line of the nonprofit. Her job would become slightly more difficult!
There was another part of it that was hard to think about. When she sat down with major donors and asked for $5,000 or $10,000, she could tell them exactly how their gift would help fund the Historical Society’s youth education programs. And it would! She knew how she could put that money into a program budget so that kids and the mission would benefit. Asking the board for that $5,000 or $10,000 to go to her personally instead of the nonprofit’s programs felt almost…selfish?
And yet, when she was being honest with herself, she knew she wanted it. And she felt like she probably deserved it too.
Linda is not alone in her anxiety around compensation. Many leaders at small nonprofits wrestle with these issues around their own compensation. Let’s break it down. Here’s the Five Ws (the Who, What, Where, When, Why, and How?) of asking for a raise—though I’m going to tackle it in an order that makes more sense.
Why should you ask for a raise?
Besides the fact that you just want more money, I mean. Let’s dive in.
First, you deserve to be paid what you are worth.
Unapologetically. That should be your mental starting point. Sometimes there’s a temptation to hem and haw about this and say, “But I love the mission! I don’t want to take away from it. I’ll just make less.”
In some ways, though, that feeling is already priced into a nonprofit ED’s salary. Having a job with a cause or a mission you are passionate about is worth something. A nonprofit Executive Director’s salary (especially at a small nonprofit) usually pays less than similar positions at for-profit businesses. This is part of the reason why.
In fact, there are other intangibles associated with working at a nonprofit, especially in the position of Executive Director:
- Often there’s greater flexibility than at a for-profit business.
- You can build your skills or personal network in a way that will reward you at a future job.
- The work environment or work/life balance can be better at a nonprofit.
But after taking all those factors into account, you should still get paid what you’re worth. If you could make $90,000 at a for-profit, but are making $70,000 at a nonprofit, the trade-off for significantly better quality of life might be worth it. But if you could make $90,000 at a for-profit and are only making $45,000 at a nonprofit, that’s not a great trade-off, no matter the intangible benefits.
You deserve to make what you’re worth.
Second, the role of Executive Director is key to implementing the mission.
Linda felt like she had to make a choice between asking the board for a raise and using those funds for the program. But that’s a usually false choice at a small nonprofit. If you are the ED at a small nonprofit, you are a key part of the program. You can’t separate them at this small of a scale. If you are writing grants, asking donors for money, or directly supervising the staff member or volunteers who are leading the program, the ED is not separate from the work of the nonprofit! This role is very much a part of it.
To better illustrate what I mean, imagine what the nonprofit would do if you left suddenly and the organization had to go four or six months before hiring your replacement. Relationships with donors and partners would weaken. Grants might not get written. Staff might lose focus. The overall mission and financial health of the organization would suffer.
In other words: if you are underpaid and starting to think of greener pastures, paying you a higher salary is in the best interest of the nonprofit and in the best interest of the mission.
Third, the job of ED is different than a lower-level job at the same nonprofit.
If your marketing coordinator quits, you can find another marketing coordinator for roughly the same pay who will do roughly the same work. (I chose that title because I was once a marketing coordinator and I didn’t want to talk badly about someone else’s job. Sorry, fellow marketing coordinators.)
For the Executive Director, though, it’s much different. Change the leader and the ramifications will be felt from the top of the organization to the bottom. As a board member, I’ve hired an Executive Director. And the job qualifications are just the first level of assessing a candidate for the position. After that, the board looks for a match to the vision, strategic direction, prior relationships, and much more. Executive Directors are not interchangeable cogs. That means that if you leave your job, by default, the organization will look different under a new leader. If there is a vision for the organization that you and the board agree on, and things are working well in pursuit of that vision, then (again) it’s in the nonprofit’s best interest to pay you what you’re worth.
I’ll repeat it. You deserve to make what you’re worth. It’s good for you, and it’s good for the organization.
Who should you ask?
Normally, I’m the guy who wants you to run everything by your board president first. Ninety-nine percent of the time, that’s the right move. But I think that’s a mistake here. Why? Because it puts a lot of power into one person’s hands. Salary and compensation are the full board’s responsibility. That means if the board president has any hang-ups about your raise, he or she can effectively kill it on the spot, without any consultation with the rest of the board.
“Hang-ups?” I hear you ask. Sure. Board presidents are people too, and the same hang-ups we all have about money in our personal life can come to the table during these discussions.
The board president might not understand the budget very well, and any increase in expenses sounds scary. The board president might work at an institution like a hospital or university where the pay scale is highly regimented and is based on years of work and educational degrees. That kind of grid rarely works in a small nonprofit, but it can color a board member’s thinking around your salary and request for a raise.
Another thing that can happen is this: the board president might make less than the Executive Director. Think about that for a second. At a nonprofit, an employee can make more than one of their supervisors. It’s something that almost never happens in the for-profit world, but it is quite common in the nonprofit world with the ED/board relationship. As a board member, I have made less in my regular job than the ED I supervised and as an ED, I’ve made more than some board members.
All of these hang-ups can be addressed in a group setting where (ideally) the wisdom of crowds will prevail and they can get past any one individual board member’s hang-ups.
Do you see the rub here? If the board president has any of these hang-ups, there’s no other board member to talk her down from the ledge in a one-on-one meeting. It’s just you and the board president.
So, if you bring your request to the board president first, and you get shot down, you’ve got two options in front of you—both poor. You can go around the board president and ask the full board for a raise (which could damage your relationship with the board president). Or you can just accept that you’re not getting a raise. Neither will feel good.
So, again, who should you ask?
In my opinion, you should ask the executive committee.
Here’s my argument:
You work for the board as a whole, not any one member, including the board president. But asking the entire board without any preamble might be…daunting. Boards don’t like to be surprised, which is why we usually run things by the board president first. Plus, it’s hard enough asking one person for a raise, but try asking fifteen of them!
But the executive committee (your board president, treasurer, VP, and secretary) is a likely first stop to hear about anything related to “personnel,” which includes this. Even if your bylaws don’t specifically call this “personnel” role out, that’s fine. Taking this request to the executive committee will at least give you a good read on how the full board will react to the idea.
There’s another benefit to taking it to the executive committee first: the treasurer is on the committee, which means that she can talk about finances if the question arises about “what the nonprofit can afford.” If you’ve done a good job managing finances and working with the treasurer, this person should be a good advocate for you—or, at least, make it clear that the money is there.
Finally, the last benefit of taking this to the executive committee is that if you succeed in convincing them to recommend this to the full board, now you have four advocates on your side, and not just the one advocate you would have had if you’d asked only your board president.
For all these reasons, I believe the executive committee is the place to start.
When should you ask for a raise?
My vote: the middle of the fiscal year. If your budget runs January to December, ask in June. If your budget runs July to June, ask in January. Asking mid-fiscal year gives you a couple of advantages.
The first is that if you are having a great year so far, that’s already clear and it’s way easier for the board to approve the raise. To boards, a budget can often feel uncertain, especially if it projects increased revenues. If you ask for a raise during the budgeting process, you will probably get something like, “Let’s see how the first few months go.” By midyear, you and the board know how things are going.
The other reason is that asking midyear gives you the option to ask for a raise that will be effective at the start of the next fiscal year. Now, in an ideal world, your nonprofit would be doing so well financially they would just pay you more when you ask for it. But when it’s not an ideal world—which is most of the time—this delay can help. If things at the nonprofit are good, but not great, having the board approve a raise a few months in advance will be easier for them to handle. Asking midyear also means you are almost certainly asking before you are crafting the next year’s budget. That gives you and the board time to plan for this increase.
There’s another subset of the “when” question. When should you ask for a raise in relation to the health of the organization?
If you are constantly unsure how you are going to make payroll, then it’s a bad time to ask for a raise. Fix that first. Whatever the size of your budget, get a month or two of reserves in the bank. Then ask for a raise. Don’t ask for a raise the nonprofit can’t afford. You know the budget. You know what can be managed.
Where should you ask for a raise?
This isn’t a real question anyone actually asks, but since I set this up as a “Who, What, Where, When, Why, How” of raises, I feel that I must include it.
So, where should you ask for a raise? You should ask in person. (I guess that’s sort of “where,” right?) Don’t email the executive committee in advance with your request either. Get them in a room together and ask them there. This will give you the best opportunity to advocate on your behalf and answer objections.
What should you ask for?
This is the big question, right? Where the money really hits the road (or something like that). How much of a raise should you ask for?
There are a variety of factors that come into play here. And you’re going to need to do some figuring on your end to justify what you want to the board. But I’m just going to make this easy on you and say you should ask for a ten percent raise.
Boom. Done. Next question.
Oh, you want more information than that?
Ok. Here’s my argument:
First, if you ask for more than ten percent you need to have a really, really good reason why.
If you’re making $50,000 a year, and you ask for a raise to $70,000, that’s a forty percent raise. You will need a ton of supporting information for why this is a good idea, and your nonprofit will need to be really killing it in order to justify that added expense. It’s certainly possible that a nonprofit that is going through a period of tremendous growth could make a leap like this. But for others with more stable revenues, without some larger rationale, I don’t see a board going for it.
Now, if you still want to get from $50,000 to $70,000 you could present a compensation plan that lays out certain benchmarks (like money in the bank or other tangible and measurable goals) that will bump you up to $70,000 in the span of three or four years. But let’s stick to just a single raise for now.
Usually, asking for a huge increase won’t get you where you want. If you really think you deserve a forty percent pay increase immediately, you should probably just look for a new job rather than ask for the raise.
Second, if you ask less than ten percent…you just might get it!
Asking for $52,000 when you make $50,000 is a four percent raise. And it’s just not that much of a difference. When you divide a pay increase like that by twenty-four or twenty-six pay periods in a year, you may not even feel it.
Getting a bump of one, two, or three percent per year should be standard. It’s called a COLA (short for Cost of Living Adjustment). Maybe your small nonprofit doesn’t use COLAs. You should, but it’s not uncommon for a small nonprofit to be so hand-to-mouth that even this is a hard thing to budget for. But even if you don’t have a COLA, this should give you good context. Getting an additional two percent is not a raise, it’s a COLA. If you treat it like a raise, you are wasting a lot of effort for very little money.
Third, you need to leave room for your board to negotiate.
In the same vein as above, you want a raise that is meaningful to you, even if the board won’t agree to the full amount you ask for. If you ask for five percent and get three percent, that’s not a raise you’re going to actually feel. But if you ask for a ten percent raise and the board puts together a counteroffer for a six percent raise, that’s not a terrible result. If you’re going to go through the trouble of asking for a raise, ask for enough to make it worthwhile.
Ten percent is a good place to start.
A caveat
There’s one caveat to the above advice. The smaller the salary, the more you should consider asking for a raise to the next round number, rather than ten percent.
Here’s an example. If you’re making $30,000, a bump to $33,000 isn’t that much, even if it’s ten percent. But asking to get up to $35,000 or $40,000 is a real increase. If you have the funds to manage a $5,000 or $10,000, then it’s worth asking to be bumped up to the next plateau.
Watch out for compensation switches
It’s important that you understand your full compensation package. Does your nonprofit pay your health care? Do they have a good vacation or sick leave policy? Do they chip into a retirement account on your behalf? Is there an automatic COLA?
You can certainly ask for these things along with a raise. But be warned that nonprofits love to give more vacation days because it’s “free” for them. In my first job out of college, I had just finished a major initiative as marketing coordinator. I asked for a fifty-cent-per-hour raise (an incredibly small amount of money—my admonishment to ask for ten percent comes from my lived experience) and a title change. You can guess which one I got. I walked out of my boss’s office a marketing manager, with no additional money in my pocket to show for it.
As a nonprofit grows and stabilizes, adding retirement matching, generous vacation, or automatic COLAs might be in your future. But I would get your salary up to something close to your understanding of “market level” before you start asking for these other benefits.
How should you ask for a raise?
First, do your research! What do other Executive Directors of nonprofits like yours make? You can find this out in a few ways.
The easiest is just looking it up on Guidestar.org. On Guidestar, search for local nonprofits of a similar size to yours and look for their most recent 990 form. It may be a year or two out of date, but you’ll get a good sense of what similar organizations are paying.
You can also buy a “compensation report” from Guidestar, which is pulled from all the 990 forms they collect. A recent report was almost four hundred dollars, so it’s not cheap. (But if it helps you get another $5,000 a year it may also be money well-spent!)
Some states also assemble this data based on job titles and you can find compensation reports there (though keep in mind the title Executive Director can be held by people who run credit unions, nursing homes, and other organizations that might be significantly different than yours).
External research completed, you should have a good idea of what “market rate” is. You’ll want this data either for your own confidence or for presenting it to the board. But there’s another kind of research you will want to do as well: research into the health of your own organization. If you want to earn another ten percent, can you afford it?
You can do this on your own, but you can even (slyly) bring your treasurer into the conversation. Let’s say you wanted a $5,000/year raise. At a finance committee meeting, you might ask, “Thinking ahead, I know that we have three months’ reserves. But how would we be looking if something increased expenses? Like if our rent or our insurance increased by $500/month? Could we still get by?” That discussion might shed some light on the topic for you.
Research in hand, you now can turn to the messaging. What do you tell the board? What’s the argument? Well, your goal is to emphasize how this pay increase will help the nonprofit. Paying you more helps the nonprofit. That’s the sell.
(This is where the advice that applies to asking for a raise at a for-profit does overlap with the advice for a nonprofit. You need to put forward a case for a raise that is more than just about putting money in your own pocket.)
I’ve mentioned two arguments already, but I’ll repeat them here for clarity:
1. The current organization is a reflection of your skill as a manager and leader.
Assuming that the organization is healthy, it is in the nonprofit’s best interest to pay you commensurate with your skills so that you can continue to lead the organization.
2. As the keeper and implementer of the vision of the nonprofit, investing in you ensures the progress you’ve made on your mission “sticks.”
We’ve all seen nonprofits that change EDs every two or three years and every time there’s a change the organization goes through a certain whiplash. Keeping a leader around longer prevents this.
There are other arguments you can make as well.
3. Relationships with donors take time to form, which means that keeping you as the ED will keep your relationships with donors strong.
This is a close argument to number two, but it’s worth teasing out separately. Individual giving and major giving takes highly relational work. If you were successful in asking for and receiving $1,000 from a major donor three years ago, $2,500 two years ago, and $5,000 last year, only you are going to be able to ask that donor for $10,000 this year. A new Executive Director, without the prior relationship, would be lucky just to keep that donor at $5,000. And even then…what if they don’t connect? What if the rapport you have with that donor isn’t there with the new ED? These kinds of things happen. Part of your value comes in the relationships that you have formed with donors. No matter how good you are at keeping your database up-to-date (and you should be!) a new ED can’t replicate your solid relationships immediately. That is part of your value to the organization. If your organization can’t keep an ED longer than three years, the relationships cultivated with your largest donors will never pay off.
4. Paying you more helps keep the entire staff at market rate.
The pay scale starts at the top. If you’re making $50,000, you are going to have to find a program administrator who will earn less pay than you do. But if the market for someone with that title is higher, you’re going to have a hard time finding a quality candidate to take that job. You might find someone young who you are taking a chance on (to be fair, that’s how I got into nonprofit work!) but it’s still a chance. If they don’t perform, that’s obviously not good. And if they do perform, they’ll take their skills elsewhere fairly quickly.
If you want to pay your staff appropriately, your own salary needs to be set high enough to make room for them. In other words: your own salary is linked to the health of the organization! (I talked about this concept previously during the “people” chapter when I discussed salary compression.)
5. The next ED will expect to make more.
This might surprise you so here’s the argument spelled out as you might present it: “I want to be here for a long time, so don’t get scared,” you might say with a smile. “But to be frank, if I got hit by a bus tomorrow, you would have a hard time finding a high-quality candidate to accept the job for the current pay. If we increase my pay by ten percent now to get it closer to market rate, and then plan for smaller annual adjustments after that, it will mean that if I ever do get hit by that proverbial bus and you have to hire a new Executive Director, you won’t have sticker shock all at once.” Nonprofit boards shouldn’t take their leaders for granted. And yet they often do, by paying the Executive Director poorly, and only realize they need to increase the pay when it’s time to hire the new ED.
6. Funders expect it.
Well, to be clear they don’t expect you to get a raise. (How nice would that be?!) But they do know what a healthy nonprofit should look like. Sustainable wages are as much a part of that measure as the amount of reserves you have in the bank. If you are reliant on foundation grants, they’re not looking for a nonprofit that has slashed expenses to the bone. They’re looking for a program that can be replicated from one year to another. And if the nonprofit is paying wages significantly below similar nonprofits, that’s not a sustainable model for the people who serve. Funders know that.
Not every argument above will appeal to you or to your board. You’ll know best which of them will fit your nonprofit’s specific context. And there might be more arguments that apply to you than what I’ve covered! The most important thing is to frame your pay increase as something that will help the organization move forward. It’s good for you and it’s good for them. Show them that.
Back to Linda’s raise
The executive committee of the Smallville Historical Society had fallen out of the practice of their quarterly meetings. So, Linda suggested to the board president that they get a meeting on the calendar to do some planning for the upcoming board retreat. She typed up an agenda and added an item at the end labeled “personnel” before sending it out. When the committee met and got to that final item on the agenda, all eyes turned to her.
“I added this agenda item because I wanted to bring up an important question that I felt I should discuss with the executive committee first. Over the past three years, the Historical Society has made some real gains. Our budget is up seventy percent since I started. We went from an ED and two part-time staff members to three full-time employees and one part-time. And on top of that, we have three months of reserves in the bank. I’ve been very proud to lead the organization.” Linda took a breath and then repeated her memorized opener. “Given all that, I’d like to ask the board to consider an increase in compensation for my position. I’ve put together a proposal for your review.” (At this point, Linda distributed a packet.) “As you can see, I’m looking for a ten percent increase in pay, from $65,000 to $71,500. I’d also like us to budget for an automatic two percent cost-of-living adjustment for myself and all staff members at the end of each fiscal year. In fact, the staff is one of the reasons I’m requesting this. Organization-wide, we need to be ready to pay higher wages to keep the team that I’ve assembled. We haven’t increased the pay for any staff members, including myself, since I started. If we don’t do this, we might lose some of them, and I think they’re too valuable to be replaced easily.”
“If we don’t do this, will we lose you as well?” Dennis, the treasurer, cut in. He was shrewd and saw the implications of what she was saying.
“I’m not looking for another job, if that’s what you mean,” Linda answered smoothly. She’d been expecting that question, and it was true: she wasn’t actively looking. “But I think you would find, based on my research, that if I did leave—if I took a new job or if I was hit by a bus or whatever you want to call it—the board would need to advertise the position at least at the level I’m asking for here if you wanted to find someone with the experience to build on the success we’ve had over the last few years.”
“I know you’ve done good work, Linda,” John, the board president, said hesitantly. “But this feels like a lot of money to ask for all at once. I mean… Can we get there over two or three years?”
Linda nodded. “I understand the concern. I had it as well when I considered the budget implications. But here’s my response. This is going to sound like tooting my own horn, but this is the time for it, I guess, so here goes: very few people could have brought the Historical Society from what it used to be to where it is now. It took a unique blend of fundraising, marketing, and business sense. You can see that in our increased donor retention and major gifts program, our media coverage, and increase in revenue from the pioneer cabin. I would also add that our initiative to save the historic bell tower downtown was successful primarily because of my understanding of political advocacy and my ability to forge partnerships. This proposal brings my compensation to a level that reflects the hard work I’ve put into the organization to make it bloom.”
“Ok, ok,” John said. He’d been convinced. “What do you think, Dennis? Can we afford this?” he asked, turning his attention to the treasurer.
Dennis shrugged. “As Linda said, we’re ahead of budget. There are three months of reserves. It’s not like we’re rolling in money, but it’s certainly a workable figure. In the end, it would probably cost five or six hundred more a month. That’s an expense we could manage if the board wanted to.”
“Well, I’m just going to say it,” Mike, the vice president, huffed. “We’re a nonprofit. Non. Profit. And paying more than seventy grand is a lot of money. I don’t want to get too personal here, but it’s more than I take home and I don’t work at a nonprofit. It doesn’t seem like nonprofits of any kind should be paying so much.”
Linda was about to point out the part of the proposal where she showed the salaries at other organizations like the Historical Society when Joan, the board secretary, did the work for her. “Oh, that’s silly talk. I earned $70,000 when I retired ten years ago, and I didn’t have half the responsibilities Linda has. Frankly this should be a no-brainer. A bargain at twice the price, as my dad used to say,” Joan laughed.
Mike didn’t have much to add after that. The conversation shifted to how to present it at the board meeting. Linda suddenly realized that any discussion of whether she should get it was behind them. Now it was just about how to make it happen. She was starting to feel pretty good.
“Why don’t you give us a few minutes to talk on our own,” the board president said toward the end.
Linda sat outside the meeting. In ten minutes, everyone but the board president left, and Linda went in to talk to him.
“We’re agreed that we’ll put a raise in front of the board at our next meeting,” he said. “But Mike really argued hard against the full amount. We’re going to recommend a flat $70,000. At that pay rate, he could support it.”
It wasn’t a huge reduction, but Linda was upset all the same that he’d knocked it down. Instead, she focused on the other part of what she asked. “I can understand if you want to keep it to $70,000, but in that case it’s important to me that the board agrees to a two percent cost-of-living increase at the end of the year and then annually after that.”
John frowned. “We forgot to talk about that part.”
“This is the right thing to do. It will prevent me from falling behind again and it will be a good baseline for the whole staff to keep their pay competitive as well,” Linda said.
John nodded. “All right. I think we can sell that to the full board. I’ll put it on the agenda. With the four of us supporting it, I don’t think you should have any problems. Congratulations.”
Linda had gotten her raise, and an annual COLA to go with it.
Dealing with a “no”
Things worked out well for Linda, but what if your board turns you down flat? I’d say you have a couple options. The first is to talk one-on-one with your board president to find out why the board turned down the request. Was there a particular argument that held sway? A particular person who objected? Is there a financial fear around the raise or is there a question about your performance as the ED? These are hard questions, but if you’ve been turned down, I believe you deserve to know the answers.
In these situations, I recommend two things. First, thank them for their consideration of your request. Then ask for a performance and compensation review in six months to revisit the question again. It’s almost impossible to turn down that request.
If there are issues the board wants you to address, six months gives you time to address them. It gives you time to build up reserves or win over skeptics on the board. The board will know you want the raise and they’ll be watching you. So, make sure your Executive Director reports are thorough and do the best work you can.
Furthermore, if you’ve asked for the raise midyear, when you create the next budget you can make sure the budget has room for your raise. Don’t put your raise in as a line item, to be clear. But if you’re asking for a $5,000 raise, then you owe it to yourself to present a budget that has at least that amount in “profit.” Give them the room to make it an easy call.
If even after that six-month compensation review, you can’t get a raise…well, it’s time to start assessing your options. If your nonprofit is healthy, if you have the money in the bank, if you’ve made the arguments in your favor, if you’ve gone through a six-month waiting period and you still can’t get a raise, then it’s not worth banging your head against the wall over. Find another board who will appreciate what you can bring to them and their organization.
Let your board miss you when you’re gone.
Thoughts on benchmarks
Sometimes a board will want to approve a raise if you meet certain performance goals or benchmarks. In general, if you can avoid these, I would try.
Assessing an Executive Director is already hard for a nonprofit board. They are evaluating your performance based on their perception of how things are going and a couple meetings a month, which doesn’t give them the clearest picture. So, you can understand how both a board and an ED might be tempted to tie compensation to certain agreed-upon benchmarks and metrics since it feels more concrete to them.
But it doesn’t always track. If you based your compensation on the health of your nonprofit, then a recession, the passing of a major donor, or some other outside event could cause you to have a bad year financially. It’s not that you can’t ask for a raise in a bad year, it’s just harder. Especially if you set yourself up to get a raise based on a metric that’s not really under your control.
Besides that overall issue, there are two risks with benchmarks you should be aware of: The first is if your goal is too vague, reasonable people will disagree on whether it was achieved. If the goal says that the ED should “meaningfully increase fundraising” to get a raise, there could be a lot of discussion at the end of the year about what is “meaningful.” Alternatively, if the goal is so specific (like, say, increasing donations from major donors from $25,000 to $40,000), it encourages the ED to be single-minded about achieving this goal, possibly to the detriment of everything else, including, perhaps, the wishes of the donor. Pushing major donors so you can get a raise is a bad look and is very shortsighted overall.
Here’s the truth: the job of Executive Director is multifaceted, especially at a small nonprofit. It’s a constant balance between competing interests. One day, you’re meeting donors, the next you’re writing a grant, and the next you’re filling in behind the counter because your one employee is out sick. (Or maybe that’s all on the same day!) And it’s all important. Picking one or two or ten benchmarks and tying compensation to those benchmarks is hard in a job where defining the right work is just as important as doing the work.
Don’t agree to “a percentage”
You may find a board member who says, “Why don’t you just take a percentage of however much you can fundraise? That way you have an incentive to raise money.”
Generally speaking, this isn’t (and shouldn’t be) done. In fact, the Association of Fundraising Professionals considers it unethical. It may feel like aligning incentives, but in fact, it pushes the ED (or whomever is raising money) to become too transactional with donors. Your rate of pay at the end of the year shouldn’t depend on this. You’re not a commission salesperson.
Wrapping up
As I advise you do in preparation for meetings with major donors, I always recommend rehearsing and practicing for an important conversation. Plan out how your discussion with the executive committee might go, polish your written proposal, and work on your opening line and responses to common rebuttals.
Getting a boost in pay often makes you more willing to do the work and rise to the challenge. It’s not even about the money as much as it is the knowledge that your board values the work that you do. I hope you find that as well.
Now read the rest of The Little Book of Nonprofit Leadership: An Executive Director’s Handbook for Small (and Very Small) Nonprofits
If you found this chapter helpful, I hope you will read the rest of The Little Book of Nonprofit Leadership. The book is a mix of practical tips and big-picture ideas about running a nonprofit.
I’m also the author of three other books for leaders of small nonprofits:
