Our Path to a Compensation Philosophy

Currently, both in Maine and the U.S., there is a systemic lack of investment in nonprofit leadership and talent. As such, a key part of how we're working towards MANP’s Vision for the Sector is to lift up the critical value of nonprofit workforce and advocate for appropriate and competitive compensation to ensure that individuals seek out nonprofit jobs as rewarding and sustainable careers. We believe that to attract and retain a skilled and diverse workforce, nonprofits must offer competitive and equitable compensation practices that reward people for investing their time and talents in our missions.

Easier said than done, certainly. Increasing wages is often quite complicated for nonprofits, many of which have business models that rely on funding agreements and practices that do not reflect the true costs of mission-driven work, and/or that are difficult to adjust in a quickly changing environment. Staff are often nonprofits’ largest expense, and increases to wages raise the baseline of expenses for years to come. 

“As employers with limited and often restricted resources, nonprofit leaders and boards can feel wedged between equity goals and budget constraints,” writes former Minnesota Council of Nonprofits executive director Jon Pratt in Nonprofit Quarterly. 

As nonprofits grapple with these conditions, a meaningful step is to develop a transparent “compensation philosophy,” which can:

• Demonstrate to staff and stakeholders the critically important role of staff and staff retention in mission advancement;
• Hold decision-makers accountable to a set of guidelines grounded in organizational values and not just market data (which is often itself inequitable);
• Equip staff with information that can support self-advocacy and broader organizational accountability; and
• Bolster the organization’s ability to communicate (and advocate) with donors and funders about compensation as a core cost.

MANP's Compensation Philosophy

A compensation philosophy is a high-level guiding document that articulates goals related to how compensation is determined. Like a strategic plan, this kind of document is only useful if an organization keeps it “off the shelf”; an organization can bring their philosophy to life by documenting pay grade definitions, publicizing pay ranges, and engaging staff in budget planning. 

MANP’s own compensation polices and practices have been evolving over the last decade. In December 2023, our board voted to endorse this formalized compensation philosophy proposed by a board/staff workgroup, which will guide our compensation strategy in the years to come. There are parts of the philosophy that reflect current practice, and there are other components that we will be working towards.

Through this philosophy, we make explicit commitments that reflect our organizational values and equity commitment, including:

• Starting pay that both reflects a living wage and meets or exceeds median pay for comparable positions in local nonprofits of similar budget size and location.
• Providing a robust benefits package that has value to employees regardless of their family structure, and that prioritizes employee choice; 
• Limiting executive pay to no more than three times the wage of the lowest paid employee (in practice, the ratio is lower); 
• Updating pay scales each year informed by the national Cost of Living Adjustment (COLA), with a more thorough review every several years;
• Listing starting pay on all job postings, and being transparent that we do not negotiate starting pay, which disproportionately disadvantages certain candidates; 
• Offering clarity on when and how pay is increased.

In alignment with this philosophy, we have defined starting pay ranges and definitions of our job categories to provide context as to why some categories earn higher pay. 

We have also increased staff-wide engagement in budget planning to ensure that everyone has what they need to understand and engage with MANP’s financial strategies and realities.

Important Caveats

• MANP is atypical: We recognize that our business model is not deeply reliant on restricted funding, government contracts, or individual donations, and as such, have a lot of control and flexibility to implement changes to our compensation structure relatively quickly. 

• MANP is relatively simple: We have a small staff (8 people currently), all of whom are based in Maine. We do not have a strategic imperative to attract talent based elsewhere in the country or world, and our philosophy does not currently need to account for equity across very different markets and cost-of-living contexts.

So, how did we get there? 

In 2023, MANP formed a staff/board committee with a goal of documenting a transparent, values-aligned compensation philosophy that furthers MANP’s commitment to equity, supports strategic objectives, and is achievable by a sustainable revenue model.

For those interested in the nitty gritty details, here's what that process looked like for us. 

As a group, me met by Zoom 3 times over about 3 months. We considered hiring outside facilitation, but ultimately determined we could self-facilitate the process, with our executive director taking the lead. 

• In the first meeting we explored:
  • Purpose: What will/won’t be addressed by the group? What are the elements of a formal philosophy we want to include?
  • People: What can we each bring to the table? Who can we learn from? Are there other voices that need to be involved? What is the committee's role versus the full board?
  • Process: When and how will we meet? What's the overall timeline?
• Between the first and second meetings, MANP staff distributed peer examples for review, drafted a philosophy, and circulated it to the group as google document for everyone to add their questions, comments, and edits.
• At the second meeting we reviewed and discussed reactions to the draft, and also explored:
  • What are the implications for budget development and future planning?
  • What assumptions are we making?
• After this meeting, staff revised the draft and recirculated it for feedback
• At the third meeting, the group resolved outstanding questions/comments, and discussed:
  • Is this realistic and achievable?
  • Is anything missing?
  • How do we present/share this with the full board and staff?
  • How do we share this experience with our network?
• The draft philosophy was shared with the full staff, and all were invited to ask questions or offer feedback. The workgroup then shared the draft philosophy with the full board at the next quarterly meeting. The board had a robust discussion, including:
  • Is this philosophy a hard policy or a guiding document? (The latter)
  • How does this apply to executive compensation? (By ensuring appropriate ratios between executive pay and other staff, while allowing the board flexibility and control of executive compensation.)
  • What’s the board’s role in operationalizing this? (Ensuring the annual budget reflects the compensation philosophy; evaluating whether revenue strategies are appropriate to goals; setting executive compensation.)
  • The board ultimately voted to endorse the policy, with some amendments to clarify the above questions.
• This endorsed philosophy was again shared with staff, with the opportunity for questions and discussion. 
• And, we shared our learnings (so far!) with all of you! We aspired to get this blog post written and live in the first quarter of the year, and yet, here it is….August. Sigh. (You can identify, right?)

What did we learn?

Some of the things that made our process successful were:

• Readiness: This process was the continuation of conversations and work that had been going on for years, and there was a high level of commitment and interest from both staff and board. Organizationally, we had the stability to prioritize this conversation rather than putting out more immediate fires. 

• Clear Scope: The workgroup discussed both the aspirations and the boundaries of their work. We limited this particular philosophy to employee compensation, for example, and did not tackle board compensation, contractor/vendor relationships, etc. 

• Board-staff partnership: It was extremely valuable to us to have both staff and board perspectives at the table to discuss this topic, but critical to the success of that model was a high-level of trust, respect, and role clarity. For organizations that expect there to be widely varied opinions within a working group, it can be wise to consider having an outside facilitator so everyone can participate equally. 

• Embracing complexity: We aspire to root our compensation philosophy not just in market data (which itself reflects inequities and biases of the broader economy and culture), but in cost of living. Cost of living estimates vary widely, however, by family circumstance and other factors, and it’s not easy to figure out how to build a legal and sustainable compensation structure where individuals are paid differently based on these types of factors.

• Leaning into discomfort: Many of us do not have a lot of practice at candidly discussing compensation. Raising and discussing questions that affect the livelihood of teammates can be a vulnerable experience, perhaps especially in small teams. This is another reason that trust-building and team agreements are essential, and an outside facilitator can be useful.

• Being pragmatic: While we were lucky to have strong philosophical alignment around our aspirations, we remain keenly aware that the burden to raise more money to pay people more falls primarily on staff (at least in our particular business model). This is an important place to have candid conversation about the relationships between compensation and capacity. 

• Not letting perfect be the enemy of progress: There are organizations doing really interesting work around how to value different skills, competencies, and types of labor. Our current philosophy does not fully incorporate all of these ideas, and we look forward to continuing to learn about and explore these models! (See: Restorative Compensation: Moving from Theory to Practice in NonprofitQuarterly for one example)

What’s Next?

We anticipate we will revisit and evolve our own philosophy as we continue to learn from peers and partners! We hope sharing our experience is useful in some way to your staff and board as you develop policies and practices that are right for your communities and rooted in your unique organizational values and goals.

A Few Recommended Resources

• Research:
  • Report on Nonprofit Wages + Benefits in Maine (MANP)
  • 5 Research Findings on the Health of the Nonprofit Workforce (Fund the People)
  • Social Impact Talent Retention Practices Survey (Nonprofit HR)
• Fund the People
• Five Questions To Ask When Setting the Compensation Philosophy You Need (MANP Blog)
• MIT Living Wage Calculator
• MANP’s Survey of Nonprofit Wages + Benefits in Maine
• Management Challenges: Early Lessons in Advancing Pay Equity and Wellness Globally (NonprofitQuarterly)