The Grant Thornton 2014 Nonprofit Compensation Survey

The Grant Thornton 2014Nonprofit Compensation SurveyA national survey of association and nonprofit compensation

Produced in conjunction with

1 The Grant Thornton 2014 Nonprofit Compensation Survey

Executive summary

Not-for-profit organizations face a singular challenge of balancing two opposing forces: the critical need to attract and retain high-performing and talented individuals versus the limited resources that must not only be stretched in support of the mission but that also must satisfy wide stakeholder scrutiny. In other words, how do not-for-profits engage the right team with an effective compensation and benefits program that meets mission-based, financial, philosophical, regulatory, and constituent demands and expectations?

Helping you answer this question is the aim of The Grant Thornton 2014 Nonprofit Compensation Survey. Now in its second year, the survey has again been developed in partnership with Columbia Books Inc. The inaugural survey in 2013 has proven to be a valuable resource for not-for-profits across the United States. In this year’s survey, you’ll find up-to-date critical compensation and benefits data, trends and insights to assist in your compensation and benefits planning. One of the ways the 2014 survey has been enhanced is contributing to a deeper understanding of the compensation and benefits consulting practices in the executive suite. A new section reports specifically on C-suite compensation.

The Grant Thornton 2014 Nonprofit Compensation Survey provides fresh reporting that will be news to many organizations:

• Effect of the economy on competition

• C-suite compensation segmentation

• Board compensation

With a healthier economy, risk increases for retaining talentAs the economy improves, competition for top performers will ratchet up. The survey shows that salary increases have remained constant. But for most organizations, that won’t be enough — compensation and benefits plans that were appropriate in previous years, even last year, won’t be adequate to meet the expectations of today’s talent marketplace.

In light of changing times, it’s a business and strategic necessity for organizations to review their total rewards offerings and compare them to up-to-date, reliable and industry-specific market data.

As they make their plans, organizations can consider viable options outside of salary hikes, based on our experience and the data revealed in the survey:

• Variable pay

• Recognition programs

• Deferred compensation such as supplemental retirement programs

While continuing to be mindful of a reasonable ratio of administrative to mission expense, organizations must also avoid losing valued leadership because of competitive disadvantages.

Budget change from 2013 to 2014

% change Overall organization budget

Salary budget

Increased by >10% 15% 13%

Increased 5–10% 14% 10%

Increased 0–5% 23% 34%

No change 14% 15%

Decreased 0–5% 5% 3%

Decreased 5–10% 3% 2%

Decreased by >10% 3% 1%

Not disclosed 23% 22%

Average rates of salary increases

Upper management 3.2%

Middle management 3.0%

Nonmanagement 3.0%

Budget and salary reports contained noteworthy details:

• Slightly more than half (52%) of the participating organizations reported an increase in overall organization budgets.

• 57% of the participating organizations reported a boost in their salary-increase budgets due to a combination of improving economic conditions, updating of reward programs, and acting upon the need to attract and retain top talent in an increasingly competitive market.

• As indicated above, salary increases for upper management were slightly higher than for other positions in the organization.

Despite controversy, some organizations compensate board membersThe idea of board compensation may come as a surprise to some. It isn’t a widespread phenomenon; only 4% of survey participants reported that they compensate board members for their services. The rationales are many: sometimes the skill set is so unique, the amount of work required so great and/or the exposure to risk so high that remuneration becomes a must. Average annual compensation is between $15,000 and $25,000 — generally a bargain by for-profit standards. The practice remains controversial and of interest to watchdog groups and regulators alike.

The 2014 survey builds on the reporting in the 2013 survey with insights into trends and what the data is indicating.

The survey provides comprehensive information about a variety of jobs and subsectors from numerous participants:

• Compensation data for more than 100 job titles

• Data for an array of subsectors, including trade associations, human services organizations, educational and cultural institutions, public benefit organizations, health care organizations, special interest entities, and scientific and research institutes

• Participation from over 800 organizations from all 50 states

Data covers essential elements of total compensation:

• Base salary (annual fixed compensation)

• Bonus/incentive compensation (e.g., variable compensation, discretionary bonuses, annual incentives and long-term incentives)

• Benefits (e.g., qualified and nonqualified benefits offerings)

This year’s survey offers additional features:

• Expanded set of C-suite positions (C-suite positions now number six)

– Highlighting practices for disqualified persons and key employees

• Streamlined data displays in a user-friendly format

• Information on board of directors compensation practices

2014 shows modest budget and salary growth At 3.05%, average salary increases remained consistent with last year’s increases.

The tables show general salary trends for survey participants:


The preference to rely upon a total rewards program that differentiates the high performers from the broader employee population appears to have resulted in an increased number of organizations targeting base salary increases in a more strategic manner, ensuring that top performers receive greater differentiation in increases (e.g., two times the budgeted average for the rest of the organization’s employees).

Variable pay plans continue to rise in prevalence The table shows variable pay plan (bonus and incentives) trends for survey participants:

Percentage of participating organizations offering bonus/incentive plan

Yes 37%

No 63%

Slightly more than one-third (37%) of reporting organizations are offering some type of variable pay opportunity for their employees.

Within the not-for-profit industry, offering formal incentive plans and bonus opportunities is clearly not a given, although the prevalence of the practice is higher at organizations in certain sectors of the not-for-profit community, in particular professional trade associations, and scientific society/research institutions.

The prevalence of these plans also increases with the size of the organization.

Sector % with bonus/incentive plans

Avg. bonus/incentive as % of salary

Educational/Cultural institute 34% 7.3%

Health 38% 4.8%

Human services 32% 3.4%

Professional/Trade association 67% 9.2%

Public benefit/Conservation 34% 5.2%

Scientific society/Research institute 56% 6.5%

Special interest/Religion-related 20% 4.2%

Other 39% 14.8%

Budget size % with bonus/incentive plans

Under $500,000 24%

$500,000–$1M 42%

$1M–$5M 45%

$5M–$10M 57%

$10M–$20M 54%

Over $20M 55%

Of organizations offering bonuses, the level continues to be modest as compared to the for-profit community, although our experience with larger NFPs has shown much larger bonus opportunity levels than small to midsize organizations.

As highlighted in the table below, top executives (executive director or CEO) still receive the largest bonuses, at approximately 9% of base salary, while other senior executives in the C-suite receive an average bonus of 4%.

Average bonus/incentive (% of salary)

Top executive 9%

Senior executives 4%

Other executives 3%

Managers 3%

All other employees 3%

Medical, dental and retirement benefits remain a standard offering across the not-for-profit community, even as health care reform continues to take effect

Nearly eight in 10 (78%) of the participating not-for-profit organizations reported that they continue to offer medical benefits, with an average employer share being 80% of the total cost of the premium, although more and more organizations, regardless of industry and size, are investigating the sustainability of such a cost-sharing approach in light of the various Affordable Care Act provisions being implemented. Just slightly more than six in 10 (63%) of participating organizations reported offering dental benefits and the employer-share percentage is typically around 75% of premiums. Seventy percent offer a retirement plan, generally contributing an average of 5% of salary.

Additionally, 56% offer life insurance or disability benefits, and 44% include vision coverage in their benefits. Thirty-one percent offer benefits to part-time employees (those working fewer than 30 hours per week).

Only 6% offer an executive supplemental deferred compensation arrangement to the leadership of the organization.

Board compensation varies within the industrySurvey results show that of not-for-profits that compensate board members, professional and trade associations do so more than those in any other organizational category.

The prevalence and frequency of incentive plans beyond annual performance plans is far less common, with only 1% of participating organizations stating that they offer some form of a formal long-term incentive plan. The use of longer-term compensation vehicles, such as nonqualified deferred compensation programs or supplemental retirement programs, is considered more applicable for not-for-profit organizations.

“Discretionary bonuses” or bonuses not linked to a formal incentive plan opportunity remain the most commonly reported type of incentive pay. Not-for-profits are looking to more effectively align compensation with organizational performance through the use of more formalized metrics.

Types of organizations that compensate their boards

10Professional/Trade association

Educational/Cultural institute

Public benefit/Conservation

Other

Human services

Special interest/Religion-related

Health

Scientific society/Research institute

0 2 4 6 8 10

0

1

1

3

4

4

6

Number of organizations that compensate their board


About Grant Thornton LLP’s compensation and benefits services for not-for-profit organizationsNearly 900 not-for-profit clients count on the audit, tax and advisory services of the Grant Thornton professionals dedicated to serving this industry. With our deep experience in compensation and benefits, we can advise and guide you in implementing a practical and equitable plan.

Our value proposition is simple. We can help your organization to achieve:

• A compensation structure that is appropriate and competitive with your peer group for talent

• Compensation programs that are customized to ensure executive, management and staff total compensation programs are justifiable internally and externally

• Compensation and benefits packages that are designed to support the various quality, people, financial, efficiency and growth objectives in your strategic plan

Executive total compensation design

• HR and compensation committee process design

• Executive compensation philosophy development

• Customized and compliant comparable market analyses

• Annual and long-term incentives design

• Employment contracts

• External communications strategy

• Reasonableness opinion letters/intermediate sanctions regulations

Employee total compensation design

• Comparable market analyses

• Salary structure and job evaluations

• Incentive compensation program designs, documentation, administration and communications

• Geographic differential analyses

• Performance management program assessments, designs, implementation and communications

Information and regular review strengthen compensation planning Appropriateness, compliance, strength and effectiveness of each element of total compensation requires leaders’ regular review. This demands an informed view of the comparable market and best practices, and alignment with mission, purpose and goals.

About the survey participants The not-for-profit organizations participating in our survey included over 800 responses from a broad array of not-for-profit sectors, including education/cultural institutions (21%), health organizations (10%), human services (27%), professional/trade associations (19%), public benefit/conservation (14%), scientific society/research institution (2%), special interest/religion-related (2%), and other types of organizations (5%).

Annual operating budgets

Under $500K 30%

$500K–$1M 19%

$1M–$5M 30%

$5M–$10M 6%

$10M–$20M 8%

Over $20M 7%

Staff numbers

Under 10 44%

10–24 22%

25–99 22%

100–200 6%

Over 200 6%

ContactsKen Cameron Director Compensation and Benefits ConsultingD +1 404 704 0136M +1 404 353 9459E [email protected]

Mike MonahanAssistant Managing PrincipalCompensation and Benefits Consulting Employee Benefits ConsultingD +1 212 542 9860E [email protected]

Mark OsterNational Managing Partner Not-for-Profit and Higher Education Practices D +1 212 542 9770E [email protected]

Stay on top of business trends For insights into accounting, regulatory, legal and operational issues, and solutions for your challenges, join our Board & Executive Institute (grantthornton.com/bei) and visit our Not-for-Profit practice site (grantthornton.com/nfp).

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The Grant Thornton 2014 Nonprofit Compensation Survey

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