#cbizmhmwebinar 1

CBIZ & MHM Executive Education Series™

Win The Not-For-Profit Talent War: Recruitment, Retention, Rewards and Regulations Angie Salmon & Hal Wallach August 10 and September 15, 2016

In partnership with EFL Associates

#cbizmhmwebinar 2

About Us

• CBIZ Human Capital Services offers a comprehensive range of solutions to balance your organization’s strategic goals

• 5 offices across the nation • Services offered

• Retained Executive Search (EFL Associates) • Compensation Consulting & Litigation Support • Career Transition Services • Executive Coaching

#cbizmhmwebinar 3

Before We Get Started…

• To view this webinar in full screen mode, click on view options in the upper right hand corner.

• Click the Support tab for technical assistance.

• If you have a question during the presentation, please use the Q&A feature at the bottom of your screen.

#cbizmhmwebinar 4

CPE Credit

This webinar is eligible for CPE credit. To receive credit, you will need to answer periodic participation markers throughout the webinar. External participants will receive their CPE certificate via email immediately following the webinar.

#cbizmhmwebinar 5

Disclaimer

The information in this Executive Education Series course is a brief summary and may not include all

the details relevant to your situation.

Please contact your service provider to further discuss the impact on your business.

#cbizmhmwebinar 6

Presenters

Angie Salmon joined EFL Associates in 2004 and has successfully

completed over 150 senior-level search engagements during her tenure.

Salmon leads the Not-For-Profit Practice for EFL Associates and co-leads

the firm’s Board of Directors Practice, as well.

Salmon’s portfolio of completed searches also includes several corporate

organizations. She has led C-level searches for many corporations in

addition to supporting search engagements for Executive Directors,

CFOs, Development leaders and others within foundations, social service

agencies , health care organizations and even credit unions. Salmon’s

generalist background allows her to assist several clients in recruiting

multiple positions, as she develops a deep understanding of the

organizational culture and structure.

816.945.5403 • asalmon@eflassociates.com • @SalmonSearch

ANGIE SALMON Senior Vice President, EFL Associates

#cbizmhmwebinar 7

Presenters

Hal Wallach leads CBIZ Human Capital Services’ Executive Compensation

Consulting practice.

With more than 25 years of experience, Wallach helps management

teams and boards of directors create and institute executive

compensation programs that attract and retain top leadership, adhere

to regulatory requirements, and drive maximum return on

compensation investment.

Wallach brings a finance-focused approach to his consultative process,

having earned his bachelor’s degree in accounting. He held his CPA

designation for two decades and started his career at an international

public accounting firm.

314.692.5819 • hwallach@cbiz.com

HAL WALLACH Director, Executive Compensation Consulting

#cbizmhmwebinar 8

Agenda

Recruiting

02

01

03

04

Retention

Rewards

Regulations

#cbizmhmwebinar 9

Angie Salmon

RECRUITMENT & RETENTION

#cbizmhmwebinar 10

Recruiting

#cbizmhmwebinar 11

Not-for-Profit Sector Experiencing Growth

• Not-for-profits of all sizes are expecting growth • Development; direct services; education/community outreach;

program management/support and marketing/PR are top growth functions

2016 Nonprofit Employment Practices Survey Results

Staffing challenges faced by Not-for-profits

#cbizmhmwebinar 12

Lack of Recruitment Strategy/Budget

2016 Nonprofit Employment Practices Survey Results

Not-for-profits Lacking Recruitment Strategy

Not-for-profits Lacking Recruitment Budget

#cbizmhmwebinar 13

Recruiting in a Modern World

• Non-line networking • Build and maintain talent pipeline • Recruit top performers from competitors • Monitor employment brand and reputation • Utilize partners, board and staff referrals

#cbizmhmwebinar 14

Recruiting in a Modern World

• Social networking • LinkedIn, Twitter, Facebook • Aggregators/consolidators

#cbizmhmwebinar 15

Recruiting in a Modern World

• Associations

#cbizmhmwebinar 16

Recruiting in a Modern World

• Search-firm dynamics • Transparency (sharing of databases) • Milestones • Good candidates, fast • Recruitment process outsourcing (RPO) • Candidate-identification firms/name-generation firms • Offshoring

#cbizmhmwebinar 17

Retention

17

#cbizmhmwebinar 18

Unemployment in an Improving Economy

• Although unemployment rate is 4.9% overall, the rate is less than 3% for those with a bachelor’s degree.

4.9%

July 2016 U.S. Department of Labor

Bachelor’s degree or above 2.6%

Some college or an associate’s degree 4.1%

High school graduate 5.1%

Less than high school diploma 7.3%

#cbizmhmwebinar 19

Not-for-Profit Retention

• Turnover has increased overall (19%) since 2012 • More opportunities to blend purpose and profit • 84% of not-for-profits lack a formal retention strategy

2016 Nonprofit Employment Practices Survey Results

Most difficult to retain by functional area

#cbizmhmwebinar 20

Projected Turnover as the Economy Improves

• Good News • 71% of US employees say that are satisfied in their current job

• Puzzling News • 73% are “thinking about another job”

FORTUNE: “Employees are happier at work, but plan to quit anyway” May 2015

#cbizmhmwebinar 21

Hidden Costs of Losing Tenured Employees

• Rule of Thumb: 33% to 150% of the annual salary • Salary costs • Recruiting expenses • Downtime and training time

• If true: • Cost to replace $50k position

ranges from $16k to $75k

World At Work: www.worldatwork.org/waw/adimComment?id=35633

#cbizmhmwebinar 22

Employee Engagement

“A heightened emotional or intellectual connection that an employee has for his/her job, organization, manager, or coworkers that, in turn, influences him/her to apply additional discretionary effort to his/her work.” - The Conference Board

Engaged employees = 70% less turnover

#cbizmhmwebinar 23

Employee Engagement

• Highly engaged workplaces score high on all six

• Highly engaged workplaces have “signature” drivers

#cbizmhmwebinar 24

Employee-engagement Tactics

• Hot topics • Stretch assignments • Title enhancement • Flexible scheduling • Telecommuting

• 46% of not-for-profits provide a telecommuting policy

• 80-90% of the US workforce would like to telework at least part of the time

#cbizmhmwebinar 25

Employee-engagement Tactics

• Base Pay

• Bonus

• Health Benefits

Tangibles

Intangibles

Short term Long term • Retirement

• Deferred Comp

• Job Security

• Work/Life Benefits

• Hiring Practices

• New-Hire Coaching

• Work Climate/Vision

• Supervisor Behavior

• Trust in Leaders

#cbizmhmwebinar 26

Hal Wallach

REWARDS & REGULATIONS

#cbizmhmwebinar 27

Trends in Not-for-Profit Compensation

27

#cbizmhmwebinar 28

Overview

• The design and levels of compensation in not-for-profits have been impacted by numerous factors

• Organizations find themselves having to strike a balance between:

• IRS Intermediate Sanctions and • Donor Perceptions and Expectations

• IRS Intermediate Sanctions and • Expanding Market for Talent

#cbizmhmwebinar 29

Key Questions in Setting Compensation Strategy

How will we position compensation levels against

the defined market (e.g., market median,

above/below market, fixed versus variable pay)?

2

What is the right linkage between performance and

pay?

4

What is the market for determining our

competitive positioning (e.g., industry, size,

location, non-profit and for profit)?

1

What is the right mix between fixed and variable, short-term and long-term? How do compensation and

other elements of total rewards complement each

other?

3

#cbizmhmwebinar 30

Trends

• Increase in prevalence of legal counsel attending board or compensation committee meetings

• Significant increase in annual incentives (86%*) and deferred compensation plans

• While still not very prevalent (<20%*), more not-for-profit organizations are creating long-term incentive plans for executives

*Source: 2016 WorldatWork Incentive Pay Practices: Nonprofit/Government Organizations

#cbizmhmwebinar 31

Incentive Plan Design Issues

• Incentives vs. bonuses

• Results vs. efforts

• Team vs. individual

• Participation / eligibility

• Incentive compensation for fundraising/development positions

#cbizmhmwebinar 32

Picking the Right Incentive Measure(s)

• Most organizations have two or three “key” measures reflecting the organization’s mission and long-term strategy • Revenue growth • Operating income • Customer satisfaction / service quality • Operational efficiency

• While organizational performance is a critical element for most incentive plan participants, functional (e.g., marketing, finance, human resources, etc.) and individual performance are also used to evaluate performance and determine individual awards by the majority of organizations.

#cbizmhmwebinar 33

Measuring Performance

• Majority of organizations establish “threshold, target and maximum” award levels for participants

Source: 2016 WorldatWork Incentive Pay Practices: Nonprofit/Government Organizations

• Median total budget/spending for annual incentives is approximately 3% of operating income (earnings before interest and taxes) • At 75th percentile, incentive budget rises to 10% of

operating income

Threshold Target Maximum

Incentive Paid as a % of Target 50% 100% 150%

Performance Achieved

#cbizmhmwebinar 34

Intermediate Sanctions

34

#cbizmhmwebinar 35

Who Does it Impact?

• Organizations exempt under 501 (c) (3) and (4)

• People • Disqualified Persons • Organization Managers

• Not-for-profit organizations must pay “Fair Market Value” to disqualified person(s)

• If engaged in an excess benefit transaction, disqualified persons may have to pay a two-tiered excise tax, and organizational managers may have to pay a tax also • 25% penalty imposed on “disqualified person,” which may be

increased to 200% if not corrected • 10% penalty imposed on “organizational managers,” capped at

$20,000 per transaction

#cbizmhmwebinar 36

Rebuttable Presumption

• Compensation will be presumed to be reasonable if the organization has followed the rebuttable presumption procedures, shifting the burden of proof to the IRS

• Requirements 1. Compensation arrangement is approved in advance by an

independent authorized body without conflicts of interest 2. Authorized body obtained and relied upon appropriate data

prior to making determination (i.e. compensation consultant’s data)

3. Authorized body concurrently and adequately documented the basis for making determination of compensation

#cbizmhmwebinar 37

Appropriate Data

• Compensation paid by similar organizations, tax exempt and taxable • Base Salary • Bonus • Long-term incentives • Benefits • Perquisites

• Current compensation surveys

• Written offers to disqualified person

#cbizmhmwebinar 38

Case Study

38

#cbizmhmwebinar 39

Case Study

• Fast growing, healthcare-related organization lost their long-time CEO to an unexpected early retirement

• No successor had been identified among current management team, so an outside search was initiated

• Two of the three “finalists” for the role came from the for-profit sector (one from a publicly-held and one from a privately-held company)

• Board of Directors felt “sticker shock” when compensation expectations of the finalists was revealed • No compensation market analysis had been conducted for several

years • Organization had no formal incentive plan

#cbizmhmwebinar 40

Case Study

• After much hand wringing and internal discussions, the Board decided to adopt a formal compensation philosophy

• As part of the philosophy, bi-annual competitive market reviews were to be conducted, along with implementation of an annual incentive plan for all management

• Once the new CEO was selected, the Board developed a marketing/communication campaign that addressed • The rationale behind the selection (e.g., large company leadership

experience, previous successes that did/would apply to the organization going forward)

• The salary of the new CEO and the adoption of a new annual incentive plan intended to more closely link executive pay with achieving the organization’s critical goals and objectives

#cbizmhmwebinar 41

Highlights of the Revisions to FLSA

Regulations

41

#cbizmhmwebinar 42

Minimum Salary Test

• Applies to employees exempt under the executive, administrative and professional exemptions

• More than doubled, going from $23,660 to $47,476

• Based on the 40th percentile of full-time salaried workers in the lowest-wage census region, currently the Southern region

• The level will increase every three years going forward

• Employers must comply with the changes by December 1, 2016

#cbizmhmwebinar 43

Much of the FLSA Remains Intact

• Duties Tests Remain the Same: • Executive • Administrative • Professional • Outside Sales • Computer

• As always, duties and other tests, not the way the employee is paid, determine the overtime eligibility.

#cbizmhmwebinar 44

Nonprofit Considerations

• Nonprofits • FLSA does not apply to non-profit charitable organizations with

less than $500,000 in commercial activities, however… • Definition and calculation of “commercial activities” can be

difficult and level of commercial activities can fluctuate

• CAUTION: Individual FLSA coverage can still apply to many employees based upon job responsibilities (i.e. interstate travel, accepting/mailing packages across state lines, making phone calls to other states, etc.)

#cbizmhmwebinar 45

Additional Industry Considerations

• Higher Education • Teachers/instructors/professors

not subject to salary level test

• Academic administrators

• Qualifying employees must be paid “on a salary basis which is at least equal to the entrance salary for teachers in the educational establishment by which [they are] employed.” §541.204(a)(1)

• Public higher education institutions can continue to use comp time in lieu of overtime payments.

#cbizmhmwebinar 46

Additional Industry Considerations

• State and Local Governments • Can continue to use comp time in lieu of overtime payments

• Fire protection and law enforcement employees employed by agency with fewer than five fire protection or law enforcement employees, respectively, are exempt from FLSA.

#cbizmhmwebinar 47

? QUESTIONS

#cbizmhmwebinar 48

If You Enjoyed This Webinar…

Upcoming Courses: • 8/11: Private Company Business Combination and Valuation Overview

• 8/11 & 8/17: Implications of the New Partnership Audit Rules

• 8/16: The Combined Benefits of Cost Segregation and Tangible Property, Part 2 - How Lease Language Affects Capitalization

• 8/18: Important Considerations in Retirement Plan Design and Administration

Related Publications: • Hiring A Nonprofit Executive (podcast) • Changes in nonprofit total compensation • Making job descriptions work for your organization • Combat the counteroffer: An employer’s perspective

#cbizmhmwebinar 49

Connect with Us

https://www.linkedin.com/company/357478

@cbiz_hcs

linkedin.com/company/ cbiz-mhm-llc

@cbizmhm

youtube.com/ BizTipsVideos

slideshare.net/CBIZInc

CBIZ Compensation/ EFL Associates

CBIZ

#cbizmhmwebinar 50

THANK YOU CBIZ & Mayer Hoffman McCann P.C. cbizmhmwebinars@cbiz.com