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How to build a wage structure that support your goals

May 19, 2021

The COVID-19 pandemic forced many older workers into retirement — expanding an already enormous talent gap for nonprofits and other organizations to fill. According to the Pew Research Center, the number of retired baby boomers increased by 1.1 million between February and September 2020. That’s four times higher than the same timeframe in 2019, when 250,000 boomers left the workforce. 

So it’s no surprise that nonprofits said workforce-related issues were their top challenges and priorities in the 2021 Nonprofit Priorities Benchmark report. But, with limited funds, what can nonprofits do? How can they compete for talent? 

Here are four strategies to help nonprofits create equitable pay structures to recruit and retain employees: 

1. Assess your positions

Do you know the current market value of each position? Could you fulfill your mission if some roles were vacant for an extended period of time? 

Compensation should be commensurate with the value a position brings to the organization, more so than title or tenure. Some staff positions may be mission-critical, regardless of where they fall on your organization chart.

To build a compensation structure that matches the value of your positions, assess and rank the value of each position against “internal comparables.” Then, apply market rates to each of your positions. Try to build latitude into pay levels so employees don’t “cap out” too early, and make sure hard-to-fill and essential positions are compensated competitively for your market.

Look outside your organization to learn what “external comparables” (nonprofit and otherwise) are paying, too. Nowadays, corporations are tying their missions and work to social causes, so nonprofits can’t assume that being mission-focused will be enough to recruit and retain employees. 

Equitable pay structures may require more flexibility or ingenuity than traditional pay levels or “step” systems allow. Don’t be afraid to try something new to recruit and retain talent; it’s probably your best investment. And in today’s market, it may be necessary to recruit and retain the best talent.

2. Reframe HR

Many organizations are shifting their HR and management focus toward engagement and creating positive employment experiences. That includes supporting and creating pathways for employee growth. Talent optimization tools and human resources information systems (HRIS) can facilitate the process, making it easier for organizations to plan and track employee information and performance data. 

HRIS programs can also help you manage more frequent performance reviews than the typical “one-and-done” evaluations. Frequent, less formal evaluations give employees the chance to improve continuously, which can affect their longer-term development and the success of the organization overall. Feedback is valued by younger generations of employees, and it can help teams course-correct in real time.

3. Shift funding toward talent

Typically, nonprofits pour as much money as they can into programming. But programs are only effective if you have staff to implement them. Nonprofits need to invest in the people — and compensation systems — that keep them running. Plus, it’s usually “cheaper” to pay higher wages than it costs to continuously manage turnover (e.g., recruitment, onboarding and training).  

In this tight talent market, it may be smart to direct more money toward compensation, especially if you have discretionary funding. Paying to get the skills you need can reap dividends down the road, especially for roles that are essential to your mission. 

4. Communicate change 

Change can only be effective if it’s communicated well. Any HR, recruitment or retention change should be accompanied by a thorough communications plan. Explain why changes are being made and how they affect the employee and the communities you serve. 

Remember, communication starts at recruitment — not an employee’s first day on the job. Make sure job descriptions and interview processes reflect your HR mindset. 

For more tips and trends related to nonprofit priorities, including compensation, download the 2021 Nonprofit Priorities Benchmark report. Or, sign up for our Virtual Training Experience this summer. 

Related content:

How a pay equity analysis can benefit nonprofits
Succession planning is planning for success
4 ways to manage employees — and their goals — while meeting your organization’s changing needs

Author(s)

Brian R. Gaumont
Principal
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