Dear Nonprofiteer, What’s this “shared sacrifice” I keep hearing about?

Dear Nonprofiteer,

My mom works for a small nonprofit that recently went through financial hardship.  The organization did everything in its power to keep afloat, including (unfortunately) firing employees and cutting pay, hours, and health benefits for the people remaining. And it has bounced back, for the most part.

Recently managers have given themselves raises based on their own research about pay scales elsewhere. First, is this a conflict of interest? Does it seem unethical to give yourself a raise based on your own research while other employees are not given one at all?

My mom works in the accounting department and has been there for over 10 years. While the company wasn’t doing well she accepted all the cuts while taking on the work load of the people who were let go. Since then, other employees have been given raises, and now make nearly double what she does. She was even promised a pay increase for obtaining her BA in Accounting but it was never delivered.

She has brought these issues up but nothing has been done for her. She’s a dedicated worker, going out of her way to take on more work and more education for nothing more than the occasional cost-of-living increase.

Does this happen often? Is it common to see managers in non-profits overcompensate themselves even though it was their poor decisions that almost caused the organization to go under? Does it seem wrong that the employees who fought to keep it afloat have not been given the same percentage increase?

Have you come across any literature or articles on the subject?   I feel terrible for my mom because I know her work ethic and her commitment to the good the organization does for the community.  She deserves to be paid more than an entry-level accountant and her employer should have recognized that long ago.

Signed, Daughter in High Dudgeon

Dear Daughter:

You’ve asked two separate questions, really: first, is this ethical behavior?  Second, is it common behavior?  The first question is easier than the second.

Of course it’s not ethical for leaders to provide themselves with raises before restoring their subordinates to their pre-emergency level of compensation.  Employees who are considered essential enough to be retained during times of crisis, albeit at reduced pay and benefits, must be considered essential enough to be rewarded once the crisis is through.

However, many managers (and the Boards of Directors to whom they report) assume that employees are working there for the love of the agency and/or that any monkey could do the job those employees are being underpaid to do.  This is the proverbial Catch-22: we pay you so little, you and your work must be worthless; since you’re worthless, why should we pay you any more?

The only way to respond to this is to document how people who do the same job are paid elsewhere.  Your mother should use her financial skills to find out what BA accountants with similar responsibilities are paid at similar-sized agencies in your city or county.  Then she should take this documentation to the Executive Director with a specific demand for an increase in pay and benefits to at least parity with her professional peers.  It’s always harder for an ED to refuse a raise based on outside comparables, whereas if your mother tries to compare herself with people in her own agency the ED can always checkmate her with, “Well, but Ellen works three extra nights a week,” or, “But Josephine has been here since 15 minutes before you arrived.”

The other advantage of seeking outside comparables is that it will give your mother a sense of the job market.  It’s hard to think of moving elsewhere after years of loyal service, especially while feeling committed to the agency’s mission and clients.  But that’s no reason to be treated like a slave.  (And salaries from other agencies may include ones paid to men.   No one ever believes that women are paid less than men for the same work until they encounter the cold hard facts for themselves.)

Notice that the major fault is the agency’s unwillingness to restore your mother’s salary now that there’s money available again.  The fact that managers documented the market for their services, and then rewarded themselves based on that documentation, is more an apparent conflict of interest than an actual one.  If everyone does his/her job it doesn’t really signify who did the research about comparable compensation: only the Board of Directors can give the Executive Director a raise, and the Board is designed to be independent of the ED.

But perhaps the Board isn’t actually independent, which leads to the question about whether your mother’s situation is a common one. It’s very common in nonprofit organizations for the Board of Directors to be utterly in the Executive Director’s thrall and prepared to do as s/he says without any independent evaluation whatsoever. This is partly because many nonprofits are still run by their founders, to whom every Board member is personally loyal, and partly because Executive Directors manage their agencies full time while Board members govern them only part time.

So if the Executive Director of a small nonprofit wants to skim off a raise for him/herself while withholding money from his/her subordinates, it’s easier for him/her to do so than it would be in a larger nonprofit with a professional human resources department, or in a regular business.  (The Nonprofiteer herself once succeeded an ED who had helped herself to a raise: knowing that the Board Treasurer signed checks without paying attention to the amount, s/he simply took advantage of that fact.)

But however easy, or common because easy, such practices may be, they are unethical.  If your mother can’t get the raise she deserves by offering honest comparables to her boss, she should find a new job and, on the way out the door, send a letter to the Board president and treasurer (or the whole Board) denouncing the ED’s shoddy financial practices.  It won’t get Mom the raise she hungers for but she will get to enjoy the dish best served cold: revenge.


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4 Responses to “Dear Nonprofiteer, What’s this “shared sacrifice” I keep hearing about?”

  1. Lesley Rosenthal Says:

    Great question, DHD, and great answer as always, Kelly.
    For some add’l legal context about about executive compensation, as well as other HR-type observations about employees of mission-driven organizations, you or your mom may want to have a look at my book Good Counsel: Meeting the Legal Needs of Nonprofits, esp. Chapters 2, 3 and 7. Sorry if I sound like a shill – many public libraries have copies now if buying is not an option.

    • Nonprofiteer Says:

      As all the Nonprofiteer’s readers know, she highly recommends Ms. Rosenthal’s Good Counsel. It’s particularly great for advice on the really complex parts of compensation, such as executive pensions.

  2. Anita Bernstein Says:

    I sympathize with DHD and her mother–it’s outrageous mistreatment–and agree with 95% of the Nonprofiteer’s advice. DHD’s mother is in a good position because she’s good at math and the argument for a pay raise is simple algebra: the same multiple that supported the pay raise for high-ups when times got better can be applied to DHD’s mother’s salary. If “pay scales elsewhere” support a raise for one employee, they probably support a raise for another. Maybe a better raise.

    The part I disagree with is “find another job.” That’s for DHD’s mother to choose–not DHD, not the Nonprofiteer. I know from experience that it’s painful to watch helplessly when someone you care about is exploited or abused … but for DHD’s mother this job is more than just torment + degradation + toiling for ungrateful piggy bosses. Maybe the thought of looking for another job is distressing to her. Maybe she feels unduly grateful that the nonprofit gave her work as an accountant when she didn’t have her degree. For better or worse, I think loved ones have to let the underpaid worker decide whether it’s better to stay or go.

    • Nonprofiteer Says:

      Prof. Bernstein is absolutely right: the appropriate response to being paid unfairly is not simply to quit, and the Nonprofiteer didn’t mean to suggest that it was. DHD’s mother would be doing a service not only for herself but for her fellow/sister employees by documenting the unfairness of the current system and working hard to rectify it. The Nonprofiteer is simply concerned that an agency run as badly as the one DHD describes won’t respond in any rational or appropriate way, leaving DHD’s mother frustrated and furious and ulcer-ridden in her workplace. But, as Ms. Bernstein says, this is a decision to be made entirely by Mom, on whatever basis she deems appropriate.

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