Salary Transparency in a Nonprofit Executive Search

Several states have recently implemented salary transparency laws or regulations that require employers to list salary ranges on job postings. As of January 1, 2023, there are now salary transparency laws in California (for employers with 15 or more employees), Colorado, Connecticut, Maryland, Nevada, New York City (for employers with four or more employees), Rhode Island, and Washington. Similar laws or regulations are currently being debated in other states as well. These laws are an important step towards addressing gender and race-based inequities.

As a nonprofit executive search consultant, I appreciate salary transparency for an additional reason. Transparent salary expectations help limit the potential for a search to break down at the very end. Imagine that you are the Chair of the search committee for a nonprofit organization looking for a new Executive Director. You have posted the position, reviewed resumes, and interviewed candidates. Your committee offers the position to an individual but then discovers that the organization is unable to meet that individual’s salary expectations. You have to go back to the drawing board with a bitter taste in your mouth. This heartache can be avoided by embracing salary transparency.

When the nonprofit organization includes the salary range for a position in the job posting, all applicants should be aware of the position’s salary prior to applying. During the initial interview stage, the salary range should be verified in order to make sure that the range fits within the candidate’s expectations. By the time an offer is made, it is much less likely that the salary offered by the employer is widely different than what is expected by the candidate.

The key to making salary transparency work in a nonprofit executive search is to conduct due diligence up front to set the right salary range prior to posting the position. The right salary range should be competitive with other similar sized nonprofits in your community, should fit within the organization’s budget, and should be attractive to candidates.

Before posting a position, the Moran Company works with the client search committee to identify a salary range by conducting a salary study. This salary study includes research from three key sources of data:

1. 990 Tax Returns. With a free account on GuideStar (www.guidestar.org), you can look up the 990 reporting forms for comparable nonprofits that include compensation data for the Executive Director based on a prior year. When working with a nonprofit client, I typically provide a summary table that includes executive salaries from 5-7 comparable nonprofit organizations. Because this data is not current, I will also add a column to this table that includes an inflationary adjustment to provide an estimate of current year salaries. Prior to setting the salary range, the search committee can then see the salaries for Executive Directors working at similar nonprofits.
2. Salary Surveys: In many communities there is a local nonprofit association, university, or other organization that conducts annual nonprofit salary surveys. These surveys can be a great source of data when determining an appropriate salary range because they typically provide information about compensation by nonprofit type and size in your community. Like 990 Tax Forms, this data is usually at least one year old, and therefore an inflationary adjustment should be made to this data as well.
3. Current Postings: A great way to find out what salaries are currently being offered in your community is to visit local job board sites. Even in states that do not have salary transparency laws, more and more postings now include salary ranges. By reviewing current opportunities, you can make sure that you choose a salary range that is competitive and attractive to potential candidates.

In the salary studies that I conduct for Moran Company clients, I provide this comparable salary data and then guide the search committee through a discussion that concludes with an agreed upon salary range. I usually recommend choosing a salary range that is not too wide (no more than a $20,000 range between the minimum and maximum). A tighter salary range sets clearer expectations and limits the possibility of incongruent salary expectations between the organization and the candidate. I remind the search committee that the organization should be prepared to offer the top end of the salary range. At the same time, the candidate should be aware that an offer might come in at the lower end of the range, depending on the individual’s qualifications and experience.

Salary is of course only one component of compensation. Although benefits, PTO, relocation allowance, and other aspects of the total compensation might not need to be listed in the position posting, the search committee should have a common understanding of what benefits they are prepared to offer as well. Because salary transparency essentially takes salary out of the discussion to some degree, the candidate is more likely to negotiate for more generous benefits. Be ready to discuss what, if any, flexibility exists to keep top candidates interested while being realistic about parameters so expectations are aligned on both sides.

At The Moran Company, we guide our nonprofit clients through these important conversations about salary and benefits as part of our customized search process. It is important to know what organizations of the same size, sector, and region are offering in order to be competitive. At the same time, it is important to be good stewards of your nonprofit’s resources. Contact us today if we can be of assistance with your organization’s next search for a key leadership or senior-level fundraising position.

By Mike English, M.P.P.
Vice President for Search Strategies & Senior Search Consultant
The Moran Company
“We Find Great Nonprofit Executives”