Balancing the Mission Checkbook

I’ve had several conversations lately with directors and board members of nonprofits about offering benefits to employees. The question often starts as a budget question - can they afford it? After a while, though, we end up in a discussion about organizational culture and values. Nonprofits often have stated values - a set of guiding principles that have been crafted during strategic planning with the board, staff and other constituents. Our goal and intention is live out our values in every aspect of the organization. Here are some values that are frequently embraced by nonprofits: Respect, Integrity, Cooperation, Teamwork, Dignity. These values statements and employee benefit questions can collide when nonprofits make financial decisions and feel that they have to choose between budgets for employee benefits and wages or budgets for added programs. But what about those values? If respect, teamwork, and mutual support are core values, what about living wages jobs and employee benefits?

How can nonprofits justify spending 70% of the budget on payroll?

I’ve talked to three nonprofits in the last month that are working their way through this question – with difficulty. One of the difficulties is caused by the ambivalence that some staff and board members may have about compensation in general, particularly in young or small organizations. I was recently asked by a new employee of a nonprofit “how can nonprofits justify spending 70% of the budget on payroll?” I asked him how he thought they should spend their budget and he answered, of course, “the clients”. He needed a quick lesson in the financial basics of how nonprofit social service agencies provide their services. This same naiveté leads boards to convince themselves that employee pay and benefits are a less worthy budget choice than other priorities. Every nonprofit with paid staff has to face this question at some time.

Of the three nonprofits I’ve talked to about benefits recently, two of them have been operating for less than three years and are navigating a familiar organizational transition in staff and structure. The third nonprofit is a long-established organization, with social justice as a core value, that’s had employee benefits on the priority list for years. They’re having the hardest time with the benefits question because it has become a critical values clash that’s been avoided for years – and it’s getting worse as time goes by without facing their responsibility to “walk the talk”. So look at your values statements again and make sure that you haven’t been ducking your responsibilities.

To learn more about employee compensation structure and employee benefits in Minnesota, see the Minnesota Council of Nonprofits Salary Guide. The Guide reports overall benefit trends by filed of service, budget size and location, and specific information detailed by benefit categories and positions.