Nonprofit Executive Compensation
Lilia Sandoval
Southern New Hampshire University
OL -620 Total Rewards
Professor Jenkins
Date: July 17, 2022
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Nonprofit Executive Compensation
Advantages
A not-for-profit organization (NFP) helps the community without making a profit in return.
Whereas for-profit businesses (FP) make a profit by providing a service to a certain audience.
NFPs funds are solely based on donations allowing the organization to have more freedom of
how the executives will be paid. Making it an advantage unlike the FPs, executives must rely on
their production turnover to receive a reward that can increase their salary. FP's businesses are
required to have a well-document compensation that states the company's intention regarding
how executives will be paid (Dorf, 2013). NFPs do not need a state quote for the quarter they
just provide for the community, meaning if they continue to provide for the community, they can
get an increase in salary in a shorter amount of time than the executives in an FP can.
Therefore, the NFPS must disclose any spending if the executive makes more than $150,000.
Leading to the next advantage that NFPs has is opening the doors to more opportunities
for other successful leaders. Johnson mentions in his case dissection that NFPs that adopt a
business model can end up bidding against businesses when recruiting talented executives
incorporate a higher salary and compensation. This will help NFPs have better management
that can help contribute and give back in more ways to the community. A leader that the NFP
may be pursuing may have great ideas they can do to help expand or make known to receive
more donors to the organization.
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Disadvantages
After understanding what can be possible with NFPs a disadvantage for executives
that make less than the FP would be not having as many leaders interested to help improve
the organization. Having another position available in the FP that is willing to pay more will
make executives want to switch to the FP company. Most executives won't want to deal with
this uncertainty and an abundant amount of work to improve and expand the organization. It
will be hard to hire any strong executives knowing that the FP companies are offering more
for the same position. It's a survival of the fittest in a business world, ensuring you have
competitive salaries and compensations to compare with other orientations and businesses
will determine its success.
Therefore, leading to the next disadvantage. If you don't have executives working
hard because they aren't getting paid as much, then there is a risk of the organization
closing. If you don't have executives planning out fundraising events, especially putting in the
overtime, when necessary, there won't be many donors to help the NFP. This can result in
having employees work during holidays and no vacations (NPCrowd, n.d.). As discussed in
the beginning NFPs survive based on donations to provide to the community. If the NFP
doesn't show the community the collaborative ideas this runs the risk of the committee not