Bridging the Gap - Wage Equity and Fiscal Sponsorship

The Problem

Starting with the tax policies of the Regan era our country has doubled down deeply on neoliberal, free-market economic policy over the past 40 years. The result: skyrocketing pay for CEOs, stagnant wages for most everyone else, consolidation of most of this country’s wealth by a tiny fraction of our populus, and one of the greatest wealth and wage gaps in modern history. According to the Economic Policy Institute, CEO compensation in the private sector has grown 940% since 1978, in contrast to the rest of the workers whose compensation rose only about 12% in the same period. Average CEO pay in 2018 was about $14M. In 1965 the ratio of typical CEO to worker compensation was 20:1. Today it is 221:1.

One of the greatest—if the the greatest—contributor to the growing social and racial inequities in our country is economic and income related. Poverty is rampant. While racism, white supremacy, and free-market capitalism have somewhat divergent historical origins, their stories are intimately and inextricably intertwined in the late 20th and early 21st centuries. Though economic inequality affects a broad cross section of our citizenry, it disproportionately affects communities of color and other marginalized groups. According to Harvard Business Review, Black and Latina women average a loss of roughly $1 million in compensation over a 40-year career, when compared to white men.

But the nonprofit sector is different, right? Unfortunately, the answer is yes and no. The nonprofit sector may not see the eye-popping numbers above, but the cultural issues that lead to such great inequity in compensation have deeply infected our sector. This is yet another example of private-sector thinking and assumptions poisoning the well of the commons sector, starting with the assumption that nonprofits “compete” with the for-profit sector in salaries, especially management compensation. Really?

According to a Nonprofit Quarterly article, a 2016 Charity Navigator study revealed that the average CEO salary in the nonprofit sector was $123,162. The same article touted the policies of fiscal sponsor Resources for Human Development (RHD) in Philadelphia, which strives to maintain an internal compensation ratio of 14:1 among their 6,000 employees. Now 14:1 starts to sound reasonable when compared to 221:1 in the private sector! But don’t let that fool you; there is still ample cause for concern.

The nonprofit sector suffers from wage ratio distortion, which is owing to the fact that smaller ratios become less meaningful when they are applied to number ranges at the bottom of the compensation spectrum. Having an organizational compensation ratio of 2:1 is no great shakes, when the compensation ranges from $20,000 to $40,000!

In the fiscal sponsorship community, we often hear about the tremendous impact that grassroots, all-volunteer projects have on their communities, thanks in part to the support of the sponsor. But if that impact is predicated on volunteer (uncompensated) effort, is that really a success? Moreover, is it sustainable? Likely no, in both cases. Of course, volunteerism and zillions of dollars worth of sweat equity will remain a mainstay of our sector, as we wrote in our last post. This is both how we carry on in such adverse funding and economic conditions. But it also means we need to push all the more toward fair and individually sustainable compensation—not just settling for “living wage” as defined by the government or policy wonks. We all know such wages are rarely conducive to “living”.

A Few Pathways Forward

So what are we to do as fiscal sponsors? There is no quick and easy path. But in our position as intermediaries and capacity builders there is a fair amount we can do, if we apply the time, resources, and intentionality to fostering wealth and wage equity among our projects.

Set Wage Ratio Standards - Despite the above criticism and notion of wage ratio distortion in the nonprofit space, it is nonetheless important to think about ratios, as many nonprofits—including fiscal sponsors—do not. Given that we’re dealing with the bottom of the earning spectrum, it might be more effective to think about how we are lifting up everyone in your organization (project and sponsor staff alike) to a baseline flourishing wage, not just a subsistence-level “living” wage. This flourishing wage will naturally vary depending on where you are working, based on cost of living and other factors. San Francisco and New York are a world apart from Peoria and Philadelphia.

Conduct Pay/Employer Equity Audits (PEAs) - There is growing awareness and practice in the nonprofit sector of conducting Pay Equity Audits, a fancy term for periodically checking your organization on how it’s doing not just on compensation baselines, ratios and the like, but also on employee benefits, equitable hiring practices, and other individual wealth building support for employees. There is a growing and ample body of literature on implicit bias and other historically exclusive employment practices and how employers can avoid them. There is no excuse today for not following these practices when building your team as a sponsor and in the policies you set for your projects.

Overcome the Tyranny of Job Title - Though often left out of conversations around equitable employment, we need to challenge the traditional vertical notion of organizations and the attendant job title-salary tether and think more fluidly and horizontally. That means possibly giving more weight to length of service to the field or sector (not just “seniority” in your organization) above a specific skill set or experience in determining compensation. It could also entail developing shared skill sets within and across your team, that would permit a change of job/role (“up or down”) without affecting income negatively. This might lead to more variety and job interest among your team members, as well as help you plan for more resiliency and job coverage when you find yourself down a few hands.

In the late 1990s The Andrew W. Mellon Foundation conducted a landmark study of American symphony orchestras. They found that despite the fact that most full-time symphony musicians were much higher paid than their freelance compatriots, they exhibited astonishingly low job satisfaction. The reason: lack of variety in day-to-day work activity. Having reached the pinnacle of their professions, players in even the finest orchestras fell victim to the monotony of the job. What if an employee simply wants to do something different in your organization--even something that would be considered a “lesser” job title—just to change things up for a bit? They should be able to step into that role, assuming they have the knowledge and skill, without a pay or benefits cut. In other words, we need to stop tethering compensation so tightly to a hierarchical set of job titles.

Rethink Benefits & Hire from Within - Offering employee benefits is a perennial challenge for nonprofits. I get it, money is tight. But in addition to traditional benefits, there are many benefits you can offer that have real cash equivalency to your employees and those of your projects without necessarily high cost to you as employer. For example, some organizations offer (whether you pay for it or strike an in-kind deal) individual financial planning support, something many nonprofit workers assume doesn’t apply to them; they don’t make enough. But the tighter your finances, the more important it is to plan and strategize. You can help your team set themselves on a path of greater financial health. In that same category are a host of other supports that in many cases may be obtainable through a partnership, in-kind contribution, or the time to set up the benefit. These include childcare, public transportation subsidy, pet sitting, among others. Finally, lowering thresholds for benefit eligibility so that part-time employees can access benefits as well should be strongly considered before dismissing such an idea as contrary to convention and “business best interests”.

One of my favorite benefits—though still somewhat uncharted territory—is Unlimited Paid Time Off (UPTO), which has been popularized by the tech community of Silicon Valley. We all know that most folks in our sector are driven not by the money but by the mission. This means that it’s probably safe to leave people to set their own schedules, provided they are meeting team and other work responsibilities. This is likely a greater motivator of productive work, as well as a benefit unto itself—more freedom and individual agency. In fact, the limited literature on this model cites that the main problem is that under UPTO most workers never take any time off! As a counter-balance, many UPTO employers offer “wellbeing allowances” to encourage spending on vacations and the like; some even require as a term of employment that staff take time off.

Lastly, and perhaps most importantly, whenever possible, hire from within. There is an entrenched nonprofit culture, in particular when it comes to “senior” management positions, to conduct a formal search, often with an outside consultant. The assumption is that the best solution always awaits in the marketplace. If you have been supporting and developing your team with intention, the best candidate should be one of your existing team members. This practice of avoiding hiring from within costs the sector countless dollars in on-boarding and training up. And it is one of the chief barriers that keep leaders of color from advancing in income and career development.

Move from Opt-in to Opt-out Benefits - On the more traditional benefits side, such as retirement savings, long-term/short-term disability insurance, life insurance, and others, there is human behavior to consider. Multiple studies from the field of applied behavioral economics have shown that people are very resistant to opt into something, even if it is beneficial to them. And they are also unlikely to opt out of the same benefit as well. The simple act of having to make a decision to contribute to your retirement fund is what keeps most people away from saving—not a limited wage. The truth is, even at our sector’s low wages, we could all be better at saving. Offering employer/employee retirement contributions (and other like benefits) as an automatic (but opt out) benefit can help overcome this human barrier to adopt and set your team members on a healthier financial path.

These are but a sampling of ideas and things to think about. We look forward to collecting more and imagining further.

‘Tis the season for thinking of others, after all.