Recruiting Non Profit Executives

Finding competent, qualified executive talent for non profit organizations can be challenging, as non profits are seeking the same leadership attributes as public, for profit entities. Compensation is often a major factor for non profit executives, even as non profits must find the resources to create a fair compensation package for non profit executives. As excessive executive compensation has made headlines in recent years, non profits have several options to consider when completing the due diligence for a non profit executive’s total compensation package.

Board members, who also carry the responsibility of providing sound fiduciary management for a non profit organization, should first be aware of the regulatory consequences of a non profit executive’s compensation. The IRS requires filing of Form 990, an informational tax form that most non profit organizations must file each year, which states the compensation of the five highest-paid officers of the non profit organization. Once this information is publicly available, the Board must balance the possible tax implications with being prepared for the emotional consequences of the non profit executive’s compensation, as donors and internal staff may raise concerns about the executive’s pay package when compared to the financial resources needed by the organization to fulfill its role as a service provider to the community.

As for-profit companies and non profit organizations are looking for leaders with solid development experience and strong networks, the competition for executive talent can quickly become a bidding war. While it is well known that compensation for non profit executives trails the compensation packages of public and private companies, non profit organizations can utilize some innovative ideas to attract and fairly compensate the non profit executive. Once the non profit organization’s Board determines the ideal executive’s qualifications, capability to support the organization’s mission area and goals and competence regarding the nature and scope of the non profit’s plan of work, the Board can use the following tools to determine the non profit executive’s compensation:

• A base pay structure that can feature a bonus after the non profit executive achieves a certain development or strategic goal for the organization;
• Specific incentives that can be tied to the non profit organization’s delivery of services or management of it budget;
• Automatic inclusion in the non profit organization health and investment savings plans
• The addition of “perks” that can include dining club and/or VIP memberships, use of a company car and company-provided cellular phone;

Non profit organizations can set aside organizational constraints and creatively craft the non profit executive’s compensation, all while considering a variety of options. Before finalizing the details of any compensation package, it is important that the Board seek the advice of professional legal counsel and clarify the obligations of both the non profit organization and the non profit executive.