Strategic Compensation: An Effective Tool in Recruiting, Promoting and Retaining Highly Qualified Employees
Happy Tuesday! Marissa here! We are continuing our discussion about retaining employees today with a post by Evette Simon, VP of Alford Executive Search. Thanks, to Evette for sharing her expertise with us. Enjoy!
HR system design and a consultative executive-level approach have quickly replaced the traditional philosophy that HR simply serves as an administrative function in support of achieving organizational goals.
The non-profit sector, more than any other industry, has had to quickly make the shift from the philosophy that HR is something that they we HAVE to do, to viewing HR as a strategic partner in organizational development and sustainability.
In an environment where organizations of all types and sizes have begun to recognize that our human resources are among our most valuable and costly assets, attracting and retaining highly skilled employees has become a high-level strategic priority, in order to gain or maintain a competitive advantage.
More than ever before HR practices are being intentionally designed with business outcomes in mind. However, the notion of building strategic compensation systems and policies remain a daunting endeavor for many non-profit organizations due to the lack of trained HR professionals on staff and/or the limited strategic compensation expertise available. As a result, most organizations simply take the best-case default approach of aligning position titles with market surveys and compensating within the reported ranges. And, in many cases, market surveys aren’t used and employment offers are made based on what the compensation of the incumbent in the position at the time of separation or what they were hired at any number of years earlier or even some arbitrarily contrived number in between the two.
Because compensation, whether we like it or not, is usually visible within our organizations, having a written compensation policy that is clearly and consistently communicated throughout the organization is critical toward ensuring that employees understand how compensation decisions are made.
An effective compensation policy will successfully communicate the following:
Internal consistency which highlights and clearly places each job in the organization into an ordered job structure that recognizes the differences in job functions. Placing at a higher level in the structure jobs that require higher degrees of skill and expertise, include more responsibility and more complex tasks, than those jobs requiring less skill, less responsibility and less-complex tasks. Compensation professionals use systematic job analysis and job evaluation to establish pay differentials for each position in the organization.
Market competitiveness refers to the pay practice used most often in compensation policies geared toward attracting and retaining highly qualified employees. In order to determine how the organization’s compensation structure lines up against market competitors, the internal job structure is compared to the competitive external market using compensation surveys. As a result of this analysis, organizations are able to strategically determine whether they wish to lead the market (Market Lead), lag behind the market (Market Lag), or match the market (Market Match).
Many internal and external factors should ultimately play into deciding which market position an organization chooses. An organization might actually choose to lag behind the market for some job categories, lead the market for some and meet the market for others, depending on the internal value placed on specific job categories and the external market conditions for those pools of talent. However, the best practice is to have one market position across the organization. This more equitable philosophy lends itself to internal consistency and is easily justifiable.
Recognizing and rewarding individual contributions should be a key component of an effective compensation policy. Similar to the process for establishing internal consistency using job analysis and evaluation to distinguish the differences between two job functions, attention should be given to the fact that no two employees perform the same job equally, nor do they usually possess the same credentials or expertise. Therefore, when completed, effective pay structures should include defined ways and rationale for recognizing and rewarding employee contributions in order to promote the retention of valued employees.
Other structural components of compensation policies include pay grades and pay ranges. As another outgrowth of the job analysis and evaluation processes, pay grades are used to group job functions determined to have similar compensable factors and, pay ranges outline the minimum, maximum and midpoint pay rates for each pay grade. This allows HR professionals and managers to more consistently apply the organization’s pay policy.
Strategic compensation practices, like every other component of human resource management, must also take into account all of the legal and compliance related factors associated with employee recruitment, compensation and separation. Therefore compensation professionals must also consider all of these factors as part of the high-level strategic process.
Once legally compliant compensation policy and structures are in place, managers and other HR functions will be able to use them as effective tools in recruiting, performance appraisal systems, professional development, labor relations and even terminations.
How does your organization retain highly qualified employees? Let us know in the comments!
Hi, DonorsDreams Readers! It’s me, Marissa. I’m covering for the blog for Erik as he sails the ocean blue on a well-deserved vacation. Today’s post was written by Denise Benages, an HR professional for over 16 years. She shares with us best practices for retaining employees in an ever changing job market. Thanks, Denise!
Once upon a time, people stayed at their first job, moved up the ladder and received a gold watch when they retired. How very Ward Cleaver!
Welcome to 2015, where the average worker will have 12-15 jobs in their lifetime. Ten of those jobs will be held before the age of forty. So how is a nonprofit to function in the land of no golden watches? Well, we must ask ourselves, how do we retain employees.
First, let me ask you, do you have a retention strategy? In a 2013 survey of nonprofits, 90% did not have formal retention strategy. However, the majority of them did have informal retention strategies. Let’s talk about how you make an informal retention policy into a formal one.
Your first step is to evaluate your policies. What are you doing to keep your employees? What is your turnover rate? Are you turning over staff in a particular department? These questions will lead you to discover what issues your nonprofit faces when it comes to retaining employees.
Remember that statistic about having 10 jobs before the age of 40? It should not be surprising that entry and mid-level staff were reported to be challenging to retain (30% and 40%). It is interesting to note that the numbers were much lower at the experienced-level (17%) and executive level (only 4%). Yet, most HR training dollars are spent on leadership training rather than job specific or business skills training. When surveyed on staffing challenges, 49% of non-profits are concerned with retaining entry level staff.
Retention is extremely important to nonprofits because turnover costs can be as much as 50-60% of an employee’s annual salary when you consider the cost of recruiting, onboarding, accrued time off, workflow disruption, lost clients and replacement costs. So it’s imperative that we look at why employees leave and how we can monitor this.
Here are some of the most common reasons employees leave their current positions:
- Dissatisfaction – To examine this, immerse yourself in each department. Pay attention and monitor the feeling in the office. Conduct exit interviews to determine why people were unhappy at your non-profit.
- A Better Opportunity – Employees are always looking to move up, you will not be able to stop some of this turnover. But you can ensure they know you have a career path for them. Build goals into the review process, so employees are clear of what they need to do to move forward. Employees only look when they don’t see their next step.
- Following Their Map of Success – Some employees know they have do to A, B & C to get to the next place in their career. Their current position may have been a stepping stone from the beginning. Turnover can be stopped before an employee is even hired. Dig deeper in your interview to see where an employee aspires to be. If their dream is not available in your organization, they might not be the right candidate.
- They Just Quit – This is the most important turnover to dig into because they are reacting to something negative in your organization. You need find out if it’s the job, harassment, bad management, skipped over for a promotion or any other HR situation. You may not be able, or want, to save that employee but it’s important that you resolve a systemic issue before you replace the employee.
We touched on why people leave, but it’s equally as important to know why they stay. You would be surprised to hear it’s not the money.
- Job Satisfaction – Employees need to enjoy their work and believe their job is important. Give them feedback on how they are doing and how it’s helping the company. Tell them randomly during the year, not just in a review.
- Employer/Employee Relationship – It’s imperative for employees to have good communication with their supervisor and have a good working relationship. They don’t have to be friends, but need to be considerate and fair. Make sure your team is trained on how to deal with employees. Observe their interactions and coach them.
- Training and Development – Your investment in them shows them loyalty and commitment. They will give you the same in return.
- Work/Life Balance – Your organization may not be able to be competitive with salary, but you can also compensate staff with paid time off, flexibility in schedule, or telecommuting.
While retaining employees might seem challenging; the good news is the most important thing you can do to retain your employees is to listen to them. If you do that, you have all of the answers right in front of you and may be able to hand out a gold watch or two.
Dani Robbins is the Founder & Principal Strategist at Non Profit Evolution located in Columbus, Ohio. I’ve invited my good friend and fellow non-profit consultant to blog this week about board development related topics. She also agreed to join the DonorDreams team and contribute a board development post every month. Dani also recently co-authored a book titled “Innovative Leadership Workbook for Nonprofit Executives” that you can find on Amazon.com. I hope you have enjoyed the genius musings of my friend for the last next few days . . .
The question comes up anytime someone resigns, and often when someone is forced out as well. Do we really have to do a search?!?! It’s usually followed by “we have someone that’s great” or “there’s a Board member that’s interested.” Wonderful! Encourage those people to apply and do a search.
Why? Because it’s the most legitimate way to ascend to leadership. The absence of a search leaves people, at a minimum, with the perception of impropriety. Even if you are the one they think is great, or you are the Board member who is interested, encourage the search and then apply. Perception is reality and leadership is hard enough without people thinking you didn’t earn the spot. Why set your new leader — or yourself — up for that?
In the absence of a search, people, at best, become mildly uncomfortable by the thought that there might be something unsavory going on. At worst, they choose not to follow what they perceive as an illegitimate leader. Either way, an internal conflict gets created that takes people’s attention away from the work at hand. It is a conflict that could have been easily avoided. It may also be a violation of your organization’s policies. Most policies include a requirement and a process for doing a search. Any lawyer will tell you that once you violate one policy, the remaining policies become more difficult to enforce.
Now is the easiest and least expensive time to post an opening. In Columbus, Ohio alone, there are a variety of free or low-cost search web opportunities including OANO, the United Way and Craigslist. Post it on your organization’s website; and if your organization is part of a larger national organization or state or county-wide collaborative, then post the position opening on the group’s web site as well.
You can also create a posting and send it out to all the agencies with whom you partner and ask them to post it.
Finally, if you have a budget, you can pay for an ad, and because of the internet, that ad can be as long as you’d like. If you’re interested in advertising in the classified section of the local paper, you will still have to pay per word, but even in that case, there is usually a contract with an internet site to post the ad as well. In your ad, I recommend you request a cover letter as well as a resume.
- review what you want in a candidate (both overall and by priority area)
- determine what salary range you can offer
- review the current range for such a position in your community
- consider the job you want the applicant to do and the skill set and experience they will need to be successful (both the minimum requirements and your preferred qualifications)
- consider the culture of your organization and the values a candidate would have to have to be successful in that culture.
If you are seeking resource development staff, consider if you want an event planner, a grant writer or an individual giving / major gifts person. If you are seeking an executive director, consider if you want someone to grow your organization, maintain it or turn it around. Each is a different skill set, and even if the applicant has previous experience in the role, then it may not be relevant to the needs at hand.
Prioritize the skills you seek. Write your interview and reference questions to reflect the needs at hand, by priority area. An Executive Director may be proficient at resource development, board development, operations, community profile building, marketing, financial acumen, and more. They may or may not be a subject matter expert. They may have prior experience at a similar agency. What are the top 5 priorities in order of importance to your organization? Develop three questions under each priority area and one or two questions, each, for everything else.
Inquire as to what applicants have done as opposed to what they would do. There are lots of things we would all like to do in a perfect world, but what we have done is a much better gauge of what we will do in the future. Plus, you can confirm it during the reference check.
Once you begin receiving resumes, filter applicants by their ability to follow your instructions to include a cover letter and resume, their writing ability (if writing is a piece of the job), and if they meet your minimum or preferred qualifications.Education and relevant experience are the price of admission to an interview. After that, good judgment and fit are the most important criteria for me.
- How does the candidate respond to mistakes s/he made and mistakes made by others?
- Within what amount do they return phone calls/emails?
- How has s/he handled it when s/he disagreed with a supervisor?
- Do they generally get work in early or at the last-minute?
You will learn a lot about the judgment of your applicants, and their ability to fit onto your team during the interview process. Good leader can do a lot to groom and guide a mentee, but improving someone’s judgment or changing their values are not usually among them.
Create a measurement tool to rate applicant’s answers by section. Interviewing should not solely be about feel. While it’s true that you should always trust your gut, you should also always have a process to assess candidates. I recommend prioritizing the skill sets you seek and use a 1-3 scale for each answer that allows you to tally up answers by priority area. This process will allow you to compare applicants against your criteria by area and overall. I recommend a minimum of two interviews, with a background check being conducted in between, and a reference check of your top candidates being conducted after the final interview.
When you call the finalist to make an offer, include information about salary and benefits. When you finish speaking, wait for them to accept. Know before you make the call if you have the authority to negotiate salary and if so, how high. Be prepared to answer benefits questions. Once they accept, discuss start date and a plan to announce your new hire to your organization’s constituents. Congratulations!
Hiring is one of the most critical factors to the success or failure of your organization. It takes time, as does almost everything worth doing. A search will inspire the board, the staff, and the community’s confidence in your leader and your confidence in their success. It is one of the most important roles and responsibilities of your non-profit board.
Welcome to O.D. Fridays at DonorDreams blog. Every Friday for the foreseeable future we will be looking more closely at a recent post from John Greco’s blog called “johnponders ~ about life at work, mostly” and applying his organizational development messages to the non-profit community.
Recently, John wrote two related posts titled “Rabbit Chase” and “Maslow’s Hammer“. These posts spoke to the ideas of organizational culture and effective processes. Additionally, they featured one of my favorite quotations of all-time from Abraham Maslow:
“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”
As John’s posts typically do, they get my mind racing about how his organizational development principles apply to my non-profit experiences. Sometimes, they even set me off in an unpredictable direction as is the case today.
Three non-profit executive director friends of mine are all involved in some kind of job search process:
- One friend is unemployed and jumping into an executive director search process.
- A second friend is filling a vacancy and hiring a CFO.
- My third friend received approval from the board to create a development director position and is hiring a fundraising professional with major gifts experience.
So, you’re probably wondering what in the heck do these three things have to do with Maslow’s quotation about hammers and nails or John Greco’s posts about organizational culture and effective processes?
Well, it dawned on me that when non-profit organizations go into “hiring mode” and open an employment search, they are essentially adding tools to their organizational toolbox. Carrying this analogy to its logical conclusion . . . The obvious challenge for those organizations who have a toolbox full of hammers is to not add another hammer. Right?
Having formerly run a non-profit agency, I look back over all of the search processes that I ran, and I now wonder how many times I started out the search by assessing my organizational toolbox to figure out what type of person would best fill the gap.
You might be thinking that a when you have a vacancy — like my friend who is hiring a replacement CFO — you are by definition filling a gap, but I encourage you to rethink your position by reading John’s post “Rabbit Chase“. You will clearly see in that example that all three actors in that post — the FBI, CIA, and NYPD — do the same thing (e.g. law enforcement), but they all have a different approach.
Won’t that be the same thing my friend experiences during his CFO search? All of his final candidates will know finance, but they will all come with different backgrounds and experiences. They will also all have different approaches.
I think we can also take this organizational development principle beyond the confines of executive search and apply it to board development and how you approach your organization’s board development process.
Think about it for a second.
How do you maintain a diversified organizational toolbox from a staff or board perspective? What tools do you use? How do you develop your interview guides with this organizational development principle in mind? Does your board development process utilize a board composition matrix?
Our organizations are stretched too thin for us to continue re-inventing the wheel. So, why not share your approaches and tools with each other in the comment box? We can all learn from each other.
I don’t know about you, but I can’t get the idea of hammers out of my head this Friday morning. So, I thought I’d end today’s post with this classic song from Peter, Paul and Mary:
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
Back on July 22nd, my post at DonorDreams blog was titled “I Quit” and it started off with a look at the Philanthropy Journal’s article titled “Exodus of executive directors expected“. This article cited a study by the Meyer Foundation and CompassPoint Nonprofit Services that reported: 67-percent of non-profit executive directors surveyed said they plan to leave their jobs sometime in the next 5-years.
Ever since writing that blog post, I’ve kept my eyes open for evidence of this trend, and I must admit that I see indicators everywhere pointing to:
2012 will be a year of transition for many non-profit executive directors.
In the fall of 2007, our world changed when the stock market crashed, our banks failed, and our economy sputtered. Most non-profit organizations were operating with a fundraising model (e.g. an annual resource development plan) that worked well for them in their community and within the parameters of our economy. However, when the economy changed, many nonprofit executive directors and fundraising professionals didn’t change their revenue models, and instead they made the decision to “ride out the storm”.
Well, we’re 4-years into this storm and it is becoming clear that the economy isn’t going to snap back to it original shape. “The New Norm” is coming into focus. The Nonprofit Quarterly did a nice job reporting a few weeks ago when they published “Wisconsin Nonprofits in the Economy’s ‘New Normal’“.
So, what does this have anything to do with nonprofit transition and executive leadership? Quite simply this . . . I’ve been watching many of my nonprofit friends “hold their breath” for the last few years waiting for things to snap back to the way they once were. Here is what I’ve specifically seen:
- adding another event to bridge revenue gaps
- writing grants and promising deliverables they never would’ve done previously (e.g. resulting in mission creep and money chasing)
- continuation of plans to rely on government funding streams
- laying off program staff and trimming budgets to the bone
During the same period of time, I’ve seen boards of directors failing to evaluate their executive directors and sticking their collective heads in the sand hoping things return to normal before the doors need to be shut.
Let’s get real for just a moment . . . when most boards hired their current executive director years ago, they hired based on skill sets and experiences rooted in the old economy. Now that times have changed, new skill sets and experiences are needed if the organization is going to thrive once again. While it is possible some executive directors have been growing right along side of their non-profit organizations and now possess those skills, I’m quite frankly not seeing that.
It is this observation in addition to the fact that I’m hearing more boards grumble about their executive leadership and many more executive director friends of mine complain about their jobs that leads me to conclude that 2012 will likely bring with it an uptick in resignations and terminations.
The final thing I think will drive this trend is the massive amount of talent currently available in the marketplace. In the past, I can’t count the number of times I heard board members say that changing executive leadership was unthinkable because they didn’t believe they could find anyone better for what they were willing and able to pay. This is obviously no long the case. The job market is awash with tons of talent, and strategic thinking boards will use this unique opportunity to snag talent that they otherwise couldn’t find or afford.
It is this last factor that I believe will likely fuel this potential trend as boards try to realign their people resources and talent with “The New Normal” brought on by a new economic paradigm.
Are you getting tired of your job? Ready to quit? Are you feeling increasing tensions in your board room? How is your non-profit organization re-aligning its resource development model with The New Normal? What skill sets and experiences does a successful executive director and fundraising professional need to thrive and succeed in The New Normal?
Please weigh-in with your thoughts using the comment box below because we can all learn from each other.
Here’s to your health!
Founder & President, The Healthy Non-Profit LLC
A few days ago, an Executive Director friend of mine from Indiana emailed me a link to an article in Philanthropy Journal titled “Exodus of Executive Directors Expected“. I encourage everyone to read this article in full because it is deeply disturbing. It is also very telling about the state of the non-profit sector.
According to a survey cited in the article, 67-percent of respondents said they plan on resigning their executive director position in the next five years. While there are many reasons cited, I found it most interesting that many of the reasons deal with the board of directors. I suspect much of this originates from conflicts such as:
- board members not engaging enough in fundraising and resource development
- board volunteers having unrealistic expectations of staff
- disagreements over how to address economy related issues (e.g. can we cut our way out of this budget hole versus let’s roll up our sleeves and do some fundraising)
We can go on and on with possible examples, but let’s stop here because all of this really isn’t the issue. There are two bigger problems
- Only 17-percent of organizations who participated in the survey have written succession plans.
- Fundraising is ALL about relationships and when human capital starts leaving your organization it can impact the relationships your organization has with volunteers and donors.
So, there are a few options I suggest you start considering:
- Be proactive and ask your organization’s HR Committee (or set-up an ad hoc committee) to start working on written succession plan. Here is a link to some great resources published by The Foundation Center.
- Roll up your sleeves and start doing the hard work associated with engaging and reinvigorating your board. I blogged about this a few weeks ago. Click here if you want to re-read the post I titled “Really? An Exhausted Board?”
- Ask different board members and fundraising volunteers to engage in stewardship of your existing big donors. When your most important donors have multiple relationships with board and staff, they are less likely to be upset when their one and only connection to your organization quits.
While it is almost impossible to prepare for someone’s resignation, there are things you can do to get your organization in the best possible position to deal with it when it arrives. And keep your fingers crossed that it doesn’t come in the form of a YouTube video like this one “The BEST EVER way to quit a job!! HOAX“.
Do you sense frustration out there among non-profit staff? Do you agree with the Philanthropy Journal article? Do you think there are ways to avoid the exodus or best prepare for a scenario like this? Please use the comment box below and share your thoughts. We can all learn from each other.
Here is to your health!Erik Anderson Owner, The Healthy Non-Profit LLC firstname.lastname@example.org http://twitter.com/#!/eanderson847 http://www.facebook.com/eanderson847 http://www.linkedin.com/in/erikanderson847
A few weeks ago, I posted a piece about “Hiring a fundraising professional“. It has been one of the more well-read posts year-to-date. Since that post, I’ve had two close friends speak with me about changing their direction in life and pursuing a career path in non-profit work. In addition to providing them with my point-of-view, I found a FREE online resource by idealist.org titled “Idealist Guide to Nonprofit Careers for Sector Switchers“. It is actually a great resource that I suggest you pass along to any of your for-profit friends who might be considering a change.
So, what does this have to do with you hiring a fundraising professional (perhaps even your first fundraising pro)?
I have seen many non-profit organizations go through a search process for a resource development professional and end up with a bushel basket full of for-profit people claiming to possess “transferable skills” (e.g. marketing people, sales professionals, etc). I have also seen a number of these for-profit professionals fail miserably once they cross the great divide into non-profit work.
After reading “Idealist Guide to Nonprofit Careers for Sector Switchers,” I am convinced that those of you looking to hire fundraising professionals can use this guide to fine tune your search process, sharpen your interview questions, and sell your organization and its culture.
- Chapter 5 of this guide tells job seekers how to make themselves more appealing to you. Reading this chapter might help you develop a better resume screening process (e.g. looking for for-profit candidates with volunteer, board, and/or internship opportunities).
- Chapter 7 instructs candidates how to get a sense of organizational culture and assess if there might be a fit. You can turn this around and use the same tactics with the candidate to determine how well they might fit.
- Chapter 12 addresses the challenges of “switching sectors”. You could use this information during the interview process to determine which candidates have thought this through and how they plan on dealing with the transition.
I could go on and on, but I will let you explore this wonderful resource for yourself. Happy reading!
Have you ever hired or worked with someone who “switched sectors”? How did it work out for them? What do you attribute their success or failure to? Please share your thoughts in the comment section and remember that it might be polite to “change the names to protect the innocent”. LOL
Here is to your health!Erik Anderson Owner, The Healthy Non-Profit LLC email@example.com http://twitter.com/#!/eanderson847 http://www.facebook.com/home.php#!/profile.php?id=1021153653 http://www.linkedin.com/in/erikanderson847
As I said on Friday, I am currently reading the book Co-Active Coaching as part of a business coaching certificate program. While digesting this text, it caused me to reflect back on Penelope Burk’s book, Donor Centered Fundraising. I think this is happening in part because when I read Penelope Burk’s book, I kept asking myself questions like “what would that look like in practice?” and “what skill sets would a donor-centered resource development professional need to possess?”.
I think some of the coaching material I’m currently reading fills in some of those blanks in my head, and I want to share those thoughts with you here today.
Chapter 5 in Co-Active Coaching talks about how one quality of a successful coach is “curiosity” and one skill set required to be curious is being able to ask powerful questions and dumb questions (which can also be quite powerful). On page 79, the authors list a few example questions:
- What does what you want look (or feel) like?
- What about that is important to you?
- What else?
- What will you do and when will you do it?
I now see the importance of limiting the number of “Yes-No” and “Why” questions because these questions can be intimidating and limit discussion. Likewise, I found myself thinking that open ended and naturally curious questions help deepen understandings and in turn deepen relationships.
If I was an executive director again and looking to hire a development professional with donor-centered fundraising skills sets, I suspect I would build a search process around finding someone with the following qualities:
- listening skills
- curiosity & engagement
- life-long learner
- the ability to create accountability
- connectivity & relationship building
Have you ever hired a donor-centered fundraising professional? If so, what qualities, characteristics, competencies and skill sets did they possess? What were some of the questions you used to tease these qualities out of your candidate pool? Please jump in and share.
Here is to your health!Erik Anderson Owner, The Healthy Non-Profit LLC firstname.lastname@example.org http://twitter.com/#!/eanderson847 http://www.facebook.com/home.php#!/profile.php?id=1021153653 http://www.linkedin.com/in/erikanderson847