Ending Low Pay in the Social Impact Sector

Low pay the social impact sector is reaching a critical point.

Leaders and workers alike are grappling with the harsh realities of compensation in an industry driven by passion and purpose. But at what cost?

In the latest episode of Designing Tomorrow, Eric and Jonathan dive deep into this pressing issue, exploring:

• The cultural shift around work-life balance and its impact on the sector

• Why attracting top talent is crucial for solving intractable social problems

• The hidden costs of underpaying staff, from turnover to missed opportunities

• Practical solutions for leaders and staff looking to improve compensation

They share personal stories and hard-won insights from years in the trenches, challenging conventional wisdom about what's possible when it comes to pay in nonprofits and social enterprises.

Whether you're a seasoned executive or just starting your impact career, this episode offers a fresh perspective on one of the sector's most persistent challenges. 

Tune in now to join the conversation and learn how we can build a more sustainable, equitable future for social impact work.

Episode Highlights:

• [00:00] - Introduction to pay inequity in the social impact sector and its consequences for mission-driven organizations.
• [01:00] - Jonathan shares a personal story about discovering pay disparities at the Seymour Center and his decision to raise wages for key staff.
• [03:02] - Discussion on the exploitation of passion in nonprofits, where employees sacrifice their wellbeing for the cause.
• [06:16] - Eric and Jonathan examine why low pay stigmatizes discussions about compensation and its damaging effects on organizational impact.
• [11:05] - The cost of turnover and how paying fair wages can prevent talent loss, increase organizational stability, and improve mission outcomes.
• [16:04] - Strategies to address compensation issues, including prioritizing key performers, normalizing pay transparency, and focusing on quality over quantity
• [25:17] - The importance of appointing an executive sponsor to lead pay equity initiatives within an organization.

Notable Quotes:

• "If your business cannot exist with fair wages, there's something wrong with the fundamental premise of your business." – Jonathan Hicken [11:05]
• "The problems that nonprofits and social impact organizations exist to solve are the problems that the other sectors have not been able to solve. Why would we want anyone but the most intelligent, smart, creative people working on these problems?" – Eric Ressler [07:07]
• "We are such passionate people... willing to sacrifice our own wellbeing for the cause. Whether unintentionally or intentionally, I do think that there is exploitation of that passion." – Jonathan Hicken [03:02]
• "The cost of not paying your employees properly is actually much higher than what appears on a cashflow budget." – Jonathan Hicken [11:05]
• "We need to lead by example and have conversations like this and destigmatize it. But it can't stop at conversation—it needs to move into action." – Eric Ressler [29:06]

Resources:

• David C. Baker - https://punctuation.com/
• Article - How Your Nonprofit Can Escape the Overhead Trap Once and for All
• Article - Philanthropist MacKenzie Scott Proved Unrestricted Funding Works. Follow Her Lead.
• Whitepaper - Going All In: A Digital-First Guide to Sustained Nonprofit Fundraising

Transcript:

Jonathan Hicken [00:00]:

Compensation actually becomes somewhat of a taboo topic to discuss within the organization. It's almost stigmatized, right? And unfortunately, I think that that's really damaging to an organization. I think that the cost of not engaging in these discussions and talking about them openly, ultimately impacts your missions and real impact. We want to attract

Eric Ressler [00:21]:

The world's brightest minds to these causes. The problems that nonprofits and social impact organizations exist to solve are the problems that the other sectors have not been able to solve. Why would we want anyone but the most intelligent, smart, creative people working on these problems? And why should we expect the most intelligent, smart, and creative people to take a huge pay cut to work on these problems?

Jonathan Hicken [00:43]:

If your business cannot exist with fair wages, there's something wrong with the fundamental premise of your business. 

Jonathan Hicken [01:00]:

Eric, I want to talk about pay in the social impact sector.

Eric Ressler [01:04]:

Ooh, okay.

Jonathan Hicken [01:05]:

Lemme start with a personal story. So when I got to the Seymour Marine Discovery Center, keep in mind this was coming off of covid. The center had been shut down for almost two years at this point. It was a small team at the time. It had been slimmed down to a pretty small team. When I got there, I met some incredible people and when I looked at the amount that they were being paid, I was shocked. There were people, they had been working at this organization for 10, 15, 20 years, and I knew just in my heart that there was something wrong here. But even when I looked at it from a business case, I was like the pain that this organization would suffer if we lose one of these three people, or God forbid all three of these people would've been absolutely catastrophic to the organization.

[01:56]:

So I made a pretty swift business decision to get these people compensated the way that they really needed to be, the way that was the right thing to do, but it was the way to keep some really high performing, really highly valuable, really wonderful people at the center. We made that choice and looking back on it, it was the right choice, and I know this is a question that nonprofit and social impact leaders are asking themselves every day, and I would guess that 99% of the executive directors and CEOs and presidents of their organizations want to make pay changes. I believe that the intent exists and sometimes it's just hard to make the change. So I'm hoping today we can diagnose why this happens in the nonprofit sector, the business case for raising wages in the sector itself, and actually some solutions, some concrete steps that leaders can take to raise the floor for compensation at their,

Eric Ressler [03:00]:

I'm super interested in this conversation. Let's go.

Jonathan Hicken [03:02]:

Let's start with setting the stage a little bit. In the social impact space, there's this aura, there's this stereotype, and in some cases this reality, you're laughing because you've seen this. I know you have and I want to hear about it, that we are such passionate people. We're all bleeding heart activists and we are willing to do anything for the cause, and we are willing to sacrifice our own wellbeing and our own family's wellbeing for the sake of the cause. And whether unintentionally or intentionally, I do think that there is exploitation of that passion trying to eke the most out of people in their good intentions for the maximum impact and just work people into the ground until they can't stand it anymore. I got to imagine this is something you're seeing across the board.

Eric Ressler [03:53]:

Yeah, I mean, this is honestly something I spend a lot of time thinking about. Not necessarily so much for cosmic, although I'm happy to share my perspectives and experiences from that perspective, but for the sector at large, I spend a lot of my time thinking about how we can build a more sustainable and effective social impact sector at large, and how that also trickles down into building more sustainable and effective social impact organizations individually. I got to tell you, I'm really worried about the pay discrepancy largely because I think people are done. I think people are done, and I've seen it and I've seen it happen over and over and over again. I think there's been a huge cultural shift around work and how work fits into our lives or doesn't fit into our lives largely accelerated because of the pandemic and lockdowns and the changing environment around work, but certainly something that started way before then, and I got to be honest, I think people have a right to be done because we can't expect people from any perspective.

[04:56]:

Let's look at this from a couple perspectives, from the perspective of any given social impact worker or leader being asked to give up your own safety and your own security and your own ability to thrive and survive and grow a family. If you want to do that, invest in your future. If you want to do that, save money, build wealth over time, that is not a choice that we should be asking or forcing people to make. Even before the pandemic, I have some very clear memories of an executive director at a local nonprofit who was highly credentialed, who was an MBA from a very prestigious university who literally told me at one point I could easily become a CEO of another organization outside of the social impact sector and make four or 500 KA year. And this person was barely scraping past six figures, leading a super effective and impactful and important organization. Are we ever going to get to a point where the pay scale in social impact for a nonprofit specifically or for a social enterprise are going to be completely congruent with super high-end tech or finance jobs? Maybe not, but frankly, I think we got to get a hell of a lot closer.

Jonathan Hicken [06:16]:

It's too bad that this has existed for so long. I mean, each of us have been in the space for 10 years or so, and that's the lens that we have. But I know that this is not in the last 10 years phenomenon, and I think the problem is, one of the things I see is that compensation actually becomes somewhat of a taboo topic to discuss within the organization. It's almost stigmatized that how dare you put your own wellbeing, your own earnings above the cause and it becomes uncomfortable. And I think these work cultures emerge where it's not okay to talk about that stuff. And unfortunately, I think that that's really damaging to an organization. I think that the cost of not engaging in these discussions and talking about them openly, ultimately impacts your missions and real impact.

Eric Ressler [07:07]:

Yeah, let's talk about this from the perspective of an organizational leader or the organization's point of view. We want to attract the world's brightest minds to these causes, and we don't just want to, we have to because we are trying to solve intractable problems. The problems that nonprofits and social impact organizations exist to solve are the problems that the other sectors have not been able to solve. Government has not solved it. The private sector has not solved it, and so there are these leftover, wicked intractable problems. Why would we want anyone but the most intelligent, smart, creative people working on these problems and why should we expect the most intelligent, smart, and creative people to take a huge pay cut to work on these problems? I just don't think you can talk about the morals of it. You can talk about the ethics of it, but even just look at it pragmatically, that is not going to work.

[08:01]:

You could talk about any tech business, any tech startup in the same way. And to be fair, you do see this sometimes in the early days of tech startups where people are doing sweat equity or getting paid really low wages in the early days. So there is some congruency here, but at the same time, I think everyone knows that it is expected to pay off one day. Another story, I have another client who we've worked with and are working with right now actually, and they've launched a really successful curriculum, digital curriculum, and I want to be somewhat obscure about this. I won't get into too much more detail, but it's been very successful, very widely adopted. They're getting a lot of traction, and this person actually comes from that I'm thinking of comes from a tech background. I remember him lamenting about, of course, the one product that got product market fit had to be a nonprofit.

[08:51]:

And I could just see his gears turning around how much money he would be making right now if he were at a tech startup with the same amount of success. Again, do these need to be equal? No, but that hurts me to hear those kind of stories because I know that he's doing that mental calculation around how long he can do this for before he needs to go back to working in tech. If he wants to grow wealth, be able to support himself and his family, especially with the cost of living increasing across the board everywhere right now. So yeah, I honestly think this is a massive, massive problem.

Jonathan Hicken [09:22]:

I'd be lying if the thought didn't cross my mind from time to time. I love my job. I am paid fairly, I think, and I know I have a son. I'm a single dad. I got to take care of my family. So I'd be lying if I didn't think to myself, well, if I went over there I could be making double, triple what I'm making now. I'm delighted with where I'm at and I'm still committed to it, but I do play with that thought from time to time and I'd be lying if I didn't and I wish I didn't have to.

Eric Ressler [09:51]:

And I think we should also acknowledge that there's different degrees of how important this problem is, so we're both very lucky and privileged to be in a situation where we're not scraping by necessarily. I think both of us could probably make more money outside of the sector that we're in, even though I'm not at a nonprofit, I still work in the social impact space and serve social impact clients and budgets are a consideration in the space of course, but we also have to look at especially staff and entry level staff and you hear about the story or the kind of honestly cruel joke about the employee at the food bank who needs to use the food bank services because they're so poorly compensated. I mean, this is a problem in an actual bottom level for a lot of people. It's not just about, oh, I could be making double at a tech company and I honestly think both are a problem, but this could be especially prescient for someone who is already scraping by and at the lower end of the pay scale in a nonprofit. I mean it often times doesn't even come close to reaching living wage for certain organizations in certain cities. That's where we need to start.

Jonathan Hicken [11:05]:

We're talking about how to attract the world's best talent to solve these big problems. There's another side of the coin, which is the cost. The cost of low wages, the cost of turnover rates, the cost of losing an employee. There's a variety of estimates out there about how much it costs proportionally to lose an employee anywhere from 50% of that person's salary to two x their salary. I mean, there's a bunch of estimates, but I think the truth is that losing somebody in any organization, it comes with a major cost. And so when we as social impact leaders have high turnover rates within our teams, we are actually hamstringing ourselves. We are preventing our own organizations from having the impact that we have promised. We are losing money, we are spending on training and recruiting and onboarding and all these activities that is not delivering impact. And so I think the cost of not paying your employees properly is actually much higher than what appears on a cashflow

Eric Ressler [12:06]:

Budget. I completely agree and I think about this a lot as I've been growing cosmic out, look, I'll just say it. I wish I could pay everyone on my team, including myself more than I'm able to right now. We've made some really good progress there over the years. I think our average salary is probably double what it was in the early days if not more, but that's an intentional choice that I've made, and part of that equation is not just pure. I think there's part of that for me is I really do my best to take care of my team and believe in that strongly, and I've seen the benefits of that, but I just do the mental calculation. I've had to hire people that I've lost, I don't think usually because of pay, but maybe that was part of it and past employees just didn't share that with me. I don't know, and I know how expensive it is and it's hard costs, but it's also a huge amount of opportunity costs, especially if you're a small organization. The amount of time I personally spend finding training vetting a new employee is huge, and that takes away from really high impact activities that I can't do. Instead of that.

Jonathan Hicken [13:07]:

I imagine there are some people listening to this being like, well, I can't raise everybody's wages right now. It's something that we've all felt, it sounds like something you felt your clients have felt. I've certainly felt, and I would go as far as to say, look, if your business cannot exist with fair wages, there's something wrong with the fundamental premise of your business.

Eric Ressler [13:32]:

The way I say this is that the equation isn't solving,

Jonathan Hicken [13:35]:

The equation isn't solving, and so I challenge anybody who's feeling like I can't do it. I want to, but I can't. To look at their products, their services and prioritize quality over quantity and make some tough decisions potentially about who can stay on the bus and who can't, but making sure the ones that are still on the bus are being paid properly. I think that's a really hard decision to make, but sometimes quality over quantity can produce great results in this space.

Eric Ressler [14:04]:

I agree. I think it's worth another relevant topic to bring this into the conversation, which is that the sad truth is what I've often seen is not only are people underpaid, but they're overworked and underpaid, so they're not just making below market rate wages, but they're also being asked to do 1, 2, 3 extra people's jobs on top of the job that they actually were hired for or maybe they were hired with a job description. That's just not feasible for any one person to do. I think this is essentially just adding insult to injury, but have you seen this

Jonathan Hicken [14:40]:

All the time? All the time. I think this is sometimes a prioritization mistake. I think this is sometimes leaders deciding to do certain activities they think should rather than it being a necessary component of the business, but it's really true. It's both of these things where we kind of expect, unfortunately, we expect people in our sector to be kind of masters of many things. Jacks of all trades and masters of all trades, and that's just an unrealistic thing, and it does. It burns people out, especially when they're being paid much less than they should be. Yeah, I talked about quality over quantity, and I think that that's really sound team building approach. I have a couple of other solutions I want to offer things that leaders can consider or implement that might help them start moving towards the pay structure that they want. I'd love for you to reflect if you've seen any things at any of your clients, but also to share if you think anything's missing from this list. So I talked about quality over quantity. That's the first. There are five total here. The second, and I think this is a really important one, it's one that I did myself, is that I normalized compensation talk.

[16:04]:

I made it really clear to my team that I wanted to talk to them about their pay

Eric Ressler [16:09]:

Just to you or amongst the team

Jonathan Hicken [16:11]:

To me specifically, but I didn't define if it was amongst each other. I assume that's happening and I welcome it. I think more conversation about pay is better, even though that creates hard conversations. Oftentimes those conversations do happen as a result of these conversations, but I think more normalizing compensation talk is a good thing in our sector.

Eric Ressler [16:36]:

So sunlight being the best disinfectant. That's

Jonathan Hicken [16:38]:

Right.

Eric Ressler [16:39]:

Yeah, I agree. I mean, in reflection to that, I haven't ever pulled the trigger on this at Cosmic, but many times I've thought about and researched some kind of open and transparent pay scale for Cosmic. I think Buffer did this at one point. Some other organizations have done this where it's published on the website and there are some criteria for particular positions and particular levels of experience. I think sometimes there used to be at least, I don't know, after the pandemic, a location multiplier, so higher cost of living cities would be taken into account. The reason I liked that idea, and maybe at some point we'll still implement it, I'll talk about why I haven't so far in a second, is that it just destigmatizes it and it removes the emotion from the equation. Because honestly, as a leader making choices about pay and about when to provide pay raises or even how to put out pay for job posts, anything about pay, I often find it to be a really emotional process, and maybe the emotional tension is, I know I wish I could pay more than we're able to, and that's always been true, and at some level that might always be true for us, even if we are hitting higher pay scales than counterparts in our industry.

[17:56]:

But there's this kind of emotional, almost identity around pay that I think makes it a little bit of a taboo in our culture.

Jonathan Hicken [18:06]:

What you're describing to me is taking the emotions out of things, objectifying it a little bit. Now look, I think there are some pitfalls. I think there's a version of going too far on that where you actually prevent yourself from compensating somebody who really deserves it because the rules you've set up are too restrictive. I think that that possibility exists, but I think the spirit of making it more transparent and it is the point we're trying to get across. I also, and this is potentially controversial in our space, I do think that you should tie compensation to outcomes in some cases, and for some roles, the fundraising role is the obvious place to start. There is a lot of disagreement about whether or not you should provide performance-based bonuses for fundraising. I'm firmly on the side of, I think you should, and it's for the exact same reason that you brought up earlier, that it's really about attracting the best talent. It's about delivering impact and what are the tools at my disposal to deliver the impact that my organization has promised? And if I can compensate somebody for delivering excellent financial results, I'm willing to pay that person more, and I'm willing to have the conversation with the donor or the foundation who might be forking up that money.

Eric Ressler [19:31]:

Yeah, there's a couple threads to pull on there in my opinion. The first is around compensation and results, and I don't know this so much from the fundraising side. I've thought about it a lot from the new business side. Right now, I run a lot of our new business and sales. I don't have a rep doing that, which is typically who might be getting compensation in that way similar to fundraisers. I'm a big fan of David C. Baker, and he's an agency consultant, and he's firmly in the camp that you have to be careful with compensation based on performance in that kind of a role if it goes too far. So certain sales reps, for example, are compensated a hundred percent by commission. I think that's really dangerous because it puts the precedent, they basically are having to hunt and kill to survive within the organization, and that's a huge risk to take as an employee.

[20:24]:

So some kind of mixed compensation model I think is much healthier, and that's probably what you're doing and probably what you're describing. David Baker's ratio, I think is pretty conservative. I think it's like 90/ 10. I think you even phrased it in the way of performance bonuses so that there's a healthy base salary to provide that employee with a sense of stability and comfort, and also to make sure the incentives are aligned, because if there's too much incentive or necessity for performance-based pay, that person might start making some choices that aren't aligned with your mission because they need to survive.

Jonathan Hicken [21:01]:

To be clear, I'm not suggesting that in all performance based compensation plans is the structure, and I like just shooting from the hip. 90 10 sounds about, and when I was doing director of development work, I was on about a 90 10 plan myself.

Eric Ressler [21:20]:

That

Jonathan Hicken [21:20]:

Sounds pretty healthy.

Eric Ressler [21:22]:

We have done, I'm thinking of one example at Cosmic where we had one of our team members co-create a new role with leadership at cosmic, and that led to a performance-based pay escalation over a set of agreed upon milestones. So this is a way to do it more in terms of professional development or career growth. And I think the thing to watch out for here is that you have to make sure from both sides, whether you're an employer or an employee, that you have enough agency and control and influence over those outcomes for good or for bad, that you can agree to that in good faith because if the outcomes are so out of your control that it's almost like you have no ability to move them forward or not, well, that's not going to work, and that's just more of a strategic thing is making sure it's like, well, does this person have the agency and the setup and the time and the resources to be able to reach these goals in the first place? Otherwise, it's just this kind of empty promise. Yeah.

Jonathan Hicken [22:32]:

There's another component of this, which is who are you in an organization? It's unlikely you're going to be able to raise everybody's compensation at the same time. So there's a question of where do you start? You need to work on it slowly. At least that's the approach I've taken at my organization is I'm going to start in one place and I'm going to use that new ceiling to raise, to bring everybody else along. And my decision was I was going to start with the most valuable members of the team, the highest performers, the people who are indispensable to the success of the organization, and we started with their compensation first, and I think that I stand behind that decision now, and I would recommend that other organizations think about the same, start with your superstars. Raise the ceiling of your superstars first and use that precedent to bring everybody else along.

Eric Ressler [23:31]:

I think that's a sound strategy. I think, again, this is a reason why de-stigmatizing and decoupling emotion from these decisions is really important, because I could also see a case, and I'm even reflecting on some past experiences that I've had here where if you look more personally, if you understand people's personal needs and personal struggles that they're going through, that could influence your choices, and hey, that's not something to discount necessarily. I think if you feel strongly that one of your team members is really struggling and you're in a position to be able to help them out, that's your choice. At some level. It comes down to how you're being funded and all that, of course. But at the same time though, I think there is sometimes a need to be really intentional around who you give pay bumps to or who you give pay raises to, or making sure pay is equitable. And oftentimes your superstars are often, in my experience, also your highest paid employees in certain cases, so it can feel inequitable to be giving them pay raises when there's other people on the team who are already making less, even if their job does not require as much experience or does not have as much, I'll just say market value. So how do you work through that as a leader?

Jonathan Hicken [24:48]:

Probably part of it depends on the size of the organization. Keep in mind, I came in and the organization was small. I think there was five total employees. I think the size matters. I think your trust and your rapport with your executive leadership team also matters. This could be a conversation. You could sit down with your executive leaders and say, Hey, I think we need to do something about compensation. What do we want as a team? How do we want to handle it? I'd like to start with you

Eric Ressler [25:12]:

Three,

Jonathan Hicken [25:13]:

But I'm open to a different approach.

[25:17]:

I think there's a couple of different ways about it. It's probably bespoke to the organization, but this brings up the fifth recommendation, which is you’ve got to appoint an executive sponsor or an executive owner of this initiative or else it's not going to happen. Just like anything else, just like any other project, who is going to own this and who is going to take it upon themselves to lift those compensation numbers and make that a part of somebody's job for a year or three years or whatever it might be? And if it's not you as the CEO or the executive director, maybe it's the person who's managing your budget, maybe it's your CFO or your deputy director or whomever, make it that part of their job. Say, we need to see movement here and here's what success looks like, and now this is part of your job for the next three years. You got to appoint that executive sponsor. You’ve got to have that accountability if you really, really are meaningfully trying to change the culture of compensation at your organization.

Eric Ressler [26:16]:

Yeah. There's one topic we haven't covered yet that I feel like is really important as it relates to pay, which is pay related to grants. So my understanding, and I haven't done grant writing professionally, but I work with a lot of organizations who are largely grant funded. If you're building out a program and its grant funded program, oftentimes funders have influence around your pay, right? You're building out a budget for the program. Part of that budget is, and maybe even most of that budget is staff time and hours and compensation. Have you had to negotiate with funders around increasing pay for people, or have you had pushback from funders who are saying, oh, well, you don't need that salary for this type of person. You should decrease their pay?

Jonathan Hicken [26:59]:

Look, I believe that happens. I have not personally had to have that negotiation. I mean, my approach with grants is to overestimate staffing, is to overestimate either the number of hours that might be spent on this or build in salary, increases into the staffing estimates that I haven't even promised

Eric Ressler [27:18]:

Yet,

Jonathan Hicken [27:20]:

And basically just fill that bucket with more staffing dollars that I need than I need. Because if I can, I get those into the hands of my team, and if I can't, I'm going to use those funds to be applied to the grant work elsewhere. And nine times out of ten and in my experience, that's more of the conversation that I can have with the funder, which is, Hey, I'd like to reallocate some of the staff money over to direct services and funders are usually pretty happy to hear that story.

Eric Ressler [27:51]:

Yeah. Yeah. I mean, I think this many issues in the sector comes back, in my opinion, to larger cultural precedents that have been set around, oh, well, you just don't make as much money if you work in a social impact space, or even from small donors, oh, well, I don't want my money going to covering their staff's pay. I want it to go to program work as if those things happen in silos. And so like many things, how do you change culture? How do you change, especially for people who are outside of the space who aren't thinking about the deep implications of this and the sunk costs and the opportunity costs and all of that. Does it start, in your opinion, with individual organizations being leaders and telling stories about that and sharing the benefits of this approach? Do we need to be going to consensus builders? How do we make these big changes?

Jonathan Hicken [28:40]:

Damn, that's a big one. I don't know. My honest reaction is start with yourself. I mean, start with your own organization. If there's an advocacy, a nonprofit that wants to advocate for higher nonprofit wages, I will donate to support that. Cause I don't know what that looks like, Eric, but I do know that I have the agency to make a change in my own organization, and I'm proud of the progress we've made.

Eric Ressler [29:06]:

Yeah, I mean, I think that's my inclination as well is that we need to lead by example and have conversations like this and destigmatize it. I am seeing more discussions around pay, around burnout, around exploitation within the social impact space, and I think we just need to make sure that it doesn't stop at conversation, but actually moves into action. So I was really excited for this topic to come in for this season. Thanks for sharing your thoughts on it, Jonathan. This was a fun one.

Jonathan Hicken [29:32]:

Yeah, thank you so much, Eric.