Why Are Nonprofits So Mediocre At Hiring?

Last week had lengthy discussion with a nonprofit manager we'll call 'Cheri' concerning underperformng staff members.   As I dug deeper my thoughts turned from how to improve performance towards a more basic question: "Why did you hire them in the first place?".
 
I'm a big fan of GoDaddy's CEO Bob Parson's thoughts on the subject of hiring. I also adhere to the words of Ken Schiller to Hire Slow, Fire Fast.   In digging deeper with this leader, I found that in practice she was hiring fast, firing slow.  When a position would open up, the pressure to get all clients covered pressured her to get a warm body in place.  However, the personnel policies are so layered with documentation and appeal processes that it could take 6 months to terminate an outright insubordinate employee, let alone one who was just underperformng. 

• Slow It Down.  Take your time.  I recently saw an organization post a job announcement for a deputy program manager.  Post date was February 10.  Application Deadline March 1st.  Start date April 1.    Let's see how that works out for them.
• Bring Other Staff Members Into The Process.   Cultural fit matters. Having others from your staff involved in the screening educates the candidate about the culture of the organization as well as allow the current staff their perspective if the candidate could work with you.  One of the problem staff in Cheri's organization is a woman who came with impeccable credentials and sterling references.  However, in her previous job she basically worked alone.  In Cheri's organization she is part of a team, which quickly revealed her haughty manner and poor interpersonal skills.
• Pay For Quality:  You get what you pay for.  If you find someone you want, be prepared to offer an above market salary.  If you don't, it's more likely that a high performer will eventually be lured away to another employer. I'm monitoring an organization recent hire of a new Executive Director, the hire left a powerful, high profile gig to follow his spouse to town.  I'm guessing his salary is 25-30% of what he made in New York City.  On the job for 1 month I suspect he's continuing to shop his resume. 
• Check References In Depth.  Far too often the reference check is a perfunctory exercise.  Let me show you how to take it deeper.

Defective hiring processes are a major problem in nonprofits.   One bad hire can cause disruptions in the organization as well as eat up resources.   A good rule of thumb is that the cost of replacing an employee equals 30% of the salary for the position.  Thus a bad hire eats up big chunks of dough.  You can't afford the hit to the bottom line, nor the headaches which come from bad hires.

Are We Paying The Executive Director Enough?

Short story.  Back in the 90s I was advising a nonprofit when in the midst of this year long engagement, the Executive Director suddenly announced her retirement.  As the agency prepared to advertise the vacancy, one Board member approached me to ask "Could you do a salary survey to see if we're offering enough?"

Well, I did. And discovered that they were paying the previous ED too much....way too much.  What happened is that over 27 years with the nonprofit (23 as Executive Director) she received small increases in lean years and larger ones during fat times.  Little by little, it lead to where she was earning $93,000/yr at the time of retirement....when the market rate for a nonprofit of this size in their specialty was $65,000-$71,000.  The excess also had a carryover effect by lifting the salaries of the Assistant Director, Program Managers and Department heads far above appropriate scale.  All told, the inflated salaries cost the agency in the range of $55,000/yr.

Many nonprofits worry about paying their EDs enough, and with good reason.   A sharp Executive is likely to be identified as an up-and-comer in the community and recruited away from you by a more attractive package. Paying too little is just as bad as paying too much.  The compensation structure of your organization requires thought from your Board.  Some steps to deal with the issue.

1. Set a policy at the board level about your goals in compensation and benefits.  A policy is a strong message to your employees about how you value them and your long term organizational goals in this area.
2. Seek advice from peer organizations and state and national trade organizations. Don't reinvent the wheel.
3. Have a strong HR talent on your Board.  They'll keep you abreast of salary and benefit trends.
4. Seek flexible benefits to the extent allowable. Simply put, allocate 'x' dollars per employee, and then allow employees to choose how that money is spent. The more control employees have over their own benefits the happier they are--or at least they will be less discontented.
5. Show what the organization pays per employee for benefits and how it has risen. Educate the Board and Staff.. If you take the step above and make benefits flexible, make sure you help people avoid making the choices that don't benefit them.
6.  Make sure everyone gets the same deal.....no higher benefits for senior managers.  Equity does affect organization morale.