Non-Profits Step Up Incentive Pay to Stay Competitive

Non-profits are stepping up incentive pay opportunities to attract and retain top executives, experts say. Those already offering it as a part of compensation packages are increasing the amount CEOs can earn, said Tim Dupuis, a Detroit-based vice president for Chicago-based executive compensation firm Pearl Meyer.

And smaller non-profits that hadn't yet begun to offer it are adding it to compensation packages. Base salaries paid by non-profits have generally been competitive with for-profit companies of similar size, Dupuis said. But for-profits offer larger incentive opportunities.

Non-profits have tried to close the gap by offering slightly more generous health and wellness and retirement benefits, Dupuis said.

"But in order for us to be competitive in the market and attract and retain the talent we need to achieve mission, we need to have some kind of performance pay. The base salary and health and wellness benefits aren't cutting it anymore," he said.

Non-profits "are finding that to attract and retain their executive talent, they have to pay more similarly to for-profit organizations."

If they are going to pay executives more, boards prefer to put more pay at risk to ensure they get what they pay for, Dupuis said.

Non-profits that have included the "at-risk" or merit pay as part of compensation for years are giving executives the opportunity to be awarded a higher percentage of their base pay—say 20 percent instead of 10 percent—for hitting defined performance targets, Dupuis said.