Canter Bridge

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BoardSource habitually produces short works for non-profit leaders that–once read–leave one wondering how we muddled through without knowing about this resource. This reviewer wonders how they keep up the pace.

Vogel and Quatt’s badly subtitled book, however, is different than other BoardSource materials. Believe it or not, it’s better. How? It delivers much more than it promises.

If you’re a CEO or board member of a non-profit organization, chances are you spend too much or too little time thinking about the chief executive’s compensation. It’s a tough one to get just right. Dollars and Sense gives concrete, thoughtful, and hugely helpful guidance for edging or dashing closer to the mark.

Along the way it tosses off gem after gem on compensation issues that go far beyond the matter of retaining and rewarding a productive CEO and corralling or disposing of one who is not getting the job done. This is where these 100 pages deliver far more than they promise.

After an introduction in which the first sentence establishes that `(H)iring, compensating, and retaining the chief executive are some of the most important functions of a nonprofit organization’s board’, the first of nine nicely-sized chapters argues that boards must approach this priority as an investment rather than an expense and provides a handy checklist for such boards to follow as they do so (`Understanding the Board’s Role in Setting Chief Executive Compensation’, pp. 1-4).

Chapter two (`Aligning Compensation with Organizational Mission, Goals, and Culture’, pp. 5-8) recommends the Balance Scorecard Approach pioneered and popularized by Harvard Business School’s Kaplan and Norton. The BSA has generated a plethora of follow-up material, much of it dedicated to strategic implementation. The authors of Dollars and Sense lay the foundation in this chapter for compensation moves that are the product of careful delineation of the organization’s mission and a path towards its accomplishment rather than an annual agenda item treated in relative isolation from the larger picture.

In `Outlining the Title, Job Description, and Profile’ (chapter three, pp. 9-13), Vogel and Quatt argue that off-the-shelf boilerplate is not enough. Rather, the board or Executive Committee must craft a document that emerges from concrete mission and leadership needs of the organization at a given period of its history, taking care not to produce a profile that only a `divine being’ could match.

A fourth chapter (`Developing a Compensation Philosophy’, pp. 14-16) distinguishes between an organization’s compensation philosophy, its compensation system, and its compensation structure. If these are to become part of the shared life of an organization’s staff and board, ongoing training is required, a step that would move the mysterious and arbitrary qualities of compensation in many non-profits helpfully toward the margins.

How is a measure of objectivity to be injected into a project so similar to a minefield as establishing executive compensation? The authors argue that the committee entrusted with this task must analyze the non-profit marketplace in order to do so (chapter five, `Understanding the Marketplace’, pp. 17-24). IRS scrutiny and the restraint that has been inherent in the non-profit sector must be balanced against a steady rise in demand for qualified non-profit leaders and the easy availability of data from commissioned surveys that demonstrate national and regional trends.

Nowadays more than just public opinion and executive performance figure into compensation decisions. The IRS is a third member hovering over the punch bowl in eager anticipation of malfeasance (chapter six, `Meeting the Legal Standards’, pp. 25-31). Even if recent research suggesting that non-profit misbehavior is oversold, the evidence suggests that there is some reason for the IRS—but prior to that, the non-profit community—to act with vigilance before ethical norms, a somewhat skeptical body of public opinion, and legal/regulatory oversight. This receives further treatment in chapter seven (`Passing the Test of Public and Stakeholder Scrutiny, pp. 32-35).

Arguably the most valuable chapter in the book, `Understanding the Elements of Compensation’ (chapter eight, pp. 36-48) moves on from the process that has been established to the components that comprise the executive’s total compensation package: base salary, annual salary adjustments, bonuses, incentives, deferred compensation, sign-on and retention bonuses, and a surprising host of tax-deferred savings instruments, and other perquisites. Each has its place in a retention and/or incentive scheme that has been carefully thought through on the basis of the principles laid out in earlier chapters. An effective compensation package can be complex without being complicated.

A final chapter addresses `Term Negotiations and Final Contract’ (chapter nine, pp. 49-57), stressing the value of good will, flexibility, and transparency for getting to a signed contract in shape to implement with enthusiasm. Four appendices provide BoardSource’s signature templates and samples, along with the customary contacts and bibliography.

Quite simply, no non-profit organization with a paid CEO should do without this priceless and practical paperback manual.