Nonprofit Compensation and Benefits Practices

By Costello, Ann | Journal of Risk and Insurance, December 1999 | Go to article overview

Nonprofit Compensation and Benefits Practices


Costello, Ann, Journal of Risk and Insurance


Nonprofit Compensation and Benefits Practices, by Carol L. Barbeito and Jack P. Bowman (John Wiley & Sons Inc. 1998)

Reviewer: Ann Costello, University of Hartford

Compensation studies are very common among large profit-making companies. They have access to the services of consultants who will clarify the present policy, explain competitors' actions, assist in a thorough analysis, and implement any changes. Of course, all human resource, tax, and legal issues will be explained and appropriately handed. The company's major impetus is to attract and retain workers as well as to provide them with motivation, self-growth, and potential promotion. These goals are the same for the nonprofit. However, the cost of these services is not small and thus the need for a book such as Nonprofit Compensation and Benefit Practices.

At first glance, the book appears to be a "how to" type with many listings, charts, and check-off sheets, but it is much more. Barbeito and Bowman do not assume anything about the reader's background; they support their comments by an exhaustive list of references after each chapter. From the beginning of the book, they build on the changing composition of the workforce and the need to be innovative in compensation practices to succeed in a diminishing qualified employee pool. Characteristics of the nonprofit organization and their employees are compared to the profit-making sector. Ten percent of the total workforce compose the former and 68.2 percent are female; the management and professional levels are highly educated. The number of nonprofit entities has declined over the period of 1977 to 1992 and many have suffered major problems with cuts in government grants and other shortages.

Two major problems cited several times in the book are 1) recent scandals and 2) organizational cultures different than that of the profit-making sector. The scandals refer to exorbitant compensation packages of the heads of United Way, Adelphi University, and the PTL and charges of criminal actions. The media has often generalized that high payments, are a common practice for all executive directors when in reality the total budget of many nonprofits is below $500,000. In turn, the government has passed new laws that outline criteria for setting compensation for executive directors and his/her relationship to the Board of Directors. The author explains the new legislation and other appropriate rulings, in the appendices.

Stock options and bonuses are the most commonly innovative compensation options in the profit-making sector; however, these present a problem for nonprofits who do not have stock and a culture that questions the use of a bonus for employees. …

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