Establish — and strengthen — an effective partnershipYour nonprofit is lucky enough to have an engaging and effective executive leader. But are you proactively taking steps to keep him or her in place? Here's how to promote retention of an executive director or chief executive.
What's the cost of executive leader turnover?
When thinking about what your organization is willing to do to retain your executive leader, consider the cost of losing him or her.
A study by the American Center for Progress found that turnover cost is up to 213 percent of annual salary for highly educated executive positions. That makes the cost to replace a leader earning $100,000 up to an estimated $213,000. Possible turnover costs include severance and benefits continuation for the outgoing leader, advertising for the new position, interviewing candidates, training the new leader and lost productivity as he or she gets up to speed. Turnover in this role may also cause further complications for nonprofits due to rocky transitional periods between leaders.
What role does the board play in executive leader retention?
As a board member, avoiding unnecessary turnover of leaders begins with you. It's easy to think that the board's main role is to hire and fire executive leaders — but boards play a key role in retention, too.
To establish and strengthen an effective partnership with the executive director or chief executive:
- Clearly communicate the organization's goals, seeking understanding and shared meaning
- Create a detailed executive leader evaluation policy that explains how his or her performance will be monitored and evaluated
- Ask the executive leader to provide feedback on the sources of information used to evaluate his or her performance
- Be aware of challenges facing the executive leader and the accompanying stress and frustration
- Seek opportunities to coach the executive leader or provide resources to enhance critical skills
- Provide support when difficulties arise with issues such as fundraising, strategic planning or financial oversight
What are some ways to estimate your executive leader's value?
Another important element of nonprofit executive leader retention is appropriate compensation.
Experts disagree about how closely linked an executive leader's performance evaluation should be to his or her compensation. Still, talk of job satisfaction — including satisfaction with the compensation package — is likely to come up around evaluation time.
To determine an appropriate compensation package, ask:
- What's the compensation of executive leaders at similar organizations?
- How does your executive leader perform relative to his or her peers?
- What are the costs of retaining your current executive leader versus hiring a replacement?
- How does your executive leader's salary compare to those of others in the organization?
- What level of compensation makes the most sense, given your nonprofit's finances?
When evaluating your executive leader's compensation, take into account the whole package — not just his or her salary. This includes paid time off, retirement planning, paid education and other factors. Ultimately, be sure that you're able to comfortably justify the executive leader's salary.
In addition, consider that your executive leader likely derives other rewards from working at your organization, such as emotional satisfaction, prestige and the challenge involved. Knowing how satisfied your executive leader is with these areas can be a big help in determining what your organization can do to keep him or her on board.
Retaining a strong executive director or chief executive isn't easy. Taking the time to establish a strong relationship with the executive leader will keep your organization moving in the right direction.
Spokes: How much should you pay your nonprofit executive director? (2015)
Center for Nonprofit Management: The true cost of employee turnover
Blue Avocado: How much to pay the executive director? by Jan Masaoka
NC State University: Nonprofit exec turnover more turbulent than previously thought by Amanda Stewart and Matt Shipman (2016)
First Nonprofit Foundation: Evaluating the executive director: Your role as a board member by Vincent Hyman (2011)