Should executive director compensation be based on budget size?

There is a nonprofit in Los Angeles that serves 30,000 community members every month. What is especially remarkable is that they do it with only 24 staff members and have found ways to use 500 volunteers every day to deliver their services. They have found ways to truly increase their impact without spending a lot of money.

When their board goes to find comparables to assess the executive director’s salary, should they base it on the budget size or on other organizations that also serve 30,000 people per month?

Another organization, rather than growing their programs, has shifted their focus to lobbying and changing public policy that impacts the field across the state and nation so fewer people need services. Their impact is now much greater, but their budget isn’t growing as quickly.

Even if they grew their program tenfold (and their budget along with it) their impact would be lessened. How should the board consider this change in setting executive director compensation?

If we want to see a more efficient and effective nonprofit sector, we need to align executive compensation with the results we want to see.

Aaron Hurst is the President & CEO at the Taproot Foundation.

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For a closer look at how Taproot is impacting the capacity of the nonprofit sector, check out our resources page.