January 13, 2023
Consistently Benchmarking Compensation Ranges
It is vital to the success of your organization that you approach employee compensation with the accuracy of metrics. Routine benchmarking of your salaries and benefits against those of your employment competition can help you retain valuable employees. Before you can offer the right pay, you must know what the competition is offering.
What Benchmarking Means to Your Retention
In order to reach your goals and fulfill your mission, you need to know what skills are required and how many people you need to achieve success. To determine the answers to these questions, you must analyze vital metrics including employee turnover, wages, opportunities for promotion and your organization's hierarchy. Knowing this information can help you understand, identify and correct underlying weaknesses in your organization. If you're hiring and training people only to lose them before your expense has been covered, studying key metrics on turnover rates combined with average wages may help you focus on the cause of your problem, be it pay, engagement, or something else entirely. From there, you can find employees and strategies that make for a better fit.
You then need to learn how to interpret and respond to the metrics you uncover. But don't fear the answers you uncover—there is no "ideal" turnover rate, even within your specific mission. However, knowing where you fall within the range of employers in your geographic region and mission can help you make deliberate and informed choices in pay and benefits. Simply put, you won't know what you can do until you see a complete picture of how you compare.
An annual benchmark report card covers all the basics, but if you find that a particular issue or program requires additional follow-up, which will most likely be the case, you should consider tracking it quarterly in order to continuously monitor key metrics.
Affordable Benchmarking: Nonprofits Helping Nonprofits
While paid data resources can provide detailed information, their costs generally reach beyond the budget of a small- or medium-sized organization. Fortunately, most states offer affordable resources for the information you need. The National Council for Nonprofits, a nonprofit itself, connects nonprofit organizations with localized associations that offer data-based best practices information. A quick review of the map will provide the contact information you need to get in touch with the nonprofit association in your state. For example, the Maine Association of Nonprofits (MANP) publishes a survey that describes the latest rankings of salaries and benefits for all participating nonprofits in the state. "Any nonprofit experiencing staff retention issues should, first, verify that their salaries correspond to regional benchmarks with other nonprofits," said MANP Executive Director Jennifer Hutchins. "Once you have the data, your executive director should have a conversation with your board of directors ensuring that the organization is adequately investing resources in retaining the staff needed to achieve desired outcomes toward reaching mission goals."
Maine's association also provides other resources for nonprofits, such as training, advocacy and legal assistance. Their publication, Guiding Principles & Practices, provides a free online best-practices guide for nonprofit leaders including the chapter, "Staff & Volunteer Management." The associations in most other states offer similar reports. For information on benchmarking against for-profit businesses, contact your state's department of labor or your local chamber of commerce. Membership in associations vary by state and are usually based on a sliding scale so that newer or smaller nonprofits can take advantage of the information without financial hardship.
Nonprofits with larger operating budgets may be able to invest in research conducted by the Employers Council. This nonprofit provides help with Employment Law, HR, Training and surveys. While their fees are higher, you'll find a broad scope of research that includes for-profit salaries and benefits. If most of your employment competition is coming from the for-profit sector, it may be worth the investment.
Start with Salaries
You went through a rigorous hiring process and found employees who formed a team that has created awesome results. But then, one by one, members of your team leave for other jobs. What went wrong? It may be tempting to solely blame the comparatively low financial picture of a nonprofit organization. However, there are winning strategies that the smart HR professional can use to retain employees longer, so the organization benefits from their professional growth and accumulating experience. It's not just about money—nor is it just about the mission. Employees need you to understand that a complex blend of mission and compensation—including professional development—will help them stay with you longer.
Some salary benchmarking strategists argue that employees these days have a lot more access to compensation information on the internet. It's true, there is more transparency than ever, but it doesn't have to act against you. With the right benchmarking plan in place, you can make good use of this information. Bear in mind that low turnover can be a sign that you're paying more than the standard. Finding a balance between overpayment and underpayment will only happen when you benchmark your salaries against the competition.
What Else to Benchmark?
Retaining personnel requires benchmarking information that goes beyond the hiring process. For example, knowing how often you promote from within could be a crucial factor in staff retention. You should dig deeper than this, of course. Say, for example, your organization diligently promotes male employees to management positions but fails to promote females at the same rate; this could signal a serious problem. It's important to study all aspects of "promotions" as a topic in order to uncover issues.
The first step, of course, is to know where your organization stands by benchmarking your situation regularly. The ADP Research Institute (ADPRI) provides the benchmarks needed to gain a better understanding of employee retention in different organizations. This new data will help you measure the effectiveness of your diversity and inclusion programs. If your organization lacks such programs, this data will show how you compare to other employers who do have such systems in place.
It's no secret that pay gaps between men and women still exist in today's society. And yes, even in well-intentioned nonprofits, gender-based pay disparity remains a critical problem. If you catch this with benchmarking, it's critical that you monitor the situation closely.
In an Ever-Changing Field, Knowledge Truly Is Power
You must be aggressive in pursuit of frequent benchmark updates. Stay abreast of your status in relation to compensation by industry and location. The employee you hired six months ago could go online today and discover new information on salaries and other perks that recently developed for a particular skill-set. With the shortages of skilled labor, transferable skills are more desirable today than ever before. The question then arises: How often should I benchmark? The answer is simple (though painful): How often do you want to be caught off-guard when a valued employee leaves?
Pay careful attention to your nonprofit's annual calendar when planning your benchmarking activities. Find those times when you can move ahead with benchmarking, and then be sure to follow through consistently. Be sure to understand the particular needs of your nonprofit and know that it might not reflect what is measured in the for-profit business world. Of course, it's valuable to study the metrics for your particular location. If you're located in a region where the cost of living is higher than the national average, be sure to recognize and measure the degree to which it affects your employees' ability to stay with you.
Retention Is Not Enough
Tracking retention, alone, is not the solution to all of your concerns. Some employees may be staying in place while waiting for a better opportunity to present itself. They're not necessarily doing their best work for you, and they will not hesitate to leave when the chance arises. So, for the weeks, months or even years that they are occupying that position, don’t assume everything is good. More than retention, you need employee loyalty.
Try measuring who is satisfied in their job for the long term. How do you know what to measure? Business expert Jon Picoult listed nuanced metrics to prioritize:
• Ask the right questions on employee satisfaction surveys. How likely would it be for the staff member to recommend your organization as a workplace and why.
• Track your real referrals. When you interview job candidates, ask them if they were referred by a current or past employee.
• Track employee suggestions. A loyal employee is more likely to make suggestions for workplace improvements.
Whether you're making your first foray into benchmarking employee retention, or you're taking it to the next level with regular studies on employee loyalty, you're already doing better than many other organizations. Remember to create and follow a solid benchmarking schedule to track this information frequently, and then you will be properly prepared to build and maintain your organization's robust workforce. There truly is power in knowledge, and this is how you plug in.
This is an excerpt from UST’s eBook, “5 Vital Employee Engagement Practices to Foster a Desirable Workplace” in collaboration with Beth Black, Writer and Editor.