Nonprofit Myths: #2 - Salaries

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Starting and running a 501(c)(3) tax exempt nonprofit is a lot of work and not everyone is cut out for it. Some go into the venture with false assumptions and myths and only later find out they didn’t understand what they were getting themselves into. Let’s examine some of those myths.

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Myth: I am going to be president of my nonprofit and make $100,000 a year!

Truth: Probably not. If you’re head of a giant nonprofit like the American Red Cross, then you’ll be paid much more than that. Most senior leaders of nonprofits are called “executive directors," and their average yearly salary is about $78,000.

The second really important truth is that it’s not your nonprofit. By law, nonprofits have no owners. They are created for non-commercial purposes and they are governed by a board of directors. Most nonprofit boards are made up of volunteers, so even if you become president of a board, there’s no big paycheck coming your way.

When your organization gets big enough to pay salaries, it’s the board’s job to approve an annual budget—which includes salaries, operating costs, other expenses and revenues. The board approves hiring an executive director, then that person hires staff and reports to the board on hirings, firings, budgets and other business matters. The board isn’t the “direct report” for anyone but the executive director.

It sometimes happens that a board member becomes an employee, but in that case you can’t “vote for your own salary.” That’s up to your direct boss, probably the executive director.

Moral of this Myth: Roll up your sleeves and get ready to do a lot of hard work growing your nonprofit. When it’s time to draw salaries, it’s the executive director who’ll present the cost (and the plan for revenues to cover it!) to the board.

 

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"Nonprofit Myths" is a 12-part series by Dr. Kitty Bickford, founder of Pasture Valley Children Missions. As a nonprofit consultant, Dr. Bickford has provided guidance to thousands of nonprofit leaders in best practices for setting-up and effectively running their organizations. We're also proud to claim Dr. Bickford as an alumna of The Grantsmanship Center.

© Copyright 2020 Kitty Bickford, Ph.D., CPC     Used  with permission

 

For further delight and edification, here's a short series on board development:

Who's On Your Board?     Where Can You Find Board Members?     What Does a Board Do?

 

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