The Compensation Conversation You're Avoiding (But Shouldn't)

This is the Executive Navigator Podcast. I'm Dr. Chip Roper and, and I'm Dr. Rich Kid. And you have the appropriate name, brother, for this, this episode. I know. Rich Kid. As we talk about compensation, because the theme today is that it's kind of a sticky issue. Yeah, you know, it is pay for nonprofit ministry leaders, pastors too, but we're focused more on nonprofit ministry leaders. And so let's just jump into it. What are, what are some of the issues? Like, how's this, how's this topic come up for, come up in your world, Rich? Yeah, great question. Well, our angle, I suppose, is that we're, we talk compensation every time we serve a client and, you know, they usually will say to us, Hey, we think that this position, you know, needs to get paid this amount. And we nod and write that down. And, you know, then somebody on a board says something and somebody on the hiring team says something and it either goes up or down. And then, you know, whatever they say, then the market talks to us, right? So ours is a real market-driven view of compensation. I'm, I'm no HR expert. You know, we have that on our team. You know, folks who've done corporate HR, etc. But what I know is what the market says. And no matter what you think a position should be paid or could be paid, the market will tell you whether somebody will work for that or not. And how's it usually land? Is it usually that like boards or, or senior executives are paying more than the market or less than the market? Well, on the nonprofit side, it's almost always less. They are hoping, I think, back to wishing and hoping as a management philosophy, they're hoping that they can get the person to work for X, Y, or Z. And look, more power to them. It's tithe money, it's philanthropic contributions. They have to be wise. They have to be careful with how they spend that money. I don't want to be glib about that, but Where I'm coming in is organizations want to take a step forward in talent, right? They want someone with specialized abilities and then usually some connection to their mission. They've been to Africa. They've helped a mission effort. They've been involved in the water sector, whatever it might be. So, it's a pretty rare set of skills that these people have. But the thought sometimes, I wish it weren't so, but the thought is sometimes, well, hey, you know, their part of joining in to help the mission is to work for less. So we kind of face that sometimes. I see that a lot too. I've, there's been some instances I can recall where I was asked by board members, how much should we pay our senior leader? And I always ask them where they're starting and it's embarrassingly low. You know, it's like, it's not even mapped to some standard. You know, it's just, there's a mindset out there for folks deciding comp, at least that I've seen, that they just, they don't have a reference point. They just assume it's going to be a lot lower and they start, they really lowball things. This topic also comes up for me in a couple other ways. So it's been interesting that I've, as I've, you know, one of the things we do at VOCA is we coach and help develop senior leaders. And a common thread that's arisen in the decade or so that we've been doing this is that yes, they all are very committed to the cause, but they also need a job. You know, they're not they didn't need to work, they might not be doing it. It's kind of an interesting dynamic. So there is a job aspect of this that goes beyond like devotion to a purpose or an impact-oriented calling. That's all there, but they care very much about the compensation and that side of the job. And then finally, just full disclosure, you know, after, for me, most of my my early career, I was a pastor. I was a pastor for 20 years, and to be candid, I feel financially behind. You know, I feel like I'm behind where many of my peers are. Um, and it's, so it's, it's a pretty personal topic too. No, I, I connect to that. You and I both, um, you know, share that. And I was just talking to a group of students today and was telling them in my first ministry job, they offered me $1,000 a month to work as a youth pastor, and they told me that they were going to put the other $1,000 a month in a scholarship fund so that I could go to seminary where you and I met at Trinity Evangelical Divinity School, and I thought that was great. Of course, later I found out They didn't have that other $1,000. They were hoping that I would do a great job, and so at the end of that time, they could raise that money and say, "Let's send sweet little Richard off to seminary." And so, but, you know, honestly, I was of that old school. It was kind of like, you know, better to burn out than rust out. I'm here to serve the Lord. You know, $1,000 a month seemed like more money than I'd ever seen, and I did it. And I lived in somebody's basement and had another job, and I just didn't really think much of it. But looking back, I definitely discovered that there's no such thing as part-time ministry, just part-time pay. And sometimes it ate my lunch, and I didn't have that much coming in. So I'm with you. I think that's very real for many many folks in our arena. It is. That's, I mean, when all of us think about this, no matter what kind of career calling we have, we think about the comp. It's part of the picture. So let's get into some of the subsets of this as we dive in. So one is just the topic of setting pay. If you're a CEO or an executive director of an organization, you're not just getting pay, you're also probably setting it. Yeah, you do. It starts at the top, obviously, and it's all about comps. Like, where are you taking your comparables? You know, there's basics like looking at what other organizations your size in your sector are doing. There are things like, you know, churches will look at school teacher pay in their region because that's usually very, very well tied to cost of living, et cetera. And also it's regionalized and cost of living increases. So, you know, setting your comps, that will get your top individual. And then you have to set those compensation bands. I mean, again, you and I are not HR experts, but you do have to have a range And it's important not just to make up the compensation to the person, you know, you're fitting that into a full compensation plan. Right. And it's not just salary. It's bigger than that. No, it's total cost. You've got all the other costs associated with that employee and the benefits that you have. And, you know, are you going to relocate them? I remember I was doing a search. For an organization and I asked, hey, did you budget in relocation for this position? And they looked at me with that deer-in-the-headlights look. And I was like, so this is a local search then, huh? And you know, sometimes that's fine, but you know, I remember I did a search in Webster Parish, Louisiana. It's tough to find talent in Webster Parish, Louisiana. So you may need to be willing to relocate folks. Yeah, it's, it's an interesting dynamic. This, just this, uh, lowball everything gets in there. But I think even those of us who are the leader, we can come at, we can kind of get enticed into the same kind of mindset and always trying to get something for less. And, and I think we talked about this on a prior episode, but you know, the right person the right person is going to have an outsized positive impact on your mission. And it's worth paying for them. It's worth, you know, it's worth, if they're moving, it's worth paying for their move because that's often a significant family event. You know, it's like, and it's just, sometimes I feel like, why do we make, it's like we just want to make it harder and harder for this to actually work instead of really just, rolling up our sleeves and having some faith and some confidence. And you know, there's a biblical principle that the worker is worthy of their wages. Like it's, it's, uh, like trying to go below market for talent is actually, uh, sub-biblical. Yeah. No, it's a good point. I mean, if you, if you, if you just want to go get biblical on it, Chip, let's go get biblical. It, it, it's pretty common. I mean, it, throughout scripture that you can't cheat your workers. I mean, justice in wages starts in Leviticus. The wages of a hired worker should not remain with you all night. The idea is, you know, you've got to pay people when they need it. And, you know, when I was in the construction business, we paid very often, certainly compared to, you know, some more executive firms. In situations because the people, they needed it. And they had their wages at the end of the week and we'd make sure and give them those. And Deuteronomy, James, they all talk about paying workers a fair wage and on time. And Jesus seizes on that theme. He knew Leviticus and Deuteronomy better than any of us. And he said the worker deserves his wages, and Paul quotes that in Timothy. And the idea, it's not just that, okay, well, I can do something for you, therefore I'm valuable. It's a picture of how God wants us to use our talents. And in fact, my favorite parable, the parable of the talents, the guy that worked hard and was skillful gets the biggest reward, right? And I think that's an important thing for organizations to remember. If somebody out of the team is doing better than others, they need to be rewarded. That's Parable of the Talents. And honestly, it's one of the things that drove me crazy about working in a local church is that that's not their concept. They're all about fairness, quote unquote, which is pay everybody as little as possible. Not every church is like the same. Just the equal, equally as little as possible. Yeah, equally as little. And you know, you'd have the best year of your, of your career and, you know, things are going great. And the guy down the hall who, you know, done, done the pretty much the same thing for the last 20 years, you both get the same amount. And that's not the Bible. No, I think it's a great point. I sometimes wonder if those of us who are setting pay and sometimes, you know, if you're the CEO or ED, you're setting it for your staff or doing it with the a subcommittee of your board, or you're a board member and you're, you're as a board setting compensation for your CEO or ED or senior pastor. I, I wonder if we're actually practicing the golden rule, you know, like we're even thinking about that. Gold makes the rules, is that what it is? Yeah. So that, no, that's not the golden rule. Oh, sorry. You know, like I, I just think, I, I just, I just wonder about that. And I think, um, there's an institution here in the city that's made a decision to pay more and hire less people. So they're going to ask more from their folks, but they're going to be paid well. And they'll expect a lot and they'll give them a lot. And I really admire that. I think that's really good. Moving on from this idea of setting pay, have you ever had to ask for A race? Yes, it was the most humiliating and embarrassing experience. And I wish that I had handled it better than I did, but it was the church thing. I thought I had knocked it out of the park, had a great year, did all these things, and, you know, had the biggest, to my knowledge, and still the largest new member class that this one particular church has ever had. And I even went in and looked at the finances and all the new givers from that year that I had welcomed at the front door and then gotten to join. And I pointed to the bottom line. I mean, I was a little hot to trot about the fact that they weren't paying their folks well and they didn't vote an increase. And so I was like, man, what's a guy got to do around here to get a raise? And so I went to a friend of mine who was on the elder board. And I just lost it. I did not deal well. Now, thankfully it was in private. It was just me and him, but I was just like, what the heck, man? Like, I'm killing myself here, which is my own issue that I tend to over-function. But he was very compassionate about it. And then he said, listen, I don't think this is right what we're doing. So he went to the board and they ended up changing their viewpoint and raised my pay. So, Um, I, it shouldn't have had to come to that, but it did. It was very embarrassing for me and I kind of wish I'd done it a different way, but it did work. So you wish you didn't have to do it and we could argue that you shouldn't have. Um, so what would you have done differently? Because I, I see some things in what you did that were, that sound pretty good. Well, that trick that Samson did with tying foxtails together and putting a torch on them and then letting them loose in the fields. I was kind of leaning more towards that. I see. I see. That was hyper-biblical, brother. No, I just think you gathered some evidence, you were able to point to impact, you knew your facts and figures about the church. Yeah. You know, and I think it's, that's all very different than just somebody saying, just starting with them and themselves and saying, hey, I'm not making enough money. Right. From my personal perspective. From my personal balance sheet side. And that could be true. And it, that it's still actually a legitimate thing, I think, for a board to wrestle with. For instance, it's like, if we want to keep so-and-so and it's just not cutting it, we can, we need to, like you said before, benchmark what we're paying. It's almost always light and there's almost always more you can do. And, uh, but, but anyway, I just think coming and asking when you have to, and I had to too. Different points along the way, I had to ask. And I think, yeah, you shouldn't have to, and it feels a little strange, awkward, you know, why don't they see what I need? But, you know, we have to provide for our families, and if it's like we're not in that, at least the center of the range, and we're doing good work, then we need to And part of it isn't, it's not sticking up for you general as much as it is sticking up for your family. And if you're married and have kids, it's especially like, it's not just about you, it's about the range of responsibility. And it could just be my background. And I certainly don't want to cast this on everybody else, but in the religious circles where I was, you didn't really talk about money. That was considered sort of gauche and selfish. You know, if you were gonna talk about compensation. So it's changed the way that I do recruiting because in the very first conversation I have with serious candidates, I'll tell them the range and I'll say, you know, I don't know where you're at, but does this make sense for you? I don't wanna waste anybody's time. And generally speaking, the responses that I get are gratitude because they say, oh wow, I've been in And I hate to say it, but churches are notorious for this. You're in this long extended candidacy process that can stretch for months without ever disclosing the salary. And the person just assumes, well, I'm assuming that they know what I make or what I need. And you get to the end and it's a lowball offer and you're just like, well, no, I can't work for that. And it can get very problematic, and especially, nonprofits, one of the biggest reasons that they can't get talent, of course, is compensation. And that sort of goes without saying, but it's true. And what they all want, marketplace talent, they want people who are coming out of corporate. And the general idea is, well, let's find me somebody who's made their money and who doesn't need the money and that they would come work for us kind of out of the goodness of their heart. Now those people do exist that, you know, there's an equity event. I have a friend that works for a dollar a year and does an amazing job for a nonprofit. You know, he's in a situation like that. There are many others who could do that. But for the majority of people, they still would like to, you know, to make money. Executives will say, well, I'm willing to take a big cut. I remember talking to this guy from Cisco Worldwide, and when I told him the mission salary that he was going to be accepting. He says, "Boy, that's an eye-watering pay cut." And he took it, he took it, right? But they don't think you mean what it actually is. They think, "Well, surely there's more zeros. Didn't you leave something out?" It could be a challenge. Yeah, it is a challenge. And I mean, I think there's this tension involved here because As a board member myself, like, we know we can't compete for what somebody could make in their compensation in industry. We know that. On the other hand, there's this tendency to kind of be, I think, too cheap, always looking for a discount. You get great talent at a discount kind of mindset, which I don't think that's good either. So how do we parse all that out? Like, how do we parse out this call to sacrifice in some ways, but then compensating the excellent employee? What's reasonable compensation versus excessive compensation? These are, these are concepts that get batted around and we need to think about if we're in the setting or asking Paychair. Well, I'm going to talk out of both sides of my mouth. All right. If I, if I can do that, and hopefully I'm not contradicting myself, that there, there is a reasonable compensation that is market-based. That you can look at comparables, right? And you can determine if something's in the 50th percentile, if something's in the 75th percentile, if you're coming in at the 25th or below percentile. You know, I've in fact never worked with an organization that said, you know, we don't really care who you hire, just find somebody with a pulse. They can be in the bottom quarter of the talent pool. It's fine. Right? Nobody wants that. Nobody ever says that. They always say, We want, you know, this, this, this, and this. And it ends up sounding like Jesus on a unicorn, right? It's so rare that you're just thinking, does this person even exist? And so you do have to think about paying fairly. Obviously there are some ministries, especially, you know, I think you probably didn't take your Gulfstream jet to our podcast today. There are some ministries that are notorious and even have gotten congressional attention for having unreasonable compensation. And there are ways around the rules, and people are parts of more than one organization. They have family members that get compensated. I won't name any names because I kind of like this job I have. And so, of course, you have to follow, you know, IRS guidelines to have reasonable compensation. And that's where the benchmarking comes in, that you have to demonstrate that it's reasonable compensation based on the tasks that people have. And there are some ministry settings where frankly that's not true. It's not usually true for the whole organization. It's usually the top person, but those do exist. So both of those things are true, I think. That's good. That's really good. I think for me being in this world, making my living from, a church for 20 years and from a Christian nonprofit for 10. I think the thing that I didn't understand or realize, I knew I was going to take a pay cut relative to what I thought I had the potential, potential to do. I didn't realize I was also going to take a wealth cut. Talk to me about that. What's a wealth cut? So A lot of, a lot of my friends in business, it's not just that they got paid more, it's that they were given shares in companies or stock or shares of ownership, formal stock, other things like that, that have ended up positioning them to be able to basically retire earlier. And some of the clients that we work for in our business side, I mean, part of their whole pitch to people to work for them is, you know, not just we're going to pay you a salary, but we're also going to give you, you're going to build wealth by working here. And, um, and what I found in, so all the people, I'm just thinking back, you know, I'm sure most of the people that were on the board that I reported to were all looking at their stock options and their 401s started when back, back when I started and you started and, and their pensions and all this other, all these other things, but they were not. Carefully counseling me or advising me or even making sure that they did anything similar for me as part of my comp package. And you mentioned teachers and educators as a benchmark, and they are a pretty good benchmark for a lot of nonprofit ministry roles, especially senior pastor might be more like a high school principal kind of thing, or if you're the CEO of a medium-sized nonprofit, same thing. And the salary could be comparable, but when you work for a school district, you get a great pension plan. That's right. And you basically get your salary for the rest of your life if you hit a certain number of years of service. Yeah. And medical benefits. And I don't know, I just see this as a big gap that, that a lot of folks aren't thinking about. Um, for, for people in ministry, it's like, You know, it's just, they're just not thinking about it. It's back to that. Are they really loving their neighbor as themselves? Are they really doing unto others as they, nah, not actually. Like they're, they're very calculated about building the capacity to not have to work for money, but they're not very calculated about helping, uh, the pastor or the ministry leader think the, even think the same way, let alone do it. I, I wish that weren't true, but today, and we never use names on here except your name. I can use your name if I have a story about you. You can use mine. So there was once a guy, we'll call him Chip. That got you. Yeah. Who reached out to me and he said, I've been working for this ministry for 25 years and there is nothing here for me in terms of retirement., and I'm just hoping they're going to do right by me, but I really have no idea. Yeah. I had another instance here locally where a pastor had worked at a church and he had no, he had given up his pay in the lean years because the church wasn't doing well. And they did a church merger and the church that merged with theirs made him whole. They funded a retirement package. And do you know that that pastor died like weeks after that was signed? And because the church that they merged with had agreed to make them whole, his widow had enough support that she can live the rest of her life. She would not have, she would've been destitute. And the— As it should be. Yeah, the Bible is pretty clear about widows and orphans. That's true religion. So that was a happy story, how it worked out, but it doesn't always work that way. No, no. I think it just gets back to the idea, if you're on a board, you're a decision maker, you're a CEO, you should be thinking about the whole package and looking out for your team members financially. And like anybody in business would, that's really what we're talking about. Even though the numbers may not— they're not going to be as big, the upside is what all my business friends will talk about is not as high. You still need to be thinking not just near-term but long-term. And it's part of the system. It's part of the way pay and benefits work. Yeah. Well, this is an important conversation. Let's just I'm just going to roll through like some of the best practices we want to leave everybody with and then turn it over to you for some closing comments, Rich. So first idea, big idea, whenever you're setting pay, even if you have to set it for yourself or propose it for yourself, use benchmarks. And there's websites like salary.com, paycheck.com. Um, there's church versions of those things. There's a compensation survey, but you have to have comparables. Which would be based on size, budget, and location. Those are the, those are the primary variables you need to look at. Size of the organization, budget of the organization, and location, because location makes a big, has a big impact on what's fair. Sure does. Secondly, everything needs to be documented by, at least for your, if you're the senior person, everything's got to be documented by your board. There needs to be good, needs to be a board decision, good documentation to back it up. Most clergy have to have their— their senior clergy have to have their housing allowance reviewed every year if they have one. So that already should be baked in, but it all needs to be documented. So benchmarking, documentation. A third idea I just have is that if you're feeling like, or if you know you're being underpaid, you should ask. You know, I think it's okay to ask even though it doesn't feel great, and then trust that God will honor your heart and with the outcome of that. But you need to ask. And sometimes it's just the reality is you can't expect a board to read your mind. They're not, they're actually not thinking about your pay. They should be, but they're not. And then another thing I think for all of us as people that are managing our own money is just because we're being paid, quote, less, we're being paid, quote, less. Doesn't mean we aren't called to generosity and savings. You know, those themes are maybe even more important for us to really steward well the resources we have. There's a lot we could talk about that, but I just, I've heard statistics sometimes about how much people in ministry actually give, and it's actually embarrassing. So it's, you know, it's, we gotta set a pace in that. And then we already talked about a holistic view of comp. It includes benefits. It's not just your wage. Set a fair wage, include benefits, think about retirement, and do incentives carefully. And the EFCA— ESFA, sorry, Evangelical Council of Financial Accountability— is a great resource for checking in. And even if you're not a member, they've got great guidelines and policy policy frameworks that you can use in your organization. So big topic, compensation. It's actually not that hard to make it better for everybody, I think, but worthy of everybody's attention. Yeah. Well, my final word on this is that there is a generational difference. And one of the things that I have been doing across the country is replacing boomers who have been in their place of service sometimes for decades and just very God-honoring, very diligent serving their organization, whether it's a rescue mission or a mission agency. And often, it's impossible to generalize about an entire, one of the largest generations in American history, but often those people have worked for less than what they could have got. They have sacrificed. And I just want to pause to honor those who have been in those positions and say, you know what, I've been underpaid and the Lord was always gracious. He always met our needs. We prayed for grocery bills at times. We prayed for diapers that we didn't have. And those folks who have been faithful in those positions got paid less than what they should have. And now they're changing out. And unfortunately, it seems like Gen X is getting left out of the mix. Maybe it's because we're smaller or whatever. But they're hiring millennials, and apparently the millennials have already heard our podcast, Chip, because they come in loaded for bear and say, well, I'm not going to work for that. I know what I'm worth. Okay. And again, not to generalize for an entire generation, but I'm seeing younger workers overall in this space. They know the comps, they know what they could make in other places, and they're asking for it. And good on them. It's excellent. The problem I'm seeing is that there's kind of a list. Okay, I will serve the Lord if it's not in a place that has allergies, that's at least this latitude and longitude because it needs to fit. My wife doesn't like cold climates and I could work here at this business and so I know I could make this much. So, you have to pay me this much. And it's very conditional. And it's tough for me because I've watched time and time again that younger worker who could be a great fit, who could bring great talent and ideas and energy to an organization, just they won't go as low as the organization is offering. And so there's a missed opportunity. And I don't know how to answer it because they're right. The market says if you have a CPA, if you have this many years of experience, you should be paid $200,000+. And what do you do when the organization says, well, we only paid the other guy $70,000, so we're raising it to $100,000. We're doing great. And the answer is the market says no, you're not doing so great. How do you encourage those younger workers to engage the sense of call, the sense of sacrifice, the sense of commitment to a mission because our retirement isn't here. Our retirement's in heaven, and we're not going to get our full pay package until we get to heaven. I don't know how to resolve some of those issues, but I definitely see the problems. Now, I think that's a really good final challenge for our listeners to think through. Because ultimately they need to decide. You know, there was times when Paul would say like, hey, you guys could pay me, but I'm not going to let you. So there was an M— they weren't forcing him into that. He was choosing it. And which is interesting to see where the decision actually lied. Um, but I think what you're saying, it's important to think through, like, do we have so many conditions that we're actually really not following the person we call Lord? You know, and I'm OG too. I'm an old cynical Gen Xer just like you. And, but I've also had the experience of working for less than I'm worth, always having enough to do all the things that I felt like I needed to do and more, including send kids to college and pay for weddings and all the other things that you worry about not having enough money to do. Yeah. And I just think, you know, You don't want to insulate yourself from a really powerful step of faith. And I heard one— somebody, it was just a friend, it wasn't a famous person, but just a friend that just said, if your problem is money, it's actually not a problem. You know, God owns it all, he's going to take care of you. If it's just money, it's not something else. Uh, maybe that's not actually a great reason to say no to an opportunity. That's powerful. So we'll leave it at that. Lots to stir up here on the topic of, of compensation. Rich, I know that when you are representing organizations and going out and finding them talent, you are advising them and helping them decide where their comp should be, and you provide that expertise to them. On our side at VOCO, what we're helping people navigate career opportunities and job, the job market, we help them negotiate from their side. So we're both, we're working both sides of the table and we're, we're happy to help through both of our organizations as we can. So we'll look forward to seeing everybody on our next episode of the Executive Navigator. Thanks.