Last week I mentioned that I wasn't quite satisfied that my analysis provided convincing evidence that when charities pay their top execs more that it's even worth it. The graph that I presented was a comparison between groups of charities defined by salary of highest paid employee and number of employees. After finishing the analysis, I realized that I wanted to compare the same charities year over year, to see if there were examples of charities who increased the pay of their top execs in the following year. If I could find those examples, then is there any evidence that increasing the pay actually helped in terms of the dollars raised?
Thankfully, I was able to find a nice sample of 2,138 charities who reported an increase in their highest paid employee(s) in 2015 vs. 2014. I was also able to find a sample of 1,262 charities who reported a decrease in their highest paid employee(s) in 2015 vs. 2014. I've used the same graphing logic below, with the addition of distinction between the year that the funds raised per employee metric was measured. I'll recap how to read the graph below:
1. Each pink rectangular section of the graph represents a charity size category in terms of number of employees. This ranges from 1-4 employees, all the way to 100-199 employees. There are of course charities with more employees than that, but I have filtered them out of this analysis.
2. Along the horizontal axis are salary ranges representing the salary of each charity's highest paid employee in 2015. If your charity's highest paid employee gets between $120k - $159k, then you would fall into the 3rd category on the horizontal axis.
3. The height of the bars (the vertical axis) represents the average funds raised per employee. This enables a fairer comparison between charities within size categories.
4. The colour of the bars represents the year that the fundraising metric comes from. Light purple represents 2014 and dark purple represents 2015.
Charities who increased top exec pay:
Interesting. In 2 cases, increasing top exec pay seems to significantly decrease funds raised per employee - 1) Charities with 5-9 employees who increased their top exec pay to $160k - $199k, and 2) Charities with 100-199 employees who increased their top exec pay to $80k - $119k.
Apart from many categories where fund-raising stayed largely the same, I see 2 or maybe 3 cases where fund-raising looks significantly better in 2015 than 2014 - 1) Charities with 50-99 employees who increased their top exec pay to $120k - $159k, 2) Charities with 5-9 employees who increased their top exec pay to $120k - $159k and perhaps 3) Charities with 20-49 employees who increased their top exec pay to $120k - $159k.
Now, let's look at charities who decreased their top exec pay relative to 2014.
Charities who decreased top exec pay:
Here we see the cherry on top of the analytical cake! Whereas increasing top exec pay sometimes leads to improvement, but other times leads to a decrease in fundraising performance, decreasing top exec pay either has no effect, or has a damaging effect on fund-raising performance!
In conclusion, we see support for the notion that increasing your charity's top exec pay can sometimes be helpful, but that decreasing your chariy's top exec pay is much more likely to be detrimental to your charity's fund-raising.
So, before you increase the pay of your top exec, be sure that they are a stellar fund-raiser. Similarly, before you decrease the pay of your top exec and probably drive them away from the organization, make sure that they truly have little value as a fund-raiser.
Source: 2014 & 2015 T3010 data, charities with total revenue less than or equal to $5 million
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