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The Compounding Effects of Salary Negotiations

The Compounding Effects of Salary NegotiationsCombating the Gender-Wage Gap in the Nonprofit Sector

Women make up the majority of nonprofit sector jobs at 69 percent.1 Yet per GuideStar’s 2016 Compensation Report, salaries for women trail those of men in comparable positions at nonprofits of all sizes.2 The gap is widest—23 percent—for female CEOs at nonprofits with $2.5 million to $5 million budgets. In fact, the gender-wage gap persists across industries. The Pew Research Center found that in 2015, women across industries earned 83 percent as much as men.3

Many who work at nonprofits do so to try and combat inequality in our world, so it’s essential that we walk our walk and combat the gender-wage gap in our sector. Importantly, there is also a race-wage gap that is real and needs to be addressed, though my focus here is on gender.4 There are many factors involved in the gender-wage gap, and thus need to be addressed to close it. One key step is improved salary negotiations—so that everyone, but especially women, are being compensated appropriately for the role they’re in and experience they bring. Indeed, it is one of the key pieces of advice cited by the American Association of University Women (AAUW) in their 2016 report, “The Simple Truth about the Gender Pay Gap.”5

Research by Linda Babcock and Sara Laschever, authors of Women Don’t Ask, found that 46 percent of men always negotiate a salary following a job offer whereas only 30 percent of women do.6 7 On the plus side, a salary.com survey found that the older people are, the more comfortable they are negotiating salary.8 This finding makes sense—over time people have more experience and confidence with which to negotiate. But by waiting to negotiate, employees likely cost themselves substantially in lifetime earnings AND further perpetuate the gender-wage gap.

Many employers—and in my experience many nonprofits—ask candidates for their salary history and then base what they are willing to offer (and pay) a candidate on that number. Thus each time you don’t negotiate, you’re actually causing a compounding effect downstream.

Massachusetts took an important step forward on this issue on August 1, 2016, signing into law a bill that requires employers to state their compensation offer to a candidate before they are allowed to ask for salary history. In covering this historic event, Journalist Stacy Cowley of The New York Times wrote, “By barring companies from asking prospective employees how much they earned at their last jobs, Massachusetts will ensure that the historically lower wages and salaries assigned to women and minorities do not follow them for their entire careers. Companies tend to set salaries for new hires using their previous pay as a base line.”9

This is exciting to see. However, regardless of state policy, everyone should still feel comfortable and empowered to negotiate for themselves when they think it’s necessary—men and women alike. So why aren’t they?

In a blog post, “Overworked and Underpaid? That Stops Here,” Cathie Ericson cites some common fears that keep people from negotiating including:

  1. It won’t work;
  2. My (future) employer and I will get off on the wrong foot; and/or
  3. I’m not comfortable and don’t know what to say.10

Indeed, another salary.com survey found the following when they asked people why they didn’t negotiate: “Fear of being told no topped the list with 43 percent of respondents saying they're scared of being rejected and feeling like they're not good enough.”11

In my experience, these fears may be exacerbated in the nonprofit context, where budgets are often tight and there may be the (unfair and unrealistic) expectation that the work is “mission driven” and people should be willing to “work for less.” And the situation is almost surely exacerbated for women. Babcock and Laschever note, “Many women are so grateful to be offered a job that they accept what they are offered and don't negotiate their salaries.”12

In reality, people really should not be afraid to negotiate. Salary.com also found that “The vast majority—80 percent—of the employers we surveyed said they are not upset or offended when jobseekers negotiate during the interview process, and 57 percent of HR personnel expect people to ask for more when presented with a job offer. Furthermore, 48 percent expect their employees to ask for a raise at least once a year.”13

As women advance in their nonprofit careers and become leaders in organizations, they will undoubtedly be offering people jobs and many—including hopefully more and more women—will negotiate. Negotiating for oneself is also a key step in leadership development.

If you are reading this and you are working in the nonprofit sector—and especially if you’re a woman: Advocate for yourself, either during a hiring process, upon receiving a job offer, in your annual review, or at any other appropriate time. In doing so, you are not only increasing your own salary today (as well as your future earning potential), but you are also being part of changing the culture and dynamics of the gender-wage gap.

A few helpful resources and guides:

  1. Neale, M. A., & Lys, T. Z. (2015, 06 29). More Reasons Women Need to Negotiate Their Salaries. Retrieved 10 18, 2016, from Harvard Business Review: https://hbr.org/2015/06/more-reasons-women-need-to-negotiate-their-salaries
  2. Ericson, C. (2016, 03 17). Overworked and Underpaid? That Stops Here. Retrieved 10 18, 2016, from Grow from Acorns: https://grow.acorns.com/2016/03/overworked-and-underpaid-that-stops-here/
  3. Berkshire, J. C. (2012, 10 28). How to Overcome a Fear of Negotiating and Get a Bigger Paycheck. Retrieved 10 18, 2016, from The Chronicle of Philanthropy: https://www.philanthropy.com/ article/How-to-Negotiate-a-Bigger/155905
  4. Women for Hire. (2016). Negotiating Salary 101: Tactics for Better Compensation. Retrieved 10 18, 2016, from Women for Hire: http:// womenforhire.com/negotiating_salary_benefits/negotiating_salary_101_tactics_for_better_compensation/
  5. Segran, E. (2015, 08 12). A Woman's Most Powerful Salary Negotiation Tool? Silence. Retrieved 10 18, 2016, from Fast Company: https://www.fastcompany.com/3049676/how-i-get-it-done/a-womans-most-powerful-salary- negotiation-tool-silence

What about the role of nonprofit boards?

BoardSource’s 2015 Leading with Intent survey found that women account for 48 percent of nonprofit board members and 46 percent of board chairs, which is a strong signal that we might see improvement in wage equality between men and women.14 That said, they may not be evenly distributed across nonprofits and some boards may have underrepresentation of course. Further, while it seems reasonable to think that more women on boards will help close the gender-wage gap, I haven’t seen any data yet that proves this.

If you are a nonprofit staff leader or board member reading this: Please be aware of the gender disparities in compensation, address them in your executive compensation, and be sure staff are trained and supported to address them in your hiring processes. Yes, there is often a tension in trying to “make the budget” and the incentive could be to hire people at the low end of market rate or be happy if/when they don’t negotiate for more money. But if you aren’t working to combat the disparity, then you’re perpetuating it. Further, research has shown that when there is no explicit statement that wages are negotiable, men are more likely to negotiate than women, but when it is explicitly stated that wages are negotiable, then the difference between men and women disappears.15

I have worked in the nonprofit sector for nearly my entire career, and today I feel well informed both as someone being hired and someone doing the hiring—but I wish that I had seen a summary like this earlier in my career. When I was being hired, it would really have helped me to understand earlier than I did all of the reasons to negotiate, the huge costs (literally and figuratively) that can come from not negotiating, and links to some practical tools, guides, and resources. In my experiences hiring others and setting salaries, I would have been aware of the dynamics at work and how my framing could either help or hinder the broader gender-wage gap.

From every vantage point in the sector—whatever side of the negotiating table you sit on—the choice you make can either sustain, compound, or improve the gender-wage gap. Use compensation negotiations as one tool and vehicle to improve it.

 

The Compounding Effects of Salary NegotiationsLindsay Louie is a program officer at The William and Flora Hewlett Foundation. This post is reprinted from Independent Sector, Gender Equity in the Chartiable Sector: A Learning Guide for Next Generation Charitable Sector Leaders (Washington, 2016): 27-29, 32-33.

 

 

Endnotes

  1. Preston, A. E., & Sacks, D. W. (2010). Chapter 8: Nonprofit Wages: Theory and Evidence. In B. A. Seaman, & D. R. Young, Handbook of Research on Nonprofit Economics and Management. Edward Elgar Publishing Inc. Retrieved 10 18, 2016, from http://www.elgaronline.com/view/9781847203588.00017.xml
  2. McLean, C. (2016, 09 13). 5 Key Findings from GuideStar's 2016 Nonprofit Compensation Report. Retrieved 10 18, 2016, from GuideStar Blog: https://trust.guidestar.org/5-key-findings-from-guidestars-2016-nonprofit-compensation-report
  3. Patten, E. (2016, 07 01). Racial, gender wage gaps persist in U.S. despite some progress. Retrieved 10 18, 2016, from Pew Research Center: http://www.pewresearch.org/fact-tank/2016/07/01/racial-gender-wage-gaps-persist-in-u-s-despite-some-progress/
  4. Hill, C., Miller, K., & Benson, K. (2016). The Simple Truth about the Gender Pay Gap (Fall 2016). Washington: American Association of University Women. Retrieved 10 18, 2016, from http://www.aauw.org/resource/the-simple-truth-about-the-gender-pay-gap/
  5. Ibid.
  6. Ryan, W., & Gouveia, A. (2007). Why Women Don't Negotiate. Retrieved 10 18, 2016, from Salary.com: http://www.salary.com/why-women-don-t-negotiate/
  7. Babcock, L., & Laschever, S. (2007). Women Don't Ask: Negotation and the Gender Divide. Bantam.
  8. Salary.com. (2015). Why American Workers Aren't Negotiating Salary. Retrieved 10 18, 2016, from Salary.com: http://www.salary.com/why-american-workers-aren-t-negotiating-salary/slide/6/#comments
  9. Cowley, S. (2016, 08 02). Illegal in Massachusetts: Asking Your Salary in a Job Interview. Retrieved 10 18, 2016, from The New York Times: http://www.nytimes.com/2016/08/03/business/dealbook/wage-gap-massachusetts-law-salary-history.html?_r=0
  10. Ericson, C. (2016, 03 17). Overworked and Underpaid? That Stops Here. Retrieved 10 18, 2016, from Grow from Acorns: https://grow.acorns.com/2016/03/overworked-and-underpaid-that-stops-here/
  11. Gouveia, A. (n.d.). Salary Negotiation: Separating Fact from Fiction. Retrieved 10 18, 2016, from Salary.com: http://www.salary.com/salary-negotiation-separating-fact-from-fiction/slide/3/
  12. (Babcock and Laschever 2007)
  13. (Salary.com 2015)
  14. BoardSource. (2015). Leading with Intent: A National Index of Board Practices. Washington: BoardSource. Retrieved 10 18, 2016, from https://boardsource.org/eweb/pdf/LWI-Report.pdf
  15. Leibbrandt, A., & List, J. A. (2012). Do Women Avoid Salary Negotiations? Evidence from a Large Scale Natural Field Experiment. Cambridge: National Bureau of Economic Research. Retrieved 10 18, 2016, from http://www.nber.org/papers/w18511
Topics: nonprofit compensation gender gap
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