The ongoing COVID-19 pandemic has created challenges on many fronts for the nonprofit sector, which encompasses foundations, healthcare, education, nonprofit service providers and others.  Foundations are pressed to respond to the needs of grantees.  Educational institutions face decisions regarding the conduct of classes, safety of students, transitioning to remote access, and reduced tuition revenue.  Healthcare must provide care throughout the pandemic crisis, maintaining and supporting essential staff, and facing lost revenue from the cancellation of other care.  Not all sectors are impacted equally; nor should all respond in the same way.

Opportunities for leadership are many – from CEOs taking pay and bonus cuts, to physicians and nurses working in the ICU and environmental staff supporting patients and caregivers.  Regarding executive compensation, The Wall Street Journal observed that “Senior executives are taking pay cuts in an attempt to show solidarity with their employees who are being downsized in unprecedented numbers. And while forgoing a few high-end salaries may be immaterial to the bottom line, companies whose leaders don’t follow suit face reputational risks for years to come.”[1]

Optics matter to employees and stakeholders, and the media are likely to call out nonprofit executives who receive incentives and/or pay increases (e.g., University of Colorado and Denver Health).[2]  However, some argue for a more measured longer-term view of executive compensation.[3]  Despite a time of great uncertainty, organizations should review short-term and longer-term incentive plans to assure that they remain attainable, measurable, realistic and motivational.

Your organization is not alone.  Society for Human Resources Management (SHRM) research found that 7 out of 10 organizations are struggling to adapt to remote work; 65% say that maintaining employee morale has been a challenge; 83% have changed business practices; 40% have shut down certain aspects of the business; and 38% have decreased hours for employees.[4]

Each organization’s approach, and the tools it chooses to utilize will differ by:

Short-term and long-term strategy;

Determination to maintain the status quo, grow to respond to community/ client needs, pare expenses, restructure and/or re-focus to survive; and

Perspective on the duration of the pandemic.

Lawrence Associates routinely conducts compensation and benefits surveys.  We anticipate having specific market data on compensation practices under COVID in September 2020.  For now, we offer some observations.

 What opportunities exist?

Focus on employee welfare, lead by example and balance short-term with anticipated rebound.

Be attentive to disparate impact of policies – gender, internal equity, protected classes, pay equity.

Review short-term and longer-term talent management strategies.

Assure a succession strategy.

Consider the overall impact and optics of pay actions across executives, management, staff, care providers, and essential workers.

Implement Lean, Six Sigma, and other quality and efficiency improvement processes.

Assure the culture is aligned with the short-term and longer-term recovery strategies.

What pay and benefits tools can support essential staff?

Over-and-above pay for special/hazardous working conditions, surge pay, hero pay

Guaranteed pay continuity

Expanded benefits, extra vacation, shortened eligibility

Bonuses

Expanded overtime

What tools are available to reduce expenses?

Salary freeze

Salary cuts

Deferred merit adjustments

Below market, flat, across-the-board increases

Reduced hours

Furloughs

Layoffs

Management of leaves, sabbaticals and early retirement

Re-structuring, job changes, job-sharing

Delaying new hires

Hiring freeze

Managing overtime

Managing outsourced work

What does the future hold?

Greater application of remote technology

Greater shift to digital presence

Focus on expense reduction and cash flow

Short-term and longer-term changes to strategic plans, and related incentive targets for executives, management and staff

What resources are there?

Exponent Philanthropy (foundations)

Ogletree Deakins’ Newsletter[5]

WorldatWork

Society of Human Resource Management

[1] Nina Trentmann & Kristin Broughton, Wall Street Journal, “Companies that Don’t Cut Executive Pay Now Could Pay For it Later, April 21, 2020, available at: https://www.wsj.com/articles/companies-that-dont-cut-executive-pay-now-could-pay-for-it-later-11587477361 .

[2]  See, Kate Langford, Boulder Daily Camera, “Kennedy will receive $200k bonus”, April 25, 2020, available at: http://boulderdailycamera.co.newsmemory.com/?publink=3bb8a3f22 ; and Brian Maas, 4 CBS Denver, “Denver Health Executives Get Bonuses 1 Week After Workers Asked To Take Cuts”, April 24, 2020, available at: https://denver.cbslocal.com/2020/04/24/coronavirus-denver-health-bonus-ceo-pay-cuts/?fbclid=IwAR3uf-Pjq8ghFqP_QAtjudPt1NhqspLNrcUsaepBTwsL-3oYL3XH53oWGHU .

[3] See Ryan Reish, et. al., Executive Compensation Programs & COVID-19, Harvard Law School Forum for Corporate Governance, April 3, 2020, available at: https://corpgov.law.harvard.edu/2020/04/03/executive-compensation-programs-covid-19 /

[4] SHRM, COVID-9 Research, “How the Pandemic is Challenging and Changing Employers”, from a sample of 2278 HR professionals from SHRM’s membership surveyed between April 1 and April 7, 2020.

[5] Available at: https://clientservices.ogletree.com/7/15/forms/subscribe.asp?sid=8dc0065a-4116-4311-a5f1-da53f8d51e5c.