Corporate America Emerging Source for Nonprofit CFOs

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October 4, 2016; Wall Street Journal

A growing number of chief financial officers and finance executives in for-profit sectors are making the leap to similar positions at nonprofit organizations. As observed in the Wall Street Journal, there has been about a 25 percent increase in the past year in the number of for-profit professionals considering making the jump to the nonprofit world. Some unexpected obstacles can spring up during this transition.

The first difficulty, and in many cases the most important, is the pay gap.

A study this year from research firm GuideStar USA Inc. found that salaries for nonprofit finance leaders range from an average $44,200 at the smallest to about $314,700 at the largest, with more than $50 million in revenues.

That compares with an average salary of $2 million last year for finance chiefs at the largest public companies, according to an analysis of S&P Global Market Intelligence data by the Wall Street Journal.

Beyond the pay scale, however, there are a number of differences between nonprofit and for-profit accounting practices and cultures that new CFOs need to learn. For instance, the regulatory burden placed on nonprofits to report to the IRS annually is something many CFOs may find challenging; as used as they are to the arcane and complex regulations governing public stock corporations, they may assume federal and state nonprofit oversight is far easier to satisfy. Perhaps most important, though, is the lack of resources typically available to the nonprofit CFO, relative to the for-profit world. One CFO quoted in the article discussed his need to spend time on things he typically delegated in his for-profit life.

Still, both nonprofits and their new CFOs stand to gain with the right hire. Nonprofits are attracted to the potential discipline a for-profit CFO can bring, which many organizations feel they lack. Meanwhile, the CFOs are attracted to “mission-focused” employment and the feeling of making a difference.

What’s very interesting, and may warrant further study, is what is driving this trend. It’s not fair to compare the top CFO salary at a typical nonprofit to the top salaries at a large public company. A better comparison would be to find for-profit firms that have similar revenues as the top nonprofits and then compare those CFOs’ compensation. One expects the gap would shrink but not vanish.

The sometimes-stark differences in salary do not necessarily mean that nonprofit CFOs are not as skilled and valued as their for-profit counterparts. Some forms of compensation are simply nonmonetary—a less hectic work schedule, more flexibility, a more collaborative work environment, and so on. Even the conviction of making a difference in the world can be esteemed as a priceless nonmonetary benefit to working at a nonprofit.—Sean Watterson