Podcast | Executive Benefits for Nonprofits

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Transcript

Jonny Rosch
Hello and welcome to the PBMares Advisory Watch podcast, the weekly show that provides businesses with the guidance and insights they need to grow. It features timely, thought-provoking conversations with industry experts. I’m Jonny Rosch, a partner with PBMares and a nonprofit market leader, your special guest host this week. Today, we have an episode tailored for nonprofit leaders and HR professionals.

In this episode, we’ll explore how executive benefits can be a powerful retention strategy for nonprofit organizations. Andrew Lindsay, co-founder of Evolve HR, will join us to discuss the types of executive benefits nonprofits can offer to keep their leadership teams engaged.

Advisory Watch is brought to you by PBMares, a top 100 certified public accounting and consulting firm. PBMares serves U.S. and international clients, offering financial and business advisory services, including audit and assurance, cloud accounting, consulting, cybersecurity, tax services, pension plan design, and third-party administration. Visit PBMares.com to learn more.

Our guest today is Andrew Lindsay, co-founder of Evolve HR, a firm dedicated to bringing the human touch back into human relations. Andrew has extensive experience helping nonprofits craft HR solutions that are both people-centered and mission-focused. Today, Andrew will share insights into how executive benefits can make a real impact on nonprofit retention. Hi, Andrew. Thanks so much for joining us.

Andrew
Thank you for having me, Johnny. I’m excited to be here. I’m most proud of how Evolve HR and PBMares have teamed up to address these critical challenges for nonprofits. At Evolve HR, we provide HR outsourcing solutions that help nonprofits create environments where leadership talent can thrive.

Today, with PBMares financial expertise, we take a holistic approach to ensure that nonprofits can retain critical leaders and focus on their missions without the worry of constant turnover or economic instability, and a true partnership that leverages the strengths of both firms to support nonprofits in a sustainable and impactful way.

Jonny
Well, thanks, Andrew. I certainly echo that sentiment. You’ve built a reputation for a unique approach to human resources, especially in the nonprofit sector. Can you talk a bit about what sets Evolve HR apart?

Andrew
At Evolve HR, our philosophy is simple. HR should be about people first. We understand nonprofits are driven by passion and purpose, but some organizations need structure and support to thrive. What makes us unique is that we focus on the whole health of the organization. This means that we’re not just handling paperwork or policies. We’re working to create environments where employees feel supported, valued, and motivated to stay the long term. Our commitment to putting the human touch back into human relations means that we design benefit plans that are as individual as people they serve. We recognize that nonprofits need customization. They need custom solutions that, once ISPIT’s solved, don’t work when every team member is deeply connected to the organization’s mission.

Jonny
Yeah, and we’ll keep talking about how this goes back to the organization’s mission throughout. Thanks for providing that background information. From your perspective, why is retention such a pressing issue for these nonprofit organizations?

Andrew
Well, retention is crucial for nonprofits. These organizations rely heavily on the passion and commitment of their leadership to drive their missions forward. However, many nonprofits struggle with high turnover, particularly at the executive level, because they can’t always offer the same financial compensation as the private sector can. But it’s not just about the money. It’s about creating a work environment that makes people want to stay there.

Jonny
Yeah, and again, that goes back to the mission-driven nature of these nonprofits. Considering their nature, this is a significant challenge.

Andrew
Yeah, exactly. Non-profit executive turnover rates can be as high as 30 percent. And when you consider the impact, it’s clear how losing a key leader can cause significant disruptions. Everything from strategic planning to mission advancement can be thrown off course.

Jonny
30% is incredibly high. I wasn’t aware that it was that high. When working with our clients, we see that replacing an executive can also be a financial burden.

Andrew
Yeah, absolutely. And let’s remember the cost factor. Replacing these executives can cost anywhere from 20 % to 200 % of their annual salary depending on their role. For many nonprofits, that’s a significant hit to their budget, so focusing on retention is essential.

Jonny
So, what I’m hearing you say is that it’s about more than just the financial implications, though.

Andrew
Yeah, when we talk about retention, it’s not just about saving money, though that’s certainly important. It’s also about maintaining organizational stability and ensuring that their nonprofit can continue to advance its mission without being derailed by constant leadership changes.

Jonny
Interesting. Well, I think that really gives us a good base on why executive retention is so important for nonprofit organizations. Let’s switch gears a little bit and talk about the solutions. Now, I know you’ve been a strong advocate for using these benefits as a tool for retention. How do the executive benefits fit into the equation, especially for nonprofits?

Andrew
Yeah, executive benefits are a powerful tool because they go beyond just salary. For nonprofits where budgets are often limited, these benefits really provide a way to offer more value to their leadership teams without necessarily increasing base pay. At Evolve HR, we work with nonprofits to design benefit packages that are sustainable and meaningful to their executives.

Jonny
So beyond the salary and compensation benefits, what are some other types of benefits that you might typically recommend?

Andrew
We recommend deferred compensation plans that allow executives to earn retention bonuses over time. These bonuses are only accessible after several years with the organization. This plan incentivizes executives to stay for the long term while allowing the organization to spread out the financial burden.

We also focus on creative wellness benefits such as stipends for mental health, leadership coaching, or even professional development. Supporting the well-being of the executives helps them avoid burnout and remain engaged with the organization. That’s very important. Additionally, providing financial wellness resources shows executives that the nonprofit genuinely cares about the overall well-being.

Jonny
And we see that in action all the time with our clients that we work with, just how this plays out. So is it fair to say that nonprofits that offer these types of comprehensive benefits can see a reduced turnover rate?

Andrew
Absolutely. Studies show that nonprofits offering comprehensive executive benefits see a reduction of turnover by 15 to 20 percent. This is because these benefits demonstrate a commitment to the executive’s long -term success, making them feel valued and appreciated.

Jonny
Now, considering all of these benefits and how they work together, would you say it’s about finding the balance between traditional benefits and maybe a more personalized perk?

Andrew
Yeah, exactly. Our goal is to create a mix of traditional benefits such as retirement plans, health coverage, with more personalized perks like executive coaching, mental health stipends, or even sabbaticals. These options help prevent burnout and keep executives engaged with the mission.

Jonny
Yeah, it’s exciting to hear you bring up those types of perks like the executive coaching and sabbaticals that maybe aren’t considered, you know, part of these benefit packages but really could add value. We’ve talked about the importance of these benefits so far. Can we dive into the how? It’ll be important to talk about how these can work in practice. So some nonprofits may feel constrained by their budgets.

How can they begin implementing these types of benefits?

Andrew
Yeah, first, it’s essential to recognize that not all benefits must be expensive to be effective. The key is to focus on what their leadership team values most. We often recommend starting with a survey of the executive team to understand their needs and priorities. This can help guide the direction or which type of benefits will have the most impact.

Jonny
So you mentioned some cost-effective benefits. Can you get a little more specific there? What specific cost-effective benefits can they offer?

Andrew
Yeah, we might recommend implementing flexible work policies such as remote work options or flexible hours for some nonprofits. These cost little but can significantly improve job satisfaction and work-life balance. It’s also about creating an environment that supports your executives personally and professionally.

Jonny
Very interesting. So, we’ve touched on the non-financial side here. Can you tell me a bit more about specific financial and insurance solutions nonprofits can use to retain their executives? You’ve mentioned that they go beyond the salary increases we already talked about. Can you provide an overview of key solutions that they should consider?

Andrew
Yeah, absolutely. Nonprofits face unique challenges, especially when competing with the private sector for talent. However, there are several powerful strategies they can use to retain their executives with meaningful long-term benefits.

Jonny
Now, one item you mentioned earlier is deferred compensation plans. Can you talk about how these work and why they might be an effective strategy for nonprofits?

Andrew
Yeah, deferred compensation plans are a great option. You know, these plans allow nonprofits to offer future payouts to executives in a tax-deferred manner, incentivizing long-term commitment. For example, a nonprofit might offer a deferred bonus that the executive only receives after five or ten years of service, providing both a clear financial benefit and helping the nonprofit manage cash flow.

Jonny
interesting. Another thought might be something like a key person’s life insurance. Ken and I guess, really, how does that benefit both the organization and the executive when you have the key person’s life insurance?

Andrew
Yeah, know, key person life insurance is crucial for organizations that rely heavily on one or two key leaders. If something happens to an executive, financial impact could be significant, whether through lost funding connections or disrupted operations. Key person life insurance offers a financial cushion to help cover costs related to finding replacements.

And you are keeping the nonprofits stable during the transition. It demonstrates that the organization commits the executive as well. The policy could be structured in a way that, you know, a portion of the death benefit goes to the executive’s family, benefiting the executive’s heirs. Imagine a small nonprofit where the CEO has strong ties to major donors.

You know, the organization takes out, key person life insurance policy on that CEO, ensuring that if the worst were to happen, they’d have the funds to continue operations and hire a new leader without being thrown into some financial turmoil.

Jonny
Yeah, I can really see how that example would play out in a real-world setting. I’ve also heard about split-dollar life insurance. Can you talk about that strategy?

Andrew
Yeah, split dollar life insurance is an effective strategy in which the nonprofit and the executive share the cost and benefits of a life insurance policy. The nonprofit covers part of the premium, while the executive benefits from the policy’s death benefit or even the cash value. This strategy benefits nonprofits looking to offer competitive life insurance benefits without bearing the full cost.

For instance, if an executive plans to retire in let’s say 10 years, the policy could allow them to receive substantial financial benefits upon retirement, creating a strong retention incentive.

Jonny
Yeah, that’s really interesting. Again, just adding value to these benefits in the whole package. Another thing I’ve heard about that I don’t know a lot about is a SERP and SCRP. Can you talk about SERPs and how they might benefit or offer more substantial retirement benefits?

Andrew
Yeah, for nonprofits offering substantial retirement benefits, supplemental executive retirement plans, otherwise known as SERPs, with insurance components can be an ideal option. These plans provide executives with additional retirement income and are often funded by life insurance policies. This approach ensures that executives stay long enough to receive these valuable benefits.

Jonny
So far, my takeaway from the conversation is that it really depends on the organization’s structure. There are many different ways to do this and we can add value to the benefit package. How important is aligning the strategies with the nonprofit’s overall mission?

Andrew
Yeah, it’s crucial. Strategies like these depend on the organizational structure, so working with Evolve HR in tandem with PBMares is essential. We ensure that the right financial strategy aligns with the nonprofit’s mission and financial capabilities.

Jonny
Yeah, and I think that’s a key takeaway: Always, always focus on the mission for these nonprofit organizations. What they care about is serving their constituents, serving their mission, and doing what they’re trying to do. So, if we align that and have that conversation, it’s going to go a long way toward making sure they’re getting what they need. It brings us to the idea of corporate-owned life insurance, or COLE. How can these nonprofits use COLE effectively?

Andrew
Corporate-owned life insurance (COLE) is a versatile tool that benefits nonprofits and executives. The nonprofit owns a policy and can use it to a cash value or the, you know, a legacy for legacy purposes or even endowments upon the executive passing. Part of the benefits can go to their family, while another part supports the nonprofit’s long-term initiatives. This

dual purpose type of approach is very appealing to executives looking for a way to leave a lasting impact both for their family but also for the organization.

Jonny
Finally, let’s discuss executive critical illness insurance or long-term care hybrid insurance. How would these policies support the executives and the nonprofit’s mission?

Andrew
Yeah, these are great benefits, and they are pretty unique. Many firms haven’t necessarily heard about these, but executive critical illness insurance or long-term, you know, long-term care, hybrid insurance. Now, these combine long-term coverage with life insurance. These policies provide a safety net for executives facing severe health issues, ensuring they are supported during their challenging times.

This not only makes the leadership role more secure, but it also shows that the organization cares about them and their wellbeing. Imagine a nonprofit offering a hybrid long-term care and life insurance policy to its CFO, concerned about healthcare costs and retirement. This policy ensures that if they need long-term care and face critical illness, they won’t have to worry about draining their savings or burdening their family.

Jonny
Yeah, that’s excellent. These are all excellent strategies. And, you know, in my work with nonprofit organizations, when they do lose executives, it can be hard to find the right one. So, adding these benefits to retain those executives they want to keep or even attracting new ones can be an important factor in distinguishing themselves in the job market and ensuring that their mission continues. So, Andrew, thank you so much for sharing these insights. We appreciate the time.

Andrew
Yeah, sure. My pleasure. These financial insurance solutions are not only practical but also demonstrate a commitment to the executive’s long-term success and security, which is essential in today’s competitive market, that’s very important.

Jonny
Excellent. Next week, we will continue guiding to help you move forward. Thanks again to Andrew Lindsay for joining us today. If you want to ask a question for a future episode of Advisory Watch, click on the link in the show notes and let us know. See you next time.