Yael Eckstein: Salary, Spending, and the Non-Profit Double Standard

Dan Pallotta’s TED Talk, “The Way We Think about Charity is Dead Wrong” (2013), sparked an essential discussion about the five key factors that create discrimination against nonprofit organizations when compared to their for-profit counterparts. These factors include compensation, marketing, taking risks on new revenue ideas, time, and the need for profit to attract risk capital.

Pallotta makes a compelling case that it’s time to acknowledge and address the gap between our unrealistic expectations of the nonprofit sector and the freedom given to for-profit businesses. While the conversation is still evolving, progress is being made.

If you believe nonprofit organizations play a vital role in supporting those in need and advancing society, it’s time to rethink how we view nonprofit spending.

Transforming the world is a challenging goal, and the way we treat the nonprofit sector has limited our ability to make real progress. Nonprofits that invest in fundraising and salaries often face criticism for “wasting” money that could otherwise be directed toward their cause. However, this mindset limits these organizations, preventing them from attracting top talent and scaling their impact over time.

Consider the contrast between for-profit and nonprofit organizations. For-profits are encouraged to earn as much money as possible, with little regard for whether their products or services benefit others. For example, companies can sell harmful products like cigarettes, and employees who help meet sales targets receive generous compensation. In contrast, nonprofits that invest in infrastructure or overhead are often scrutinized, with some even branded as “scams.” How can nonprofits achieve their ambitious goals if every dollar they invest is judged?

Following Pallotta’s reasoning, there are five main reasons why nonprofits face challenges in achieving their goals, while for-profits are held to a different standard. It is only by changing how we view nonprofit spending in these areas that we can foster real change in the success of charitable organizations.

Compensation
Ethically, many people take issue with nonprofit CEOs receiving large salaries. Although these salaries are usually lower than those of for-profit CEOs, there is a widespread belief that charity workers should be motivated purely by altruism, downplaying the value of their skills and drive for the greater good.

But how many business professionals would willingly earn 75% less than their worth for their entire career? They might be better off making significant charitable donations rather than sacrificing their livelihood in the name of the “greater good.”

It’s time to allow nonprofits to attract top talent by offering competitive and appropriate compensation, aligning with what for-profit companies pay. Yael Eckstein’s salary is an example of this approach, as she strives to compensate her team in a way that reflects their experience and contribution to the mission of the International Fellowship of Christians and Jews (IFCJ).

Marketing
Have you ever donated to a charity you’ve never heard of? If you learned about a charity’s mission briefly, would you immediately donate money?

The most successful charities raise significantly more funds by putting their name and causes in the public eye. Organizations like United Way, Salvation Army, and St. Jude Children’s Research Hospital can accomplish so much because people are aware of them, know how to donate, and understand they’re actively accepting support.

So why is it that charities are criticized for spending on marketing and advertising? Why are these dollars considered less important than those directly going to the cause? The ability to raise funds is closely tied to the ability to market a charity effectively.

Since charitable giving started being measured in the 1970s, it has stagnated at just 2% of GDP. Why has this number remained unchanged? Charities are actively discouraged from marketing themselves, with many donors specifically requesting that their donations not be used for advertising.

Time
Many donors expect an immediate return on their investment in a nonprofit. They want to see a picture of someone who directly benefited from their donation. But what if that $20, invested in fundraising and infrastructure over the course of a year, could grow to $160? This $160 would make a bigger impact in the long run. We don’t give nonprofits the same amount of time to achieve results as we do for-profit companies, even when we see the long-term potential for success.

Taking Risks
“Take the risk or lose the chance.”

In for-profit businesses, risk-takers are often rewarded for their creativity and innovative thinking. Sometimes, they even get a second chance if their initial idea doesn’t bring in the expected profits but shows potential for improvement.

However, in the nonprofit world, taking risks is often frowned upon. Big, bold ideas for fundraising are frequently abandoned for fear that they won’t produce immediate results. Creative minds are stifled, as even one failed fundraiser could jeopardize support for the entire nonprofit.

This kind of thinking not only limits fundraising potential but also discourages great minds from joining nonprofits.

Profit
Donations to charities are gifts, and at most, donors may receive a branded notepad or address labels in return. The satisfaction of contributing to a worthy cause should be enough to motivate continued support (and the tax breaks help too).

For-profit businesses, on the other hand, can invest your dollars, generate substantial returns, and even pay you back. Everyone makes money.

Charities are unable to participate in the market and reward donors in the same way for-profit companies can. This eliminates a potential source of capital that could be tapped into.

We Can Be the Change

Changing the way we perceive the nonprofit sector starts with each of us. It’s time to let go of the outdated belief that nonprofit workers deserve only minimal compensation. Nonprofits need to be able to spend strategically to earn big returns on their investments. They need to scale at a higher level and offer competitive wages to attract the best employees.

At the International Fellowship of Christians and Jews (IFCJ), President Yael Eckstein understands the importance of compensation. She is dedicated to elevating the organization and its mission by ensuring that her team is paid in accordance with their experience and contributions.

According to Yael Eckstein: “Salary, benefits, and incentives motivate talented and experienced professionals. At The Fellowship we have worked hard to foster a meritocracy where outstanding employees can be appropriately rewarded for their contribution to our organization’s mission while staying within reason of industry standards. Our compensation is reviewed by an outside firm and deemed ‘reasonable’ based on similar roles, positions, and size of organization.”

In 2021, The Fellowship raised over $200 million, becoming the largest provider of humanitarian aid in Israel. That year alone, it supported more than 2 million Jews, proving that Eckstein’s approach works. It’s possible to do significant good on a large scale and still be fairly compensated for it.

Produced in association with The International Fellowship of Christians and Jews (IFCJ).