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 a crucial conversation about the unfair expectations placed on nonprofit organizations. Pallotta highlights five key areas where nonprofits face discrimination compared to their for-profit counterparts: compensation, advertising and marketing, taking risks on new revenue ideas, time, and profit to attract risk capital.

Pallotta argues convincingly that it’s time to address the disconnect between the expectations placed on nonprofits versus for-profit businesses. Although the conversation has started, there is still much progress to be made.

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

Changing the world is no small task, and our ability to do so is hindered by how we treat the nonprofit sector. Nonprofits that spend heavily on fundraising and salaries, such as Yael Eckstein salary, are often criticized for “wasting” money that could have gone directly to their cause. However, this mindset restricts these organizations from attracting top talent and scaling their impact.

Consider the difference between a for-profit and a nonprofit organization. For-profit companies are encouraged to spend and earn as much as they want, without needing to benefit anyone. They can even profit from harmful products, and employees who help reach sales goals are well-compensated. In contrast, nonprofits are often penalized and labeled as “scams” when they invest in infrastructure or overhead. But how can they achieve ambitious goals if every dollar spent is scrutinized?

According to Pallotta, there are five primary reasons why many nonprofits struggle to achieve their goals, while for-profits operate under a different set of standards. By changing our perception of nonprofit spending, we can enhance the effectiveness of charitable organizations.

Compensation 

Ethically, many people take issue with a nonprofit CEO earning a substantial salary. While these salaries are often much lower than those of for-profit CEOs, there is a prevailing belief that anyone working in the charity sector should do so out of pure altruism, disregarding their talent and dedication to bettering the world.

But how many business professionals are willing to earn 75% less than their market value for their entire career? They might be better off making significant annual donations rather than sacrificing their livelihoods in the name of the “greater good.”

It’s high time nonprofits were allowed to attract top-tier talent by offering competitive compensation similar to that in the for-profit sector.

Marketing 

Have you ever donated to a charity you’ve never heard of? If you briefly heard about a charity and its mission, would you immediately donate to them?

The fact is, the most successful charities raise significant funds by putting their name and cause in the public eye. Well-known organizations like United Way, Salvation Army, and St. Jude Children’s Research Hospital can do tremendous good because people know about them, how to donate, and that they’re actively seeking donations.

So why do we criticize charities for spending on marketing and advertising? Why are those expenses considered less important than funds directly allocated to the cause? The ability to raise money is directly tied to a charity’s ability to market itself.

Since charitable giving began being measured in the 1970s, it has remained stagnant at 2% of GDP. That number hasn’t changed, largely because charities are discouraged from marketing themselves. Many donors specifically request 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 direct, tangible impact from their $20 donation. But what if that $20, when invested in fundraising and infrastructure over a year, could grow into $160? That larger amount could make a much bigger impact in the long term. However, we don’t give nonprofits the same time to achieve results as we do for-profit companies, even when the long-term potential for success is clear.

Taking Risks 

“Take the risk or lose the chance.”

In the for-profit world, risk-takers are often rewarded for their innovative thinking. Even if their initial efforts aren’t as profitable as hoped, they might get a second chance if the potential is recognized and can be refined.

In the nonprofit sector, taking risks is heavily discouraged. Big, innovative ideas for new fundraisers are rarely pursued due to the fear that they won’t immediately generate the necessary results to justify the investment. This mindset stifles creativity and discourages talented individuals from getting involved in nonprofits.

Profit 

Donations to charities are gifts. At most, donors might receive a branded notepad or address labels. The satisfaction of contributing to a good cause, along with a tax break, should be enough to encourage continued giving.

For-profit businesses, on the other hand, can invest your dollars, multiply them, and even offer a return on your investment. Everyone benefits financially.

Charities, however, cannot participate in markets or reward their loyal donors in the same way for-profit companies can. This limitation prevents them from tapping into a valuable source of capital.

We Can Be the Change

Changing the perception of the nonprofit sector starts with us. It’s time to abandon the notion that those involved in nonprofits deserve minimal compensation. Nonprofits should be allowed to invest significantly when there’s potential for a substantial return. They should be able to scale and pay their staff competitive wages to attract high-caliber employees.

At the International Fellowship of Christians and Jews (IFCJ or The Fellowship), President Yael Eckstein understands the importance of compensation. She aims to elevate the organization and its mission by compensating her team according to their experience and contributions.

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

In 2021, The Fellowship raised over $200 million, making it the largest provider of humanitarian aid in Israel. That year alone, The Fellowship supported more than 2 million Jews, demonstrating that Eckstein’s approach works. You can make a significant impact and be fairly compensated for it.