Recently a fellow association executive asked me what a fair salary may be for someone in his position. It occurred to me that managing associations has a lot of variables and because of that it’s almost impossible to pinpoint an exact formula. I include a simplified formula further down in this blog but its just a guide for small to medium-sized organizations.
The big advantage in calculations is documented history, your 990 tax forms. It is my opinion that the biggest part of this equation is overall revenue. It may sound elementary but if your organization is averaging $500,000 of annual revenue, you are probably not paying your Association Executive $300,000. That would be fiscally irresponsible and certainly a big red flag when donors, supporters and sponsors begin trolling through your 990 forms.
**Although every association budgets differently most aim to be revenue neutral. Thus an executive salary of this size would be 60% of their annual net revenue (in the above example) and cripple your bottom-line..
Many associations have written detailed policies and activate compensation committees to determine what they think may be necessary for their organization. The American Society of Association Executives did some detailed analysis on this topic as they compared 70 different association pay-scales. You can buy this on their website for $380 but in the end, you are still comparing apples to oranges as the scales change based on geography, experience, organization size, and stage of company. By stage, the longer you’ve been around the easier it is to project a proper salary budget. Some associations also wrongly account for age and gender, which is obviously discriminatory if proven but it happens none the less.
I have my own simplified salary schedule based on percentages. My schedule applies to all states and all trade associations. It ensures you are attracting the best talent but keeping your salary/ benefits within an acceptable range. Keeping in mind special circumstances, my schedule is based on what I have seen in the market by reviewing hundreds of association financial profiles.
It is my belief that overall association salaries should be roughly 45% of the annual budget average of the past three years of financial performance. The reason why we incorporate the last three years is because your revenues can change based on additional programs, sponsors and membership changes. Thus your entire budget should include the actual's of your last three years. So in simple math terms:
2014 - $500,000 revenue
2015 - $450,000 revenue
2016 - $550,000 revenue
The average you are working with for 2017 is $500,000 revenue (45% of that is $225,000)
Remember $225,000 is ALL employee salaries and benefits. Out of that $225,000, 40% of that should be the compensation for your top association executive.
You can also derive this figure by simply taking 18% of $500,000.
***The 18% formula applies for associations over $500,000 or less
I would then minus 1 % point for every $100,000 of revenue up to 1.5 million
For example:
17% ED salary for a $600,000 budget
16%ED salary for a $700,000 budget etc
Once you reach the range of 1.5 million then I would strongly consider a formula that is more fitting for a larger organization.
What you should also consider is raises should be based on performance measurements. Also you can include financial incentives based on increases in membership, sponsorship's and programs led by your association executive.