The non-profit sector can often find it difficult to compete on employee compensation levels with the for-profit and public sectors. A recent US study examined the challenges that the non-profit sector faces in attracting and retaining Millennials by analysing the compensation levels, perceptions of equitable compensation, and sector-switching intentions among Millennial workers. The results indicate that compensation was a factor in sector-switching intentions for some types of Millennials but not for all.
Key Topics: Millennials; Non-profit sector; Compensation; Turnover
Title of Reviewed Article: Money Talks or Millennials Walk: The Effect of Compensation on Nonprofit Millennial Workers Sector-Switching Intentions
Researchers: Jasmine McGinnis Johnson (The George Washington University) and Eddy S. Ng (Dalhousie University).
Publication: Review of Public Personnel Administration, 2016, Vol. 36 No. 3, pp. 283-305.
Setting the Scene
In the face of competition from the public and private sectors, one of the primary challenges for non-profit sector companies is the attraction and retention of key talent (Clerkin & Coggburn, 2012; Ng, Gossett, & Winter, 2016). With Millennials (born 1980-1995) continuing to enter the workforce, this is a key demographic for employment in the non-profit sector. Research has suggested that Millennials have different attitudes and values towards work than previous generations (e.g. Lyons, Ng, & Schweitzer, 2014).
Millennials have been shown to be highly extrinsic reward focused (Twenge & Kasser, 2013), as well as wanting greater meaning and fulfilment in their work than previous generations (e.g., Ng, Schweitzer, & Lyons, 2010). These findings raise both opportunities and concerns for non-profit companies as they can offer meaningful work but often lower compensation than other sectors (Ng & Gossett, 2013). Additionally, Millennials have been shown to change jobs and companies much more frequently that previous generations (e.g. Lyons, Schweitzer, & Ng, 2015), which suggests that they may be more likely to move out of non-profit sector work if they are not satisfied with aspects of the work.
This study looks to examine the relationship between sector switching and compensation levels amongst Millennial nonprofit workers, and the researchers examined a number of research questions:
Hypothesis 1 - “As pay increases, Millennial workers will be less likely to state their intentions to leave the nonprofit sector.”
Hypothesis 2a - “Millennial nonprofit workers who perceive their pay as equitable to their nonprofit peers (internal equity) are less likely to state their intentions to leave nonprofit work.”
Hypothesis 2b - “Millennial nonprofit workers who perceive their pay as inequitable to their peers across all sectors (external equity) are more likely to state their intentions to leave nonprofit work.”
Hypothesis 3 - “As pay increases, Millennial managers will be less likely to state their intentions to leave the nonprofit sector.”
Hypothesis 4 - “Millennial managers who perceive their pay as equitable to their peers in nonprofit and other sectors are less likely to state their intentions to leave nonprofit work.”
How the research was conducted
Data was collected from 617 Millennials working in the non-profit sector via a 2011 survey conducted by the Young Nonprofit Professionals Network (YNPN), a US association providing professional development and support to members.
The researchers examined ‘Intentions to switch sector’, ‘Pay level’, and ‘Perceptions of equitable pay’. In addition, the researchers controlled for a number of demographic variables, namely gender, race, education level, and years of work experience.
Key Research Findings
The majority of participants earned between $25,000 and $49,000, with 21% earning $25,000 - $34,999 and 43% of participants earning $35,000 - $49,999.
52% of participants indicated that they thought their compensation was competitive within the non-profit sector, while 11% indicated that they thought their compensation was competitive with peers in any sector.
67% of participants indicated that they might switch sectors at some point in the future.
Those with higher educational qualifications were found to be more likely to switch sector, while those without a college degree were much less likely to switch sector.
Generally, there was no difference in sector switching intentions at various compensation levels, and so Hypothesis 1 was rejected. However, for Millennial managers, as their compensation increases, the results indicated that they are less likely to switch to another sector, thus supporting Hypothesis 3.
Perceptions of compensation equity with peers in the non-profit sector and with those in other sectors was not found to have a significant effect on intentions to switch sector, therefore both Hypothesis 2a and 2b were rejected. This was also found to be the case for Millennial managers, thus Hypothesis 4 was not supported.
In spite of research suggesting that Millennials have a strong preference for extrinsic rewards (Twenge & Kasser, 2013), the results of this study indicate that, for the most part, compensation is not a primary factor for Millennials in relation to intention to leave the non-profit sector. In fact, there was little evidence found to indicate that Millennial non-profit workers will switch sectors when presented with more attractive pay from other sectors.
There were however two notable exceptions to this generally finding, namely that both Millennial managers and those with higher education levels were more sensitive to compensation levels and they are more likely to remain in non-profit sector work when they receive higher compensation. This may be reflective of a need for achievement that can come with greater educational attainment (Kim & Lee, 2007; Ng et al., 2010). Additionally, for Millennial managers, when they perceive they are adequately compensated, it may be that they become more attached to the non-profit sector over time, having had more time to develop meaningfulness in non-profit work.
Organizational and Reward Implications
The results suggest, that at least for many Millennials, the non-profit sector still holds a ‘donative labor’ appeal, whereby employees in non-profit companies forgo potentially higher compensation elsewhere in exchange for greater intrinsic rewards such as job satisfaction and fulfilment from working in the service of others. From a non-profit sector perspective this is certainly one of the key appeals for many who work in the sector and the findings of this study indicate that companies in this sector should continue to promote the meaningful work that they do in recruiting and retaining Millennials.
It should not be ignored however that the study found that those in more senior positions and with higher education levels are sensitive to compensation. While non-profit sector companies may not be able to compete with the for-profit and public sectors on compensation levels they should be mindful of keeping compensation, particularly for these key groups, above an acceptable threshold. Companies might also consider facilitating greater and development and promotion opportunities to cater to the advancement needs of Millennials.
This study gives valuable further insight into the effect of compensation on the career decision making of Millennials in the non-profit sector, and demonstrates that Millennials may not be as extrinsically reward focused as previously thought. It would be interesting to see future research review the questions raised in this study across multiple generational groups to further understand the extent to which this study’s findings are unique to Millennials.
Source Article: McGinnis Johnson, J., & Ng, E. S. (2016) Money Talks or Millennials Walk: The Effect of Compensation on Nonprofit Millennial Workers Sector-Switching Intentions. Review of Public Personnel Administration, 36(3), 283-305.
Published by: Sage
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