Last week we established the foundation: nonprofit employees are operating under a psychological contract that is under real pressure, and leaders who stay silent about compensation during hard times almost always make things worse.
This week we move into the harder question: What does fair actually mean when it comes to compensation, and how do leaders know whether they are meeting that standard?
The honest answer is that most organizations are working with an incomplete picture of what fairness requires. And that gap is costing them more trust than they realize.
The Problem With How Most Organizations Think About Fairness
For many nonprofit leaders, compensation fairness begins and ends with one question: Are we paying at market?
Market benchmarking matters. It is a necessary input to serious compensation decisions. But it is not the same thing as fairness. Organizations that conflate the two can find themselves confused when employees who are paid at or above market still feel unfairly treated—or when a well-intentioned salary adjustment fails to repair trust.
Compensation fairness operates across multiple dimensions simultaneously, and market positioning addresses only one of them.
Benchmarking Tells You Where the Market Is — Not Where You Have to Be
Benchmarking tells you what comparable organizations are paying for comparable roles. It does not determine where your organization should position itself within that range.
That is a strategic decision shaped by legitimate factors: how competitive you need to be for the talent your mission requires, what you offer beyond salary—mission alignment, flexibility, development opportunities, location—and what your budget can responsibly sustain while protecting the programs and people you exist to serve.
Paying below the midpoint of a market range is not inherently unfair. Organizations that are transparent about where they are, why they have made that choice, and what they offer in exchange can attract and retain employees who make an informed decision that the full package works for them.
What corrodes trust is opacity, inconsistency, or attracting employees under one set of expectations and quietly changing the terms.
The fairness obligation is not to pay the most. It is to be honest about where you are, deliberate about why, and consistent enough that employees can trust the terms of the relationship.
The Three Dimensions of Compensation Fairness
Organizational justice research points to three distinct dimensions of fairness. Each matters, and weakness in any one can undermine trust even when the others are strong.
Distributive fairness is about outcomes. Do people feel they are receiving what they deserve relative to their contributions and their colleagues? This is the dimension benchmarking most directly addresses. But employees can sometimes accept outcomes they disagree with without losing trust—provided the other dimensions of fairness are intact.
Procedural fairness is about process. Were the criteria clear and consistently applied? Did employees have a meaningful opportunity to provide input? Is the process applied consistently across the organization? Research by Jason Colquitt at the University of Georgia has shown that procedural fairness can be a powerful predictor of outcomes including employee commitment and trust in leadership. People care enormously about how decisions get made, not just what the decisions are.
Interactional fairness is about how people are treated. Were employees treated with respect and dignity? Were they given an honest explanation for the decision? Did leadership make space for questions? A sound process delivered with opacity or condescension can still produce a deep sense of unfairness. A difficult message delivered with genuine care and clear explanation can preserve trust even when the outcome disappoints.
The Insight That Changes the Conversation
The most important insight is how these dimensions interact.
Joel Brockner at Columbia Business School has studied what is known as the fair process effect: when procedural and interactional fairness are high, people tolerate outcomes they disagree with far better than they otherwise would.
For nonprofit leaders navigating constrained budgets, that matters.
Employees who understand how a decision was made, feel they had a voice, and are treated with dignity when it is communicated are more likely to maintain trust even when the outcome is not what they hoped for.
This does not mean organizations can proceduralize their way out of paying people unfairly. Fair pay remains a genuine obligation. But during periods of real constraint, leaders can protect trust by getting the process and the interaction right.
What This Looks Like in Practice
This does not necessarily require new programs or significant resources. It requires deliberate attention to four things.
Make the compensation philosophy visible. Employees should understand how compensation decisions get made: what the organization uses for benchmarking, where it aims to position itself in the market and why, how individual decisions are made within a range, and how often the approach is reviewed. The answers do not have to be perfect. They have to be honest and accessible.
Create voice before decisions are finalized. Procedural fairness does not mean employees set their own salaries. It means they have meaningful opportunities to provide input through performance conversations, salary discussions, or structured feedback processes—and can see that their input was genuinely considered.
Explain the reasoning, not just the result. When communicating raises, adjustments, or freezes, explain what drove the decision and how it fits the organization’s broader approach. Too often organizations communicate the what without the why, leaving employees to construct their own explanations.
Be consistent. Consistency does not mean treating everyone identically. It means applying the same criteria, process, and standards of transparency across the organization.
A Quick Diagnostic
Before moving to next week’s question—how to know what employees are actually experiencing—consider where your organization stands.
Where are you strongest: the fairness of your compensation outcomes, the clarity and consistency of your process, or the quality of how decisions are communicated? Where is the biggest gap between what you intend and what employees are likely experiencing? And if an employee asked you today to explain how compensation decisions get made, how confident are you in your answer?
These questions do not require a formal assessment. They require honesty. And often, they surface something worth addressing because the gap between thoughtful intent and clear communication is larger than leaders assume.
What Comes Next
Next week we turn to one of the most important—and most underused—leadership practices in this space: how to know what employees are actually thinking and experiencing before it shows up in attrition or disengagement.
Because even the most carefully designed compensation philosophy will miss the mark if it is built on assumptions about what employees value rather than honest insight into what they are experiencing.
Adam Francis-Maurer is the CEO and Co-Founder of Positively Partners, an HR consulting and outsourcing firm that helps mission-driven organizations build workplaces where people can do their best work. This series is developed with the help of the talented voices on the Positively Partners team. If this series is resonating, share it with a leader who needs it and follow along as it continues.
