Furthermore, organizations must reward great performance and this should be far more than your 3.5 to 4.5% typical annual raise. They argue raises should be as high as 12% for great work.
So what does the NPO do once again? First, average salaries are thousands of dollars less for most positions in comparison to the for-profit sector. Second, most donors and funders stipulate their money only go to programming and not on overhead. It is very common for you to find Windows 95 on 10 year old computers and one barely working flatbed scanner at an NPO. Third, unless you are a very large NPO, most are unable to spend any money at all at binding talent through leadership training or other programs. In the end, you have what the Stanford Social Innovation Review calls the "Nonprofit Starvation Cycle."
http://www.ssireview.org/articles/entry/the_nonprofit_starvation_cycle/"A vicious cycle is leaving nonprofits so hungry for decent infrastructure that they can barely function as organizations—let alone serve their beneficiaries. The cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs, and results in nonprofits’ misrepresenting their costs while skimping on vital systems—acts that feed funders’ skewed beliefs. To break the nonprofit starvation cycle, funders must take the lead."
Of course, most people who choose to enter the NPO field are willing to take a pay cut. I argue, if NPO's have missions to improve our social welfare and find cures for diseases, should they not have the talent and organizational infrastructure on par with for profit firms?