The Puzzle: Blog

Competition for Talent

Over the past twenty years, the job of an independent school Head of School has become increasingly more complex and demanding. As a result, there has been and continues to be keen competition for talented individuals who can successfully and effectively lead independent school communities. In this highly competitive market for talent, Heads’ compensation has increased significantly both in terms of total dollar amount and variety of compensation options. What use to be a contract or agreement for base salary and benefits, perhaps including school housing, a school car, tuition remission, and/or a club membership, has expanded to include bonuses, deferred compensation arrangements, housing allowances, life insurance, and even college tuition assistance.

IRS Form 990 Protocol

Since 2007, there also has been generally required reporting of Head of School compensation through schools’ IRS Form 990 annual filing to ensure that Boards of independent schools, as well as other non-profits, offer executive compensation that is reasonable and not excessive. The current version of the IRS Form 990 includes the following question that outlines the process schools should use to assess and set compensation for certain employees: Did the process for determining compensation of the following persons include a review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision?

Head of School Compensation Benchmarking

An organization’s process for obtaining comparative data on total compensation typically involves hiring an independent consultant to conduct a survey focusing on Head of Schools’ total compensation at similar schools (type, enrollment, and operating budget) on a national basis, as well as in a specific comparable markets, regions, and/or index school groups. This comparative survey data is then typically presented to the Board’s Compensation (or Executive) Committee, which makes compensation recommendations to the full Board, based in part on the data and before making a recommendation to the full Board. The independent consultant typically remains available to discuss compensation with the Compensation Committee (or Executive Committee) and/or the full Board, as requested. The ultimate negotiations and decision regarding compensation are made by the Board.

Benefits of Benchmarking for the Board

• The Board’s decision regarding Head’s compensation is based on data, not guesswork.
• The benchmarking process takes the pressure off the Board Chair and the Compensation Committee Chair, who might be newer on the Board and not involved in the previous discussions and decisions regarding the Head’s compensation.
• The process helps ensure that the school follows IRS requirements and best practices with respect to negotiating and setting Head of School compensation.

Benefits of Benchmarking Process for Head of School

• While the independent compensation consultant is hired by and works for the Board, the process can include an interview with the Head of School to gather their thoughts about personal compensation priorities, such as paying for children’s education or increasing retirement savings.
• The benchmarking process sends the Head of School the positive message that their compensation is a priority for the Board.
• The process reassures the Head of School that the Board is following proper protocol by making a decision based on comparable data, not guesswork.

If you would like more information regarding Carney Sandoe and Associates’ Head of School Compensation Benchmarking services, please contact Senior Consultant Scott Nelson at scott.nelson@carneysandoe.com

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