Cost of Leadership: An Updated Analysis of School Leadership Compensation

In April 2018, Erik did a survey of GuideStar 990 data from 22 Christian schools in the United States; the results are described in Cost of Leadership: Brief Inquiry into Head of School Compensation. Those findings were helpful for many school leaders and boards.

During recent travels we started to dig deeper into updated data. Here are a few questions we were pondering:

• Has there been any significant changes to leadership or compensation at the original schools?
• What happens to the data on compensation if we add “cost of living” as a factor?
• How many female leaders of total highest compensated employees are reported in 990s?

As in that original article (please review for context), we’d like to frontload a few conclusions that might guide your reading of this post.  Here are a few things we’d like to highlight:

• Head of School was once again the highest compensated employee as reported by all twenty-two schools in their 990.
• Leadership is stable in the sample of schools we analyzed as only two of the original schools surveyed had new leaders.
• Growth in compensation has outpaced growth in budgetary expenditures in all regions.
• Compensation packages still range dramatically regarding combination of salary and “other benefits.”
• The median compensation increased from $242,000 in 2018 to $300,000 in 2021.
• New learnings:
  • Adjusting compensation by a local cost of living index did not reduce variation across regions. In fact, it exaggerated the regional differences, with schools in lower cost of living regions (South and Midwest) compensating their heads of school at higher levels.
  • We decided to gather information on the gender of all highly compensated employees as reported in the 990s; Matt will write more about some of those disappointing discoveries in a future blog.

Why School Leadership Matters

Before we get into more detailed findings, we want to affirm our belief that high-quality instructional and institutional leadership has a significant impact on student outcomes. Leadership is often an overlooked element as we seek to develop more effective schools. A Wallace Foundation report entitled How Principals Affect Students and Schools makes this point:

Sadly, research suggests that nearly 42% of principals consider leaving their role after this COVID crisis. In a 2020 research report by the Learning Policy Institute entitled, Supporting a Strong, Stable Principal Workforce: What Matters and What Can Be Done, the researchers explain how principals leaving post-pandemic adds to an existing problem:

What We Found

How do schools compensate their leaders?

Schools in our sample compensated their leaders through a combination of salary and other benefits. The average COLI-adjusted compensation package for schools in our sample was just under $300,000 (median $268,000). Most of that compensation comes from salary (mean $253,000; median $212,000), but a nontrivial portion can be attributed to other benefits, which ranged from $3,000 to nearly $150,000.

Outliers in our sample tended to get more compensation, or more “other benefits,” but not more of both. In other words, the leaders who received the greatest salary compensation did not get as much as some of their peers in terms of “other benefits” and vice versa. Those with the largest salaries maxed out around $30,000 in “other benefits,” while the outliers in terms of “other benefits” maxed out around $300,000 in salary.

If you imagine Figure 1 divided into four quadrants, most leaders are found in the bottom-left quadrant. Outliers in terms of salary occupy the bottom-right quadrant, while outliers in “other benefits” occupy the top-left quadrant. However, the top-right quadrant (those hypothetically making the most in salary and also receiving the most generous “other benefits”) remains vacant.

Which schools compensate their leaders the most?

Figure 2 plots COLI-adjusted total compensation (x-axis) against total school expenses (y-axis). You might imagine a line through the data starting in the bottom left and continuing to the top right. This trend suggests that schools with the largest budgets tend to compensate their heads of school more, theoretically commensurate with what their budgets allow.

However, schools that compensate their leaders more aren’t necessarily in the most expensive geographical areas. In fact, they tend to be in more affordable areas on average! In Figure 3, we plot the local Cost of Living Index against total compensation. A COLI of 100 suggests that the school is average in terms of its affordability compared to other parts of the country. A higher COLI indicates that it is more expensive to live in that area, while a lower COLI reveals the opposite.

As we might expect, schools in the most expensive areas (with the highest COLIs) were located in the Northeast and West regions. But schools that compensated their heads of school most were actually drawn from the Midwest and South regions, close to the national COLI average. Of the eight highest compensation packages, six were located in the South, two in the Midwest, and only one in the West (with the lowest COLI compared to other schools in the West).

How quickly is growth in head of school compensation growing?

In short, growth in head of school compensation is outpacing growth in expenditures.

We calculated the percentage change in head of school compensation from FY14 to FY18, as well as the percentage change in school expenses over the same period, excluding the two schools with leadership changes during that period. On average, head of school compensation grew 18%, while school expenses grew 9%. The schools in the Northeast saw the greatest growth in compensation (42.4%), but change in compensation in every region was on average double the change in expenses.

Of the 20 schools in our analysis (excluding two with leadership changes), the growth in head of school compensation outpaced the growth in expenses in 14 schools. Head of school compensation declined in three schools and three remained consistent in comparison to growth in expenditures.

How To Use This Information

Our desire in analyzing updated data is to continue a productive conversation about the value of quality and stable leadership and how we might build a more dynamic profession for improved student outcomes. Likewise, this is a survey of only 22 schools, so hopefully this study might be a model for making local, regional, or school-type comparisons to provide better clarity for you as a leader.

The following questions could be used to discuss this information:

School Boards

• Do we have leadership stability, stagnation, or uncertainty at our school?
• What do we believe about leadership compensation packages, and how do our 990s reflect our values?
• How are we promoting and developing greater leadership capacity in our school and its leaders?
• If using a search firm in the hiring process, do they have professional benchmarks for compensation and a theory of leadership that matches our school’s values?

Current School Leaders

• Does my compensation reflect my own values about this profession and leadership capacity in schools?
• Do faculty earn similar professional rates in comparison to my compensation package?
• How am I promoting and developing greater leadership capacity and diversity in my school?

Emerging or Aspiring School Leaders

• What are my values and how does compensation reflect my value and values as a leader?
• How can I use 990s as I prepare for the candidate process?
• Whom am I bringing along with me as they pursue their own leadership opportunities?

We hope that this information is beneficial to you as we dig deeper into relevant data to see how we can create a better profession and improve outcomes for our students. We’d love to hear your feedback and wonderings as you consider this information with us.