A recent Bloomberg article highlighting concerns about excesses in executive pay at non-profits (in this case, primarily theatres) got me thinking ...
The following excerpt from the article highlights what I think is an important angle in the issue surrounding non-profit compensation:
Paying competitively helps theaters attract and retain administrators capable of managing complex businesses, fundraising, and, as they outgrow their facilities, empire building.
Some public companies with comparable revenue pay their chief executives more than $1 million a year. Yet compensation that's modest by comparison can still rankle donors.
``Contributors are clear that when they see salaries over $200,000, they freak out,'' said Ken Berger, president of Mahwah, New Jersey-based Charity Navigator, which rates non-profits on growth and efficiency. ``They associate charity with a vow of poverty.''
To be clear, I am not defending excess compensation for any organization's executives, whether for- or not-for-profit. A non-profit agency with overpaid executives is not likely to attract my support, or my charitable dollars. But I see an unfortunate trend being played out here.
The non-profit world is a diverse one, made up of a wide range of very different kinds of organizations, from foundations to trade associations, from cultural and arts institutions to healthcare and social service providers. This makes it difficult and risky to draw generalizations. Nevertheless, here I go.
Within many (not all) non-profit sectors, there is seems to be an unspoken expectation that pay will and must be set at below-market levels. And I'm not just talking about executives, I'm speaking to all levels of employees. Sometimes this expectation runs hand-in-hand with the imperative to hold down administrative costs, sometimes it is the assumption underlying the public funding provided for ongoing operation. As the HR managers supporting these organizations will tell you, this presents a real challenge to the attraction, retention and motivation of qualified employees.
This leads directly to another dilemma, and that is a reluctance to hold non-profit employees accountable - in the same way a for-profit business would - for tangible results and accomplishments. Many non-profits struggle with the concept that dispensing candid performance feedback and direction to employees is somehow at odds with their charitable mission. Under these conditions, the default becomes to appreciate that "people have their hearts in the right place" and to conclude that it is unreasonable to set high demands when we cannot deliver commensurate rewards. This is all wrong. Our non-profits, or at least the lion's share of them - are doing critical work. If we want to see them make genuine headway toward fulfilling their missions, we must ensure that they are positioned to attract and retain qualified staff, with competitive compensation levels and then we must ensure that employees at all levels of the organization are held accountable for results.
Administrative costs? Of course we want to keep them at a reasonable level. But to scrimp where we should be investing - in tools, in technology and (most importantly) in talent - is to miss the opportunity to drive real improvements and results for the clients and constituents we mean to serve through these institutions.
Competitive pay and accountability (either one without the other doesn't fly) is a combination we must insist on if we want high performance from non-profit organizations.