A while back, I was contacted by a journalist who was upset about CEO compensation for non-profit executives. He thought many of them made too much money, which he found especially galling since he thought they had cushy jobs.
Specifically, he said things like:
- “It’s not like they have shareholders!”
- “They don’t have to worry about competition!”
- “They shouldn’t expect to be paid well for their work – they are in a non-profit.”
I’ve written before about non-profit organizations and I serve on the boards of several right now. I also spent the first few years of my career in non-profits, first in the mental health sector and later in a social services agency as a fundraiser. But it’s really my board experience, including serving on or chairing several search committees for non-profit leaders, that has formed my views on the issue of compensation for non-profit executives.
First things first – I fully support the notion that non-profit CEO compensation should be transparent and should not create an undue burden on the budget. However, I think we also have to be realistic about the unusual, complex skill set required for success in this sector. In fact, I contend that it is probably a much more difficult job to run a $50 million non-profit than it is to run a $50 million private company. Here’s why:
- The non-profit has many more stakeholders; clients, foundations, board members, politicians, donors, customers, regulators – the list goes on and on. And they all expect to be listened to. Ask a non-profit CEO who tries to build a group home for disabled adults in a neighborhood if blowing off the local civic association is a good strategy. Or the local politicians, churches, newspapers, shop owners, etc.
- Non-profit boards are usually much more difficult to manage. Too often, board members want to reach into the organization and run things. Or maybe there is an indispensable, major donor who has lots of well-meaning but “way out there” ideas on strategy. Depending on the size of their annual gift, that idea may start to look good when money is tight.
- Corporate shareholders can easily monitor the performance of their investments – through earnings per share, stock price, etc. Non-profit shareholders (also known as donors) have a harder time understanding whether their investment is being used to the best possible advantage. Non-profit CEOs have to constantly think about ways to demonstrate impact.
- Leading an organization in a fishbowl can be tricky. The press reserves some of its most critical – and often mean-spirited – commentary for non-profit executives. They seem to draw a lot of attention when things don’t go exactly as planned.
- Companies in the private sector that compete with non-profits often have more capital to sink into marketing and advertising to attract customers. The Philadelphia Zoo and the Philadelphia Phillies are chasing the same patrons – but in a very different way.
I often have the chance to speak with people who are networking on their way to a new job. Sometimes they are senior-level executives who have made their mark (and their cash) in the for-profit sector and now want to “give back” by taking on a leadership role with a non-profit. It sounds good on paper, and it sometimes works, but they are usually shocked by the size of the challenges they find and the lack of resources in the non-profit world.
The non-profit sector is a critical part of our economy and society, often filling in the gaps in areas where a strictly commercial enterprise would fail. Let’s think about balancing the value they bring to the compensation their leaders receive.