CEO's making market-wages (100k+) "working for charity" frustrates me. At that wage, they aren't charity workers at all. Every dollar they accept is someone remaining underfed, while the CEO gets resume-flair.
Protip: Charity's do not need a CEO in the sense that a company pushing a product to market needs a CEO to manage various business units. They need someone who cares about the net impact to the impoverished at reasonable expense to themselves.
I think in many cases the right candidate for a non profit is someone who cares deeply enough to take a pay cut to work there.
1. Someone making $100k who is able to bring in and distribute $3m in donations per year
2. Someone making $300k who is able to bring in and distribute $5m in donations per year
There's real value to having someone who knows what they're doing in the top position, and that won't always be the person willing to take a pay cut.
> someone who cares deeply enough to take a pay cut to work there.
I'm not saying there isn't any excessive pay in some charities. But the management needs of an organization are not determined by the goods or services being supplied by that organization so much as by the complexity of the organization. It's not somehow fundamentally easier to manage a charity than it is a product company of similar scale and size.
Now, there can be unwarranted complexity of course, but some of this is a natural outgrowth of scaling and reach. So just like in private sector, charity organizations have a huge range of needs. Running MSF is very different than running a local independent food bank.
From my limited personal experience, charity sector executives tend to be paid a fair bit less than they would in private sector work, but still at a reasonable scale for experience an skills.
This is exactly what you want: someone capable of doing the work well, who demonstrably cares enough about it that it as made a financial impact on them. Otherwise you are effectively suggesting that it is better for the organization to be inefficient and waste its donations, so long as the people heading it are also "donating" their time. You can hope for somebody good who is financially secure and doesn't need the salary, but it would be foolish to count on.
There is one other issue, which is the question of whether or not larger scale charity organizations are (or can be) more efficient at delivering meaningful impact than smaller, localized one. That seems like a good target for some proper research. If the answer is that larger organizations are better at it, then clearly there is a benefit to having them run well. And caring about the impact is nowhere near enough qualification to do that.
This is empirically false.
Companies fail far more frequently than similar charities do. The core reason for this is companies operate on a much smaller margins. A charity that distributed 90% of it’s donations last year could distribute 80% if it’s donations this year if they collect half as much. Combined with often significant endowments and failure is rarely a major concern. Companies on the other hand are almost never in those situations.
There are certainly issues with inefficiency in charities stemming from the fact they don't have the same market pressures on them as private sector companies do (or at least, not as much). However, this doesn't have anything to do with the difficultly of managing complexity in large organizations.
Or were you objecting to the hand-waving about efficiency? I agree measuring impact of charities are difficult but what else would you look at? Executive pay rate is obviously a silly one without extra context. Year-over-year changes are good, but I at least alluded to that.
I guess I don't know quite what you are objecting to.
While it is true for the reasons you mention that a badly managed charity may last much longer than a badly managed company, that has no impact at all on my statement. It is not somehow easier to manage the charity, it is just less immediate that the negative consequences impact you.
But note, I'm not suggesting we support badly managed charities. I'm saying that to manage it well requires similar skill to that of a similarly scaled private sector company, and you will have to pay for those skills.
This is entirely separable from the issue of evaluating whether or not it is being effectively managed.
Examples include that charity CEOs aren't required to have the same skills as private CEOs, companies failing at larger rates, companies having smaller margins, etc. You're making easily falsifiable claims without backing up your assertions.
Just based on the fact that it's pretty easy to start a business compared to a charity I'd say the average soil requirement for a functioning charity is as high if not higher than a private entity since you can sell your services to make more money, you typically don't have the income incentive to a large portion of the population, you have an unstable workforce of non-paid resources, and unlike an established business you're in constant fundraising mode. I'd say it's more akin to operating mode of an established company with the income model of a startup.
On top of this you need someone willing to spend either time or money to hire a professional to navigate the legal system. It's not a easy as just trying to be good. Our church for example can't be used as a warming center in the winter due to liveability requirements, we had to work with our local city government who has a full time paid grant writer to get funding to cover just the building resources and we volunteer the staffing for the center.
Then there's logistics. Any professional organization needs to know what it has and in what quantity to be able to effectively distribute those resources. That requires software, logistics expertise, and sometimes physical hardware. All of these are professional roles in a company of any real size.
I think you may be understating the difficulty of the task compared to private enterprise. This is why I'm asking for references, I did a cursory look and didn't find anything directly for what you stated, perhaps you're aware of some information resources I'm not?
It's a tough question as they may just be redirecting money away from charities with less marketing spend.
It depends on the overall efficiency, doesn't it?
I'm not saying this stuff is easy to evaluate. I'm saying there are vastly more important qualifications than "I care about this work", and if we have decided large charities are effective then clearly we want competent people running them.
I'm perfectly ok with the answer being: "no, the best bet is very small, very local, entirely volunteer organizations".
The worst case to me seems to be poorly managed large organizations, which will then just bleed resources at every level.
They've already taken a 75% paycut, at a certain point you're not going to attract the talent necessary to do great work. The difference between an A-player and a C-player is vast, and sometimes you need to compensate higher to attract the A-players that will have a transformative impact on the charity.
Another example was the guy that built a successful baseball team from low paid players (what was the book called?) which showed low pay did not mean low performance in a discipline where outcomes could be measured (much easier than CEO, so you would expect better correlation of pay with performance for sports).
Edit: Moneyball (baseball is as foreign to me as rugby is to Americans?).
You're comparing executive pay, which isn't based on verifiable public data. It's not the same thing.
While your assertion that pay doesn't correlate to performance is correct that's based on the idea that the wrong tools and metrics are being used to measure CEO performance. At a certain point you're not going to attract talented people for the task with 25% of the pay unless they've already made their money. There aren't a lot of those types of executives with this experience available unfortunately.
On the other hand a small non-profit with a half a dozen employees probably has greater need of a competent accountant.
My experience with non-profits (granted, not 'pro' since I wasn't being paid) is that organizations that limit their capacity to amateurs and volunteers also significantly limit their impact.
Are there bad methods with good missions? Yes. Are there bad missions with good methods? Yes (most for-profit companies fit here).
Furthermore, CEO salary is one of the most dismal metrics. UNICEF USA's CEO is often in chain-letter-type posts about CEO salary, yet UNICEF USA raises gobs of money for highly successful programs saving millions of lives per year in developing countries. UNICEF vaccinates somewhere near half of the worlds children. Half.
Somehow, hiring talent seems over-rated. This seems related to "efficiency" which is % of dollar going to "programming". Fine salaries paid to employees is cash they cannot hand out to homeless. I get it.
It's usually not those trade-offs that reduce "efficiency". There's a ton misunderstanding about what "programming" is. If a company installs a landing strip to fly in 10 years of supplies, have they spent that money on "programming" or "overhead"?
The worst offenders, in my opinion, are the tiniest hobby non-profits that do virtually nothing. If I fly to the third world and install a well for some people, have I done real good? Perhaps! If I hand out food once a year around thanksgiving, have I? yes! But that labor, effort, and money may have been better invested in policy changes or continuing-support programs. In almost all cases I've seen, the tiny non-profits bemoan the cost of doing this compared to the larger non-profits. Why are some programs more expensive when implemented at a larger non-profit? The main reason is they include this "extra" work such as publicity, policy, continuing support, and yes, hiring good people so they can do better next year with more money.
Any business-minded person will tell you that you must reinvest in your organization to do more. What that more is might be up for debate (the mission), but to avoid self-investment is to have a bad method.