Non-profit Millionaires

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Did you hear that the CEO of the Boys and Girls Clubs of America made $1 million dollars in 2008?

A group of Republican senators, led by the Senate Finance Committee’s ranking member Sen. Chuck Grassley, R-Iowa, sent a letter…criticizing the non-profit organization’s use of tens of millions of dollars in federal funds that it receives every year.

[...] the letter specifically cited [CEO Roxanne] Spillett…for raking in $988,591 in total compensation in 2008, according to IRS filings.

That’s right.  A million dollars.  It seems pretty astounding that an organization dedicated to public service and opposed to distributing profits can get away with paying someone a million dollars, especially one that boasts on its website that its “efficient use of resources has won national recognition.”

I have to admit, I am empathetic to the idea of paying competitive salaries to non-profit executives.  The work is as hard, if not harder, than that of any other sector and you are forced to deal with its ambiguity of success.  With evidence-based funders and impact/efficiency critics (myself occasionally included)  questioning the difficult-to-measure outcomes of your efforts, it can seem pretty thankless.  Anyone not particularly keen on having their good intentions judged, or carrying any significant education debt, will undoubtedly consider if their efforts might be better compensated in the private sector.

And one should at least consider the scale of this organization.  BGCA operates over 4,000 clubs nationwide, with over 50,000 employees, and serves over 4 million kids each year.  Spillet is essentially paid $0.25 per kid – not a bad price to pay if she is able to successfully fulfill her mission: “To enable all young people, especially those who need us most, to reach their full potential as productive, caring, responsible citizens”

But a million dollars?

For argument’s sake, lets dig a little closer into the numbers:

[...] of Spillett’s total compensation, $360,774 was her base salary, which the organization said had not changed since 2006. She also received an “incentive based on performance” of $150,000 as well as benefits, expenses and contributions to deferred retirement plans totaling $477,817.

The numbers still seem shocking, but perhaps there is potential in “incentive based on performance.”  If folks in the non-profit world want to justify this kind of compensation, it seems to me the best way is to tie it to impact.
Its essentially what the private sector does when it buries the bulk of executive compensation in stock options.  Pay for outcomes, not just leadership.

The key is transparency.  Unfortunately, we have no idea what Spillet’s incentive was based on, but I’d guess that if people knew that her compensation came as a result of increasing the rate at which teenagers graduate high school and earn college degrees, they may not be as appalled by the prospect of paying her a quarter per kid to do it.

Thoughts?

p.s. Not to be a hater, but BCGA and others could at least take 1/1000th of these salaries and build decent websites?  No one is gonna want to miss out on the impending iPad fundraising bonanza.

Posted on April 9th 2010 in news

Dude, where’s my client?

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One of the worst things you have to endure in graduate school is crappy IT services.  In order to be a functioning student – pay my tuition, register for classes, read syllabi, email – I have to log in to nearly a dozen different platforms.  Printers are a nightmare to configure.  Necessary software is often incompatible.  I’m not even sure how to get on the internet in some places.

Animosity towards the technical backbone of the school is practically universal.  Considering that students put forth a lot of time and effort to get something out of these degrees, not to mention a ton of money, you would think there would be more effort to keep us happy.  I began to think about how universities can get away with such poor client relations and concluded that the IT problem has to do with the unique model of higher education:

In.  Up.  Out.

With the possible exception of the umbrella-salesperson who seems to materialize out of thin air as soon as it starts raining, almost all businesses require repeat customers in order to survive.  The failure of a customer to repurchase a good or service is an indication it was provided inadequately.  This implicit feedback mechanism is one that keeps businesses on their toes, relentlessly focused on improving their product and keeping their customer satisfied.

Universities, on the other hand, have an in-up-out model that precludes this critical feedback mechanism.  Their core customers are the students, who enter the university, soak up whatever knowledge possible and then leap back out into the world.  Poof.  They are gone, they almost never come back, and the school no longer need concern itself with the pesky grievances those students had with wireless printer configuration.  Problem not solved.

(Some will say alumni donations can play the feedback role, though I don’t think this argument holds water.  First, when alumni make donations, they are not repurchasing the university’s services.  Instead, they are often actually donating to improve those services.  Second, they often do so under the misguided assumption that the university provided them with a service that helped them to succeed, when in fact it was either the simple act of getting that degree checkbox marked off or the illusory prestige that the top-tier universities have managed to preserve.  Either that, or they just want to support their football team)

The bottom line is that IT remains crappy because, with no expectation that a customer will return, there is no incentive fix it.

But worry not, because my experience led to a profound realization about non-profit management: the basic model does not inherently promote self-improvement because it follows the same in-up-out model.

Most non-profit organizations do not want return clients.  Some even define success by the rate at which their clients leave.  Think about homeless services: perfect execution would bring clients in, let them soak up whatever services they can (transitional housing, rehab, job-training, etc.), and have them leap back out into the world, never to return again.

But if you do not expect your client to return, how can you truly know whether or not you adequately provided the service?  Failure to return may mean that your client is off the streets and working, but it may also mean they have relapsed and are back living on the streets, having determined that your organization is useless.  You will never know for sure and you will never improve.

Hell, you may even use your useless non-return metric to raise money, claiming that all of your clients moved on to bigger and better things.  And this, in my opinion, is how donors got all crazy, paternalistic and problematic.  After years of funding in-up-out organizations with little or no tangible improvement in outcomes, they felt compelled to come up with their own metrics.

This is a welcome step, but the absence of standards makes it unsustainable.  Non-profits today are forced by donors to jump through hoops and maintain metrics that are often irrelevant to the organization and the context in which it operates, further straining their resources.

I am not sure what the answer is, but I am certain that it involves the client.  We must know where they go when they walk out our doors and we must find ways to get their feedback.

Thoughts?

Posted on January 24th 2010 in ideas
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