Last week, I did a workshop among nonprofit Executive Directors. Some of them expressed great frustration at the exorbitant compensation of CEOs of very large, for-profit companies. They mentioned that many of the companies’ products were very poor quality anyway.
One participant offered a rather novel assertion that the pay of those CEOs should be based on how much customers actually benefited from the companies’ products and services. (She refined her assertion a bit by adding that compensation should also be based on performance of the stock and on some performance goals set by the Board.)
Another participant in the workshop ventured the question, “Then should a nonprofit Executive Director’s pay be based on how many of the outcomes were achieved by participants in the nonprofit’s programs?” (Remember that outcomes are the types of changes achieved by participants in programs, e.g., new knowledge, skills and abilities.)
That question produced a firestorm of indignation and assertions about how nonprofit organizations are very different than for-profits. I asked for a vote to get a sense for how many people believed that the E.D.’s salary should be based, at least in part, on outcomes. Only 2 out of 15 agreed. Then I asked for a vote of how many believed that a for-profit CEO’s salary should be based on some measure of customer benefits — 9 out of 15 agreed that should be the case for for-profit CEOs.
What do you think? Should a nonprofit E.D.’s salary be based somehow on outcomes from programs?
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For more resources, see our Library topic Nonprofit Capacity Building.
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Marion is a popular facilitator of workshops and Board retreats. Her expertise includes strategic planning, board development, governance and harnessing the power of technology.
Carter McNamara of Authenticity Consulting, LLC, provides organizational development, consultant training and Action Learning services, and is developer of the Free Management Library.
Hi Carter,
I think neither CEOs of for profits, nor EDs of non-profits should be judged by the impact to their clientele. That is a simple response to a very complex issue. If either of these groups was only paid for the impact on their clientele, then who decides whether the impact has been enough, whether all outcomes have been met, whether all customers are satisfied. Also, isn’t it also true that you can’t please everyone everytime. To judge anyone on the finished result and not take into consideration the process that went into achieving that impact is just wrong.
Mind you, a very stimulating question again Carter. YOU certainly do get the old wheels a turning with the questions you bring forward.
Hope all is well,
Ingrid