Profits And Performance
It’s easy, as the Telegram & Gazette proved last month, to highlight the fact that many of the chief executives of our region’s largest nonprofit agencies are well paid. Some even received generous increases to their compensation packages in the last year, a difficult time for nearly all organizations. Those kinds of stories sell papers and get people talking, especially when you run their pictures, and most of us can’t help but be curious, jealous or sometimes outraged about how much the neighbor down the street makes in his or her paycheck.
What gets easily overlooked is the fact that a nonprofit organization, whatever its mission, is still a business. Many of the larger ones are complex, multi-layered organizations that take the very same leadership, vision, and strategic skills required in the private sector. While egregious pay and benefits packages should be frowned upon, the vast majority of non-profit leaders are compensated below the commensurate pay scale in the private sector.
The rubber really meets the road on this issue in the non-profit boardroom, where directors must do their homework, and do it well, when it comes to the compensation package of their chief executives. Only a careful eye on industry compensation averages and trends as well as sound working knowledge of the level of competition for top executives inside and outside the nonprofit sector, can bring the right balance in deciding on pay.
If there’s an argument to be made that nonprofit CEOs are overpaid, then that argument is with those boards, not the CEOs themselves. In many cases, nonprofit CEOs settle for less money than they would make in positions with similar responsibilities and titles in the private sector or in publicly traded companies. It would be naïve to think that many of Central Massachusetts’ top nonprofit leaders are unaware that they could be making more in Boston or New York.
When In Rome
One of the CEO’s highlighted in the story was David Jordan of the Worcester-based Seven Hills Foundation who made a salary of $263,272 in 2008 and was also provided with a benefits package (that includes the funding of a retirement package) worth about $200,000 per year.
In Jordan’s 16 years at the helm Seven Hills he has transformed it from a small agency grossing under $10 million to a $150 million dollar health and human services organization with offices around New England and more than 3,000 employees. Administrative costs run at a very low 6 percent of revenues.
While his total compensation falls within the norm for executives running $100m plus organizations (Charity Navigator reports the average to CEO pay in that category to be $462k) Jordan’s value to Seven Hills far exceeds his annual compensation. The same can be said for Mo Boisvert’s long tenure at the helm of You Inc. where he has built a strong and respected organization.
The highest-paid CEO of a publicly traded company in Central Massachusetts with around the same number of employees as Seven Hills is Frederick Eppinger of The Hanover Insurance Group, who made slightly more than $4 million in 2008, and based on the company’s performance and Eppinger’s manifest leadership skills, he’s worth every dime.
The bottom line remains the same in the for-profit and nonprofit sectors: You pay for performance. If an organization is failing, often the person at the top should, and does, take the fall. Boards of directors need to reward performance over time, and must remove ineffective executives whose lack of leadership can bring down the whole organization when the going gets tough.
Most of us are coming out of the worst economy in 70 years with a limp, and no one has much patience for overpaid, ineffective CEOs, especially when they work in the nonprofit sector. Being sensitive to how almost everyone else is doing, common sense would dictate that it's not the time to take a big raise — nor the time to drive that shiny new sports car into the preferred parking space at the front of the building. Yes, some CEO’s will earn our ire, but those running successful, growing organizations deserve their fair reward.
WBJ Web Partners
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