The expectation of low salaries is one of the biggest problems hobbling the nonprofit sector. It makes it incredibly difficult to hire people of the caliber you need to run a high-performance organization.
what kind of person working to help the poorest people on earth could live with themselves earning so much given what their organisation
This is classic Copenhagen interpretation of ethics stuff. Someone making that kind of money as a nonprofit CEO could almost always make much more money in the private sector while receiving significantly less grief. You’re creating incentives that get us worse nonprofits and a worse world.
I’m interested in the evidence behind the idea that low salaries hobble the nonprofit sector. Is there research to support this outside of the for-profit market? I’m unconvinced that higher salaries (past a certain point) would lead to a better calibre of employee in the NGO field. I would have assumed that the attractiveness of running an effective and high profile org like Give directly might be enough to attract amazing candidates regardless of salary. It would be amazing to do AB testing, or even a RCT on this front but I would be imagine that would be hard to convince organisations to get involved in this research. Personally I think there are enough great leaders out there (especially for an org like givedirectly) who would happily work on 100,000 a year. the salary difference between 100k and 600k might make barely any difference at all in the pool of candidates you attract—but of course this is conjecture.
On the moral side of things, there’s a difference between taking a healthy salary of 100,000 dollars a year—enough to be in the top 0.5% of earners in the world and taking $600,000. We’re not looking for a masochist to run the best orgs, just someone who appreciates the moral weight of that degree of inequality within an organisation that purports to be supporting the world’s poorest.
If earning 600,000 rather than 100,000 is a strong incentive for a person running a non-profit, I probably don’t want them in charge. First I think that this kind of salary might lead someone to be less efficient with spending both in the American base and in distant company operations. NGOs need lean operations as they rely on year to year donations which are never secure—NGOs can’t expect to continue high growth rates of funding year on year like good businesses. Also leaders on high pay are probably likely to feel morally obligated to pay other admin staff more because of their own salary, rather than maximising the amount of money given directly to the poorest.
It may also affect the whole ethos of the organisation and respect from other staff especially in places like Kenya where staff will be getting paid far far less. Imagine you are earning a decent local wage in Kenya, which is still 100x less than your boss in America? Motivating yourself to do your job well becomes difficult. I’ve seen this personally in organisations here in Uganda where Western bosses earn far higher salaries. Local staff see the injustice within their own system then can’t get on board with the vision of the organisation. This kind of salary inequality is likely to affect organisational morale.
At least in the US, Cabinet members, judges, senior career civil servants, and state governors tend to make on average half that. I have heard of some people who would be good federal judges, mainly at the district-court level, turning down nominations because they couldn’t stomach the 85-90% pay cut from being a big-firm partner. The quality of some of these senior political and judicial leaders varies . . . but I don’t think money is the real limiting factor in US leader quality. That is, I don’t get the sense that the US would generally have better leaders if the salaries at the top were doubled or tripled.
The non-salary “benefits” and costs of working at high levels in the government are different from the non-salary “benefits” and costs of working for a non-profit. But I think they differ in ways that some people would prefer the former over the latter (or vice versa).
In other words, a belief that charities should offer their senior leaders a significantly higher salary than senior leaders in world and regional governments potentially implies that almost every developed democracy in the world should be paying their senior leaders and civil servants significantly more than they do. Maybe they should?
I don’t have a firm opinion on salaries for charitable senior officials, but I think Nick is right insofar as high salaries can cause donor disillusionment and loss of morale within the organization. So while I’m willing to start with a presumption that government-comparable salaries for mid-level+ staff are appropriate (because they have been tested by the crucilble of the democratic process), it’s reasonable to ask for evidence that significantly higher salaries improve organizational effectiveness for non-profits.
The expectation of low salaries is one of the biggest problems hobbling the nonprofit sector. It makes it incredibly difficult to hire people of the caliber you need to run a high-performance organization.
This is classic Copenhagen interpretation of ethics stuff. Someone making that kind of money as a nonprofit CEO could almost always make much more money in the private sector while receiving significantly less grief. You’re creating incentives that get us worse nonprofits and a worse world.
Thanks Will
I’m interested in the evidence behind the idea that low salaries hobble the nonprofit sector. Is there research to support this outside of the for-profit market? I’m unconvinced that higher salaries (past a certain point) would lead to a better calibre of employee in the NGO field. I would have assumed that the attractiveness of running an effective and high profile org like Give directly might be enough to attract amazing candidates regardless of salary. It would be amazing to do AB testing, or even a RCT on this front but I would be imagine that would be hard to convince organisations to get involved in this research. Personally I think there are enough great leaders out there (especially for an org like givedirectly) who would happily work on 100,000 a year. the salary difference between 100k and 600k might make barely any difference at all in the pool of candidates you attract—but of course this is conjecture.
On the moral side of things, there’s a difference between taking a healthy salary of 100,000 dollars a year—enough to be in the top 0.5% of earners in the world and taking $600,000. We’re not looking for a masochist to run the best orgs, just someone who appreciates the moral weight of that degree of inequality within an organisation that purports to be supporting the world’s poorest.
If earning 600,000 rather than 100,000 is a strong incentive for a person running a non-profit, I probably don’t want them in charge. First I think that this kind of salary might lead someone to be less efficient with spending both in the American base and in distant company operations. NGOs need lean operations as they rely on year to year donations which are never secure—NGOs can’t expect to continue high growth rates of funding year on year like good businesses. Also leaders on high pay are probably likely to feel morally obligated to pay other admin staff more because of their own salary, rather than maximising the amount of money given directly to the poorest.
It may also affect the whole ethos of the organisation and respect from other staff especially in places like Kenya where staff will be getting paid far far less. Imagine you are earning a decent local wage in Kenya, which is still 100x less than your boss in America? Motivating yourself to do your job well becomes difficult. I’ve seen this personally in organisations here in Uganda where Western bosses earn far higher salaries. Local staff see the injustice within their own system then can’t get on board with the vision of the organisation. This kind of salary inequality is likely to affect organisational morale.
I’ve always thought the salaries of chief executives of various countries may provide an external vantage point on the reasonableness of charity-executive salaries. They tend to top out at 400K USD: https://en.wikipedia.org/wiki/List_of_salaries_of_heads_of_state_and_government.
At least in the US, Cabinet members, judges, senior career civil servants, and state governors tend to make on average half that. I have heard of some people who would be good federal judges, mainly at the district-court level, turning down nominations because they couldn’t stomach the 85-90% pay cut from being a big-firm partner. The quality of some of these senior political and judicial leaders varies . . . but I don’t think money is the real limiting factor in US leader quality. That is, I don’t get the sense that the US would generally have better leaders if the salaries at the top were doubled or tripled.
The non-salary “benefits” and costs of working at high levels in the government are different from the non-salary “benefits” and costs of working for a non-profit. But I think they differ in ways that some people would prefer the former over the latter (or vice versa).
In other words, a belief that charities should offer their senior leaders a significantly higher salary than senior leaders in world and regional governments potentially implies that almost every developed democracy in the world should be paying their senior leaders and civil servants significantly more than they do. Maybe they should?
I don’t have a firm opinion on salaries for charitable senior officials, but I think Nick is right insofar as high salaries can cause donor disillusionment and loss of morale within the organization. So while I’m willing to start with a presumption that government-comparable salaries for mid-level+ staff are appropriate (because they have been tested by the crucilble of the democratic process), it’s reasonable to ask for evidence that significantly higher salaries improve organizational effectiveness for non-profits.