During the discussions we’ve been having about nonprofit pay (see the 46 comments on this post), I’ve taken the position that employees should be compensated for the “impact” they have on an organization regardless of whether the organization is a nonprofit or a for-profit. I wrote about this last summer in the Financial Times and then again after the book Uncharitable put forth a similar argument. During that time, my core point has been that we should reverse the cultural expectation that nonprofits, donors, the public and the media have regarding nonprofit employees making less than for-profit employees.
In large measure this is a cultural expectation and not a legal requirement. This point was driven home when the IRS recently studied the compensation of top management at nonprofit hospital and found that the average salary of $490,000 was not excessive (under tax laws). They even took a closer look at a group of 20 hospitals were the average compensation for top officials was $1.4 million and found that in more than 85% of the cases, the pay packages were not excessive. But the IRS themselves drove home the cultural expectations of low pay when they said:
“Amounts reported appear high but also appear supported under current law,” the IRS said. “For some, there may be a disconnect between what, as members of the public, they might consider reasonable and what is permitted under the tax law.”
I point to this study not to lend my support to the pay packages at nonprofit hospitals, but to show that the lower pay in the nonprofit sector is mostly a cultural issue and not a legal one.
So one more time: I think nonprofits should pay employees at the rate that maximizes the organizations’ impact. Most all studies show that paying well is one key component of attracting top talent and so I think that donors should be supportive of nonprofits paying well in pursuit of high impact employees.
Now, most of the resistance to my posts on this topic has come from current nonprofit employees.This mostly stems from their feeling that I’m suggesting that the current pay rates imply that current nonprofit employees are not “high impact employees”. That’s just wrong. There are lots of great nonprofit employees. I’m talking about maximizing impact, not dissing the nonprofit sector.
To break the grip that cultural expectations have on us, let’s debate instead whether public school teachers should be paid better. That is not a criticism of teachers, it is statement in support of the importance of teachers! Studies (such as those profiled in the recent Malcolm Gladwell book Outliers – or read a great New Yorker article Gladwell wrote on the topic – as well as cited by Bill Gates in his recent open letter) suggest that the most important determinant in student success is the quality of their teacher, not the quality of the school they attend.
It seems to me to be irrefutable that paying teachers better would help attract more highly talented individuals to the career. That doesn’t mean there are not already lots of great teachers (there are!), but we could still use more and the studies suggest that improving the overall talent pool of teachers is the single most important way we can transform our education system into high impact preparation for our children.
(Yes, I know about the politically delicate discussions currently being held on the topic of merit pay for teachers. But that debate is entirely focused on how to determine which teachers deserve better pay. Everyone in the debate agrees that top teachers should be paid well.)
So my question for readers is: If you have disagreed with me on the issue of better pay in the nonprofit sector, why do teachers but not nonprofit employees deserve better pay? Or alternately, why should we not pay teachers better?