CEO Compensation in the "Doing Good" Economy

I've recently blogged and tweeted a few things from Umair Haque and Dan Pallotta, both people I've become familar with through the Harvard Business Blogs.

Well, here's another thought-provoking post from Pallotta, talking about how non-profits compensate their CEOs and how it often runs counter to their own aspirations for growth and impact.

The typical humanitarian organization sets executive (and staff) compensation by sampling other organizations of similar size (as measured by annual budget) and then matching what they find. It wouldn't occur to most of them to do it any other way. This is a terrific practice if you have no significant growth aspirations for the organization. It's also is a terrific paradigm for keeping social conditions the same for a very long time. If we want social change to occur at the pace of molasses, we needn't change a thing. We have a system that runs at that precise speed. It reinforces stasis.

The IRS and the states attorneys general enforce the practices of this system. Their test for whether an organization is paying someone too much is to look at other organizations of similar budget size and see if the compensation levels match up. There's only one problem with this. What if an organization has decided to hire a leader at a much higher level of compensation because it no longer wants to match up? What if the organization wants to pay enough to get a leader that could help it grow dramatically? What if its people actually have some aspirations?

He goes on to make the case that non-profits with big aspirations should give themselves the permission to go after the talent that can make it happen for them--and to pay that talent according to what they may be able to get in the for-profit sector.

For-profit businesses set their sights on who they want and pay to acquire them. By contrast, it wouldn't occur to the humanitarian organizations to set their sights on the kind of leaders they would want if they gave themselves permission to dream a little bit — superstars with breathtaking track records who could quadruple their size in five years. Rather, nonprofits sets their sights on a pay range designed to ensure that it attracts no one worth any more money than any of its peers and then sorts through the available candidates. And this practice has gone on for decades.

What I find fascinating about this argument is the way it seems to run counter to our established notions of an organization that "does good." Read through the comments that Pallotta got from his post and you'll see lots of people taking him to task for suggesting that the talented head of a high-performing non-profit should be paid what the market will bear for his/her services, not what the altruistic mission of the organizations deems appropriate.

But this is where I want to bring in Haque's recent idea that "doing good" is the new measure of success in the for-profit sector. If Haque is right, and more and more for-profit companies are going to embrace "doing good" instead of "making money" as their primary mission, the whole landscape for recruiting CEO talent is going to change radically--with the for-profit and non-profit worlds in much closer competition with each other than ever before. No longer will the altruistic-minded be the exclusive domain of the lower-paying non-profit sector. Thousands of for-profit companies that pay their CEOs substantially more and credibly achieve missions focused on doing good in the world are a game-changer, and the serious-minded non-profit is going to have to find a way to compete or lose the talent war.

And, more interestingly, how will the Millennials perceive this divide? If they’re driving this change towards a “doing good” economy, will they not see the higher rewards that come on one side of the fence in a different light than the generations that came before them? If both types of organizations satisfy their desire for social responsibility, but the rewards in one area are much higher than those in the other, will any of us blame them for moving away from the place we've always considered the exclusive home of altruism?

Who's Going to Make Your Social Media Decisions?

There was an interesting discussion recently on ASAE's Executive Management listserv that started with a link to this article about the Pew Internet & American Life Project. The article is headlined: "Teens Love Facebook, Hate Blogging, Are Always Online, and Don't Use Twitter;" and the original poster wondered what the underlying trends might mean for associations.

Several thoughtful posts followed, some containing advice for associations trying to decide which social media platforms to embrace. Glenn Tecker said (cogently, I thought):

Associations need to watch that they are not building platforms responsive to the opinions of young adults if their preferences as users are not likely to be the same as the larger number of youth (Gen "Y") that will shortly follow. Be careful to avoid the situation where early generations of social media, especially those used by a relatively small portion of members, inadvertently become the legacy systems of your near term future.

And fellow Hourglass blogger Jamie Notter followed up with:

I think the social internet is shaping the Millennials in a way that will have implications for all of us. Remember: the aspect of the internet that I (as Gen X) always thought was amazing (wildly expansive information, accessible via search, instantly) is ho-hum for the youngest generation. Kind of like me getting all excited about being able to pick up the phone and call anyone I wanted. Of course I can do that. I've always been able to do that. Similarly, access to information is not shaping the Millennials. It's their ability to network and create. The Social internet allowed consumers to become producers and creators and it radically shifted trust equations. That will continue to shift, as the Pew study notes and Glen points out, but I think the game has changed. As a generation, I'm guessing the Millennials are going to run with this, not slowed down by their previous experience with the old game. And demographically they are a huge generation, so it would be wise to be actively dealing with this now rather than later.

It got me thinking. Both Glenn and Jamie seem to be advocating for the premise that we should be building our social media platforms for tomorrow, not for today. They seem to be saying that if you build something for the Boomers and Xers in your membership, you may succeed in getting them to interact online, but it's something that won't have any future, because the Millennials will see it as "old media." You'll just take the ossification that's already happening to your association and put it online.

But I question how we (Boomers and Xers who lead associations) can build social media platforms that Millennials will embrace. That also seems to run counter to the ideas that Glenn and Jamie are promoting. In my own observation, many Boomers and Xers who are into social media seem focused on finding a "safe place" to network online. They want a closed community, something with pre-determined rules of conduct and a rigorous screening process to make sure things "stay professional."

Millennials, on the other hand, often reject all of that. In their world, "safe places" are boring, and there isn't any separation between professional and personal. To them, the carefully constructed social media environments favored by the older generations are exactly that--constructed. On the web, they want the freedom to be who they are, to go where they want to go, and to talk with whoever they want.

This seems like a true conundrum to me. If you run an association, which group should you let drive your social media decision-making? Listen to the call of the Boomers and the Xers, and you'll create something you can control, but will it ultimately take your association where it needs to go? Listen to the call of the Millennials, however, and you'll create something that gives them the freedom to do what they want, but will they ultimately recognize your association as one of its essential parts?

It's almost as if both paths might lead you to organizational oblivion.

The Monster Inside Your Head

I've just started following Hugh MacLeod over at the gapingvoid blog. He's a cartoonist that works on the backs of business cards. One of his recent posts came with a backstory about business executives who must get over their fears of achi­eving that which they must do, if they want to become the peo­ple they one day hope to be. As MacLeod quotes a business coach friend of his:

“The issues my clients fear the most tend not to be the actual stuff out there–com­pe­ti­tion, cash­flow, mar­ke­ting,” he says, “but the worst-case ima­gi­nary sce­na­rios. ‘The Mons­ter Inside Their Heads’, as it were. So a cen­tral tenet to what I do is hel­ping them to get over The Monster.”

The cartoon itself perfectly captures this inner demon:

How many leaders wrestle with this monster as they try to move their organizations and their careers forward? How many don't even realize the struggle is within instead of without? I've been in enough situations where the actual consequences of action have turned out to be a lot less negative (and sometimes actually positive) than the dreaded perceptions I harbored to know that this monster is real and an adversary that must be overcome. Imagine what could be accomplished if leaders were no longer afraid of the monster inside their heads.

Doing Good is the New Measure of Success

That was the comment I put on one of my recent tweets, linking to a blog post by Umair Haque. (In case you haven't noticed, The Hourglass Blog is now on Twitter. Check us out at @hourglassblog.)

I've been reading Haque for a little while now, always finding him thought-provoking and often inspiring. He's a young guy--don't know if he's Millennial or GenX--but he's saying things that don't fit exactly with any generational archetype.

In What's Your Strategy for the Next Decade? he strikes a generally Boomer-tone, predicting the rise of a new "Age of Decline", much like Howe's Fourth Turning.

In Google, China, and the New High Ground of Advantage he takes a bold Millennial view, persuasively arguing that ethics are today's and tomorrow's competitive business advantage:

An ethical edge doesn't just build stronger brands, though added cred is a certainly a benefit. Rather, it lays new foundations for better organizations, markets, and economies:

-- It builds stronger businesses, full of more passionate people, who aren't deadened by their work.
-- It builds stronger purpose, striving towards a higher calling — not just a lowest common denominator.
-- It builds stronger strategies, more resilient to 20th century-style coercion and brinksmanship.
-- It builds thicker, more meaningful value.
-- It builds stronger management, more focused on the long-run.
-- It selects better investors — engaged, committed, long-run investors, not just speculators looking for a quick buck.
-- And it builds stronger economies, that can, instead of stagnating, enjoy an authentic prosperity

And in the post I tweeted, The Scale Every Business Needs Now, he develops that theme further, saying that business success in the 21st century will no longer be measured by how much product a company sells, but by how much good they do while selling it.

The real question for today's builders is: what are you going to do with that raw stuff? Are you going to use it to pump out more sugar water — or are you going to do something radically constructive instead? Are you going to do something merely innovative — or something world-changingly awesome?

The Millennials, they say, are all about this "doing good" imperative. They will demand that the organizations they work for do more than just make money. They want to be part of positive social change. That's generally seen as good for associations and other non-profits, because positive social change has always been seen as part of their turf. Doesn't it make sense that the Millennials will be drawn to jobs and careers in those types of organizations?

But Haque is saying that this Millennial ethic is not going to be limited to the non-profit world. He believes the for-profit world is undergoing a radical change--essentially that the way they measure success will begin to look more and more like the way the non-profit world does. Both worlds want to make money, but their reason for doing so seems to be coming into closer alignment.

I hope he's right. I think we all can see changes in the marketplace that are heralding this new approach to business--corporations adopting and promoting more socially-conscious practices and agendas. Whether this is wholesale change or the rise of another niche in the marketplace is not yet clear to me. But imagine what could be accomplished if both the for-profit world and the non-profit world adopted "doing good" as their measure of success.