Not-for-Profit Profits

Recently there has been a rash of stories in the newspapers and on radio and TV about the “sudden” recognition that the chief executives (CEOs) and other senior managers of large "not-for profits" (NFP) were being paid an extremely handsome salary, usually plus bonuses.. This uproar played particularly well in Massachusetts, where the Boston Globe regularly runs editorials fulminating about the fact that consultants (hiss, hiss) to the state were getting rich at the public’s expense, by being paid at the “outrageous” rate of $100 per hour. (Full disclosure: I myself am a consultant. If that sets your teeth to gnashing,  feel free to skip the rest of this column.)

But that would be a shame, because the argument is actually quite important, and interesting. It is only secondarily concerned with the high pay per se, but rather is focuses on the question of whether NFP executives and particularly Chief Executives should be paid using more or less the same rationale as for corporate (for-profit) CEOs, which of course leads directly to roughly the same pay and the same type of pay package (including potentially substantial discretionary bonuses).

After all, in comparing the work to be done and the responsibilities of the position, there doesn’t seem to be much difference. As a matter of fact, one could actually argue that the NFP job is more, not less, difficult and exacting because there is usually less flexibility and its boundaries are more open to examination and inspection. People, particularly including all of those affected by its efforts, can see more clearly what is going on, how decisions are made and their potential effects on “me.” And by definition, the rationale for having such a category as Not-for-Profit is to encourage and invest in activities of unusual public value. So, maybe, if anything, their CEOs should be paid more.

But Maybe Not.

The other side of the coin is also quite clear. The original issue began with people entering public service, whether as a clerk in the school or a major political actor. The positive payoff from that was straightforward. People who were willing to devote their efforts to serving society, one way or another, deserved special consideration. This used to include (and sometimes still does) assured employment, the satisfaction of doing something important and recognized, the power to make a difference (not necessarily in one big splash), the esteem of their community, support in times of need, and less likelihood of turmoil in their workplaces.

Actually, there are two “other sides” of this coin. It’s not merely that  NFP workers were more protected and respected, but also that workers in the private workforce took significantly greater risks by doing so. Businesses could and often did fail, those dependent on them suffered, they were also more responsible for a variety of possible damages to the community, and even though their compensation, especially near the top, could be quite high, it could also be quite low – or zero. In both cases, the principle was pretty clear. People on public payrolls got security, private payrolls might get richer. Risks and rewards were reasonably related and clear, and people had a choice. The fact that pay scales in private organizations are largely kept secret is also a source of distortion. How can we be sure the system is fair under those circumstances? We can’t.

The problem is that the relationships between these elements, which were never as sharp as theory hoped, have largely collapsed. We now have a system in which some people are in jobs that are both low risk and high rewards (investment bankers), while most others settle for high risks and low rewards (casual or unorganized workers). The appropriate answer is to begin to revise the employment system and our laws to return to the fairer system. It will take time, but in this, direction counts more than speed.

In Mid-Air

As a practicing consultant for over 40 years, in fields as diverse as technology, community development, innovation, business and organizational change, I've undoubtedly made at least as many mistakes as most people and surely many more than I should have. But I don't seem to be making much progress. Although I've continually been thinking about how to do it better, that list gets longer and longer, for a very simple reason. Every time I examine either what I was just doing or what I'm trying to do, it coughs up a couple of headline problems or errors that I think I should have caught. It would be easy to conclude that I simply hadn't thought things through carefully enough. . In retrospect, I could easily have set up a personal “WikiErrors” site that would list every misstep, slip, catastrophe, etc, all the way to the ultimate unhappy category – the one where I say, “What was I possibly thinking?” I nevertheless still tend to suspect that I should have caught most of those mistakes.

I also know beyond any doubt that I am not alone in this situation. When I talk with colleagues, or participate in on-line groups and exchanges, I discover that the same thing is happening to them and others. We have dozens of magazines and journals, enough “how-to-do-it-better” conferences and workshops to go to a different one every day for years. Most visibly, we have now many social media programs which contain groups devoted to consulting (and virtually every other profession), and many of them, in sites like LinkedIn and Facebook, have tens of thousands of members. I am morally certain that if I (or you) looked at similar files or conferences in the past, I (or you) would find exactly the same complaints and questions. I thought – and I continue to think – that despite an awful lot of talk and writing to the contrary, we don’t seem to be learning much.

But Maybe Not.

There’s another way to look at all this, and it’s pretty much the way we mostly encourage our clients and colleagues to look at their experiences. I have been participating in a number of organizational consulting groups on LinkedIn and I see that virtually everyone using these sites at root agrees with the others. There are some outriders to be sure – some of them are undoubtedly mine – but the thing that stands out is that almost all of us agree, even though that fact doesn’t seem to translate into demonstrated effective action. Why not? How can we be convinced we’re right and yet so wrong?

Here’s how. The discussions among us are both correct and unhelpful because they are addressed at the wrong level; wrong for recognizing the need for action and understanding the characteristics of effective action on that topic or in those circumstances. It is as though we’re in mid-air. We feel as though we’re on solid ground and we act that way, but we’re really not. For example, when someone says “We need to communicate better,” or “We agree on greater communication,” there is usually broad agreement. But, there are no genuine action implications in that statement. I call this “misplaced concreteness” because although it sounds useful and actionable, it is not.

Consider just a few of the options if someone sets out to  follow such a prescription. Communicate how?  Should we write, call by phone, send emails, walk to another office and talk, convene a meeting of everyone involved (and who should that be), walk around and tell “everyone” one at a time? Etc. But these are the realities, these and many other specific possibilities, to say nothing of what the message should be and whether there are expectations as to future behavior. The choice of these and the details of actually following through makes all the difference in the world. So we can all agree that “Better communication is needed,” without at all agreeing on what should actually happen or carried out by whom. We tend to disregard these choices on the grounds that they are trivial, or that we all know what is meant, but these assumptions are emphatically false. The choice of method, the details of execution, the support or reinforcement (if any) that accompanies those actions, all make a great and even deterministic difference. 

When the Wind Blows

We are an organizational society. Every one of us is a member of dozens, perhaps hundreds of them. If you doubt that, think about it for a moment. We belong to political parties and jurisdictions, governmental, business, educational and religious groups and units, families and social  clubs. In all probability, if we did a census, we would find more organizations than people.

There has long been a remarkable lack of agreement about the nature of organizations; what arrangements produce the desired results, how, why and when they work and in particular, what to do if you’re dissatisfied with their character, performance or behavior. Thousands of books and case studies, hundreds of journals, newsletters and magazines, and dozens of university professors, research projects and courses attempt to answer these questions and offer reliable guidance.

Still, even in those disciplines and professions, like management and consulting, specifically aiming to solve those problems, there is near universal agreement that most of the time, even when things work pretty well, we’re not sure why, and when they don’t, we don’t have a reliable way of improving them. All in all, “It’s a puzzlement.”

But Maybe Not.

The island of Martha’s Vineyard, off the Southeast coast of Massachusetts, covers only about 100 square miles, stretching about 20 miles from East to West, and 10 from North to South. Despite its small size, there are consistent and very obvious local differences. For example, there is a striking contrast in appearance of the oaks that cover the island. Those along the South shore are short, bent and sparsely leaved. Along the North shore, in contrast, the oak trees are tall, straight, and thickly leaved. What accounts for these obvious differences?

In a word, wind, which blows more or less steadily, from the Atlantic Ocean across the South shore, losing most of its strength before it gets to the North shore. Continual exposure to it makes a big difference to the oaks in its path. They all start the same way, growing tall and straight, but over time, they bend to fit the wind and they adjust their growth in ways that are unpredictable in detail but very predictable in general.

There are also “winds” in organizations, and they produce similar results. Those winds are the continuing but often slow-acting and unrecognized effects of the organization’s structure, by which I mean not only the boxes and lines on organization charts but everything in the organization that’s left when all the people have been removed from consideration. This also includes, for example, in-boxes, memos, offices, desks and locations, assignments, contracts, reputation, relationships etc.

All of these tangible (non-human) factors create a kind of wind in the sense that their consequences are always developing, they make certain outcomes more likely, and their effects accumulate over time. In the short run, their effects are small, often unnoticeable. As a consequence, deliberate change can be brought about relatively easily in the short run, but is eventually overwhelmed by the accumulated effect of these structural winds.

This is what is generally seen in organizational change initiatives. At the beginning, managers can do pretty much as they wish, but these effects erode after the early adjustments are made. Lasting change requires not only a good beginning and an appropriate direction, but deliberate adjustment of the organizational winds, to encourage the early changes and sustain them in the long-term.