Click here to read an original op-ed from the TED speaker who inspired this post and watch the TEDTalk below.
When I first saw a video of Dan Pallotta's TEDTalk, I forwarded it to my Board members immediately.
I had been running Venture for America, a 501c3 non-profit, for a number of months. I had started to experience a number of behaviors that I never had when I was running a company in my last job. For example, I wanted to bring my small team to a Nets game in the brand new Barclays Center in Brooklyn. Much of the team lived in Brooklyn, and it seemed like an ideal team activity. But I found myself thinking, "Is this an appropriate use of donor funds?" I wasn't sure, so I paid for the tickets myself.
Another time, I noticed that a team member seemed demoralized. He was being compensated below market and was having trouble paying the various associated costs with attending friends' weddings (anyone past their late-twenties remembers this). In my old company, I would have pushed his pay to market, as he was doing very good work. But in the non-profit, I hesitated, thinking that maybe his suffering was necessary, despite my knowing that he was being paid far less than would have been the case in another setting.
The above were symptoms of a tension I was experiencing. I wanted to be a good non-profit leader, which cut against my instincts as a corporate leader. Why were the two so different?
At Manhattan GMAT, I had done my best to create a positive work environment and culture, and I further believed in rewarding people financially at or above the market rate for a job well done. We were a small company dependent on having talented and dedicated people drive our growth. I felt that spending a bit extra keeping people excited and engaged was going to pay off. We experienced a good deal of success -- our company's revenue grew an average 50 percent per year over the next five years until we became the market leader. Our team proved to be one of the best in the industry and we kept it together.
Organizations relying upon young, idealistic and mission-driven people to work at below-market compensation over the long-term will burn them out and find the best people leaving over time. -- Andrew Yang
At a nonprofit I found myself acting differently. It was tempting to rely upon the team 'not doing it for the money' and relying upon other motivations.
I now regard this temptation as a trap and a structural weakness of non-profits. Organizations relying upon young, idealistic and mission-driven people to work at below-market compensation over the long-term will burn them out and find the best people leaving over time. Eventually the org will have an overrepresentation of two groups -- weak performers and the personally privileged. It's not the ideal way to build a high-functioning organization.
Non-profits should be looking to enlist and retain the best people to aggressively solve problems, not to perform adequately and persist. We should expect people to innovate and do the highest-quality work and then reward them accordingly.
The best organizations are filled with people who have a wealth of choices as to what work they choose to do. We need to give them every reason possible to solve the world's problems. We don't need a culture of martyrdom -- we need a culture of high performance.
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