September 6, 2012 Philip J.W. Smith & Co.

Why I Recruit Charity Executives

Want to know why I primarily recruit executives for the charitable sector?

You can begin by reading Brady Jospheson’s post entitled, Dear MoneySense, You Are Wrecking Philanthropy, found on his blog. His post is a copy of an open letter he sent to MoneySense on their rating system which they use to evaluate charities.

Here’s a tidbit:

Dear MoneySense,

You are wrecking philanthropy.

I recently came across your 2012 Charity 100 and was very disappointed. How an educated and business savvy magazine like yours could be so misguided and off base in trying to evaluate charities is mystifying. The worse part is that your misguidedness and off baseness will continue to confuse the masses and convince them that how you evaluate charities is how they should evaluate charities and that, unfortunately, is wrecking philanthropy therefore you are wrecking philanthropy.

Josephson continues to explore his thesis through a series of main points, however, it is his first point that I would like to highlight today. In his opening argument, Josephson touches on the subject of “defining organizational efficiency on accounting”, saying:

Efficiency for charities should be the results they produce compared to the expense it took to get those results. Your “efficiency” rankings are based solely on the allocation of funds to programs compared to administration and fundraising or “overhead”. In addition to these numbers being easily manipulated they say nothing of the actual results or, to use more investor based language, nothing of the return charities give to their donors. This is all beyond the fact that the “overhead” areas that involve things like salaries, IT and marketing are hugely important to the success of charities and you are punishing organizations that invest in these areas.

The insights Josephson raises echo the debate that occurred a few years ago surrounding the proposed Bill C-470 in which the government, and subsequently the Canadian media, jumped at the idea of placing a $250,000.00 salary cap on charity executives. After all, an NPO is a charity, and folks working in a charity should not be making more salary-wise than some of those who donate to those charities – *GASP!* (Sarcasm intended for all you Sheldon Cooper‘s out there.)

Reality is that the not-for-profit sector in Canada represents 9.7 billion dollars to the Canadian economy. Of that, 37% or 4.5 billion dollars are attributed to Canada’s major 100 charities alone. With this in mind, certainly there should be much more intricate evaluation tools for the charitable sector than simply comparing allocation of funds to a charity’s programs versus administrative costs.

Furthermore, keep in mind that the executives responsible for controlling these billions of dollars and significantly contributing to the Canadian economy are worthy of their compensation for they should:

  • be highly capable and skilled in their field;
  • have and continue to pursue the appropriate credentials to succeed in the not-for-profit space;
  • have the knowledge, experience, and passion to raise and allocate millions of dollars for worthy causes both nation and world-wide;
  • be givers themselves of their time, energy, money, and soul; and
  • be the best of the best to ensure and maintain the integrity of the sector and the reputations of Canadians.

That’s why I recruit charity executives.

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Comments (4)

  1. M. Saifullah Chaudhry

    You have touched the basic question that the development sector should address. One argument, as you have indicated, is “program” vs “admin” costs. Another argument relates to “spending” funds vs delivering program “results”. In fact, both of these arguments are interconnected.

    Any average CEO can help “spend” funds but without achieving or under achieving program “results”. The charities need to invest in A-Class CEO to achieve long term results and not appear as “clearinghouse for Charity funds”.

    M. Saifullah Chaudhry (Ph.D.)

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