Does Lack of Pay Lead to Lack of Discipline?

Is pay required for professionalism? Despite the widely publicized excesses of the Wall Street crowd and the constant Hollywood demonization of capitalism, things seem to fly out of control faster when a Non-Profit is involved.  From the Papacy to Penn State and Boy Scouts of America, the shenanigans that occur in religions, schools, charities and other tax-exempt entities seem to show that NPs exhibit many Dark Side behaviors that would never be permitted at enterprises organized for crass amoral commercial purposes. 

Those who have served non-profit boards of directors know quite well what I’m talking about.  People who on their regular jobs would never think of doing something unprofessional will not hesitate to wield their power rashly from an unpaid management post.  A short list of sample misbehaviors includes: 
    •    Demanding special treatment for relatives or friends,
    •    Second-guessing vastly experienced subordinates,
    •    Playing with the careers of regular employees.

Those abuses seem less typical in corporations and businesses than they are in organizations run by volunteers.  Of course, my view could be jaundiced by the unique features of those I’ve closely encountered, but conversations with others even more experienced in the ways of non-profits have consistently confirmed these observations.   Maybe the lack of compensation gives rise to irresistible temptations to take your pleasure in other ways.  Perhaps workers need scorecards to keep track of the right and wrong of their actions.  Could it be that a salary tied to a clear quid pro quo like a job description or employment contract is necessary to supply a governor on the engine of motivation that might otherwise spin out of control? 

Is there something inherently healthy in the for-profit mode of operation?  Does a toxic seed grow when you don’t get paid for your efforts?  Researchers have identified behavioral differences in Social versus Commercial environments.  Standards and expectations are not the same in a social setting where people act without pay as a commercial motive.  Why is it that the lack of perceived “compensation” seems to inspire irrational behavior?  Well, maybe not irrational but at least irregular, when viewed thru the prism of conventional professional standards.  After all, “compensation” is literally that… something that satisfies you, received in exchange for your service. 

How, then, do you assure balance in the value proposition when work is done without pay?   I fear that, in the absence of formal rewards, volunteers create their own informal compensation programs to supply whatever consequences they find most satisfying to their personal motivations.  After all, everyone knows that anything of value not controlled by the organization will be controlled by its inmates workers, regardless of their volunteer or paid status.  That compensation may be in the form of money, the intrinsic satisfaction of creative or socially beneficial activities, the personal pride that results from public recognition before your peers, or the pleasure taken from the exercise of authority over others; but every contributor exerts themselves for some reason. 

The rewards taken by the unpaid people who rule over tax-exempt non-profits tend to be less visible than what shows up in a payroll record.  And that is not always a good thing.

What do you think?

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E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), and will express his opinion on almost anything.

Comments

[John A Bushfield]

I sit on a NP board, and have Chaired NP boards in the past. I have NEVER seen or experienced the kind of behavior described in your post. People are drawn to the NP world because of emotional and/or spiritual beliefs, which precludes the misbehavior you refer to. If it IS occurring, then the Board environment has become toxic, and it's governance ineffective.

[E. James (Jim) Brennan]

Congratulations, John! You have obviously dealt with a much better class of non-profits than I to make such sweeping generalizations and firm conclusions. My experiences have been less uniformly positive.

Personally, and as cited, I have known more than a few NP executives whose toxic emotional and spiritual beliefs found freer rein there than ever would have been permitted in the more closely regulated for-profit world. And that's before I consider the politicians, too. I have never found 501(c) status sufficient to guarantee propriety and government regulations like IRC 4958 seem to prove that others agree that it doesn't automatically confer sainthood. Wish it were otherwise... and it is good to hear that my view is indeed excessively dark.

[Patty Tanji]

I'm catching up on my Comp Cafe reading...so I was a little caught off guard by Jim's post here. Really Jim, the for-profit world is without repute? Worldcom, Enron, all those Accounting firms (ie.Arthur Anderson et al) rubber stamping the financials of their clients in order to keep the business. Sexual harrassment, pay discrimination, the list is infinite. I think I must have missed something here. So my apologize if I have but the answer is No. Lack of pay does not lead to lack of discipline. Lack of discipline leads to inappropriate behavior.

[Patty Tanji]

Oops. reproach NOT repute.

[E. James (Jim) Brennan]

Naw, I've seen lots of offenses from the for-profit world, so they are certainly not pristine models of proper behavior. Heck, I was the expert witness against Michael Milken's pay in the DBL bankruptcy settlement and I wrote the job evaluation pamphlet for the National Committee for Pay Equity. But public corporations DO operate under many rules of specified transparency, fiduciary regulations and required disclosures that simply don't exist or generally don't apply at not-for-profits. NonProfits operate mostly "under the radar" as they do the usually quite marvelous works that win them tax-exemption in exchange for open publication of their Form 990s; therefore, there are many opportunities for equally bad behaviors which are less likely to be either suspected or discovered.

The tiny group of bad-acting NFP execs tend to be far smaller, and less carefully policed by regulators and the media, too, because their offenses are typically unlikely to be either obvious or to have noticeable economic effects on society. Maybe that's why people seem so shocked when officials of some charity, foundation or other NFP turns out to have feet of clay. You don't have to claim perfection for big business in order to notice abuses at NFPs, but there ARE more controls and monitoring systems in place at commercial operations that force discipline. You are completely correct that lack of discipline is bad for all. Pay tends to produce a contractual expectation for disciplined behavior that can disappear when cash compensation is absent and the transaction is considered "social" rather than "commercial." But I will be pleased to be found wrong if lack of accountability does not facilitate a lack of discipline.

And THANKS to Ann Bares for re-activating the comment response section so I could semi-agree with you!

[Ann Bares]

Great conversation you've started, Jim. Thanks John and Patti for sharing your own thoughts and observations.

My reactions when I first read Jim's post -
(1) I have observed the same thing in my own work with nonprofits - mostly in the attitudes of immediate managers/supervisors. In exploring ways to drive and reward performance, I have had a number of managers state their opinion that they struggle to hold employees accountable for stated performance standards when they believe those employees are paid below the market value of their skills. (2) The phenomenon, if it does exist, is consistent with classic equity theory, which holds that employees seek to maintain equity between the inputs they bring to a job and the outputs they receive from it (which, obviously, can be in the form of cash... or not). According to the theory, employees who believe they are under-rewarded will seek to restore the balance by adjusting their inputs ... i.e.their work efforts.

Great discussion all!