The “Psychic Benefits” of Nonprofit Work Are Overrated

People often tell me that those who work for nonprofits should work for less because of the psychic benefits of being able to make a difference, work with the poor, and so on. The notion is a red herring. And that’s putting it kindly.

Do these people really believe that no one makes a difference in the for-profit sector, and that there is no psychic benefit associated with careers there? What about the people at drug companies working on cures for disease or the people who build the Toyota Prius and the Smart Car? What about the people who publish The Grapes of Wrath, distribute the cell phones that are revolutionizing Africa, or build the iTunes University software that brings Ivy League lectures to people at all socio-economic levels all over the world? Not to mention the less sexy industries that make it possible for us to heat our homes (and our charities), power our lives and eat.

Many people in the nonprofit sector never get to visit a village in Africa or treat a sick child. They work behind the scenes in cubicles, they file files, they beg donors for money, they sit in interminable departmental meetings &#8212 just like employees everywhere. They’re far removed from the psychic benefit that’s supposed to substitute for half of their paycheck.

Most nonprofits are small and starved for capital, preventing employees from fully capitalizing on their personal potential. Nearly every good idea is met with a dearth of resources, a prohibition on taking risk, or a broken donated computer. Whatever psychic benefit that theoretically might have accrued from putting those good ideas into action is outweighed by the grind of shoestring budgets and overstretched systems that is the reality.

In 2003 BusinessWeek surveyed the compensation packages of MBAs 10 years out of b-school. The median compensation package with bonus was $400,000. By contrast, the average 2004 salary of the CEO of a $5 million-plus health charity was $232,000 and of a hunger charity, $84,000. There’s no way you’re going to get people with a $400,000 annual pay package to take a $316,000 annual pay cut on the basis of the psychic benefits that await them.

Instead, consider the enormous psychic benefits that people in the for-profit world enjoy as philanthropists. Think about this: It’s cheaper for the MBA to donate $100,000 a year to the hunger charity than to go work for it. She gets $50,000 in federal and state tax savings, which leaves her $266,000 ahead of the game. On top of that, she gets a seat on the board of the hunger charity; indeed, probably chairs the board. She now gets to supervise the poor bastard who’s running the hunger charity. She gets to dictate his strategy and how he goes about executing it. And if that weren’t enough, the MBA is now elevated to the status of respected philanthropist in the community (while the hunger charity CEO gets demonized at the annual board meeting for wanting a $10,000 salary increase &#8212 “shame on you, that money could be going to the needy,” they tell him). And, with a $100,000 annual contribution to the hunger charity, at some point the “philanthropist” gets her name on the top of the charity’s headquarters. And maybe she loves her for-profit job on top it. Sounds like an awful lot of psychic benefit to me.

Don’t fall for this Puritan self-sacrificial psychobabble. It’s not the poor who are asking you to work for less. It’s the donating public, including many a wealthy donor. They’re asking you to end poverty and every other great social problem and to do it for them at a discount. And they’re exploiting the images of the poor to get you to agree. The fact that someone makes a one-time sacrificial gift doesn’t mean you’re obligated to make a lifetime sacrificial career choice. If you do the math and the psychic benefit comes up lacking for you, then ask the people who want you to make the world a better place for another kind of benefit that begins with a “p.” Pay.