The Data on Martyrdom

In what can only be called an effort to maintain a culture of martyrdom, when all else fails, traditionalists argue that higher compensation offerings in the nonprofit sector will not attract better talent. This effort at argument is actually progress. They used to simply declare that it was immoral for anyone to make money in the nonprofit sector. When confronted with the notion that this might restrict progress, because higher salaries would attract leaders who can achieve greater impact for those in need, they resort to the argument that money makes no difference. People do this work out of love of humanity and receive psychic benefit in return. Money will only contaminate things, attract greedy people, and we won?t get any better impact. The world?s most urgent problems are immune to financial incentive.

Then they ask for data: “Show me where high salary packages have attracted better leadership.” Clairvoyant data, I would call it. How can you show anyone data on the success of a practice that?s not permitted? The demand for data on a paradigm that doesn?t yet exist is always the status quo?s last defense. It?s an epidemic in the nonprofit sector. The sector requires data before anyone can sneeze. Imagine how long it would have taken to launch Disneyland in a nonprofit setting. We?d still be waiting for the data. But there are some data that might serve as a proxy. A Goldwater Institute paper on the merits of six-figure teacher salaries found that 7th grade South Korean students scored 21% better on math scores than their American peers, despite the fact that average South Korean classes are twice as large as average American classess — 49:23. They found that the quality of the teachers mattered much more than the class size.

And, no surprise, there?s a compensation delta. They point to a McKinsey report entitled, “How the World?s Best Performing Schools Come Out on Top,” which found that the average salary of teachers with 15 years experience in South Korea is 2.48 times per capita GDP. In the U.S. it?s less than half that — 1.12 times per capita GDP. Maybe the salaries have something to do with the quality of the talent?

Maybe. McKinsey found that South Korean schools draw from the top five percent of college graduates. By contrast, the U.S., according to the New Commission on the Skills of the American Workforce, is “now recruiting our teachers from the bottom third of high-school students going to college…. ” Could it be that the same dynamics apply to the nonprofit sector? After all, teaching comes with big psychic benefits too.

To argue that financial incentive makes no difference is to argue with the entirety of economic history. And one cannot simultaneously argue that corporations are greedy beasts that only care about profits AND that they gratuitously throw their profits down the drain by paying people more than they are worth.

I?m all for data. So let?s go and get some. Let?s try a radical new approach. Let?s open up the gates of financial incentive to nonprofit leadership and workers at all levels — the same way we do for Budweiser and BMW — and see what we get.

The data on martyrdom is in. American poverty has remained stuck at 12% of the population for decades. U.S. breast cancer deaths have hovered around 40,000 per year for the last ten years. U.S. suicides have remained constant at about 30,000 for ten years. Global AIDS deaths have doubled. Global malnutrition remained unchanged at about 820 million from 1992 to 2002. And on and on. Martyrdom has had its chance and it hasn?t worked. Martyrdom doesn?t move the needle.

I?m at the Social Capital Conference in San Francisco this week where 1,000 smart and caring people are exploring the ways that financial incentive and compassion together can move markets and talent to change the world. That?s where the future is.