For this post, my thoughts were further informed by my own experience, albeit more limited in scope, managing others. Managing employees is a skill in and of itself, and one that is seldom taught, not even (surprisingly) in business school. After all, most people who ascend to management positions, particularly at smaller organizations, do so because they are good at their previous jobs—jobs that often don’t involve managing others—not necessarily because they are good managers. So, I offer the following ten suggestions with a deep respect for how difficult the art of managing, especially in an under-resourced environment, can be. My hope is that those who read them will find therein ideas and inspiration for forging stronger, deeper ties with the young employees who represent the future of their organizations, and of the sector as a whole.

Ten Strategies for Engaging Generation Y in the Nonprofit Workplace

1. Have things for them to do on day one. There is no surer or quicker way to turn young, fresh-faced, enthusiastic Gen Y social citizens away from the nonprofit sector forever than to suffocate them with boredom in their first job. All too often, employers fall into the trap of being underprepared for their new team member’s first day, hurriedly throwing a heap of random tasks into their laps or simply telling them to spend a few days (or weeks, or months) “getting to know” the organization’s internal files. Much better to prepare an orientation of sorts for them, at least a day in length, during which they’ll have the undivided attention of their manager as they are introduced to the rest of the staff, briefed on the overall strategic direction of the organization and how their job fits into it, shown the major functions of their job, and offered specific training on the initial tasks to which they’ve been assigned. Managers should have at least several weeks’ worth of projects determined in advance of the new hire’s first day, with realistic targets for completion set and regular check-ins planned.
2. Take their intelligence seriously. If your new employee is just graduating from college, she is coming from an environment in which demonstrations of her intelligence and individuality are valued, celebrated, encouraged, and expected, and she will be looking for the same from you. If she comes from a school with a well-recognized name, it’s also entirely possible that she went through a selection process that was more competitive and rigorous than anything you’ve been through, even if you graduated from the same school. The increasing numbers of Americans going to college, combined with an increasingly competitive talent pool as need-blind admissions become more and more common and international students vie for slots, have made getting into top colleges a grueling affair. Even if she graduated from somewhere else, she probably is one sharp cookie to have made it through the even more grueling selection process that led to her being hired by your organization. After all, it’s not unheard of these days for organizations to get hundreds of applications for a single entry-level job. So recognize that you may have a rock star in your midst, and instead of feeling threatened by it…
3. Give them challenging work that matters. …take advantage of it! Look, whatever they tell you during the interview, no eager young grad comes to a nonprofit organization dreaming about organizing your tax records! or telemarketing ticket sales! or sucking up to rich people! They’re there because they believe in the mission of the organization and because they WANT TO MAKE A DIFFERENCE. Now, that’s not to say that any entry-level job will necessarily be free of boring busywork. But to the extent possible, try to find projects for them to work on, even for only part of the time, that stretch their abilities and represent new frontiers for the organization. Small organizations, especially, should have plenty of material to work with in this regard, since no one ever has enough time to do all the things they’d like to do. The work will excite them and serve as an energizing counterbalance to the aspects of the job they may not enjoy as much.
4. Don’t squash initiative. Does your new employee have lots of ideas about how to improve the way things work around here? Is he eager, maybe a little too eager, to share them with you? Does that kind of piss you off, and make you think it would be better if he just shut up and did his job? Does it make you want to shoot him down, just a little bit? Don’t give in to the temptation! This is a natural reaction whenever anyone who hasn’t “paid their dues” presumes to judge the hard work that you and your colleagues have put in. But though it may be natural, it’s not productive. What your new employee thinks about organization or departmental practices is valuable information. His perspective as a quasi-outsider and, perhaps, a member of a generation your programs are trying to reach, is difficult for you to replicate. If his opinions bother you, rather than rejecting them outright, see if you can corroborate them from other sources. He may be telling you something you need to hear. (Oh, and by the way, squashing initiative is another great way to kill a young person’s affection for the nonprofit sector.)
5. Don’t be a slave to the job description. Your new hire brings with him a unique package of abilities and interests that may or may not have all that much to do with the job that he was hired for. Sure, you wouldn’t have hired him if you didn’t think he could do the work. Nevertheless, it’s quite possible and even likely that your employee is much more passionate about the mission of your organization than he is about the details of his day-to-day job. So, as you and your employee become more familiar with each other, figure out what kinds of work really get him excited and draw his engagement. If you come across a situation in which he seems much more interested in working on something other than what you thought you needed him to be working on, especially if he is showing initiative in seeking out that work, don’t get frustrated! See it as an opportunity to forge a better match between employee and function, and try to find ways to get more of that work onto his plate. Sometimes, employees enjoy having a number of different projects to juggle; Gen Y workers, having grown up on instant messaging and cell phones and using laptops in class, tend to be particularly comfortable with this type of multitasking. If you can, you might even consider structuring (or restructuring) your organization to take advantage of this. Private sector consulting firms, for example, recruit college and MBA grads to be “Analysts” and “Associates” respectively. There’s no function or industry designation in the title. The expectation is that employees will be generalists, applying their talents wherever they’re needed. It’s then up to the managers to identify those talents and use them wisely on behalf of the company’s clients. Similarly, nonprofits could develop rotational programs for their entry-level employees that provide experience in a number of functional areas, or simply maintain a more informal workplace environment in which responsibilities are carried out by teams of workers or task forces rather than individuals. The more effectively a manager can tie an employee’s work to his abilities and interests, the more that employee’s productivity and loyalty will increase.
6. Invest in their professional growth. This one is hard for smaller nonprofits, because in most people’s minds, “investing in professional growth” means hiring expensive professional development consultants or helping employees pay for graduate degrees. While I think such programs can be quite valuable and should absolutely be explored by wealthier organizations, there are simple steps that even cash-poor nonprofits can take to develop their emerging leaders. First, by following the advice above and regularly adjusting job responsibilities, organizations will give their young employees experience in a variety of different functional areas, all of which can come in handy later. Secondly, an effective performance review system, with appropriate feedback mechanisms for the employee, can do wonders to add helpful structure to a working relationship. What are your goals for them for the next year? What are their goals for themselves for the next year? What can you do to make their work more enjoyable and effective? Finally, work to fill in the expertise gaps the employee might have that are relevant to the job at hand. Let’s say you need her to maintain the organization website. If you can teach her what she needs to know yourself, great. If not? Maybe there’s someone else connected to the organization who can help. Failing that, enroll her in a class or workshop. Expecting her to pick up these skills herself, without any further guidance, should only be a last resort.
7. Reward talent and hard work. Given that there are hordes of contenders for even entry-level nonprofit jobs, from an economic standpoint, it’s probably not necessary or wise to try to compete with private sector firms on starting salary. After all, every new hire carries with it a certain risk that things won’t work out, and that risk is more substantial when the employee has very little or no full-time work experience. Nonprofit starting salaries thus can, and probably should, reflect that risk. But once the employee has had a chance to prove herself—and, really, it shouldn’t take that long—that starting salary is no longer necessarily a fair indicator of the value she brings to the organization. So if she’s been working her tail off for six months or a year, bringing new ideas to the table and volunteering for extra tasks that interest her, and realizes that she would have achieved the exact same result for herself by slacking off and doing the minimum necessary to keep from being fired, it’s not surprising that she might begin to lose energy at that point. It’s not surprising that she might start looking around for another job at that point, or thinking about grad school. Because if she finds herself in a place where her contributions are neither acknowledged nor seemingly even noticed, she’ll want to put herself in a place where they are. So my recommendation is this: establish a probationary period of, say, three months for all new entry-level employees as they train to do their jobs. Make sure they know what the expectations are, hold them accountable to those expectations, and don’t be afraid to let them go if they’re clearly not measuring up. If they show themselves to be as competent as you thought they were when you hired them, give them a raise. If they continue to distinguish themselves after that period is over, give them another raise. If raises are a problem because of finances, change their title. Give them more responsibility. Give them ownership, autonomy. If someone else leaves, consider giving them that job. It doesn’t have to be a lot at any given time, but workers need to feel like they’re progressing and that they’re appreciated. A steady diet of recognition that’s based on actual accomplishments is the best way to do this.
8. Give them face time with leadership. When was the last time your entry-level staffers were invited to a board meeting? Doesn’t it make sense, if you want them to be invested in the organization, for them to know what’s going on with it? I was invited to be the note-taker at board meetings at one of my early jobs, and I was glad to do it. It was exciting for me to be a fly on the wall, see what a board meeting was like. Have a large staff? You could still let people participate on a rotating or lottery basis. If you’re feeling really ambitious, you could even let entry-level employees make presentations to the board. This idea of face time applies to executive leadership no less than it does to the board. I was at one of my previous jobs for months before I got to spend more than a couple of minutes with the organization’s executive director. Remember that until such interactions take place, top leadership will seem distant and inaccessible to an entry-level employee. A lunch date or a meeting in the office can quickly solve that problem.
9. Give them face time with the public. Does your organization ever send people to sit on panels? Hold public workshops? Maintain a blog, or a Twitter account? Why not give your emerging leader a shot at one of these? Remember, Generation Y is accustomed to expressing their individuality and sees it as an integral part of their existence. Many will reap a fair bit of excitement and intrinsic satisfaction from the opportunity to represent their organization before the public, and get their name out there in the process. It doesn’t have to be a big deal—for example, you could add the employee as a contributor to the blog and allot him a couple of posts a month, rather than having him run the thing entirely—but even little gestures will go a long way in this regard.
10. Incorporate their voices into organizational decision-making. One of the reasons that many nonprofit organizations now find themselves struggling to connect with younger generations is because they didn’t take full enough advantage of that generation’s presence among their employees. Today’s twentysomethings’ experience of childhood is completely different from that of their parents, due to the technologies that have emerged in the meantime. Their social networks are totally different, their relationship to information is totally different, and their cultural preferences may be totally different as well. It’s valuable, incredibly valuable, to have those voices represented at the table when making decisions that affect the organization’s future direction. Not to mention that if you have an employee who is sharp as a nail, who works hard, who believes in the mission of the organization, why wouldn’t you want that person involved in decision-making, no matter what her age?

As you can see, the above suggestions follow a certain order: certainly, you wouldn’t necessarily want to give a fresh-from-college hire a golden key to your organization’s Twitter account on his first day. But it doesn’t take that long to tell whether an employee has a future with the organization that’s hired him. And if it’s determined that he does, the above steps will help ensure that his talents and ideas are leveraged for the organization’s maximum benefit, rather than left to die on the vine. It should always be an organization’s ambition, whenever possible, to turn an entry-level employee into an emerging leader.

Further (recent) reading:

• The Entrepreneurial Generation, Inc.
• Lose the department borders and territorialism! Assign tasks by expertise!, off-stage right
• Rosetta Thurman’s From Entry Level to Leadership and Next Generation Leadership series

For this post, I want to talk about a closely linked issue, that of compensation at lower organizational rungs. You know, a couple of times a year I’ll read some article about how talented Generation Y kids are invading the workforce and begging for more responsibility, meatier roles, more flexible job descriptions at their organizations. When I was working out in California last summer, I attended a focus group run by Barry Hessenius on engaging youth leaders in the arts during which this became a topic of discussion (read some of Barry’s thoughts on the process here). I also subscribe to an email list called Emerging Leaders of New York Arts and have seen the issue mentioned there as well.

In light of the thirst for greater responsibility and impact that I (and apparently an entire generation of people just like me) felt in my own entry-level positions, I must say it drives me a little crazy when I read articles and see panels sounding the alarm at the coming “leadership gap” at nonprofit organizations. “Where, oh where, will the next generation of leadership come from,” these articles and panels seem to fret, “when nonprofits pay so little, and so many Baby Boomers are retiring?”

People, people. The next generation of nonprofit leadership is right under your noses. The problem is, in the vast majority of cases, they’re not being treated as future leaders. Look, the lower-level staffers at most nonprofit organizations I know of are insanely overqualified for their jobs. As a newly-minted Yale grad in 2002, I remember applying for an administrative assistant/receptionist position at a tiny performing arts production company in New York City and being told that there were 200 fellow contenders for the position. That’s a lower acceptance rate than any college, any business school, hell, any Ph.D. program out there. I sent out 140 resumes that summer before receiving a single offer of paid employment, for a part-time position at $15/hr. With those kinds of odds, you don’t think you’re getting some heavy hitters on your team? And how many more young people work at the lower levels than Boomers work at senior leadership positions? This is not a numbers issue. This is an issue of figuring out how to take advantage of a wealth of talent at your fingertips.

A true examination of how to develop youth leadership in nonprofits deserves a blog post of its own, or maybe a series of them. But no effort to develop that talent is going to go anywhere so long as nonprofits treat their new hires as cogs in a machine, rather than valued team members with their own unique package of abilities and interests. Part of that equation means paying them a salary that will allow them to live within a 30-minute commute of their workplace with fewer than three roommates and more than 100 square feet to their name. The life of the starving nonprofit employee can be interesting and romantic and fun—for about five months or so. After that, especially if your organization is in New York or San Francisco, you’re probably looking at massive turnover if you don’t start paying your entry-level employees a halfway decent wage.

Unfortunately, massive turnover is exactly what’s happening at lower levels in nonprofits all across the country. Younger, talented folks leave after two years, one year, six months, to pursue better opportunities at other firms, grad school, their own artistic careers, their own businesses, you name it. And it creates big problems for the organizations that had put in hours of time sorting through hundreds of resumes to hire them. Just because $30,000 or so may be the going rate for entry-level nonprofit employees doesn’t mean that a successful employee in that role is worth only that much to an organization! Frankly, I think that many support positions, ably filled, can be nearly as valuable as the management roles that they enable. Reliable, competent, satisfied support-level employees know the internal systems front and back, remember the ins and outs of all of the relationships, take care of the annoying busywork that management doesn’t want to (and quite possibly doesn’t know how to) deal with. When they leave, there’s a gap in services performed, services that are essential but that no one else has time or cares to do.

An incremental $5-10k a year for an employee like that makes far more difference in his or her life than the same amount of money does for an executive making four or five times as much. It builds loyalty, shows that the organization is invested in the employee’s future. Or, if the employee is perfectly happy in the support role, a higher salary bolsters against encroachment by other opportunities. So sure, start them off at the low end, but give rapid opportunities for raises, promotion, etc. Who knows? It might just ensure a smoother operation for which those high-priced executives can then happily take all the credit.

It seems to me the devil is in the proverbial details on this one…

Is there a number you have in mind that, once crossed, makes compensation unreasonable? How much does an organization’s budget size matter? Is performance completely irrelevant, or are you more tolerant of high compensation when the long-term performance seems to justify it? Should we consider whether someone has grown an organization or merely stewarded it?

And then, a few moments later:

Another thought occurred to me…

What about compensation for specialists at NFP orgs? For example, the Chief Investment Officer at the Ford Foundation makes nearly $1M/year (see Guidestar). But that person is responsible for investing over $12B in assets. That’s pretty important! And the specialized skills involved would be in demand at any Wall St firm, so there’s real competition from the FP sector.

I don’t think it serves the sector to be skimping on some of this stuff.

These are important points, and kudos to Adam for raising them. The first thing I’d say is that I don’t disagree in principle with people like Dan Pallotta or Sean Stannard-Stockton who say that we shouldn’t care about the magnitude of compensation so long as the organization is producing a level of impact that justifies it. I guess where I differ with them is on a couple of points: first, I am deeply skeptical that performance and compensation are all that highly correlated among nonprofit executives, or that simply offering higher compensation would somehow increase that correlation. Secondly, I feel that one must consider an executive’s performance in terms of not only the total amount of impact generated but also the counterfactual scenario of the impact generated by a hypothetical lower-priced executive’s performance. Obviously that latter concept is impossible to measure exactly, but to explain what I mean in more basic terms, I want to know if a high-priced CEO is just coasting off of the firm’s own internal momentum and/or accidents of history, or is he/she generating that momentum him/herself.

To address the question about growth vs. stewardship, clearly one job of a CEO is to grow revenues. However, that’s not his or her most important job. The most important job is either growing profit or growing impact, depending on which sector you’re talking about. Either of these can be accomplished with flat or decreased revenues. So to me, growth is an interesting but ultimately fairly incidental factor when considering appropriate compensation. Budget size matters up to point, insofar as you can’t just make up money out of thin air, but after an organization gets past a certain size ($20-30 million?) I think impact should matter much more.

Is there a magic number? Following my logic above, no, but Seth Godin says the following in the post I linked to the other day:

After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can’t eat more meals in a day or wear more shoes. What matters to the manager is the relative amount. How much more would I make over there? Why does that company pay its CEO more than my company pays me?

Seth’s number is a million bucks; I’d put it a fair bit lower than that, particularly if one doesn’t live in New York City or the Bay Area. But basically that’s the idea. I have no problem with reasonably demanding jobs supporting reasonably comfortable, upper-middle-class (or lower-upper-class) lifestyles. As one gets further and further beyond that horizon, though, for me the expectation becomes exponentially greater that the higher salary will be justified by some sort of extraordinary evidence of impact. And if it’s not, then I for one start to lose trust in individual and organization alike.

Adam also asked about investment professionals. I just took an endowment management class where we discussed this very issue in some depth. Here’s the thing: it may be hard to believe, but those folks who earn $1m+ from managing Ford’s assets are actually already forgoing much higher pay packages that they could earn in the private sector. The other thing to consider is that investment professionals’ skills are more transferable between for-profit and non-profit sectors and that it is easier to measure their performance than that of CEOs. (Though Seth G., again, would argue that the whole system is messed up: “should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thousands of dollars in cash?”) So I agree that there’s a slightly stronger rationale to pay investment managers what they get paid, though I would still think it’s important to consider whether the premium for a “blue chip” candidate over a less obvious but clearly mission-driven one is really worth it, especially when one considers the program funds and potential PR/trust issues at stake.

I will be back with my promised post on nonprofit compensation and lower-level employees in short order.

I’m sorry, but after the failure of a number of companies this past fall led by some of the most well-compensated individuals in history, can’t we retire once and for all this notion that “the best” employees are the ones who command the highest salaries? When financial professionals justify their enormous pay packages by pointing to gains by their companies in the market, and then still take home enormous pay packages when their companies lose billions of dollars in that same market, isn’t there something wrong with this picture?

As I see it, the argument for current executive compensation practices rests on three separate faulty assumptions:

• They’re worth it. Simply not true, according to academic research on the subject. (h/t FiveThirtyEight) Furthermore, with any new hire there’s a level of uncertainty, a risk factor if you will, about their effectiveness in a new environment. Past performance is no guarantee of future results, after all. Automatically offering to pay a candidate more than what he made at his last job ignores this risk factor.
• If you didn’t pay them that much, they’d go somewhere else. Sure, this will be true so long as other companies participate in the same conspiracy of self-deception with regard to the other assumptions. However, many companies, particularly well-established ones, fail to properly value the non-monetary benefits that they provide to top employees, including connections, influence, prestige, and the enhancement of future career prospects. In fact, a study by former Yale SOM Dean Joel Podolny found that workers in the financial industry will actually demand more compensation to work at lower-status (i.e., non-bulge-bracket) firms, with the corollary that higher-status firms—which are invariably firms that can pay more—can actually offer lower compensation and still get the same-quality employee.
• No one else could possibly do this job. Any executive position at a reputable company will have hundreds, maybe thousands of quality applicants. Is the difference in performance between the person eventually hired and someone a bit farther down the pack so vast as to be worth a 30, 40, 50% premium? Do you seriously mean to say that there are people who would have done worse for their companies than the recently departed CEOs of Bear Stearns, AIG, and Merrill Lynch? Isn’t it at least possible that a less experienced candidate with fewer external credentials but more integrity and intellectual honesty would have produced far better results?

The reality is that the highest-compensated executives in a given industry are not necessarily the best or most talented leaders of companies in that industry. The people who are in the best-compensated positions are merely the people who are the best at securing compensation for themselves. Should they perceive an opportunity to secure even more compensation somewhere else, leaving their current company in the lurch, they will not hesitate for an instant to make it so. It’s a classic agency problem.

A lot of this confusion stems from a narrow-minded focus on salary as the single axis of measurement for the worth of a job to employer and employee alike. Seth Godin addressed this issue recently and put it like this:

Law firms went through this cycle twenty years ago. The top firms competed with each other to recruit a too-small pool of talent from the top law schools. Unable to muster up even a mite of marketing insight, they chose to compete on only one axis: salary. So, 24 year olds were given jobs at $120,000 a year, when their peers from college were making 20% of that. The firms could have found great people at half the price, except that with only one axis, they had to be at the top if their peers were.

If you were a law student, the choice was easy. Either you got a job at a firm that proved its worth by paying a lot or you didn’t. You didn’t have to know anything about the firm, apparently, other than the fact that they were top tier, and the way you knew that was because they paid a lot.

Workers make choices about jobs based on a number of factors, with compensation being only one. Location, industry, function, challenge, work environment, relationship to the firm, the firm’s reputation, and the prestige of the position are all major factors that prospective employees consider. In Negotiation class we learn about distributive versus integrative negotiations. Distributive negotiations are the kind we usually think about: tugs-of-war in which any change in conditions will result in a win for one party and a loss for the other. Pure salary negotiation can only be distributive, assuming both parties like to have money. An integrative negotiation adds a third element: conditions that result in the improvement or worsening of the situation for both parties. A company’s location or a job’s responsibility level, for example, could play a role in an integrative negotiation, if what the company prefers is in the interests of the employee as well.

Wouldn’t we all be better off if companies pursued salary negotiations with executives in integrative rather than distributive fashion? Sure, they might get paid more if they went elsewhere, but they wouldn’t have the same experience. Call their bluff. They might have to endure a few more months of unemployment or stay in a job that they find unfulfilling. Or things might work out for them. But ultimately, don’t you want to avoid hired guns who are more interested achieving results for themselves than they are for your company? Don’t you want talented people working for you who want to be there? Don’t you want people who have an emotional or intellectual attachment to their work with you and want to make it as effective as possible? Isn’t that kind of a skill, really, that makes the employee more valuable?

I’ve been talking about these things in the context of the for-profit sector, but to my mind, they are just as if not more relevant in the nonprofit sector. A lot of people complain that compensation in the nonprofit sector is too low. In the aggregate, I agree (more on this in another post), but when it comes to executives, someone who would leave an organization over a few hundred thousand dollars that he doesn’t need is someone that probably doesn’t belong in the nonprofit sector anyway. Every incremental dollar that goes to an executive’s salary is another dollar that doesn’t get spent on programs that are the central focus of the nonprofit’s mission. Given the cash-starved state of most nonprofits, unless an organization can clearly justify that incremental expense over hiring a supposedly lesser candidate in terms of concrete outcomes for its constituents, its decision to pay that salary is both strategically and morally questionable in my view.

So how do we fix this situation? It’s a classic market failure scenario in which a suboptimal equilibrium has been reached because individual players perceive a strong disincentive to make the first move. If Bank of America takes a stand tomorrow and decides to pay all of its employees $100k or less, it probably will lose the best ones to other companies. But it doesn’t have to be this complicated, and that’s because of the third assumption I mentioned above. My advice to any reasonably-sized organization looking to get better bang for its executive compensation buck is this:

Hire from within.

Right now, most organizations recruit people from outside the company for executive positions—typically people who already have high-paying, high-profile jobs in their field. These people have all the leverage in a negotiation, because they can easily stay put in their attractive position where they know they can be successful. They will likely only leave for a big raise. By contrast, non-executive staff in the organization have no such alternative. They already know the organization and would have a shorter learning curve than a comparable candidate brought in from the outside. If the staff has benefited from professional or leadership development initiatives during their time at the organization, why let some other organization benefit from that investment? Consider this as well: the true capabilities of your organization’s staff are known much better internally than they are externally. This represents a competitive advantage: you have insider information on your own employees. Why not use it? Why go through the trouble of identifying outstanding candidates for junior positions if you’re not going to take advantage of their talents over the long term?