On being a (future) Chief Executive

I’m glad I’m not Tony Haywood. It’s not that that BP deserves any particular sympathy, but he’s clearly had a pretty rough few weeks. In the eyes of America’s media and politicians, desperate to trump one another in the outrage stakes to curry favour with November’s electorate, he cannot do anything right.

Appear contrite and apologetic and he’s not sincere, or he’s wasting time when he could be plugging the hole himself. Appear pro-active in fixing the problem and he’s not sorry enough. Appear British (which he finds hard not to) and it’s the fault of his whole country. Appear to worry more about his own life and family and everyone hates him.

Now Tony is pretty well paid for his trouble. According to Wikipedia he is paid an annual salary of £998,000 and in 2008 his bonus was £1,496,000. But his experience does proove that it’s lonely at the top. His Chair has avoided putting his head above the parrapet except to declare how much he cares for the small people. Tony has been in the firing line, and, to be fair to him, he has not shirked away from it.

Today is our future leaders summit and I am looking forward to chairing the afternoon session. The conference, aimed at our associate members who are looking to make the step up to the role of chief executive, will see a great line up of speakers sharing experience about how to bag that top job. It will also see the launch of our new publication, written by Cass Business School, on How to Become a Third Sector Chief Executive.

I suspect that most of the delegates are more interested in leading a charity than a multi-national oil company. But Tony’s experience should remind them all of one thing: once you’re the CEO there is no passing the buck. When something goes wrong it’s all your fault, even if it’s a genuine accident, even if you had all the right policies in place, even if your staff do something completely stupid.

It’s that kind of isolating responsibility which makes ACEVO’s networks so valuable. There is a point at which only other CEOs can provide you with the support you need, because only they can know what’s it’s really like.

And it is that responsibility which justifies the salaries which we pay to our CEOs. In the media circus surrounding executive pay, it’s easy to forget that it is responsibility, and not just the complexity of the role or the hours worked, which makes CEOs so valuable.

Everything comes on a scale, and not many ACEVO members have the capacity to destroy large swathes of the American coastline. But we do extremely complicated work with the most vulnerable people in the UK and around the world. The risks are enormous, and the responsibility sometimes overwhelming. Things have gone wrong in our sector and you can be sure they will again. So spare a thought for those who choose to isolate themselves with responsibility, and don’t complain when we pay them a little for their trouble.

Partnership and Placards

There’s a fascinating article on the relationship between the corporate sector and NGOs in The Economist this week. It’s written in the context of a backlash against NGOs who have build long term relationships with BP following the disaster in the Gulf of Mexico.

The article cites a number of major campaigning organizations, including the Nature Conservancy, Conservation International and The Environmental Defense Fund, who have worked closely with BP to advise on extraction methods or help develop carbon trading schemes. Some have received donations from BP in return. Now, many of the groups’ supporters and other activists are protesting that those organizations are too close to the wicked BP and have sold-out.

The article reminds us that in the last twenty years the relationships between the corporate sector and nonprofits has changed beyond all recognition, and real partnership is the norm on both sides. ACEVO is currently working closely with the CBI on identifying what leadership skills are needed in both third and private sector in order to build effective service delivery partnerships. We are also running the Sustainable Business Forum, led by Oliver Rothschild, which is looking at the future of corporate-third sector relationships.

BP’s shattered reputation does raise some important questions about how our sector works with big corporates. There is no doubt that close partnerships make a real difference to the behaviour of organizations. McDonald’s relationship with a number of environmental groups is a case in point. An equal seat at the decision making table is always likely to bring about more change than waiving placards outside the board room. However, every nonprofit has, or should have, its limit; and sometimes things happen which we must oppose. So understanding the point at which we turn our back on partnerships and pick up our placards again is key.

Many organizations in the UK will be feeling a similar dilemma about our relationship with government. The partnership between the sector and government here is the most sophisticated in the world. However, the age of austerity and fears for our most vulnerable beneficiaries cause us all to ask at what point we have to turn away from partnership and protest. (Polly Toynbee wrote on this a couple of weeks ago.)

It is a tough call for third sector organizations as there is still huge potential opportunity in partnership with government. As ACEVO has been arguing since the start of the credit crunch, by focusing on prevention, devolving control towards service users and joining up silos, the third sector can bring about real reform in our public services – both saving money and delivering better outcomes. The question is whether or not government is brave enough and bold enough to lead that kind of reform. If not, salami slicing and the protection of vested public sector interests will leave many of our service users much worse off. When this happens we have a responsibility to cry out. We must not be afraid to do so when necessary.

“Uncovering” salaries

Pay of public sector chief executives has been thrust into the headlines again this week thanks to the Cabinet Office’s decision to release the names of 170 civil servants earning more than £150,000 per year.

Much more significant for third sector leaders is the decision of Grant Shapps the new housing minister to highlight the salaries of housing association chief executives, as reported in the Telegraph the following day. The fact that these organizations receive a significant amount of public money is key to the argument in the article.

The report claims that these figures have been “uncovered” by Mr Shapps, suggesting an air of cover-up. It doesn’t, of course, take much uncovering to look through the annual reports of housing associations which, like other charities, publish the salaries of the highest paid. But this language is important as Mr Shapps is clearly suggesting that any salary over than of the prime Minister is unacceptable, and the article goes on to say:

“The housing association salary packages are embarrassing as the executives run non-profit making bodies providing housing to some of Britain’s most disadvantaged citizens.”

The obvious question is how long will it be before salaries of other third sector chief executives are again making the headlines, and how will we respond when they do?

Salaries such as those reported in the Telegraph, even for those running housing associations, are very rare in our sector. (Journalists do like to turn the exception into the rule.) The ACEVO pay survey for 2009-10 shows a median salary of £57,264, and even for organizations with a turnover of more than £25m the median salary is 104,500 (significantly less than David Cameron).

But we know that there is a significant gulf between what the public think we do in the third sector and the reality of our work in the 21st Century. In the still-frenzied media world following the expenses scandals of last year, and the supposed “new politics” of the coalition government, there is a very real risk that the very modest salaries which most third sector CEOs are paid could be conflated yet again with the excesses of the city and alienate many of the public on whose support we depend. Many serious people believe that charity CEOs should do the job for free.

The National Housing Federation are right to point out in their response to the article that housing associations have been open and accountable about senior salaries for many years (unlike the civil service) and match every penny of public money with two pence of their own resources, thus providing excellent value to the tax payer. The same argument is true of other charities.

I am not going to try to make a detailed value-for-money case here. My point is simply that making such a case is the only way for the public to judge whether or not these salaries are acceptable. I have argued many times in this blog that as a sector we need to take charge of the narrative about what makes for a good charity. Measuring and judging inputs is pointless. Describing how our work makes a difference to the world and how we use recourses effectively to achieve that difference must be the priority.

We have nothing to hide about what we pay our chief executives, and nor have we been hiding it. But in this climate we need more than ever to champion how the sector’s leaders bring about change for the most vulnerable and needy in society and how they are worth every penny.