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Dublin: 12 °C Saturday 25 October, 2014

Aaron McKenna: A functioning charity sector needs to pay well

People working in charities have mortgages and kids and wants and desires. The sector can’t hope to recruit and retain top class people, capable of running very complex operations, if they offer significantly less than the private sector.

Aaron McKenna

SHENANIGANS AT THE Central Remedial Clinic have done tremendous damage to the entire charity sector in Ireland, with reports of donations at this key time of year being down 40 to 50 per cent across all charities. Bodies completely unaffiliated with the CRC – and with financial probity that has not been called into any question – have faced stiff reactions from the public as they seek donations to fund vital services in a nation where the third sector plays a massive role in subsidising acute shortfalls in government service provision to specific segments of society.

Charities that help the young and old, sick and disabled, homeless and abused and all manner of other groups that otherwise go without vital services are losing money that keeps their doors open. The CRC itself does fantastic work to help very sick people, with its frontline staff delivering some of the best care in the world.

That the CRC and some other bodies now have questions to answer and houses to get in order is not in doubt. Nor is it a bad thing to shine a light on the charity sector in general to help ensure that every penny possible in donations is going to deliver on services for the needy.

A moral panic

There has developed, however, a moral panic about the pay of CEOs at some of the largest and most well-recognised charities in the land. It is a perennial issue that has blown up massively since the CRC scandal came to light, when unconscionable payoffs were taken from charity funds in less than straightforward fashion. When CRC Director David Martin was asked if pay cuts were ever contemplated when HSE funding for salaries was reduced, he replied “I don’t think it was ever considered.” Clearly, the CRC has dirtied its bib in a major way.

At other charities, however, there have been significant pay cuts for those at the top and on down through the ranks. Concern CEO Dominic McSorley earns 25 per cent less than his predecessor. Amnesty International’s Colm O’Gorman took a near 8 per cent pay cut this year. Most charities have cut staff pay in recent years in the region of 5 to 10 per cent.

Yet charities are getting biting comments on the streets, at doors and on social media when seeking donations; with people telling them that they’re not paying to fund the salary of an overpaid chief executive. People clearly believe that charity CEOs are overpaid.

The Irish Sun printed a breathless panel with 26 mugshots of charity bosses during the week with their salaries inlaid. The heavyweight on the list is Angela Kerins, the chief of Rehab Group, who earns €234,000; which is almost €90,000 more than her next nearest rival. Nineteen of the 26 earn between €70,000 and €125,000.

Great organisations need top-class people

This may sound like a lot, but if you crack open the salary surveys published by recruitment firms you will find that €120,000 is the average salary the Managing Director of a small or medium business can expect to earn. This is the market rate for people with the variety of skills required to run an organisation, from managing the service delivery to the day-to-day people and financial concerns to helping set the strategic direction going forward. As an average, it can be well surpassed in larger or more profitable companies.

Charities are supposed to be run by charitable people, yes; but someone working in the third sector misses out on opportunities for bonuses, acquiring shares, and enjoying the perks of the private sector without having to consider every expense in the context of breathless newspaper reports in future. The people who plump for working in charities, temporarily or permanently, will likely lose out versus their potential earnings in the private sector in many instances, provided they’ve got the talent to back up the salary.

One can argue about the effectiveness of individual cases in this well-illuminated sector, but there are people who have built and manage great organisations that truly deliver top class work. If you want top drawer CEOs, you have to pay salaries in and around the €100-150,000 a year range; depending on the size of organisation.

The same principle of needing to compete with private sector wages holds true down the list of positions in a charity. People seem to be amazed that those working in charities aren’t all on JobBridge internship wages, or at least earning significantly less than their peers in the private sector.

How can the charity sector hope to recruit and retain top class people if, say, they all worked for 20 per cent less than they might earn in a private sector company? People working in charities have mortgages and kids and wants and desires, and are often no more or less saintly than the rest of us who give to charity in the first place.

Transparency is key

Most Irish charities seem to manage to deliver 80 per cent of their earnings to services, and spend about 20 per cent on administration and overheads; with the majority of that being wages for staff. That seems like a good ratio, with four times more money going to the end product than it takes to run the place. That would, I think, be 80 per cent of nothing if most charities were run simply by unwaged, inexperienced saints.

Pay is always controversial in a time of thrift, but again it is not unreasonable to wonder if a person being paid, let’s say for arguments sake, the average industrial wage of €36,000 would either have the skills to manage their organisation through this difficult time; or, if they did possess the skills, would stick around when they could be earning three times more elsewhere?

We need a charity sector that people can have total confidence in as regards their financial probity. Charities and government alike should live in as totally a transparent world as possible and be able to account for every penny they spend and report it on it regularly, as many do.

As a donating public, however, we need to accept that well-run organisations need to hire top drawer talent at all levels, from bottom to top. In order to do that, they have to pay wages that are comparable to what these people could get elsewhere; minus all the other perks and bonuses that come with success in the private sector.

Aaron McKenna is a businessman and a columnist for TheJournal.ie. He is also involved in activism in his local area. You can find out more about him at aaronmckenna.com or follow him on Twitter @aaronmckenna. To read more columns by Aaron click here.

Read: €3.4m funding from Gorta gives new hope to disabled youth in India
Read: New charity index reveals Ireland’s top 100 highest earning charities

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