Back in the early 2000s, Professor Noam Wasserman of Harvard Business School was researching entrepreneurs (my thanks to my friend and entrepreneur David Perla for pointing this out to me). Wasserman realized that these entrepreneurs fell into two categories.
The first were those who wished to maintain control of their company, even at the expense of growth. They were reticent to bring in outside investors if it meant that they would need to cede some power. He called them The Kings.
The second category was the entrepreneurs whose primary motive was money. They were happy to give up control of the company if it meant maximizing profits. They were classified The Rich.
While it is important for entrepreneurs to understand their own motivations, like what is going to truly make them happy, it is equally critical for investors to understand the motivations of the entrepreneurs they are betting on. According to Wasserman, they may find themselves aligned with an entrepreneur whose motivation is to become rich, which is great as their entire motive is to maximize profits as well.
But what of the kings? Are they a good bet? If their prime motivation is the desire to be in control, and they are willing to sacrifice financial gains in order to keep control, then our investor may not approve. Wasserman goes so far as to say that there is “an inherent conflict between these two motivations” — most entrepreneurs need to choose between King or Rich, and investors need to make sure they understand the motivations of the entrepreneur they are about to bet on.
The parallels in our Jewish community are striking. There is no doubt that the core mission of a not-for-profit signals to the donor whether its goals are compatible with his. After all, either I want to spend my charitable dollars on the environment, for example, or I don’t. I need to prioritize between helping to finance a cure for cancer or improving my local day school or investing in the work of a social service agency in Israel. We each live in a world of finite dollars, so even if we can give to every cause we cherish, we need to make hard decisions about the amount we give to those causes, and when times are tough, where we are going to cut back.
For those of us who stay true to the Jewish imperative of giving 10 percent of our income to charity, these are significant decisions. And perhaps more important than money is where we allocate that other scarce resource — time. Where do we choose to volunteer, to serve on a committee or board of directors?
But after factoring in the mission, one of the major draws that any of us have to an organization is its CEO. After all, he or she is the face of the organization and most often the single greatest determinant of the organization’s success or failure. But how often do we ask ourselves whether that CEO wants to be Rich or King? Now, in our case, “Rich” is not about the CEO’s own salary. It’s about the CEO’s drive to maximize the profitability (the social return) of the agency, even at the expense of giving up control. Or is the CEO a King, more focused on personal power and control than on really reaching the potential of the not-for-profit he or she is leading?
Wasserman points out that savvy CEOs are able to “talk the Rich talk convincingly.” But has the CEO built a cult of personality around him or her? Have they fostered a weak lay leadership so that their power did not have to be checked or shared? Have they built a strong senior staff of independent thinkers or are they surrounded by “yes” men and women who lack authority and pose no threat?
What about the myriad organizations in the Jewish community who are kept purposely small by their founding entrepreneur, either because of a lack of an appetite for risk or because the CEO is worried about giving up control? On more than one occasion we have made grants to organizations conditional upon the creation of a more robust board of directors, only to be rebuffed by the CEO.
“We are happy operating the way we are,” I’ve been told. But is that really in the best interest of the agency and its investors? Does the organization lack a succession plan because the CEO does not want to imagine life once he or she is no longer at the helm?
On the other hand we have organizations taking risks, recruiting talent and promoting them, developing active boards and committees. We even see some cases of merger to provide better reach and better value.
We each try to do our own investigation of not-for-profits before we part with our hard-earned money. Usually the more we give, the more we investigate. Some of us ask friends, search the Internet or review the organizations’ tax returns. But before you write that next check, or consider volunteering or serving on a board, there is one more question you should add to your check list: Rich or King?
Mark Charendoff is president of The Maimonides Fund and is a member of the board of directors of The Jewish Week.