I Regret to Inform You of the Passing of Ian Hodge
Ian was one of our first columnists here at Affluent Investor. I looked forward to reading his columns when they appeared in my inbox, setting aside more urgent tasks for sheer curiosity about what I would learn from reading his drafts. He was a gifted polymath, proficient in apologetics, evolutionary theory, music, economics, and business. That list is no doubt missing a few areas of expertise. His book, Baptized Inflation, tore the scales from my eyes and helped me to see the twisted spiritual roots of Keynesian economics. Ian’s personal conversations about business strategy were challenging and his questions were uncomfortably penetrating. We will miss him. The world will miss his wisdom, even if it doesn’t know it. I trust that Ian is now before the throne offering prayers on our behalf, and reveling in the joy of being in the presence of pure Truth and participating in the reality’s only perfect musical composition, the heavenly choir.
For my part, I plan to take a long, hard look at the business strategy questions which Ian asked me, and which I was unable to answer at the time, about this business venture, Affluent Investor, and to try to improve our strategies exactly where Ian saw that they were weak.
For you, I recommend that you read the last article which Ian sent to us shortly before his death. Let it be a challenge to you as it is a challenge to me, to do business with excellence to the glory of God.
There are many opportunities known as ‘Christian Ministries’. They are identified as organizations that promote the kingdom of God in some form, quote Bible verses at appropriate times, and they depend on subsidies in some form in order to cash-flow the organization.
They are invariably non-profit organizations, and this is where it can get confusing. A non-profit organization is one that cannot, by law, distribute its profits to shareholders or members of the organization. It is often confused with the idea that non-profit means the organization does not make a profit. More on that in a moment, but it is helpful to remember Peter Drucker’s definition of profit: the future cost of staying in business. In other words if there is no profit, there will be no business in the future.
I facilitated a workshop at one time with church elders. The word ‘profit’ arose, and they assured me they did not make a profit. However, when the word was changed to ‘surplus’ they said they did make a small surplus each year.
Now it is a small step from non-profit Christian Ministry to the notion that the organization therefore has entitlements. Entitlements can come in many forms. But high on the entitlement list is the idea that staff employed by the organization are expected to work at below market rates — often well below market rates. People may even be asked to volunteer their services. What is usually denied is that these below-market rates of pay are a subsidy to the organization. But they are more than that: they are also a transfer of risk. The potential failures of the organization is minimized by transferring the risk to the underpaid employees.
The question that needs to be asked is why the organization needs subsidies. It seems to be assumed that if the words ‘Christian Ministry’ are attached to the organization, it automatically becomes entitled to pay its staff at below-market rates because it believes it is entitled to subsidies in this form.
There are, however, many Christian business owners who see their business as a ‘Christian Ministry’ and yet they pay all their staff a fair market wage rate. So it seems that the words ‘Christian Ministry’ are not an automatic entitlement to pay employees less at all.
What the words ‘Christian Ministry’ do indicate is that the organization has some obligation to Christian ethics, among which is this:
“Let the elders who rule well be considered worthy of double honor, especially those who labor in preaching and teaching. For the Scripture says, ‘You shall not muzzle an ox when it treads out the grain,’ and, ‘The laborer deserves his wages’.”
– (1 Tim. 5:17-18).
This is the second occasion the Apostle Paul reminds his readers of an important principle. In his letter to the Corinthians, after quoting the verse referring to muzzling of the ox, Paul asks, “Is it for oxen that God is concerned?” (1 Cor. 9:9). So God gives instructions about feeding oxen in order to establish a principle that can be used everywhere else. If its important to feed your livestock, then it’s important to feed your staff properly, too.
It is quite clear here that attaching the words ‘Christian Ministry’ to an organization, if anything, requires that organization to pay its staff well by market standards. To be sure, there is an element of personal choice involved, whether or not an employee voluntarily chooses to accept a below-market rate in order to help the ministry. But in my experience, this is rarely the case. Many employees in the not-for-profit sector work at below market rates because they cannot get work elsewhere at market rates. In other words, for these employees, something is better than nothing.
But now we have a ‘Christian Ministry’ taking advantage of some people. Why don’t they employ these people at market rates? Is it because they are not good employees? In which case, why employ them in the first place. And if they are good employees, why not pay them market rates? Something doesn’t add up here.
Thus, what happens in real life is that many employees who work at below market rates for ‘Christian Ministries’ use the opportunity to build their resume and then apply, and obtain, better paying jobs in the market place. And so the below-market employer now has to fish again in the unemployment pool and find people who are desperate enough to accept their below-market wage offering.
It is not too hard to uncover, then, that too often the words ‘Christian Ministry’, especially when attached to a non-profit organization, become a flag for bad management practices. The organization could, if it disciplined itself, pay its employees better. But it doesn’t. Why not? Is Management too busy building monuments than it is to take care of its people? In many instances, the organization itself becomes a monument to the founders of the organization, but it’s a monument in name only that serves the founder, rather than the organization itself.
Consider this: a group of people get together and become the founding members of a non-profit ‘Christian Ministry’. The ministry has a legitimate goal and meets a need in the community. Now who is going to fund this ministry? The founding members? Will they give say 50% of their income for the rest of their lives in order to finance the organization and allow it to pay its staff reasonably well? Or will they, instead, expect employees to work at 50% off the going market rates as a subsidy to the ministry?
Who Takes the Risk?
These are not the only choices. The organization solicits donations from other people to support the ministry. But underlying the enterprise is another inescapable factor: risk.
In an ordinary for-profit business, the owners of the business bare the risk of the enterprise. If it fails, they lose personally. If it succeeds, they bank the profits.
Now a Christian ministry does not appear to have owners. It may have members, but no shareholders. But the question of ownership is not determined by names or distribution of the profits. Ownership, properly defined, is determined by whoever controls the assets. Whoever has the right of dispossession of the assets is the ‘owner’ of the assets.
And in the Christian Ministry, someone still controls the assets. It may be a board acting of behalf of all the members, or it could even be a group of three people who are members and decision-makers.
Somehow, attaching the words ‘Christian Ministry’ to the non-profit organization exempts the owners from taking full risk. Especially if they can convince employees to work at below-market rates. Now the employees are also sharing in some of the risk of the organization. Why? Because they voluntarily choose to do this? If that were so, Christian Ministries would have a better track record at keeping their employees who take on higher-paying positions first chance they get.
By agreeing to a lower salary, employees make it easier for the owners and management and take some of the pressure off them for the success of the organization. Thus, the lower-paid worker can find himself subsidizing poor management practices rather than subsidizing a Christian Ministry.
A part of the problem is that many non-profit organizations do not include staff in their mission statement. They are here to serve the community. But you cannot serve the community if you do not look after your employees. So it seems that a well-constructed mission or vision statement should include a commitment to meeting the financial needs of its employees.
Choices are there to be made. It becomes a matter of principle which choices are made. But it seems expecting employees to be made the involuntary subsidizers of the ministry is not the right choice.
Perhaps it’s time the words ‘Christian Ministry’ became a flag for biblical principles in the treatment of employees, rather than a whip to brow-beat employees into taking a lower wage rate. I have seen this so badly in one case, the employees were required to attend certain functions. Under law, they could claim reasonable travel costs, but a note to employees said words to the effect that they might consider not claiming the expenses in order to ‘help’ the Christian ministry. This, from an organization that generated millions in revenue, wasted thousands with poor management decisions, but was too mean to spend $400-500 in a full year to cover its employees costs which the organization mandated was a necessary step to maintain their employment.
Perhaps nothing beats the now bankrupt Seed America Foundation which found itself on Atlanta’s Fox News in 2008 (perhaps it was 2007) when employees complained they were not being paid their wages. When staff approached management concerning their unpaid wages, they were told to ‘trust God.’ In this case, the wages were commissions earned as Seed America employed people to search for commercial buildings that were available for sale at low prices. Being a non-profit, business could donate their buildings to Seed America and get a tax deduction probably worth more than the building could be sold for. Seed America cash-flowed itself by borrowing against these empty buildings as they collected more of them. But the money dried up as the Global Financial Crisis made itself felt with American lending institutions. And so staff did not get paid.
Not all Christian Ministries end up this way. Some just keep turning over millions of dollars on work practices that produce little or no return value to the organization. But the activity gives the appearance of success.
Most of these problems would disappear if the non-profit organization was required to report its management practices to its donors, along with reports on Key Performance Indicators, so that donors could see how their money is actually utilized. The company that has nothing to hide would not be afraid to do this, and donors would welcome the accountability. The trouble is, not many Christian Ministries have Key Performance Indicators. In one organization productivity had dropped 40% in a key department over a 5-year period. No one knew, until I introduced measurement and accountability. The next year, productivity went back to its 5-year high and an additional $160K was added to the bottom line (not counting repeat sales). That same organization did measure other activities, but it made no management decision based on the results. In effect, the productivity recording was a waste of time.
Meanwhile, it will be up to donors to insist on full accountability of their donations. And staff who work at reduced salaries can often become the largest ‘donors’ to the organization. One Christian organization employs Ph.D. scientists at about half the going rate. Some of those scientists have worked for the organization for 20 years. If they ‘saved’ the organization $50K a year, that’s a million dollars of subsidy the organization has received from each of its key employees.
There is no excuse for poor and inefficient management inside Christian Ministry. Anything less is not a good testimony to the name ‘Christian Ministry.’