Nonprofits and the Rule Book That Keeps Them From Their Goals

Nonprofits and the Rule Book That Keeps Them From Their Goals

Dan Pallotta, self described charity defender, author of the book Charity Case, and President of Advertising for Humanity, is impassioned about his message. What he has to say is illuminating, challenging, and may lead you to think, and then act differently as you invest your own resources.

In his seminal TED talk, “The way we think about charity is dead wrong,” Pallotta asks us to question the way society has taught us to examine what we think about giving, charity, and nonprofits, and see that these viewpoints are actually undermining the causes we want to support and our underlying desire to change the world.

“...business will move the great mass of humanity forward. But it always leaves behind that 10 percent or more that is most disadvantaged or unlucky…this is where the nonprofit sector and philanthropy come in. Philanthropy is the market for love. It is the market for all those people for whom there is no other market coming.”

At 9:21 Pallotta sums up the 5 main points that show that for-profit and nonprofit business’ operate by two different rule books, and the overwhelmingly stifling outcome that these confused standards have on the nonprofit’s ability to be effective at achieving their (and ultimately our) goals.

“You can’t use money to lure talent away from the for-profit sector, you can’t advertise on anywhere near the scale the for-profit sector does for new customers, you can’t take the kinds of risks in pursuit of those customers that the for-profit sector takes, you don’t have the same amount of time to find them as the for-profit sector, and you don’t have a stock market with which to fund any of this, even if you could do it in the first place, and you’ve just put the nonprofit sector at an extreme disadvantage to the for-profit sector on every level. If we have any doubts about the effects of this separate rule book, this statistic is sobering: From 1970 to 2009, the number of nonprofits that really grew, that crossed the $50 million annual revenue barrier, is 144. In the same time, the number of for-profits that crossed it is 46,136. So we’re dealing with social problems that are massive in scale, and our organizations can’t generate any scale. All of the scale goes to Coca-Cola and Burger King.”

At 11:46 Pallotta challenges us with a question many of us have probably asked ourselves before donating to an organization, “What percentage of my donation goes to the cause versus overhead?” He explains why this is dangerous to ask, pointing to two main problems with the thinking behind it and the effect that thinking triggers. “First, it makes us think that overhead is a negative, that it is somehow not part of the cause. But it absolutely is, especially if it’s being used for growth. Now, this idea that overhead is somehow an enemy of the cause creates this second, much larger problem, which is, it forces organizations to go without the overhead things they really need to grow in the interest of keeping overhead low.”

Pallotta is passionate as he explains, “We should be investing more money, not less, in fundraising, because fundraising is the one thing that has the potential to multiply the amount of money available for the cause that we care about so deeply.”

I encourage you to watch the original presentation. This is an eye-opening TED talk that exposes a way of thinking that has confused “morality with frugality” and needs to be in his words, “revisited...revised...and reinvented” before our common goal of change for the good of humanity can be realized.