Dear Dream Builders…Listen to Dan Pallota

Dan Pallota is calling us out. Not on environmentalism, or food habits, or our country’s ridiculous obsession with the Kardashians (guilty!), but on our philanthropy. He wants us to start changing the way we think about changing the world.

If you look on Facebook, charitable pages and posts are rife with complaints about charity spending on overhead. Even on Charitable Navigator it’s fairly easy to find complaints about salaries and overhead spending.There’s a general opinion that those who devote their lives to helping others should not be compensated for their work and wealth of experience that allows them to make a difference in the world. Let me ask you, what’s better- making your million by helping children in a third world country or making a million by selling shoes made by children in a third world country? I may be biased, but I’ll take the former.

You can watch the original TED Talk video for the details of Pallota’s overhead breakdown, but I’ll give you the major points. Most people judge a charity’s effectiveness by the proportion of their salaries and general business costs to the proportion of money that goes to their charity’s goals. On the surface, this isn’t a bad thing. Oversight and accountability to donors is important. Organizations that abuse and even steal money from donors should be investigated and punished accordingly. But there is a point where good intentioned donor oversight can cause more harm than good. Overhead, if contributing to the organization’s ability to achieve its dreams and make the world a better place, is not misuse. Hiring good people who will guide the charity to its big goals and beyond is not cheap. And why should it be? Why should those with advanced degrees and good experience in the nonprofit sector be forced to work for pennies on the dollar of our for-profit business counterparts? A bake sale that makes $71 is praised for its $5 overhead, while a charity that makes millions is criticized for having a much larger overhead. But which one is making a bigger difference? More overhead equals more growth with equals more money towards the charity’s mission. Who cares what the overhead is if the charity has big goals and is making a measurable significant difference in the world. (Or plans to make that difference.) Amazon donors didn’t see a return on their investment for 6 years, and agreed to this because they believed in the company’s mission. Why should donor investment in a charity be thought of as any different than investor risk capital in a for profit firm?

Dan Pallota has some experience in this area and yet no one is listening. (This particular TED talk was filed two years ago and yet there has been no significant change in the non-profit community). As founder of the AIDs rides and the 3 day breast cancer walks, his charities have made a huge difference in the world. And are now out of business. No longer is that funding source reaching it’s intended recipients. The money that could have gone to that research and awareness is now going to Apple and Sony. And that’s ok- consumers have choice for a reason. But is it informed choice? OR choice made on the over-simplification of facts and knee jerk emotional reactions? Behavioral science when we are the most emotional, the quality of our judgement is the lowest. Now this puts charities, which depend on people’s emotional reactions, in a tough position. It’s up to those of us in the nonprofit community to start education the public on why we money for overhead and what our budgets really look like. Donors want information and it’s our job to give it to them. Explaining our “product”, how it will be developed and what is needed is too often overlooked in the nonprofit market. Too often we depend on donor’s emotions, and then wonder why our donor’s aren’t making a more logical decision.

So fellow nonprofit warrior, we need to start really thinking of our organization’s value. How is our organization benefiting the community? Who is benefiting from our goal I bet it’s way more people and groups than initially thought. And how will those who benefit form our organization then turn around and benefit the community themselves. We need to get better and communicating this to donors and grant-making organizations. Only then can we grow.

And fellow non-profit donors- how can you become an even bigger advocate for the causes your hold so dear? Lets start by asking those charities we support the right questions: What are your dreams? What do you need to get there? And for those who have been around a while, what are your results? Remember, we’re building dreams here. Making the world a better place has never happened in a day. And be careful when complaining about salaries- these comments devalue the hard work of charities in the community. If people hear that they shouldn’t be rewarded for good things enough times, they will stop doing them.

So get out there non-profit warriors and dream builders. We’ve come a long way, but we’ve got a long way to go. It’s time to get to work.

Leave a Reply

Your email address will not be published. Required fields are marked *

13 − eight =

This site uses Akismet to reduce spam. Learn how your comment data is processed.