Tag Archives: nonprofit management

How We Think About Charity is Wrong

This is a fantastic TED presentation by Dan Pallotta on why the non-profit industry is perpetually hamstrung by its inability, among other things, to break out of a structure that limits compensation, suppresses risk-taking, prohibits access to capital markets, imposes frugality at the expense of future growth potential and tags all overhead as negative.  It’s a must-watch for anyone in the non-profit sector, but the charitable arm of the non-profit sector in particular.

Here’s a link to the full transcript and a couple of excerpts that really hit home:

So in the for-profit sector, the more value you produce, the more money you can make. But we don’t like nonprofits to use money to incentivize people to produce more in social service. We have a visceral reaction to the idea that anyone would make very much money helping other people. Interesting that we don’t have a visceral reaction to the notion that people would make a lot of money not helping other people. You know, you want to make 50 million dollars selling violent video games to kids, go for it. We’ll put you on the cover of Wired magazine. But you want to make half a million dollars trying to cure kids of malaria, and you’re considered a parasite yourself…

Businessweek did a survey, looked at the compensation packages for MBAs 10 years of business school, and the median compensation for a Stanford MBA, with bonus, at the age of 38, was 400,000 dollars. Meanwhile, for the same year, the average salary for the CEO of a $5 million-plus medical charity in the U.S. was 232,000 dollars, and for a hunger charity, 84,000 dollars. Now, there’s no way you’re going to get a lot of people with $400,000 talent to make a $316,000 sacrifice every year to become the CEO of a hunger charity.

Some people say, “Well, that’s just because those MBA types are greedy.” Not necessarily. They might be smart. It’s cheaper for that person to donate 100,000 dollars every year to the hunger charity, save 50,000 dollars on their taxes, so still be roughly 270,000 dollars a year ahead of the game, now be called a philanthropist because they donated 100,000 dollars to charity, probably sit on the board of the hunger charity, indeed, probably supervise the poor SOB who decided to become the CEO of the hunger charity,and have a lifetime of this kind of power and influence and popular praise still ahead of them…

So we’ve all been taught that charities should spend as little as possible on overhead things like fundraising under the theory that, well, the less money you spend on fundraising, the more money there is available for the cause. Well, that’s true if it’s a depressing world in which this pie cannot be made any bigger. But if it’s a logical world in which investment in fundraising actually raises more funds and makes the pie bigger, then we have it precisely backwards, and 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 moneyavailable for the cause that we care about so deeply…

This is what happens when we confuse morality with frugality. We’ve all been taught that the bake sale with five percent overhead is morally superior to the professional fundraising enterprise with 40 percent overhead, but we’re missing the most important piece of information, which is, what is the actual size of these pies? Who cares if the bake sale only has five percent overhead if it’s tiny? What if the bake sale only netted 71 dollars for charity because it made no investment in its scale and the professional fundraising enterprise netted 71 million dollars because it did? Now which pie would we prefer, and which pie do we think people who are hungry would prefer?


Crossing Your Ts, Dotting Your Is

A story from Mt. Airy, NC highlights why you have to be very careful when you have a raffle or other fundraising contest at one of your events:

Vickie Riekehof was called out as the winner of the raffle for a 2013 limited edition Fiat Abarth, or that is what she thought. After arriving to claim the car, she said David Chaloupka, owner of Amadour Winery and Vineyards who oversaw the contest, told her that she had to toss a Frisbee into the car’s open window from a point estimated to be about 90 feet away.

She claims there was no such rule for the contest when she purchased the $100 raffle ticket.

Bob Meinecke, organizer of the festival and member of the Mount Airy Rotary Club, said it was his understanding the instructions would be printed on the ticket and on the literature about the event.

“There was a misunderstanding. We refunded her money and apologized,” said Meinecke. “It was a he said she said thing. My understanding was that verbal instructions were given to each person who purchased a ticket from the salesperson.” He said that person was Chaloupka.

Word of advice: whenever you're trying to separate people from their money, even for a good cause, never allow it to be organized in such a way that it come down to a "he said, she said thing."

Pink May Not Be So Pretty After This Week

Having worked with multiple non-profits, both as a staff member and as a volunteer, I'm going to be watching with great interest what happens with Susan G. Komen for the Cure over the coming months. Why? Because they've had two significant PR events just this week that I think might affect them financially for at least the near future, if not over the long term.

The first event was the announcement that they are cutting off funding to Planned Parenthood for breast cancer screenings. Their stated reason is that they have a new policy that prevents them from funding organizations that are under investigation by the government, but it's been pointed out that the implementation of the new policy is conveniently timed to coincide with the launch of an investigation by a conservative Florida congressman. The new policy hasn't prevented them from accepting funds from organizations under investigation by the government (Bank of America to name one). It's also quite a coincidence that Komen's Senior VP of Public Policy is a pro-life Republican who ran for Governor of Georgia two years ago. At a minimum the organization looks disingenuous and quite frankly I think they've offended a huge segment of their supporters.

As if that's not bad enough a new documentary about Komen is getting ready to hit the indy theater circuit this month and given the organization's recent missteps I have a feeling it will get even more attention than the producers could have dreamed just a week ago. Judging by the trailer (see below) it doesn't look like this is a glowing tribute to the organization, and added to this week's developments I have a feeling it could put a serious dent in Komen's fundraising activities. Depending on your view that could be a good or bad thing – there's an argument to be made that the money that doesn't go to Komen could go to other worthy causes – but I think it will be a case study for non-profit managers to study for years to come.