Being the Chair of Business and Professional Women’s Foundation where fundraising is key to successful programming, I find this to be an interesting read…
Why I Think Nonprofits Should Act More Like Businesses
How would you react if you knew someone was getting wealthy in charity? How would you feel if you saw your favorite charity run a $3 million ad on the Superbowl using charitable donations to fund it? What would you think if a charity lost a million dollars on a brand new fundraising idea that flopped? Lastly, what if you learned that a charity had just paid an investor a 100 percent return on a loan?
These are the kinds of scenarios that make our blood boil with rage and the kinds of practices that give charities a bad name, right?
But what if we’re wrong about all of it? What if the things that send us into a rage are actually the things it would take to end humanity’s most vexing and extreme forms of suffering? And what if you are only being given half of the story?
These are the issues that have consumed me for the last 15 years and that were the subject of my closing talk at the 2013 TED conference.
Ask yourself how you would feel if you were given the whole story.
Suppose that the person getting wealthy in charity was worth it. Imagine, for example, that the Boys & Girls Clubs hires a leader that triples revenues in 8 years from half a billion annually to $1.5 billion annually. This allows the clubs to double the number of kids served. She gets a total compensation package of about $1 million annually. This is not a fairy tale. It really happened. And the Boys & Girls Clubs were criticized for it. Is $1 million not a cheap price to pay for $1 billion in new revenues and double the kids served? Would we rather they hire a leader for a more modest $150,000 who is incapable of increasing revenues and serving more kids? Save $850,000 in salary expense and lose a billion dollars a year in revenue?
And what if the $3 million Super Bowl ad brings in $6 million in new revenues in just the first showing, and another $6 million in gifts over time from new donors who repeat their gifts? The charity would have turned each original donor’s dollar into four dollars.
What if the $1 million lost on a charity fundraiser that flopped taught the charity something they never knew that allowed them to create a new fundraiser that raised many millions, in the way, say, a cancer researcher’s big failure points them to their next big breakthrough? That would mean the donors that funded the “loss” were actually funding an investment in learning that reaped millions.
Could it be that everything we’ve been taught about charity, and about giving, and about change is backwards?— Dan Pallotta
And as for the investor getting a 100 percent return on a loan, what if the loan was to finance a brand new, risky fundraising event idea — a new triathlon for the cause, for example. The charity needs a million to cover the upfront costs to launch it. But it’s risky. It could fail. There’s no data on it. It’s never been done before. No bank will touch it. So an investor comes along and says I will put up the million, but I want $2 million back if it succeeds, to compensate me for the potential risk of the loss of my money. The charity agrees. The event is a huge success, netting $10 million in the first year. The investor gets $2 million, leaving $8 million for the cause — a figure that would have been zero without the investor. Because the concept is now proven, banks are willing to finance the event in future years at much lower interest. The event nets $8 million a year for ten years — $80 million total, all for the tiny cost of $1 million paid to the original investor.
None of these are fantasy. I’ve seen versions of these examples manifest in the real world, many times.
When you hear the whole story, suddenly it seems unconscionable not to do the things we’ve all been taught it would be unconscionable to do.
Could it be that everything we’ve been taught about charity, and about giving, and about change is backwards? That when we show people only the means, without revealing the ends, we mislead them? Is it possible that in the name of an ethic we are actually prolonging the suffering of millions of adults and children the world over? Do we really think it is of some comfort to a mother who has just lost her little boy to bird flu that at least no one made a profit in the failed effort to save her son?
We allow the for-profit sector to feast on the tools of capitalism, while we deny those tools to the nonprofit sector, and all in the name of charity, no less. Real charity, as in grace, could not be undermined with more reverence paid to the notion of something noble. It is perhaps the greatest injustice ever perpetrated against all those citizens of humanity most desperately in need of our aid. But it is an injustice about which we have been largely unconscious. If we take responsibility for the thinking that has been handed down to us, revisit it, and revise it, we could change our whole approach to changing the world. And then things could really begin to change.
It is a staggering question — what if everything we’ve been taught about charity is dead wrong?