If you haven’t heard Dan Pallotta’s TED Talk, The Way We Think About Charity is Dead Wrong, stop reading this post and watch. Resume reading after viewing.
As the keynote speaker for the CT Association of Nonprofits Annual Conference, Innovate & Elevate, Pallotta encouraged attendees to challenge some common yet pervasive viewpoints on nonprofits, fundraising, marketing and the overall business model of charity.
With the end goal of finding ways to accelerate progress so nonprofits can address the social challenges facing society, Pallotta asked attendees to consider how, under the current model of charity, social problems that are gigantic in scale can be solved by nonprofits that are miniature alongside them. Case and point – society values low overhead as a quality of a prudent and worthy cause, yet, we don’t walk into a retailer and ask to buy shoes from the manufacturer with the lowest overhead. This is what Pallotta sites as an example of the different rulebooks within which nonprofits and for-profits are expected to operate.
Interestingly, charitable giving in the U.S. has been stagnant at 2 percent of GDP since the 1970s – this is the same time we started measuring it. So, consider this: nonprofits are often frowned upon for spending money, especially donor dollars, on advertising, as opposed to investing these dollars in mission-critical work. However, how much more money could advertising help a cause to raise? As Pallotta noted during his address, we should invest money in fundraising (and marketing) because it has the potential to grow the amount of money that goes to the cause.
In keeping with the theme of overhead, Pallotta examined fundraising events on an overhead vs. yield basis. A bake sale, what he deemed the “morally superior fundraising model,” is popular and well-regarded because the overhead costs are low. The real, and often overlooked, question, however, is what is the fundraising yield of a bake sale, as opposed to a fundraiser that may have higher overhead?
Nonprofits are tasked with the ambitious goal of effecting lasting change and solving problems of significant magnitude. Yet, they are often looked down upon for spending money on anything other than direct service. While there are no silver bullets or guarantees, nonprofits, like for-profits, must evolve to stay relevant. And, as Pallotta suggested, frowning upon nonprofits taking risks in pursuit of revenue is a barrier to progress – “If you prohibit failure, you just killed innovation.”
With the holiday giving season in full swing and #GivingTuesday less than one week away, how will you evaluate the causes you choose to support this year? Regardless of the causes and/or missions that pull on your heartstrings and ultimately secure your support, remember this lesson from Dan Pallotta: A nonprofit’s legacy shouldn’t be, “we kept the overhead low.” It should be, “we changed the world.”