Uncharitable
I came across a book about nonprofits recently that I wanted to talk about here on the blog. I first heard about the book from Nicholas Kristof’s NY Times column. It wasn’t in the Lincoln City Libraries, so I suggested via their online suggestion form that they add it, and lo and behold they added it right away. I read the book a few weeks ago, and it presents some really interesting ideas.
So the basic premise of the book is that nonprofits are heavily constrained by various rules and regulations that prevent them from making a profit. The book’s author, Dan Pallotta, argues that profit is the greatest motivating factor known to man, and nonprofits by their very definition don’t consider it as an option. Additionally, the nonprofit world generally frowns on spending money on things like advertising and executive salaries or taking risks on projects, all things that are taken for granted in the profit sector.
Pallotta’s former company, Pallotta TeamWorks was a for-profit company that worked with non-profits to create charity events that raised exorbitant sums of money for AIDS research before criticism about overheads slightly above the industry standard and high advertising spending caused the company to lose contracts and eventually implode.
His solutions for the non-profit sector amount to changing the rules to allow for internal competition amongst non-profits and to allow non-profits to compete with businesses. He says if Coca-Cola can use advertising to sell sugar water, then why can’t an organization use advertising to publicize their projects and request donations? Pallotta also emphasizes doing away with the emphasis on overhead, the money spent on salaries, buildings, utilities, advertising, etc. that doesn’t go directly towards meeting an organizational objective, in non-profits.
Pallotta most contentious point for me is his notion that investors should be able to invest in non-profits and then turn a profit on their investment if the non-profit is successful. In Pallotta’s system, an investor could loan money to an organization for a fundraising event, and then a percentage of the donations taken in at the event would be returned to the investor. So what’s to stop people with the means to give from wanting to be investors instead of donors? And would donations go down if donors knew that part of their donation would never even make it to the organization?
On the whole, I like a lot of what this book has to say. Non-profits could certainly stand to borrow some tools from the business sector, and for well-run organizations at least, a little freedom in spending their money as they see fit would probably be a good thing. But the devil is in the details, as they say. Someone far smarter than me and with a lot more time would have to go through the law, statutes, etc. and see where non-profits could be made better while still maintaining their essence, which is why most of us got into this business in the first place.
