Pallotta is well known for having a bit of an axe to
grind. His private firm, PallottaTeamWorks, was a highly successful fundraising company managing an array of
high profile bike rides and walks. Organizing of events for AIDS and Breast
Cancer in the 1990s, Pallotta virtually created an entire mass Bike/Ride
industry which generated over $500 million from donors and sponsors. An impressive feat. However, Pallotta’s business collapsed in 2002
after a flurry of news stories questioned excessive overhead and fundraising
costs (one AIDS ride raised $28 million of which only $8 million found its way
to the beneficiary nonprofits) .
Six years after the collapse of his business, Pallotta
published Uncharitable: How Restraints on Nonprofits Undermine Their Potential, a book which asked the question: Why
are nonprofits discouraged from employing business practices such as marketing,
paying attractive salaries for effective leadership, or devoting more to
overhead when the return on investment is warranted? Charity
Case builds upon this theme and proposes a set of intersting if somewhat problematic
solutions.
We’ve witnessed the rise of various ‘watchdog’ agencies which inundate the
public with tales of astronomical overhead and excessive salaries at
nonprofits. Such stories coming out of groups such as Charity Navigator are guaranteed to get headlines
with a news starved press. And while
these types of accounts about inflated expenses and sparse funds going toward
the mission of the organization garner public attention, they are not
representative of the nonprofit sector. Still, they create a ‘master narrative’ that
administration is evil and that dollars should go strictly towards direct
services.
Dan Pallotta |
Yet it's easy to default to examining overhead ratios and
administrative salaries because the work of assessing the real impact of nonprofit’s
work is significantly harder. It takes hard work to understand a nonprofit’s programs
and thus assess the true impact. It is only in this context that one can
understand what operating costs are needed to be effective.
This ‘overhead’ mindset ultimately inhibits the nonprofit
sector’s ability to grow because of the demand that dollars go into direct
services and not administration. Yet if nonprofits cannot take risks, innovate
and grow, they can never build organizations of a scale needed to address our
greatest human needs. Pallotta provides
several cases which highlight how in the
face of this dilemma, the nonprofit sector is silent, defenseless, and
disorganized.
Consider the case of Roxanne Spillett, the CEO of Boys and Girls Clubs of America (BGCA). In her
eight years at the helm she doubled the number of kids in BGCA and grew
chapters to almost 4,000 nationwide.
Revenues tripled over this period to $1.5 Billion. By almost any metric you wish to apply, her
record of success is praiseworthy. That
was until Senator Chuck Grassley discovered her salary/compensation neared the
$1 million mark. Congressional
Committees, media attention and public outrage ensued which eventually led the BGCA
Board to accept her resignation. But
never once did anyone ask whether a leader who could triple the size of a
proven effective nonprofit wasn’t worth a salary equaling 0.075% of the budget.
In a political era where anyone in any business making over
$250,000 is demonized as some predatory leech on society, having the added
burden of working for a nonprofit meant Spillett and BGCA didn’t stand a chance
in the court of public opinion. In Charity
Case, Pallotta cites a letter he
received on this subject: "The sector has fallen into a trap we created.
By focusing on what we DON'T spend, and not on what has been accomplished, we
have completely missed the mark in our messaging. We are part of this problem
and it's up to us to educate our way out of it." The nonprofit sector’s wounds are self-inflicted. We not only verify the public’s sack cloth perception, we encourage it. This is main argument of Charity Case and it is Pallotta’s crusade to turn around the public's perception of the work of non-profits.
Thus Charity Case
vividly encapsulates the issues before us. Unfortunately, as the founder of Advertising For Humanity and the Charity Defense Council, Pallotta’s
solutions come off sounding somewhat self-serving. To wit:
-
An “anti-defamation league” to respond to and rectify inaccurate reports about the sector in the media
- Big public advertising campaigns for the sector
- A “legal defense fund” to challenge unproductive laws against the sector
- Work to create a “National Civil Rights Act for Charity and Social Enterprise” to support the sector
While a provocative description of the problem, Charity Case offers solutions that are
flawed and unrealistic. If the public’s perception of overhead ratios and
administrative salaries is faulty, a more productive effort would be to
strengthen the sector’s ability to communicate the actual impact of charity
work. This is what keeps donors coming back.
One suspects that if Pallotta had been able to do that back in 2002, his
fundraising business could have survived the questions about overhead ratios.
The trend in publishing is to put forth volumes
such as “Problem ‘X’ and What To Do About
It” or ‘The Latest Outrage: Three Steps To Fix It”. So often these books
fall flat in the ‘what to do about it’ chapters and Charity Case can be categorized as such. However, sometimes it’s enough just to
vividly describe the problem, and in this Pallotta succeeds. This makes Charity Case a worthwhile read.
1 comment:
Pallotta is great! Uncharitable was a great book that told many truths. Looking forward to reading his latest. Thanks for the review. Will share my thoughts when done
Post a Comment