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: The Business Case For 21st Century Charities

A-lot-a Pallotta, But Very Little to Charity

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  • Posted: 09/24/2013 10:06 AM
  • Updated: 09/24/2013

Click here to read an original op-ed from the TED speaker who inspired this post and watch the TEDTalk below.

When Dan Pallotta published his first book in 2008, Ken had just joined Charity Navigator after nearly thirty years of running nonprofits serving the poor and other groups of people in need. Bob had spent years conducting researching for a book on the importance of nonprofits measuring their results. We both (along with a number of our colleagues) considered Dan's book too disconnected from the real world to be taken seriously. Surely, we thought, no one would subscribe to such views about how to operate a charity; and especially not from someone with as checkered a track record regarding charities. However, it became increasingly apparent over time that many people were drinking the Pallotta Kool-Aid, and we needed to take his arguments more seriously. Therefore, some of us have been trying to get the message out about the fundamental problems with his viewpoint for years now.

We have both written articles in response to his views; and Ken has debated Dan on the web, on the radio, and has even spoken out against his views on nonprofit CEO salaries before the Canadian House of Commons. However, Dan's popularity has only continued to grow, culminating in the recent TEDTalk that currently clocks in at well over two million views. No one can dispute the fact that Dan Pallotta is a good pitch man, is certainly effective at selling himself, and can convey his message quite convincingly. We believe his message has gained tremendous popularity for one simple reason -- he ultimately is arguing that charities should be held to virtually no accountability standards. Yes, we know Dan says people should look at results rather than overhead; but if you look under the hood for details, there is little in his argument on exactly how to go about measuring those results. For example, he speaks of vague notions such as "Charity is in the business of inspiration, so it is particularly problematic for charity that the value of inspiration is not measured;" and "it is not a matter so much of what we must do as what we must stop doing," yet at the same time he implicitly -- and sometimes explicitly -- justifies doing away with most clear standards of accountability. Unfortunately, it is evident that this is music to the ears of many leaders in the charitable sector. Indeed, many of them seem drawn to the notion that if they follow the Pied Piper of Zero Accountability, they can basically do whatever they want and get paid millions while waving the flag of Pallotta's books and TEDTalk.

We, on the other hand, thoroughly reject most of what Dan says beyond the kernels of truth at the 50,000-foot level. We agree that results matter more than overhead (Charity Navigator has signed a letter with Guidestar and the BBB Wise Giving Alliance on that very point) and of course we should pay decent salaries for charity leadership (we acknowledge six-figure CEO salaries in the nonprofit sector as the norm every year in our CEO Compensation survey). However, to say that it is acceptable to spend 99 cents to raise a dollar of donor money and to suggest that charity leaders should be able to make millions is simply absurd. Moreover, the general public will NEVER buy such notions, even with video of Dan's cute kids chiming in to the TEDTalk!

So for those of our nonprofit colleagues who are promoting Dan's views and inviting him to be the keynote speaker at their conferences we say to you: This Is A Dead End. If you follow Dan's lead, you will ultimately lose donors and your organization will lose its way overall. We know for a certainty that those nonprofits that follow Dan's recommendations will not see the realization of his vision of a future of "reclaiming our dreams." Instead, they will see a nightmare, in which fewer people are served and the quality of services decline; because those organizations that attempt to follow his vision will lose the support of those who are grounded in the real world and are looking for truly high-performing, efficient and effective organizations. Worse still, these "dreamy" charities will not have a clear path to improving their performance. To truly make the world a better place and make the nonprofit sector more effective, what we need is more serious work on managing and measuring the results of our work to be sure that every dollar is spent wisely -- not wasting time entertaining excuses for no meaningful accountability.

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