Let’s Change How We Think About Charity
“As npos, We need to transform the way the public thinks about charity, about giving and about how change gets made.”
Most organisations in the NPO sector have been built on a foundation of fundraising, but this is simply not enough to keep everything from eventually crumbling down. NPOs constantly battle it out for donations, when what they should really be doing is figuring out ways to bring in a supply of sturdier building blocks in the form of revenue.
Now this may sound counter-intuitive to the very notion of “not-for-profit”, but in order for us as NPOs to succeed, we need to follow the same strategies as businesses in the for-profit sector. This means allocating more funding to salaries and marketing (check out our previous post, An Inconvenient Truth: NPO Expenditure).
The more money we generate from advertising and staff who are competent and adequately compensated, the bigger the pie we get to slice. The outdated charity overhead myth of keeping running costs as low as possible as a sure measure of NPO success, is not baking us a bigger pie, it’s preventing us from focusing on real results and finding real ways of increasing success.
How can we be expected to give more to the needy if we don’t have more to give?
“When nonprofit leaders are asked what frustrates them most, they often say it’s the fact that donors demand such low overhead costs that they can’t hire the talent or invest in the resources they need to maintain the status quo, let alone actually solve the vexing social problems that confront them.” – Dan Pallotta
As Dan Pallotta explains in his highly acclaimed Ted Talk “The Way we Think About Charity is Dead Wrong” (watch the full video at the end of this post), there are 5 major ways in which NPOs are handicapped in their efforts to help people.
To change how we think about charity, we must change how we think about this:
The average salary for a MBA student 10 years out of school is $400K whereas the average salary for the CEO of a Hunger Charity is only $84,028. “We have a visceral reaction to the idea of people making a lot of money helping others. Interestingly, we don’t have a visceral reaction to the idea that people should make a lot of money not helping others.”
2. Advertising and Marketing
How do we get people to support our causes if we aren’t even allowed to advertise and tell them about it? Pallotta was able to raise $581 million over nine years from getting more than 182000 people to participate in his AIDS Rides and Breast Cancer 3-Day events. “We got that many people to participate because we bought full-page ads,” says Pallotta. “Do you know how many people we would have gotten if we advertised with fliers in the laundromat?”
3. Taking Risks on New Revenue Ideas
Experimentation is a big no-no for NPOs as failure is most often met with massive outcry from the public and suspicion over donation expenditure. “Non-profits are reluctant to attempt any brave, daring new fundraising endeavors, because they’re scared their reputations will be dragged through the mud,” he says. This stomps out any hope for innovation, creative problem solving and growth.
Non-profits aren’t afforded the same luxury of time as for-profits in carving out new ventures and seeing return on investment. Amazon took 4 years to turn a profit, however, “if a non-profit had a dream of building at a magnificent scale, but it would require 6 years for the money to go to the needy, we would expect a crucifixion.”
5. Profit to Attract Risk Capital
This point speaks for itself. Non-profits, because of their very nature, can’t be on the stock market and so can’t go after capital. But how do you build scale without capital? A foundation of fundraising is simply not enough to build sizable and impactful organisation upon.
So, we are left with the question, if every NPO were to become a social enterprise, would that really be so bad?
Let us know your thoughts in the comments section below and join the broader conversation by connecting with our NPO partners.