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Uncharitable: How Restraints on Nonprofits Undermine Their Potential (Civil Society: Historical and Contemporary Perspectives) Paperback – July 13, 2010
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Pallotta TeamWorks was the for-profit brainchild behind several campaigns to raise funds for breast cancer and AIDS research and awareness, creating several nationwide, marathonlike events that raised millions. But its founder came under attack for violating the sacred premises of charitable organizations: low profile, low budget, and little or no profit. Pallotta turns on its head the assumption that charity and capitalism should be forever divided. Don’t charitable causes deserve the same kind of competitive forces that work to get results in the for-profit sector? Wouldn’t social causes be better served if charitable organizations were headed by the kind of bright, aggressive executives that work in the for-profit sector? Pallotta traces the history of nonprofit organizations to Puritan notions of charity and self-denial. He also offers a detailed case study of TeamWorks and other trends in the nonprofit sector that only tweak around the edges of a system that is sorely in need of change if it is to deliver on its mission to improve social inequities or cure diseases. A passionate, thought-provoking look at the nonprofit sector. --Vanessa Bush --This text refers to an out of print or unavailable edition of this title.
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Top Customer Reviews
The first flaw is in the cost of doing business. I've been in fundraising for a long time, and for most well-managed non profit organizations, the cost of raising a dollar is 10-15 cents. That's not unusual, and well below any potential corporate costs. For a corporation to make even a marginal profit, they would have to be at 50-60 cents per dollar raised. This is abhorrent to all donors--especially the ones you wish to see give year in, year out.
The second flaw is in motivating people to perform through financial gain. It doesn't work! Since you have nothing to "sell," you run the inevitable risk of inducing people to push donors into decisions they wouldn't otherwise make.
Yes, short-term gains always look good in Corporate America, but most successful charities are in it for the long haul, and treasure their donors (they don't plan on going out of business, and few do.) If you push for a short-term gain in philanthropy, you will fail in the long run. Sound familiar? How many corporations have been undermined by short-term profit seeking, at the expense of long-term growth? Axiomatic? Indeed!
The third flaw is right in the opening of the book--examining the roots of philanthropy. For those of us who have been road warriors for several decades, we know that there is a strong element of providence to our work, and that the act of tithing has been an integral part of our ability to secure philanthropic gifts. One cannot inject capitalism into this equation, or the whole covenant has been debased. Personally, I have marveled at the generosity of donors, both large and small. It has never ceased to humble me.
The fourth flaw is in the notion that some really bright corporate types can remake the paradigm. Granted, there are many non profit organizations that suffer from a host of issues--from poorly trained staff to struggling to keep the numbers up during this protracted recession. This leads us to the fundamental flaw that makes this book dangerous for those who don't understand the tried and true methodologies of fundraising. I have been on too many billion dollar campaigns to see through how ridiculous this author's thesis stands up to serious scrutiny--replacing smart passionate people who are donor-centric, with ones that are profit-centric.
What? Okay, if I start a really good for-profit corporation that seeks out philanthropic donations, and my company does really well, then maybe I will get bought out by some bigger corporation, like a Nabisco, or a Bank of America. Then the organization I started becomes just one more arm of some multi-national corporation that offshores the workforce to India, and then you have people from India calling on behalf of The Lighthouse, or Deborah Hospital, or even City of Hope. Follow the logic--it's a recipe for disaster.
In summation, all we need to look at is the lax corporate regulation that led to the Great Recession. Charities were "victims" of capitalism. Charities have boards of directors keeping them in check, but moreover, they have "donors" to which they are beholden. If you try coloring outside the lines, or treating donors like customers, you will most certainly lose.
While this author has concerns about the need for more pedagogy in the fundraising profession, and a stronger adherence to tried-and-true fundraising methodologies that continue to stand the test of time, I respectfully disagree that the best ideas reside in "corporate" methodologies, which run counter to philanthropy in every way imaginable.
The need to improve the fundraising teams across America is a pressing one, but one that many, including this author, are actively addressing, as the needs of communities all across our great land are growing exponentially.
America's charities will answer the call, and will deliver. Please, don't confuse an act of altruism with a potential "sale." Mr. Pallotta, you are advocating that charities employ tactics that are tantamount to doing surgery with a chainsaw.
There is a division between church and state, just as there is a division between capitalism and philanthropy. If you can't find a good fundraiser, you're looking in the wrong places.
If you have a truly "good cause," you will have ready made donors. Just leave it to the professionals. Donors who make large gifts, gifts that transform institutions and communities, will find any notion of being solicited by a "corporation," that bonuses out employees, which goes to pay for all manner of corporate perks, anathema. They will stop you cold.
Then again, unless you've been doing this for a long time, successfully, you wouldn't know otherwise. Any charity that employs the methodologies in this book will see a short-term gain, and a long-term loss. That would hurt a lot of people. The author receives one star for bringing to light the need for more philanthropy.
At the same time, I don't recommend the book generally because I don't think it is a good book (1) for the general public to read, (2) for those who you are new to or thinking about joining the sector or (3) for Board Members with limited experience. If you haven't been inside the nonprofit sector for a good while and seen all of its beauty and also its ugliness, you might get swept up in what are the book's many false and misleading arguments.
Which leads to the other side of the coin, one of the main themes in the book - over and over again was Dan's tendency to use extreme arguments and examples that are completely inaccurate characterizations of the state of affairs in the sector (hence my frequent yelling at the book). In other words, he repeatedly sets up a phony straw man and then knocks it down. All the while I am thinking BUT THAT MAN DOESN'T EXIST (!) or so rarely that the opinions stated as facts can totally mislead an otherwise uninformed reader!!! This becomes particularly important as we see the growing interest in people desiring to transition from the for profit sector into the nonprofit sector. God help us if this is a book they base their career decisions on.
Another theme in the book is Dan's idealization of capitalism almost as a God that can lead to self fulfillment and "stunning change" through the wonderful motive of personal gain. He counters this with the sad nonprofit sector that is restrained by the evil of traditional religion (which he claims mostly "obscures the bigger picture") as well as a laundry list of nonprofit beliefs based on false ideology. This leads us all the way up to the present with sexism, homophobia and other horrors rounding out his bleak view of the state of things. At the same time, he presents a somewhat Pollyanna view of the nonprofits in the sector implying that we have a few bad apples but not too much to worry about on the ethical front. Well, based on my 30 years of experience working in nonprofits, as well as the reports we get at Charity Navigator almost daily from donors and investigators around the country, it is quite clear to us that we have more than a few scoundrels and thieves to worry about. Although I do not believe it is the majority of nonprofits that fit this picture, it is a substantial number. Therefore we need to be very cognizant of this fact in developing solutions to improve the sector's performance.
Furthermore, my readings on the history of the nonprofit sector reflect a very different set of facts and conclusions about its origins than Dan's. Whereas he seems obsessed with the Puritans as our historical fore bearers, there are many civilizations and belief systems we can point to as having an influence, including those of the Egyptians, the Romans, the Jews, the Muslims as well as Christians. All of them shared the view that helping others is a most noble, honorable and important part of life and a key part of the path to being a good, decent, happy person!
Additionally, in looking at the history of our country I think it is clear that our founders worried that unrestrained capitalism, could lead to the concentration of wealth and power along with tremendous ethical abuses. Many of their worries have been realized during our history and seem to be accelerating in some of what we see today. That is why many of them worried whether, given our natural human tendencies, we could handle the liberty of the revolutionary republic they fought and died for.
Many historians and political scientists also point to the checks and balances in our founding documents and our reliance on the rule of law as being just as critical to our country's success as the value of capitalism as an economic engine. In summary, I am a believer in capitalism just like Dan is, but in his case capitalism seems to be his panacea to deal with all the imperfections of the nonprofit sector as well as the human condition in general!
Ironically, most experts note that a key factor in the unique development of our nonprofit sector is the related American belief in the power of the individual and voluntary associations to solve problems. At least up until recently, most Americans have not wanted a more centralized, powerful governmental apparatus, but the creative, innovative, dynamism and heart of millions of independent nonprofits operated by 10% of the American workforce, along with over 60 million volunteers. It is a distinguishing feature of our country. As a result, the size and diversity of the nonprofit sector in the United States is historically unique and vital to our political, economic and social systems. Scholars further note, that the nonprofit sector is a critical vehicle to balance out or mitigate the imperfections and potential heartlessness of unrestrained capitalism. I share this as a more historically evidence based view of the imperfect but also noble and vitally important nonprofit sector that Dan calls the poor stepsister of his titans of industry.
In addition, there is one area where Dan and I have already publicly crossed swords a couple of times (here, here and here). That is on the question of nonprofit executive compensation. Dan says we need to pay our nonprofit CEOs the same as for profits. Let them become millionaires if they perform well. That way we can get some of those of the best and brightest MBA's to come into our sector that normally go to Wall Street or Silicon Valley. In fact he says, until we do, the most talented among us in the sector will leave. So I guess that makes me a real dummy with my MBA from Rutgers for having stuck around for 30 something years, as well as the many amazing and yes, brilliant nonprofit workers I have met along the way.
The vast majority of experts hold the view that best practice is to set nonprofit executive compensation based upon local market conditions (geography, cause area and budget size of comparable nonprofit leaders). Our data at Charity Navigator indicates that with such an analysis, the typical nonprofit CEO of a mid-to large sized organization makes a good six figure income and is already in the top 6% of wage earners in the US. So, you can live a very comfortable middle to upper middle class life style as the leader of one of these charities. But Dan seems to think we need to get into that upper class of the top ½ of 1% before we can really get the best and the brightest.
As my colleague Dr. Penna and I have argued before, we find Dan's argument on compensation not just wrong headed but down right insulting. Just as he makes a fetish out of unrestrained capitalism, he makes a fetish out of cash over other means of securing happiness and satisfaction at work. How insulting to think that, if we make less pay than our for profit counterparts, we must be less creative, talented, intelligent and less capable of helping others. Give me a break! In fact, the research I read consistently indicates that job satisfaction comes more from the purpose or mission of what you do - a sense you are doing something that is meaningful - rather than cash.
The primary challenge in our opinion is not a lack of high priced nonprofit leaders, but rather fragmentation and inefficiency in the use of existing resources. This is caused in part by an incentivized focus on manipulative marketing and storytelling, over performance and results. In other words, we waste a tremendous amount of money in the sector each year on untested, unproven and often ineffective services, to say nothing of the scoundrels and thieves. Fixing those problems at this stage is FAR more important than throwing more money into leadership salaries. And yes, we believe you can do one without the other Dan.
I also don't agree with Dan's other primary solution for getting us to focus on results. He suggests that we require a fee of up to 1% be charged on all donations into the sector. Dan wants to take that three billion or so that he charges private contributors to create some sort of government or quasi-governmental behemoth to provide results based evaluations of charity performance. What a bureaucratic and hyper-regulatory solution! Then we can watch runaway for profit consultants take that three billion and create a whole new boondoggle!
I leave you with a quick glimpse of part of the dream that some of us hold, as to what the future might look like in ten or twenty years, to get us to our mutual goal of driving more money to high performing nonprofits. I hope that through the efforts of CN and others, in the not too distant future, every charity will have two audits each year - the traditional financial audit AND a results audit. This is a more grass roots, American solution that is decentralized in implementation and yes paid for by the charities themselves because they BELIEVE that results evidence is critical to performing their missions. They can also be motivated by enlightened self interest in knowing that the audit will ultimately pay for itself as more and more funders and donors will gravitate to evidence-based, high performing nonprofits.
So, as we move away from financial measures as the sole or primary dimension by which we and the public evaluates the performance of nonprofits, let all of us work together to get more and more charities to become passionate about performance management and measuring outcomes. Let us all aspire to getting everyone who does this noble work to do it for the right reasons. Let us all come to realize how critical it is to the sectors future to manage and measure what matters most - whether or not we are providing meaningful and sustainable change in the people and communities we all care about. Once we achieve THAT, we can move away from being Uncharitable.