Rethink Charity

posted by on Dec 24, 2013

IMG_4783It’s amazing that we as society have accepted mediocrity for most non-profits.   “They are doing good work and that excuses bad behaviors like not returning phone calls or not being responsive.  I have always felt we (meaning CYJ) could be better and possibly as an example for other Non-Profits.  However, I was not seeing the big picture.

Enter Dan Pallotta, the author of Uncharitable, how restraints on nonprofits undermine their potential.   In summary Dan says society has created a different sets of rules for non-profits.

Error #1: Constraints on compensation.   Why would the best and brightest graduates of school work at a Non-Profit that pays them 50% of the market rate?  Top business have top CEO’s.   Why are we scared as a society to pay someones value because they are doing good work?  We need to pay market rate and attract the best people possible to efficiently impact the maximum number of people possible.

Error #2: Prohibition on risk.  As Non-Profits we punish courage (risk taking) and reward status quo.  Business invest and take chances to grow.  Non-Profits don’t dream how to help more and do it faster and more economically.

Error #3: Don’ advertise unless its donated.  Business will advertise or promote until the incremental benefit is zero.  Non-profits, cannot build demand and brand identity without advertising.  If advertising works in the business world, why would we not do it?

Error #4: Short term thinking.  Business invest for the long term to build value and will take short term hits on profitability.  A Non-profit is too worried about this years budget and cutting costs then growing and serving more people.  The preoccupation on reducing costs and not increasing revenues (or services) forces a very short term thought process.

Error #5: Unlimited return on investment capital.  Why can’t non-profits pay  return on investment to attract more capital?  I am not sure how I feel about this.  However, its an interesting thought that should be considered.

There you have it.  Five errors on the misconstruction of non-profits.  We all have room to improve.  However, its time to stop thinking incremental and to start re-imagining what good we could do by reaching more people and doing better.

Enjoy the TED talk by Dan Pallotta.