Posts Tagged ‘Dan Pallotta’

Deciding where to give in the season of giving

This was originally posted on the Corona Insights Radiance Blog.

As the season of giving approaches many of us start to think about what we can do to make the world a better place, to help those less fortunate than ourselves, to give back or pay it forward.  And in addition to undertaking individual acts of kindness, many of us will look to nonprofit organizations for ways to make our individual efforts go farther – either through participating in coordinated volunteering efforts or offering financial support to help an organization carry out its mission throughout the year.

So how do we select organizations to support?  This is not only a question about identifying our deeply held values, but a question of what does it take to trust an organization (literally, to entrust them with our money)?

Limits to financials

A number of groups have developed websites to help answer the question of trust.  Charity Navigator , CharityWatch, and GuideStar, to name a few, provide measures of financial performance, ostensibly to help you know whether the organization will use your money wisely.  However, there has been a rising wave of dissatisfaction with common financial metrics (which tend to focus on low overhead), suggesting that the focus on those measures has unintended consequences that negatively impact the ability of nonprofit organizations to carry out their missions.  For a fantastic presentation of these issues, please watch Dan Pallotta’s TED Talk from earlier this year.

Program success

Indeed, in response to some of these concerns, Charity Navigator, GuideStar and the BBB Wise Giving Alliance are adopting metrics of program success in addition to financial metrics.  This move has received much press attention (see recent reports in The Chronicle  of Philanthropy and on NPR).  Nonprofit organizations seem both glad to move away from an excessive focus on the percentage of spending on overhead, yet daunted by the task of measuring performance.

These two issues are related – for most nonprofit organizations, evaluating program success will require additional overhead spending.  And for many, to get the expertise and capacity necessary to formulate clear measures and develop creative ways to measure outcomes in challenging populations, they will need to hire a professional evaluator.  While many granting agencies that provide funding to nonprofits both require evaluation as part of the grant activities and provide funding for evaluation within the grant, the charity evaluation sites may need to additionally reform how they rate overhead spent on the evaluation of program success.

What donors want is to be connected to a cause that is important to them.  Focusing on what nonprofit organizations are accomplishing in terms of world betterment is a much more intuitive way of inspiring trust in prospective donors.  It provides a direct connection with shared values, as opposed to the financial metrics that turn the focus on the money being given rather than the reason for giving.

We’re proud of our work helping nonprofit organizations measure their accomplishments, and we look forward to helping others document their success so that they can build trust with other likeminded individuals looking to make a difference – both this season of giving and throughout the year.

See also:

Charity Case

Leap of Reason: Managing to Outcomes in an Era of Scarcity

Charity On Trial: What You need to Know Before You Give

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Donors: Help your causes ask the right questions

Erica McGeachy Crenshaw

“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,” asserted Paulette Maehara, former president of Fundraising Professionals in Dan Pallotta’s groundbreaking book Charity Case (Jossey-Bass 2012).

I recently re-watched Dan Pallotta’s highly popular TED Talk about Charity Case and was energized by such a credible and well-researched argument about the commonly misinterpreted topic of administrative costs and overhead. Unfortunately, we’re working against a flawed philosophy reinforced for decades by donors and nonprofit executives alike. Consequently, this week’s post is a message to nonprofit donors and contains some of Pallotta’s main points worth repeating.

Stop asking the flawed question and get to the heart of what really matters

Donors have to stop asking the question, “What percentage of my donation goes to the cause versus the overhead?” Pallotta argues this question is flawed in several ways:

1) The question makes us think overhead is not part of the cause but it absolutely is.

2) It also promotes the notion that overhead steals from the cause, forcing charities to obsess over keeping short-term overhead low at the expense of long-term solutions.

3) This question ironically gives the donor really bad information. It tells nothing of the charity’s quality of work, shares nothing about how it defines the cause, leads donors to discriminate unknowingly, gives the wrong overhead figure because it’s measuring against the wrong result.

Help your charities advertise, take risks and give reasonable time to build sustainability

Pallotta further argues nonprofits have to operate under a separate and discriminatory rule book from businesses. For example, in the area of advertising and marketing, charities can’t build demand for donations to their causes while businesses advertise until the last dollar no longer produces a penny of value.

On the topic of risk taking in pursuit of new donors, while it’s okay if the movie industry spends $100 million on flops, a $5 million charity walk that doesn’t show a 75 percent profit in the first year is considered suspect. Consequently, nonprofits shy away from large-scale fundraising ideas and cannot benefit from powerful learning curves.

Yet another example relates to time horizon. New companies can go six years without returning any profits to investors in the interest of building market dominance while charities that have long-term goals are expected to yield short-term, direct services. If they don’t deliver, they are pariahs. You can help dismantle some of these rules by leveraging your dollars on projects that raise much-needed awareness, allow for calculated risk and long-term growth toward meaningful goals.

Nonprofits are starving financially

You can help by asking new questions like “What kind of impact are you able to accomplish with your cause?” or “What meaningful progress are you making toward systemic change?” Help charities break the starvation cycle of what feels like mandatory low or no overhead. Leverage your donor investments in new ways to get the community looking at the cause differently or to accommodate long-term systemic change.

by Erica McGeachy Crenshaw, President/CEO of Execute Now!

See also:

Charity Case by Dan Pallotta

CausePlanet blogs about Charity Case

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Why haven’t we tackled the “biggie” of systemic challenges?

We like to think we know change in the nonprofit sector. We’re in the business of systemic change after all. So why haven’t we tackled the “biggie” of systemic challenges? Yes, I’m talking about our challenges as a sector.

In our current Page to Practice™ book feature of Charity Case at CausePlanet, we’ve explored how author Dan Pallotta argues that the social sector is required to work with a different rule book than the corporate world. This alternative rule book prevents us from moving the needle on critical humanitarian issues and reflects five transgressions against the sector. These transgressions range from disparities in compensation, to risk-tolerance for revenue generation, to the time horizon for successful outcomes.

Pallotta further asserts that the social sector needs its own civil rights movement to overcome these hurdles perpetuated by the current rule book and explains his plan for a new “Charity Defense Council” to lead it.

The Council should approach the problem from five angles: 1) Establish an Anti-Defamation League; 2) launch an aggressive, paid public media campaign; 3) enact a National Civil Rights Act for Charity and Social Enterprise; 4) establish a Legal Defense Fund; and 5) organize the sector on behalf of its own issues (including 17 ways to get involved in this movement).

In our interview with Pallotta, we asked him about which of the five strategies he felt was most important and about the role of other sectors:

CausePlanet: You’ve discussed five strategies that will help the social sector change the way our society views charities. In your opinion, which is the most important among them?

Pallotta: We need to begin with anti-defamation and public advertising efforts. Those are the two quickest paths to a public conversation. Charities are defamed in the media all the time, and there is no legitimate nationally respected voice there to defend or offer an alternative point of view. And that’s free media if we can get an anti-defamation voice to respond to those stories. With public advertising, we can completely control the message and deliver lay-friendly, really smart, really provocative ads that can change people’s minds quickly.

CausePlanet: Many thought leaders observe meaningful social change happens when sectors collaborate to create a movement. What essential actions might we need, if any, from the corporate and government sectors to accomplish this new view of charities?

Pallotta: Not to be too pedestrian, but one of the things we could use would be corporate brands sponsoring these efforts with financial support. The government could create a sea change overnight by finding a national iTunes for charity that would give the public much more robust and friendly information that is updated regularly. Eventually it could provide information on every single nonprofit organization in the country.

Do you feel you operate under a separate rule book from the corporate sector? Have you experienced any of the transgressions Pallotta mentions? If yes to either question, tell us about it.

For more information about Dan Pallotta’s Charity Case, or to purchase his book, visit www.danpallotta.com.

If you would like to view the full Page to Practice™ book summary of Charity Case to research the book further, visit our Summary Store to purchase a copy or subscribe to our entire Page to Practice™ library of recommended reading. Or, download a free sample of a Page to Practice book summary and see if you like our format.

See also:

Charity Case

One-Hour Activist

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Charity Case: Are nonprofits operating under a separate rule book?

Charity Case author Dan Pallotta explains the number of nonprofit organizations that have crossed the $50 million annual revenue barrier since 1970 is 144. He adds, the number of for-profits that have crossed it is 46,136, and as many as 80 percent of nonprofit organizations in the U.S. have budgets under $500,000. Finally, only one percent have budgets greater than $1 million.

Despite the fact that our sector is tackling issues of “massive proportions,” we are required to work under a separate rule book, one that doesn’t have any of the proven capital strategies our corporate sector leverages every day.

“This is the crux of the matter,” says Pallotta.

Pallotta explains this discriminatory rule book reflects five transgressions against our sector:

1) Compensation: We let the for-profit sector pay people a competitive wage based on the value they produce without limit. Want to make $50 million selling video games to children? Have at it, says Pallotta. “But if you want to pay the right leader half a million dollars to cure kids of malaria, you and the leaders are parasites yourselves.”

2) Advertising and marketing: Charities can’t build demand for donations to their causes while businesses advertise until the last dollar no longer produces a penny of value.

3) Risk taking in pursuit of new donors: While it’s okay if the movie industry spends $100 million on flops, a $5 million charity walk that doesn’t show a 75 percent profit in the first year is considered suspect. Consequently, nonprofits shy away from large-scale fundraising ideas and cannot benefit from powerful learning curves.

4) Time horizon: New companies can go six years without returning any profits to investors in the interest of building market dominance while charities that have long-term goals are expected to yield short-term, direct services. If they don’t deliver, they are pariahs.

5) Profit: Businesses can offer profits to cultivate investment capital, but there’s no such vehicle for charities. The social sector is starved for growth capital.

The author included a relevant quote from former president of the Association of Fundraising Professionals, Paulette Maehara. She says we are to blame for perpetuating some of these transgressions. “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,” adds Maehara.

Pick up a copy of Dan Pallotta’s Charity Case. It’s a provocative look at some of the sector’s most persistent problems as well as Pallotta’s comprehensive answer to them.

Do you have personal experience with one of the transgressions mentioned above?

See also:

Page to Practice™ book summary of Charity Case
Page to Practice™ book summary of One-Hour Activist

Image credit: TED, danpallotta.com

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Why do half of all chief fundraisers want to quit?

Join me in taking a closer look at our latest feature at CausePlanet: Charity Case by Dan Pallotta. In Pallotta’s prior book, Uncharitable, he presents the problem with our social sector: the way our society has been taught to think about charity is backwards. Furthermore, the social sector is required to work with a different rule book than the corporate world, which prevents us from moving the needle on humanitarian issues. Uncharitable prompts readers to ask what we should do about it.

Charity Case is a comprehensive answer. It’s a blueprint for a national movement that will put our society on the right track to support social issues. Pallotta argues the social sector needs its own civil rights movement and explains his plan for a new “Charity Defense Council” to lead it. The Council should approach the problem from five angles: 1) Establish an Anti-Defamation League; 2) launch an aggressive, paid public media campaign; 3) enact a National Civil Rights Act for Charity and Social Enterprise; 4) establish a Legal Defense Fund; and 5) organize the sector on behalf of its own issues (including 17 ways to get involved in this movement).

We asked Pallotta about the foundation community’s role in his movement. His answer references an interesting article in the Chronicle of Philanthropy this week:

CausePlanet: The foundation community seems to be uniquely poised for funding and supporting some of the five strategies you’ve explored—especially because one of the problems is rooted in the misguided goal of maintaining a low overhead. What are your thoughts on this statement?

Pallotta: Foundations are notoriously risk-adverse, and they have a high rate of illiteracy about the power of fundraising. In fact, there is a story in the “Chronicle of Philanthropy” this week that says half of all chief fundraisers would like to quit their jobs, primarily because even their own CEOs don’t understand fundraising. Foundations understand it even less. I think the capital that foundations are sitting on would be well-used to fund an effort like this, but it’s going to take an enormous amount of work to get them to see the light.

Watch for more interview highlights with Pallotta in the upcoming weeks and follow him at www.charitycasebook.com and  www.charitydefensecouncil.org for more discussion about these issues.

See also:

Page to Practice summary of Charity Case

Page to Practice summary of One-Hour Activist

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