Nonprofits Deserve More than Small Change in Ideas and Investments
By Dawn Morais Webster 07/09
At a time when the 7000-plus nonprofits in Hawai‘i are wondering how they will keep providing the many services desperately needed by so many, we cannot afford to ignore new thinking on how to meet the twin challenges of funding and capacity-building. Dan Pallotta’s Uncharitable: How Restraints on Nonprofits Undermine Their Potential,” (Tufts University Press, 2008) offers new thinking. As the economy reels from the lack of restraint on Wall Street, it is easy to understand the alarm with which some greeted Pallotta’s argument that society should free nonprofits to use all the tools of capitalism. But nonprofits and those who fund them will find it worthwhile to examine the case he makes for capitalism as the path to survival for nonprofits. We have become leery of profit-driven executives who seem to have lost their moral compass. But it would be a mistake to ignore Pallotta’s call to give the mission-driven heads of nonprofits the opportunity to blaze new paths.
A nonprofit like Volunteer Legal Services Hawai‘i (VLSH), for example, is a place of last resort for those who cannot afford paid legal counsel. They provide an essential service which, if not funded, would cost the community dearly in other ways. Yet each year the mission of nonprofits like VLSH is placed at risk as grantors make tough choices about who to fund. Central to Pallotta’s book is a deceptively simple question: why do we admire for-profit companies for their investments in advertising or public relations but attack nonprofits who direct some of their limited funds at anything other than direct program expenditure? He argues that society conditions us to accept that talented executives in the for-profit world deserve high salaries but “a charity should have the luxury of paying people less because they get fulfillment from helping people out” (90). Having “built our society on the backs of bold gambles, experimentation, mistakes, failures, and learning” (87), we deny nonprofits and their leaders the chance to make investments in bold, new ideas.
All of us who have asked, “What percentage of my donation went to the cause?” will feel a twinge of recognition reading Uncharitable. Pallotta makes the very persuasive case that by letting go of the “illogical idea that a dollar we give today can only help the needy if it is used today” (88), we free nonprofits to dream big. Not to let go is to put nonprofits in a straitjacket that stifles their imagination and exhausts their energy. “A system that creates barriers to visions, not only loses visions. It loses visionaries” (89). The desire for conformity to a short-term view of charity rather than a commitment to a creative vision that looks to long term solutions tends to drive how we evaluate and fund nonprofits.
Pallotta’s own for-profit company, Pallotta Teamworks invented the AIDS rides and Breast Cancer 3-Day events which raised over half a billion dollars and netted $305 million for these causes in nine years. Yet, in the face of a storm of criticism over the company’s use of the tools of the free market, Pallotta Teamworks went out of business. Uncharitable provides an instructive case study of their stunning success and the negative impact of their demise on the causes they had served. When the same nonprofits reverted to conventional practices for their fund-raising after they parted company with Pallotta Teamworks, they did not yield the same results.
If we heed Pallotta’s advice, nonprofits in Hawai‘i should exploit the tools that for-profit companies use. “Paid advertising campaigns, stunning printed materials, compensation that acknowledged self-interest, cross-promotion of causes, taking a long-term view, taking calculated chances, or placing the value of a dollar over the value of a percentage” (227) delivered results. These tools could help Hawai‘i’s nonprofits achieve organizational sustainability. But this demands more of us than compassion. It requires a change of heart and mind. Let’s stop asking nonprofits to settle for small change in ideas and our investment in them. The biggest risk to this investment is not making it.
