In a fascinating TED Talk, activist and fundraiser Dan Pallotta dissects the problems faced by the non-profit sector in the USA – many of which apply elsewhere in the West. His goal is to change our thinking about charitable giving to make the non-profit sector bigger and more effective.
His point, in brief, is that there is an abiding stigma against charities spending donated money on overhead costs, such as fundraising, recruitment, advertising and other investments that are critical to build scale. People want to know that their donations are being spent directly on the needy, and are opposed – often strongly – to expenses that are understood in the for-profit sector as necessary to grow the business.
This is wrong, argues Mr Pallotta, giving examples of his own charities that have invested in growth so as to bring in more money. One such case is that of his company’s “3-Day” walks for breast cancer, launched with $350,000 in risk capital, which they grew into $194 million over five years – more money, raised more quickly, for breast cancer than by any equivalent event in history. They were shut down suddenly in 2003 after their sponsor abandoned them, scared by a media witch-hunt that criticised the charity for investing 40% of their gross in overhead costs. Next year the sponsor ran the events alone, and net income for breast cancer research dropped by $60 million (84% compared to the previous year) under the new model.
To enable charities to tackle the huge social problems we want to see them solve, we need to let them grow the size of their pies, not dictate their spending of a small pie. With investment in overheads to grow in scale and draw more donations, charities can accomplish this.
Therefore, Mr Pallotta concludes with some advice: “the next time you’re looking at a charity, don’t ask about the rate of their overhead. Ask about the scale of their dreams – their Apple-, Google-, Amazon-scale dreams – how they can measure their progress toward those dreams, and what resources they need to make them come true, regardless of what the overhead is.”
The video goes into more detail – every second of it gripping – and you can watch it below.
See more of our top video picks here.
About the Author
