Dan Pallotta, founder of Palotta TeamWorks (left) with Eileen Heisman, President & CEO of the National Philanthropic Trust (right), last night at The Wharton Graduate School of Business.
Yesterday evening I had the pleasure of attending a lecture given by Dan Pallotta, a Harvard graduate and former chair of the Harvard Hunger Action Committee, founder of Pallotta TeamWorks, author of Uncharitable: How Restraints of Nonprofits Undermine Their Potential, and blogger for the Harvard Business Review.
Many Penn and Wharton students, staff, and faculty were in attendance, such as Eric Ashton and Kenwyn Smith of SP2. I also saw Yuanxia Ding, who is organizing the Strategic Philanthropy panel for this Friday’s Wharton Social Impact Conference, which will feature our executive director, Kat Rosqueta, as moderator. I even tweeted up with a local, Philadelphian researcher at Pew Charitable who attended the talk.
Eileen Heisman, President & CEO of the National Philanthropic Trust and a lecturer at the School of Social Policy & Practice, introduced Dan with a story of how she was inspired by the Breast Cancer 3-Day Walk, the concept of which was created by Pallotta TeamWorks, now renamed as the Susan G. Komen 3-Day For The Cure. Dan’s lecture covered many topics from his book, Uncharitable, that are currently in need of change in the nonprofit sector including compensation, advertising, vision, learning, and capital. As I was “live-tweeting” the talk, I was able to capture (as accurately as I could) a few key points and resources that he mentioned, which I have included below.
- Dan’s experiences with fundraising events began when he was chair of the Harvard Hunger Action Committee and they raised money for Oxfam. (1) He stated, “I wanted to do something big but I didnt have any big ideas.” (2) Then, one year, he asked people if they would bicycle across America during the summer to end world hunger. Over 30 people agreed and raised approximately $100,000 for Oxfam. (3)
- When Dan returned to California after graduating from Harvard, he was surrounded by the deaths of many friends and associates who were dying of HIV/AIDS. It was then he realized the AIDS community needed something, so he organized a 7-day bike ride in LA and added the condition that people had to raise a minimum of $2,000 to participate. This resulted in approximately $1,013,000 being raised. (4) The 7-day bike ride sparked the concept for the 3-day Cancer ride. In 2002, the Cancer ride netted approximately $81 million. (5)
- Dan described these events as follows: “There was an emotional beauty to these events… It was joyous to see the true nature of human beings (6)… Producing these events for 10 yrs gave insight on the way the public thinks about charity.” (7)
- In his book, Uncharitable, Dan discusses the idea to give nonprofits and charities the freedom to raise and spend money and not demonize their expenses on overhead. (8) He said, “I don’t ask how to improve nonprofit performance. Instead I ask, ‘Is this whole system capable of achieving ‘Apollo-like’ results and within what amount of time are these results possible?'” (9)
- Dan also doesn’t agree with the attacks on the nonprofit sector regarding compensation. He stated, “Pepsi markets sugar water to kids and their CEO gets $14 million a year but the CEO of the Boys & Girls club who makes $988,000 per year is seen as outrageous.” (10) (Note: He is referring to the recent controversy in the news regarding the Senate Finance Committee asking for justification of spending by the Boys & Girls Club.)
- Note: The criticism of nonprofit executives who receive high salaries also reminds me of the emotions and expectations related to the recent topics surrounding Philanthropy and Guilt, and also the expectation that nonprofit workers should not be compensated at the same amounts as workers in the for-profit world. (See also the recent articles on Executive Compensation in the Chronicle of Philanthropy.)
- He went on to compare the different standards by which the nonprofit and for-profit sectors are held accountable to and the inequalities in perception of how they should operate.
- “Nonprofits spent $1.6 billion vs For-profit $729 billion in 2006 on advertising. Save the Children spent $6.4 million vs Disney $2.2 billion on marketing in 2004.” (11) (See also Dan’s article on the Harvard Business Review, Haiti Is a Marketing Lesson)
- “It’s rare you can produce success in a 12 month window but nonprofits are held to this standard each year while for-profits are not.” (12)
- According to an op-ed, co-written by Sean Stannard-Stockton and George Overholser, only 144 nonprofits passed $50 million in revenue compared to 46,136 for-profits. (13)
- “The notion that overhead is not part of the ’cause’ forces charities to forgo things they need.” (14)
- Two great references Dan referred to are:
- 1) The Bridgespan Group’s Nonprofit Starvation Cycle, an article which appeared in the Stanford Social Innovation Review (SSIR) (15)
- 2) A survey by Princeton Survey Research Associates International for the Better Business Bureau’s Wise Giving Alliance showed that 79% of people polled cared more about money to being earmaked for specific programs compared to 6% who actually cared whether a charity makes a difference. (16) (See also: Donors want more info before making philanthropic decisions.)
- Dan rounded up his talk by stating 3 steps that need to be taken to change the nonprofit sector: (17)
- 1) Stop using overhead as a metric. (See also: The Worst (and Best) Way to Pick a Charity This Year and On Topic: End of Year Giving and Moving Forward to 2010 and Beyond)
- 2) Stop asking about the percent of money to programs
- 3) Build an assessment apparatus
I’m glad to have attended this lecture and to have been able to listen to the Q&A discussion afterwards on how the nonprofit world can change the way the public perceives the work that we do and how we can effectively confront the challenges ahead. Please feel free to comment on these ideas as we encourage feedback and intellectual participation. Thanks to Dan Pallotta, Eileen Heisman, and Eric Ashton, and others who made last night’s event possible.