Dan Pallotta, AIDS Rides founder, gave an inspiring TED talk about charitable giving in the US, and he argues that the way we think about charity is just plain wrong.
“The things we’ve been taught to think about giving and about charity and about the nonprofit sector are actually undermining the causes we love, and our profound yearning to change the world.”
Donors in the US focus on organizations that have low overhead – small staff salaries, little money spent on fundraising, and almost no investment in growth and expansion – and Pallotta suggests this isn’t the right measure and, what’s more, that it hurts the very organizations donors are trying to help.
I’ve seen countless charities operate on a shoestring, with staff members running after-school programs making $20,000 a year, or computers so old they’re better used as paperweights than word processing machines. This inefficiency has a real impact on programs on the ground, on the organizations’ ability to meet their goals, and make real, deep change.
But, at the same time, there are a handful of for-profit fundraising entities out there that aren’t exactly transparent: some of those cold calls from telemarketers raising money for charities result in far more money ending up in the for-profit telemarketers’ pockets than in the charities’ bank accounts – as much as 75% according to one former telefundraiser turned activist.
It’s certainly a complex question. I believe, whole-heartedly, that the people who work in the nonprofit sector deserve to be fairly compensated for their contributions and hard work, and that the current salary range is low to attract and keep staff – especially staff who are supporting a family and have to pay the cost of childcare, one that easily exceeds average rent in many communities. However, I also want to be confident that the organizations I support are good stewards of my contributions.
So, what measure should donors use instead of the blunt instrument of percentage spent on overhead?
Pallotta argues that nonprofits need risk capital, they need investment in growth and scale, they need the chance to try out big, bold experiments – and fail, and learn from those failures – if they’re to change dreary statistics like these:
- More than 13 million kids in the US live in poverty.
- At least 633,000 people are homeless.
- One in six Americans struggles to get enough food for their families.
The next time you think about where to invest your charitable dollars, here’s what Pallotta suggests:
“Don’t ask about the rate of their overhead. Ask about the scale of their dreams…how they measure their progress toward their dreams, and what resources they need to make them come true regardless of what the overhead is.”
It’s a thought-provoking talk, and one that might make you re-think your family’s approach to philanthropy.