Cause Camp Highlight: The Way We Think About Charity is Wrong

Dan Pallotta got things movin’ and shakin’ for day one of Cause Camp. He kicked off the conference with a talk that inspired a standing ovation from the entire room. In Pallotta’s presentation, he turned the way we typically think about charity on its head. Here’s a quick recap.

Nonprofits exist to solve problems. The trouble is, we’re creating more problems for nonprofits than they’re able to solve. Right now, traditional approaches to charity aren’t doing the trick; they simply aren’t moving the needle. Social change is happening at the rate of molasses—we need to be dreaming bigger to create bigger impact. That starts with a shift in the way we think about charity.

Pallotta started off by looking at differences in leadership compensation. Nowadays, there’s an unspeakable gap between the salaries of for-profit and nonprofit CEOs. Instead, Pallotta said that charity leaders should be paid based on the value they’re producing.

As his talk went on, Pallotta continued to transform the way we think about charity. He told us that changes in the nonprofit sector can start with these five things:

Reward.

Nonprofits need to stop using money like it’s a crime. Instead, we should be using it to motivate our leaders! By investing in leadership, we can encourage big change.

Advertising and marketing.

Donors don’t want to give their money for advertising. They want to give it to a cause, but advertising only increases the reach and impact of your cause. Without more exposure, your pool of supporters will become stagnant.

Risk in pursuit of revenue.

Sometimes, it’s okay to fail. “If you prohibit failure, you kill innovation,” Pallotta said. Dreaming bigger comes with its risks, but it comes with massive payoffs, too.

Time.

Some programs and initiatives take a while to get off the ground. Nonprofits shouldn’t be too hasty in writing things off just to keep costs down. If you see potential, leave room for growth.

Profit to attract capital.

Earning revenue is a healthy practice for many nonprofits. We’re doing good for the world, but we also need to be doing good for ourselves.

After we ran through those points, Pallotta gave some compelling insight on overhead. Despite what many nonprofits convey, overhead on its own is a poor indicator of your impact. Nonprofits get stuck talking about overhead in terms of boring expenses and administrative costs, but overhead is also part of your cause. Nonprofit employees are overhead, too—and without us, there wouldn’t be anyone fighting for the cause. Nonprofits should stop looking at costs and start looking at the amount of good they’re doing instead. “Don’t ask if a charity has a low overhead,” Pallotta told us. “Ask if it has a big impact.”
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The people impacted by nonprofits don’t need low overhead, expenses or budgets. Instead, they need high performance and high impact. We can take the first step toward that by dreaming a little bigger. If you push the limits, you never know what great potential you might reach.

If you want to hear more from Dan Pallotta, make sure to check out our Hubcast episode and his two TED talks!

  • Marilyn B

    I hear what he’s saying, but I think you have to ask two questions, ask if they have big impact but also are they efficient? That’s really what I am looking for as a donor! I completely agree that nonprofit staff and leaders should be better compensated, that is part of being efficient: hiring good, effective people requires market based compensation. But I also want to make sure I am giving my money to an organization that is spending it wisely.