TED Talks–Dan Pallotta on Nonprofit Overhead

We have all heard comments about nonprofit overhead…

“I won’t donate to nonprofit overhead.”

“Don’t donate to that charity, they have a large overhead ratio.”

“They spend too much on fundraising.”

“Their Executive Director gets paid too much.”

“A lot of overhead means that a nonprofit organization is not helping society.”

“Nonprofits should be concerned about doing good, not making money.”

Have you ever heard a comment similar to these? I have.

In order to combat these types of comments, I would like to share my favorite TED talk. The talk is Dan Pallotta: The Way We Think About Charity is Dead Wrong

What did you think about the TED talk? Please, share your comments below.

Here are some of the takeaway points from what Dan Pallotta said:

  • The nonprofit sector is dealing with massive social problems, and comparatively, our organizations are small. What is further complicating this issue is that society at large is keeping nonprofit organizations small by not allowing nonprofits to take risks, invest in good leadership, spend money on fundraising, etc.
  • In society there seems to be two rule books: (1) The Nonprofit Sector, and (2) The Rest of the World.
  • Society at large tends to not have a problem with any big business CEO making money. Dan Pallotta gave the example of violent video games. We don’t have a problem with makers of violent video games making millions of dollars, but for some reason we have a problem with the Executive Director of a nonprofit organization making a fraction of that amount.
  • Many successful businesses and nonprofits rely on competent management and leadership. The nonprofit sector should be able to compensate good leadership in organizations just as businesses compensate their good leadership.
  • We are fine with the for-profit sector spending on advertising, but people never want their nonprofit donations to go to advertising. This ultimately stunts nonprofit organizations’ growth because without advertising we aren’t able to reach more supporters.
  • We also tend to have a problem with nonprofit organizations taking risks. If a for-profit business takes a risk and fails, that is one thing, but if a nonprofit takes a risk and fails people come pounding on their doors because that money was donated. While some risk should always be avoided, there are times that risk could lead to a large-scale improvement. For example, maybe an organization wants to take their donation money and invest in research and development of a new medical therapy. That could lead to a breakthrough in the cause they are fighting. But nonprofits are taught not to take these risks for fear of failure.
  • People also tend to not give nonprofit organizations as much time that they give businesses to become successful. We tend to want to see the impact of our donations immediately, rather than in 3 years. This could potentially be decreasing the impact that nonprofit organizations have because they can’t save and explore the core of their issues to make sure they are making the greatest impact possible.
  • The ultimate issue that I take away from this talk is that overhead spending (spending on management, fundraising, etc) is typically viewed as not being part of a nonprofit’s cause, but it IS part of the cause. We should be looking at the overall impact that an organization makes rather than at the percentage of funds that go to overhead costs.

Dan Pallotta Nonprofit Overhead

Why do you think people think this way? How can we hep things change? Please, share your thoughts in the comments below.

 

Related Articles:

3 Indications of Successful Nonprofit Organizations that are NOT the Overhead Ratio

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