Can Our Culture Accept Charities That Are Run Like For-Profits?
Don't fear the overhead
Dan Pallotta, founder of the California AIDS Ride and the Breast Cancer 3-Day Walk, gave a recent TED Talk asking whether nonprofits would be better off if they were allowed to behave more like for-profit companies. He argues that our cultural attitude toward charities – not allowing leaders to be paid competitively, resisting as much overhead as possible, and not allowing for risky charitable ventures that may take years to pay off – holds charities back and ultimately resigns donations to making up only two percent of our Gross Domestic Product.
Pallotta's TED Talk can be watched here. He goes through the mathematics of showing how non-profits that invest in growth systems typically associated with profitable companies may increase the total pool of charitable giving.
Pallotta doesn't talk about the difference in public versus private spending on aid for the needy in his talk. I did wonder how a change like he proposed would alter the mathematics that show 70 percent of private donations actually reaching the needy as compared to 30 percent of public aid programs. So much government aid spending gets consumed by bureaucratic "overhead." Would it be acceptable for only 60 percent of private donations reaching the needy if the end result also improved charitable giving to 3 percent of GDP?
Pallotta's argument is actually not new. His book, Uncharitable: How Restraints on Nonprofits Undermine their Potential, published in 2008, discussed these possible reforms. ReasonTV interviewed him in 2009. He discussed many of the same issues back then, which means we're way more in tune with innovation than those TED people.
Below is ReasonTV's interview with Pallotta from 2009: