Editor’s Note: This post on nonprofit talent management was originally written in 2017. It has been updated with the events of 2020-2021 in mind.
Is “doing more with less” the mantra in your organization? Are budget cuts an excuse for limited staff training and development? Do you promote fundraising above all other revenue streams? The “great resignation” of 2021 has shown many organizations that this is no longer workable.
According to activist and fundraiser Dan Pallotta, philanthropy is not working because nonprofit organizations are held to different standards than for-profit companies.
5 Market Discriminations Against Charitable Organizations
The deck is stacked, and not in favor of nonprofits. Pallotta explains how the origins of sector discrimination in the United States started 400 years ago with the Puritans who were known for their pursuit of wealth. But being Calvinists, the Puritans also believed that greed was a sin. Thus the concept of charity – or penance for making money – was born.
In his 2013 TED Talk, “The Way We Think About Charity Is Dead Wrong,” Pallota cites several major differences between the nonprofit and for-profit rule books.
The message here is that it’s okay for the for-profit world to make millions of dollars creating goods and services that do not help others, but it’s greedy if nonprofit sector employees earn a decent salary working just as hard to serve others.
A 2017 survey by BusinessWeek looked at compensation packages for MBAs and found that the median salary and bonus for a Stanford alumnus ten years post-graduation was $400,000 dollars, compared to the average compensation of a medical charity CEO ($233,000) and a Hunger Charity CEO ($84,000). What message are we sending up-and-coming talent who are choosing career paths based largely on the incentive of pay?
Advertising and Marketing
For-profit companies have no qualms about spending advertising and marketing dollars when launching a product or service. They play by the rules that an upfront investment in promotional dollars will reap downstream revenue. But the reality in the nonprofit market is that money spent on advertising is money not spent on programs.
Risk taking in pursuit of revenue-generating ideas
Employees in for-profit companies are rewarded for taking risks in the pursuit of innovation. In stark contrast, many nonprofit cultures breed fear when it comes to thinking (and moving) outside the box. In these environments, investment in risk is not encouraged because uncertainty trumps potential. When 2020 forced many companies to pivot, we saw how dangerous this attitude can be.
For-profit organizations know that product planning takes time. They know that success for any new program or initiative can be years in the making. Nonprofits see themselves as not having time, even for research.
Profit to attract risk capital
And as a final nail in the coffin, the nonprofit world does not enjoy the luxury of a stock market to fund any risky, time-intensive, well-promoted business idea – even if such a thing existed in our sector.
Implications for Nonprofit Talent Development
The nonprofit sector has come to accept that overhead – such as money spent on staff or fundraising – is a waste. This belief leads to an under-investment in talent and development. The reality, however, is that an investment in people is exactly what will drive the results that your service-oriented agency so desperately wants to achieve.
Pallotta ends his 2013 TED Talk with this charge to his audience: “Our generation does not want its epithet to read, ‘We kept charity overhead low.’ We want it to read, ‘We changed the world, and part of the way we did that was by changing the way we think about these things.’”
What are you doing to change the conversation in your organization?