Is “doing more with less” the mantra in your organization? Are budget cuts an excuse for your staff training and development deficit? Does your agency promote fundraising above all other revenue streams? If so, you’re taking a page out of the nonprofit playbook. And you’re not alone.
According to activist and fundraiser Dan Pallotta, philanthropy, or “the market for love,” is not working because nonprofit organizations are held to a different set of standards than for-profit companies.
5 Market Discriminations Against Charitable Organizations
The deck is stacked, and not in your favor as a nonprofit leader. 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 sure path to a less-than-desired afterlife. Thus the concept of charity – or penance for making money – was born.
In his 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 the nonprofit sector employee earns a decent salary working just as hard to serve others.
To illustrate this point, a recent 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 a surplus of 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 the needy.
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.
Along the lines of risk, time is viewed as a commodity in nonprofits, and one not worth the investment. In for-profit organizations, it’s understood that product planning takes time and the true success of any new program or initiative can be years in the making.
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
Because of such discriminatory trends, the nonprofit sector has come to accept that overhead – such as money spent on staff or fundraising – is part of the cause, and therefore must be minimized. This belief leads to an under-investment in talent and a de-emphasis on development. The reality, however, is that an investment in overhead is exactly what will drive the results that your service-oriented agency so desperately wants to achieve.
Pallotta ends his 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?