At Harvard’s Center for Public Leadership my guest presenter on Wednesday was Dan Pallotta, author of UNCHARITABLE and founder of Pallotta Team Works that created the multi-day AIDS rides and the 3 day breast cancer walks. His talk was about “why can’t nonprofits achieve Apollo like aspirations?”
As part of his presentation about the various factors that hold back nonprofits, Dan cited as evidence, that since 1970 there have been 46,136 businesses that have crossed the $50 million annual revenue barrier, but only 144 nonprofits that have done so.
Dan argues that there were two distinct rulebooks: one for nonprofits and one for the rest of the economic world and he used vivid examples to make his provocative points about how the nonprofit sector is discriminated against in the following ways:
- Compensation: If you re CEO of a $50 million a year business that sells violent video games to kids, you are deemed worthy of making $1 million a year. If you work to feed hungry kids and are paid $500,000 a year you are considered a parasite. Talented people who want to have a nice lifestyle feel like they have to go into the for-profit world and make their difference by contributing money once they are wealthy, rather than by contributing their talent.
- Advertising and marketing: Charitable giving has remained stuck at 2% of GDP, not because human beings are wired to give only 2% but because nonprofits can’t build demand and take market share. Budweiser can buy Superbowl ads in a business culture that believes you can spend down to the last dollar that yields value, but AIDS and Darfur are left with no way to build retail demand for their needs. In the business world it would be malfeasance to build a great product or service but not then invest in a great advertising and marketing campaign, as Apple does for example, to create desire and demand for it
- Risk taking for new donors: Hollywood execs almost always have a mix of hits and flops, and the risk taking makes them better over time, but launch a big event in the nonprofit sector and losing a lot of money on it, and you’re finished.
- Time horizons: Nonprofits are judged on an annual basis, thanks to tradition and the IRS form 990. Amazon.com lost money for six years, before becoming wildly profitable, because it understood the need to invest in capacity for long-term return. A nonprofit that began with six years of projected losses would find little donor or foundation support. And so nonprofits keep making only incremental gains.
Dan founded Pallotta Team Works and created the AIDS rides and breast cancer walks after bicycling across country as a Harvard student to raise money for hunger relief. He really gets the power of asking people to share their strength. And in an era of activism in the form of on-line petitions and clicks, etc. he believes “people are tired of being asked to do the least that they can do, people want to be asked and challenged to do the most they can do.”