Money as a Means, Not an End: Redefining Success in Nonprofit Organizations
If you’ve never watched Dan Pallotta’s 2013 TedTalk, “The way we think about charity is dead wrong,” you should. Then make everyone on staff and on the board watch it. And then talk about it. You might want to throw into this show and tell reading the 2009 article in the Stanford Social Innovation Review titled, “The Nonprofit Starvation Cycle.” And, please, do not tell me these are “old” and, therefore, no longer relevant. Are you still proudly telling your donors and potential donors an unrealistically high percentage that you spend on programs and services? Are you still patting yourself on the back because of how little your organization spends on operating costs? Are you still turning yourself into a pretzel trying to make the numbers look “good” while crossing your fingers behind your back as you spout those untrue numbers? Then these “old” things are not just relevant to you, but an essential lesson in how to run successful and thriving organizations.
And if you happen to be an organization with a fiscal year that aligns with the calendar year, then the messages of these previously available resources are particularly timely, as you still can rethink your upcoming budget. (If your fiscal year runs otherwise, here are messages to store for later.)
With the end of government COVID dollars and the general uncertainty of the fundraising landscape, nonprofits are very worried about the financial picture for the coming year. So, instead of asking the usual question of, “How are we going to finance program X?”, think about asking these questions:
Should we continue to offer program X?
Is program X meeting the impact we promised?
Do we have a solid business model for this program or will continuing to provide program X force us to prolong our doing the robbing Peter to pay Paul dance?”
Why bring this up now? Pallotta has just released his documentary entitled, “Uncharitable,” which, like his book by the same name, and the above mentioned TedTalk, challenges everyone to rethink how we, as donors, give and how we, as nonprofit employees and board members, explain our “goodness” to ourselves and our donors. Full disclosure, I’ve not yet seen Uncharitable, as I’m still waiting for it to be scheduled in a theatre near me. But I’ve read the book, watched the TedTalk several times, heard Pallotta talk on multiple occasions over the years, read many of the interviews he has given (most recently the one in the Chronicle of Philanthropy, in honor of the tenth anniversary of his TedTalk and the pending release of the documentary), and his core message is always the same. And while I think he has gone off the rails a bit of late in some areas, his basic challenge to our historic approach to funding nonprofits remains totally valid: it isn’t about how we spend our money (y% on programs, x% on overhead) but what we do with the money we spend (are we having an impact, making the difference/change we promised).
Think about this. According to various sources, the US government spent as little as $18 billion and as much as $39.5 billion to develop COVID-19 vaccines. While I have no inside information, I would put good money on the fact that those receiving these funds to work on the vaccine were not nickeled and dimed on their overhead ratio. And look what was accomplished. While COVID cases are rising again, the CDC announced in early September that the hospitalization rate in August 2023 was about 25% of that in August 2022. Should we cringe at the size of the expenditure or focus on the impact that vaccination has had on so many and us as a society?
Clearly, if ten years after his hit TedTalk came out Pallotta’s documentary is still needed as a way to educate people, not much progress has been made. It is true that the three major nonprofit watchdog groups that perpetrated this notion that nonprofits should be judged based on how they spend their money have tried to backpedal from that position, but the needle hasn’t moved much in people’s minds, words or actions. Sadly, even nonprofits have not stepped away from pushing out front the money numbers. And don’t get me wrong: money is important; after all, we are a business, and like every business, we need money in order to do our work. But money isn’t our business, but a means to our business as a mission-driven business. As such, we should be judged by how well we meet—or not--the promises of that mission, and secondarily, on how well we use the money to maximize that impact.