Let’s Stop This Myth About Charitable Giving

September 13, 2017

In the wake of Hurricane Harvey and Hurricane Irma, many well-intentioned folks are exploring ways to make an impactful donation that will provide shelter, food and comfort to those in need. If you find yourself wanting to pitch in, I hope you find the below advice encouraging, if not eye-opening.

There are few moments in my life when I’ve found my fundamental belief system turned completely upside down. In 2013, I had the pleasure of meeting Dan Pallotta in Milwaukee, only a few months after his radical TED talk “The Way We Think About Charity Is Dead Wrong.”  (If you haven’t seen it, stop what you’re doing and watch below.)

I’d heard about Pallotta’s talk, but it wasn’t until I was in the same room with him that his message really hit me: I judged nonprofits, including the one I was running, completely wrong my entire life.

Pallotta called out the double standard that drives our broken relationship with charities: Too many nonprofits are rewarded for how little they spend — not for what they get done. Pallotta laid out five ways in which nonprofits are not only misunderstood, but discriminated against in their mission to help people. Here’s a quick paraphrase:

  1. Compensation: We have a visceral reaction to the idea of people making a lot of money helping others. Interestingly, we don’t have a visceral reaction to the idea that people can make a lot of money not helping other people. There is a stark, mutually exclusive choice between doing well for yourself and doing well for the world.
  2. Advertising: We have an expectation that for-profits should spend, spend, spend on advertising, but nonprofits are expected not to advertise, unless the advertising space is donated. People want to see their money spent directly on the needy, not on advertising.
  3. Taking risks on new revenue ideas: Nonprofits are not allowed to try new things because public outcry sounds quickly at failure. Experimentation is a big no-no for nonprofits.
  4. Time: On the same note, Pallotta points out that it took Amazon six years to turn a profit. While businesses are given time to build the infrastructure they need, nonprofits are not afforded this luxury.
  5. Profit to attract risk capital: This point is a simple one: Nonprofits can’t go after capital because they can’t be on the stock market. And how do you build scale without capital?

From my experience, nonprofits and their staff are the definition of hustle. They make do with less. They always find a way. But I like to imagine a world where these organizations are not only allowed but encouraged to invest in essential infrastructure like top talent, fundraising and advertising, putting them on an equal playing field with their for-profit counterparts.

If you’re considering contributing to a hurricane-relief organization, or any other group, here are some suggested evaluation criteria:

  • Rather than overhead, take a look at outcomes. Are there measurable goals they are setting out to achieve? What have they accomplished thus far?
  • Read their annual report and website. Do they have testimonials that talk about the work they’re doing? Are they upfront about any challenges they’ve faced? Does their mission inspire you?
  • See their work IRL. Sign up to volunteer. If they’re local, stop in to visit, sit in on a class or workshop. Get a hands-on feel for what they’re doing and interact with their staff. I’m a strong believer in gut instinct — so after you meet them, what does your gut tell you?

As you evaluate your own charitable giving, I hope Dan Pallotta’s insights (and a few of my own) give you the perspective to have confidence in your investment. The world could use some more good and I think we’re all up for the challenge.