Recently I have had the pleasure of watching Dan Pallotta speak on his ideas around how we must change our expectations and controls around the business of bringing about social change and good. I got to see the TED talk as well as see him in person as a keynote speaker at #13NTC, the annual conference of NTEN (Nonprofit Technology Network). http://www.nten.org/
If you haven’t seen Dan’s TED talk, stop reading this now and take the time to watch his talk. I would much rather you saw this first hand than rely on a poor summary from me.
Impressive speaker isn’t he? I was very impressed with both his ideas and the facts that back up his message. Expect to see Dan in front of congress at some point… But let’s get to Dan’s message.
The existence of our organizations at a high level is to carry on the business of social change and good. In essence, we exist to “make the world a better place”. This is our product. Realization and delivery of this product is arguably more challenging and complicated than many for profit businesses. We ask donors to part with their money in return for the feeling of having made a difference.
Yet for all the complexity and difficulty of delivery, we restrict the tools that nonprofit entities are allowed to use. Many of Dan’s objections to our current system revolve around how we think of overhead and how we measure effectiveness. We all refer to non-program spend as “overhead” or “administrative costs”. Are they really? Dan does a great job of pointing out just how wrong our ideas are here.
In the for profit business world, we are fond of saying that it “takes money to make money”. We look for and pay for good leaders, we advertise, and we invest in innovative risks that might not pan out. It is part of how we win in the private sector. We demand growth and results and offer rewards to those that make it happen.
However we have been taught that these expenditures are wasteful when it comes to nonprofits. The measure we’ve been taught to pay attention to is maximizing “program spend” and minimizing “administrative overhead”. Why wouldn’t we want to hire exemplary leaders that are capable of really impressive and disruptive results? Why wouldn’t we want to create awareness and “sales” of our product through high quality advertising? Why is it ok to sell potato chips in this fashion, but not fund providing clean water in developing countries?
If we are looking to solve hard problems like eradicating AIDS or Breast Cancer, why would we limit the quality of tools that people may use to make that happen? Why don’t we want our best leaders working directly on it? Why not our best advertising firms? Our best software engineers, technologists, and speakers? Why do we reserve that talent for “for profit” pursuits? Why do we make this talent choose between what is good for them personally and their family and causes we all know are globally and temporally important? Do we just seek the “good feeling” of having donated to a compelling cause, or do we truly want to see results toward the goals? Our current framework of measurement does not incent the behavior we say we would like to see, nor the results we desire.
Yes, Dan has me a bit fired up. Through listening to him, I too believe a change is needed. I hope you’ve found him inspirational. He’s not just talking though; he’s starting up his own organization to help drive this change. You can read about it here. http://charitydefensecouncil.org/ . You can also follow Dan on twitter @danpallota.
Grant Howe
VP of Research and Development
Hi Grant, thanks for your perspective on Dan’s plenary. He really sparked a lot of debate and conversation among attendees. I thought you made a great point that we need to re-frame we measure results. However, I also think it’s important to look at numbers. How much are nonprofits spending on advertising and promotion? How does that percentage compare to for-profit companies? And for orgs. that are spending a larger portion on advertising, is it having the desired effect? I’m glad to see the nonprofit tech community examining many aspects of the points Dan raised.
Megan, I agree.
It’s important to measure the return on investment of the spending and not just the spending itself.
Often in the for profit world we have to invest significantly in advance of realized revenue. We have to be patient and take risks to get the results we want. We need to extend that same patience and risk tolerance to non profits if we want to see more strategic results.