The whole premise of the book is that there are these unwritten rules about how charities are supposed to be run but these rules hold charities back and render them ineffective, or at the very least, unable to live up to their full potential.
Pallotta goes into many many rules but let me touch on the ones that resonated most with me.
- Charities can't take risks primarily because if they fail then money that was supposed to go to a cause has been "wasted." Of course, with big risk comes big reward, even if it takes a few tries. How many people are going unserved because charities can't take a risk with funding sources, program delivery and more?
- Employees of charities should be working out of the kindness of their hearts and willing to sacrifice some (or lots) of pay. Demanding a compensation package that accurately reflects their skills and worth is supposedly greedy and taking from the cause. However, it is somehow moral to get rich while potentially harming people (tobacco anyone?) but immoral to get rich helping people. Imagine if charities could match the private sector in salaries. Maybe Warren Buffet or Bill Gates would have made their fortunes curing diseases.
- Charities can't advertise. Again because it is "taking" money from the cause. Buying a Superbowl ad, or even local paper ad, is seen as frivolous spending despite the awareness it creates. However we all know from our personal consumer experiences that the more awareness we have of something, the more attractive it is. For example, you didn't want an iPod until you were aware of it.
- The most important figure for determining a charity's effectiveness is the percent that "goes to the cause" versus the percent that is overhead. While I doubt anyone would salute ineffective or mismanage charities, this figure is virtually meaningless since 1) there are no guidelines as to what "going to the cause" actually means. For instance, the electric bill at a community clinic is considered overhead by most but is certainly required to have the lights, computers, screening equipment, etc on. And 2) it says nothing about effectiveness. A soup kitchen that spends 90% on "the cause" but serves watered down soup is not more effective than a kitchen that spends 80% on "the cause" but is serving hearty vegetable soup.
- Charities are expected to act like a business but without any of the same allowances. Since a business can rake risks, pay employees almost whatever it likes, advertise, sell stock, spend on infrastructure how it see fits etc, it has a nearly endless set of allowances not afforded to charities. This is a pretty all encompassing point.
Here's my attempt at providing a few guidelines any one of us can do to make it happen.
- Give unrestricted gifts. When you make your donation, don't specify how it has to be spent. Trust the org to use it wisely (the vast majority do) and if they need staplers or bathroom cleaner or staff health insurance, just let them spend it that way. It all helps the cause in the end.
- Ask about the change made and not the percent "going to the cause." Volunteers or staff will be thrilled to tell you how many kids learned to read, the amount saved by keeping someone out of jail and the number of kitties with new homes. You'll be able to better determine how much good the org is doing and probably feel really satisfied with your donation or volunteer service. It's a two-for.
- Advocate for better salaries. If you read about a nonprofit exec "getting paid too much," look into it before declaring the person devil spawn. Have they increased fundraising dramatically? Enhanced services? Improved effectiveness? And if you have the chance to serve on the board, support staff salary increases or bonuses to help retain the most effective staff members.