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Should Nonprofits Be Judged By A Different Standard of Success?

I want change

Dan Pallotta, a journalist, philanthropist, and businessman with a longstanding background in the nonprofit world, recently published an article in the Wall Street Journal entitled “Why Can’t We Sell Charity Like We Sell Perfume?” The piece raised some provocative questions, though perhaps not the ones the author was originally intending.

Mr. Pallotta’s thesis, “It’s time to change how society thinks about charity and social reform,” is based upon his belief that the public has disdain for nonprofit organizations overall. He supports this viewpoint by presenting what he says are common “man on the street” opinions concerning nonprofit organizations. These include:

  1. NPO executives should not be paid “high” salaries;
  2. NPOs should not spend precious funds on advertising and marketing;
  3. Most every dollar should be spent on mission-related services and not overhead;
  4. Our nation’s best and brightest professionals are not drawn to NPOs because of the low pay;
  5. NPOs should see immediate net revenue for start up and new ventures; and,
  6. NPOs that take on large and perhaps global problems should use a model that basically rejects all of the above.

As a nonprofit professional with over three decades of hands on experience in every NPO vertical, I have to take issue with Mr. Pollotta both on his thesis and supporting perceptions. Of course there will always be a portion of the US population that holds onto untrue and outdated beliefs; convictions like Iraq has weapons of mass destruction and that AIDS can be contracted from a public toilet. But far greater numbers of Americans – thanks in part to our 24/7 media machine – are beginning to understand that nonprofit organizations require the business, operational, and management discipline as for profit businesses to be viable and fulfill on their missions. And that their roles as providers of basic services, cultural experiences, environmental champions, community health advocates, and catalysts for economic development only increases as the role and wealth of government declines.

The highest tier executives that lead nonprofit medical centers, higher education, arts, environmental, advocacy and all other NPO sectors are paid competitive salaries, often in the low to mid six figures. Just like in the private sector, there is a relationship between the size, budget and complexity of a NPO and the compensation that senior executives and middle managers receive. The reality is that NPOs are attracting the best and the brightest because for many professionals mission as well as dollar driven.

The most successful NPOs are unapologetically adopting proven business practices that have made their for profit cousins successful. These organizations understand their goals, missions, and budgets, and tie metrics and accountability to performance. They understand it takes money to make money; the power of advertising, marketing, social media, and visibility; the role of formal contracts, business partnerships, and standard operating procedures; among other critical factors. But they also take accountability and oversight to the next level, by finding and appointing “stakeholders” rather than just shareholders, insuring mission and well as business compliance and best practices. The experiences of these board members, volunteers, patrons, donors, and beneficiaries are also contributing toward the public’s changing attitudes towards NPOs.

As performance and accountability expectations have increased, so have those of the donors that help to fund these high performing organizations.
Now more than ever, donors are demanding results, communications, engagement, and new ideas from those organizations that address their philanthropic aspirations. They want to see their contributions at work; donors giving five, six, and seven figure gifts are also hoping to “move the needle” in significant ways.

So, is the time now to change how society thinks about charity and social reform?
I would argue that our country’s great recession has already answered that question a few years ago. Attitudinal change often moves at a glacial pace, but it is impossible to argue that the importance and visibility of nonprofit organizations has not grown significantly over the past five or so years. The full and ever growing spectrum of NPO constituents – from those who utilize services, to their employees, to those who help support them – all share the responsibility of supporting these organizations through advocacy, financial, in-kind, volunteering, social, and word of mouth means.

Your takes:

  1. Consider adopting relevant for profit “best practices” in order to bring greater accountability, discipline, and results to your nonprofit agency or organization.
  2. Your nonprofit is a corporation that has “stakeholders” rather than “shareholders.”
  3. Find ways to leverage the decline in government funding toward increasing philanthropic funding.
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