As someone who's at times had to produce media and marketing assets for companies and institutions that I personally might not freely endorse off the record, I'd love to believe that Dan Pallotta is onto something.
In this popular TED Talk, Pallotta's basic stance is that the non-profit sector addresses societal needs that the business sector and even social enterprise realms don't simply because there's no market there for them to engage in. Moreover, the big problems lie in the fact that captial arrives in the non-profit sector with a host of attached strings that cripple the organization in its effort to grow, and that these accepted parameters regarding how a non-profit is supposed to operate are born of a morality that is retrograde and obsolete. In other words, we need to dump the way we think of charities if we want them to be effective in addressing the massive problems that we are faced with today.
He takes the 30K-foot view, and he looks at GDP as a market where the non-profit sector has about a 2% market share, which he believes is not enough to ultimately make a dent in any of the crucial issues at hand. He shows palpable frustration at how hamstrung the sector is, how it's denied the tools (marketing, freedom to invest in talent and overhead, the ability to take risks) that the business sector employs on a daily basis in its effort to wrest even more of that market share away from the non-profit sector. It's an unfair fight. And to this end, he's got a real point.
His arguments for scale and the importance of growth seem, intuitively, to make sense. In general, it would be better to have a million or a billion (or many billions if you're the Bill and Melinda Gates Foundation) dollars with which to address a problem like global poverty or ridding the world of polio. Having a lot more money at your disposal by no means guarantees success, but it's not hard to imagine that it would at the very least provide the leeway to try approaches and fail and learn from those failures on the way to a real solution. Pallotta touches on this with his third point when he asserts that non-profit organizations are not allowed to fail. He suggests that it's a question of perception, but is it not also not having the wiggle room to absorb an audacious failure without seeming to squander what little capital resources are available? If a venture may result in real progress, but is slighly more likely to result in valuable employees losing jobs or having to take pay cuts because suddenly the organization is struggling for funding, is that a risk that a non-profit would be willing to take, regardless of outside perception? Regardless of where the impediment to risk-taking originates, Pallotta's arguement for scale seems to hold true in this light--more money would offer the organization more flexibility and the wherewithal to be a bit more daring in action.
The stickier questions with what he's suggesting, it seems, might be down on ground level where the day-to-day operations exist. It's a pretty bold assertion these days to say that executive compensation needs to be upped in a big way. In a time of Occupiers and the Great Recession, Main Street v. Wall Street, and it being fairly well acknowldeged that there are at the very least problems with executive pay packages that are stratospheric, to focus on the compentation offered to non-profit executives and to categorically state that these levels need to rise dramatically seems bold, but more of a steamroll than an idea that seems carefully considered.
Might a focus on "attracting the best talent" with big salaries not possibly lead to the same myopic short-term thinking on the part of that talent that has obviously been the case in the business sector? I come in, you pay me 400K a year, I know I can do this for a couple years, it looks good on my resume, I can leave after that having done my good deed. It's not about my dedication to the cause--it's a resume stuffer. It may not even be that insidious, that intentful. It could just be that that's the way things work out after the fact, at the end of a short tenure for a CEO or CFO.
And what about the sort of snowball effect? You pay the CEO, which means you need to pay the CFO and CIO and CTO and the rest of the C-suite commensurate salaries; suddenly the charity HAS to raise the money to cover this extra overhead, and so has to adopt these methods to bring in more donations/revenue, which maybe is possible, but which also adds another stressor to what is already an environment that fights daily fights trying to come up with enough money to be effective. It quickly devolves into a situation where the prime directive is to raise enough money to cover the overhead including these salaries because that's what you need to do to stay afloat. The purpose of the organization takes a back seat to raising capital and you haven't addressed the initial problem of lack of scale because any growth is funneled directly into overhead.
I'm guessing that Pallotta would argue that, yeah, that's exactly the point, and that any CEO worth half a million dollars a year is going to have the vision and leadership to bring in more than enough revenue to cover the cost of his salary and then some, so these pressure would not be brought to bear. But is this how it typically works out in the private sector? The history of business and class struggle, the board room v. the mail room, provides example after example of this not being the case. At the very least, it opens the door to prioritizing the short-term view over the long term outlook that, it seems obvious, is necessary in dealing with problems like climate change or global poverty or overpopulation.
And don't we know from behavioral economics that dangling a big bag of cash to be delivered around Christmastime isn't best incentive in terms of output/productivity, anyway? What is it that will intrinsically motivate? Don't the lower salaries in purpose-driven organizations select against attracting those without the intrinsic motivation? Is it important to have people leading the way who really do on some level put the cause before the compensation? You'd have to believe that Pallotta would say yes, of course, but his call to action suggests otherwise. Isn't part of 'talent' in this context the true belief in the cause, in the purpose of the organization? You'd think that talent would go beyond simply growing the revenues and crunching numbers along the way.
Pallotta's stance on marketing and the stigma associated with overhead seems to make more sense. The problem there being that most contributions to charities come with a requirement that no more than say 15% of the gift goes toward overhead. This doesn't make sense. If you're giving a gift, in general, it does make sense to leave up the experts you're entrusting with the money how to deploy those resources. Even if it's 100% towards overhead, if that's the best use of money in contributing to the overall mission, how can you argue that you're not getting the most for your contribution? Unfortunately, emotionally, and to some degree legally, this is not how things work. Pallotta is right to question this convention, to wonder if changing this outlook might not open up some possibilities for growth.
As for marketing and advertising, it almost seems silly for a non-profit not to at least think about devoting resources toward this end. If you are doing good, you want to let people know that you are doing good and that they can get involved. There has to be a way to get this headed in the right direction.
Pallotta's impassioned plea to change the way we think about non-profits and how they are supposed to operate comes at a time when these issues need to be discussed. As complex as they are, he's done an terrific job in distilling down the problems to points which the layman can absorb, and at the very least, his are ideas that we need to consider carefully. The time really is now.