Overhead of non-profits – rethinking
All regular readers of this blog know that I am a big TED fan because the speakers on TED frequently challenge my thinking about a wide variety of issues. This morning I listened to several TED talks, some of which provided additional evidence that society’s approach to particular issues is not based on sound scientific evidence and one of which challenged me to think differently my often-myopic view of the issue of overhead for non-profit organization. Dan Pallotta gave a Ted Talk entitled “The way we think about charity is dead wrong.” Mr. Pallotta is an activist and fund raiser. On his website, he posited:
"I BELIEVE DEEPLY IN THE POTENTIAL OF PEOPLE AND IN THE POTENTIAL OF OUR SOCIETY. AND I DON'T THINK WE'VE COME ANYWHERE CLOSE TO TAPPING THAT POTENTIAL. NOWHERE CLOSE."
This is not the statement which challenged me although it did impress me. No, what challenged me to think was his very simple assertion:
So, the next time you're looking at a charity, don't ask about the rate of their overhead. Ask about the scale of their dreams, their Apple-, Google-, Amazon-scale dreams, how they measure their progress toward those dreams, and what resources they need to make them come true, regardless of what the overhead is. Who cares what the overhead is if these problems are actually getting solved?
Although if I sat down with Mr. Pallotta to have a conversation about making non-profits more effective we might disagree about such issues as the salary one needs to pay the directors of non-profits, he could teach me a lot about viewing the annual reports of non-profit organizations with my business eye rather than merely looking at the amount of money they are collecting and the percentage that they are spending on overhead. Usually, the overhead figure is a pretty blanket figure indicating salaries, office supplies, rent, maintenance and related costs. It may or may not give one a detailed business plan and how the board of directors is making decisions about how to spend money in terms of short and long term goals. Mr. Pallotta cites the example of:
“In the 1990s, my company created the long-distance AIDS Ride bicycle journeys, and the 60-mile-long breast cancer three-day walks, and over the course of nine years, we had 182,000 ordinary heroes participate, and they raised a total of 581 million dollars.
They raised more money more quickly for these causes than any events in history, all based on the idea that people are weary of being asked to do the least they can possibly do. People are yearning to measure the full distance of their potential on behalf of the causes that they care about deeply. But they have to be asked. We got that many people to participate by buying full-page ads in The New York Times, in The Boston Globe, in prime-time radio and TV advertising. Do you know how many people we would've gotten if we put up fliers in the laundromat?”
Amazon did not plan on making any profit for six years. They were focused on long term goals.
I have traditionally donated goods and sometimes money to the Salvation Army because it spends very little of what is donated on overhead. Its mission is very clear:
“The Salvation Army, an international movement, is an evangelical part of the universal Christian
Church. Its message is based on the Bible. Its ministry is motivated by the love of God. Its mission
is to preach the gospel of Jesus Christ and to meet human needs in His name without discrimination.”
This is, in my opinion a very laudable goal. What it does not say, however, is whether or not it is committed to reducing the need for its services. Its community care ministry seems to be focused on training individuals to care for others. Within that limi6ed mission it does a very good job. On the other hand, if one looks at the programs and work of such organizations as Glide church in San Francisco one finds;
“Since the 1960s, Glide Church has provided various services for the poor and disenfranchised. Glide currently runs 87 various social service programs. Through their Daily Free Meals program, Glide serves three meals daily, amounting to over 750,000 free meals a year. [10]
In 2007, Glide provided 750,000 meals per year through their community clinic, which serves more than 3,000 homeless people. They provided over 100,000 hours of licensed childcare and quality after-school programming to over 325 clients in 2007. They provided emergency supplies to 2,190 individuals in 2006. And they booked 5,707 shelter beds and helped 120 homeless persons move into permanent housing in 2007. [11] According to their website, Glide’s daily Free Meals program served 934,000 meals in 2009. [12]
The church also provides HIV testing, mental and primary health care, women's programs, crisis intervention, an after-school program, creative arts and mentoring for youth, literacy classes, computer training, job skills training, drug and alcohol recovery programs, free legal services for the homeless, housing with case management, and much more. “(Wikipedia)
They are two very different organization, both of which I respect and admire. Purely from a business standpoint the organization which I think is long term going to do more to address the issues which lead people to needs its services is Glide church and Foundation.
In the past I, have focused too much of an aspect on the overhead such as salaries and not enough on what the organization is accomplishing in reducing the needs for its services. I am still not convinced that an MBA degree worth so much more to society than a masters in social work, education or clinical psychology. I am not convinced that anyone needs a salary of $400,000.00 per annum or more to feel good about the work that they are doing, but, on the other hand, if I found out that the director of all the programs at Glide Church was making a $400,000.00 a year I would feel significantly better about that then I would when I look at the results of some other non-profits including some community mental health centers.
Once again, I am blessed to be challenged to think outside of my little box. In that case my little box has to do with analyzing the overhead of non-profits. Thanks to Mr. Pallotta, my mind has expanded just a tiny bit again today.
Written March 23, 2017
All regular readers of this blog know that I am a big TED fan because the speakers on TED frequently challenge my thinking about a wide variety of issues. This morning I listened to several TED talks, some of which provided additional evidence that society’s approach to particular issues is not based on sound scientific evidence and one of which challenged me to think differently my often-myopic view of the issue of overhead for non-profit organization. Dan Pallotta gave a Ted Talk entitled “The way we think about charity is dead wrong.” Mr. Pallotta is an activist and fund raiser. On his website, he posited:
"I BELIEVE DEEPLY IN THE POTENTIAL OF PEOPLE AND IN THE POTENTIAL OF OUR SOCIETY. AND I DON'T THINK WE'VE COME ANYWHERE CLOSE TO TAPPING THAT POTENTIAL. NOWHERE CLOSE."
This is not the statement which challenged me although it did impress me. No, what challenged me to think was his very simple assertion:
So, the next time you're looking at a charity, don't ask about the rate of their overhead. Ask about the scale of their dreams, their Apple-, Google-, Amazon-scale dreams, how they measure their progress toward those dreams, and what resources they need to make them come true, regardless of what the overhead is. Who cares what the overhead is if these problems are actually getting solved?
Although if I sat down with Mr. Pallotta to have a conversation about making non-profits more effective we might disagree about such issues as the salary one needs to pay the directors of non-profits, he could teach me a lot about viewing the annual reports of non-profit organizations with my business eye rather than merely looking at the amount of money they are collecting and the percentage that they are spending on overhead. Usually, the overhead figure is a pretty blanket figure indicating salaries, office supplies, rent, maintenance and related costs. It may or may not give one a detailed business plan and how the board of directors is making decisions about how to spend money in terms of short and long term goals. Mr. Pallotta cites the example of:
“In the 1990s, my company created the long-distance AIDS Ride bicycle journeys, and the 60-mile-long breast cancer three-day walks, and over the course of nine years, we had 182,000 ordinary heroes participate, and they raised a total of 581 million dollars.
They raised more money more quickly for these causes than any events in history, all based on the idea that people are weary of being asked to do the least they can possibly do. People are yearning to measure the full distance of their potential on behalf of the causes that they care about deeply. But they have to be asked. We got that many people to participate by buying full-page ads in The New York Times, in The Boston Globe, in prime-time radio and TV advertising. Do you know how many people we would've gotten if we put up fliers in the laundromat?”
Amazon did not plan on making any profit for six years. They were focused on long term goals.
I have traditionally donated goods and sometimes money to the Salvation Army because it spends very little of what is donated on overhead. Its mission is very clear:
“The Salvation Army, an international movement, is an evangelical part of the universal Christian
Church. Its message is based on the Bible. Its ministry is motivated by the love of God. Its mission
is to preach the gospel of Jesus Christ and to meet human needs in His name without discrimination.”
This is, in my opinion a very laudable goal. What it does not say, however, is whether or not it is committed to reducing the need for its services. Its community care ministry seems to be focused on training individuals to care for others. Within that limi6ed mission it does a very good job. On the other hand, if one looks at the programs and work of such organizations as Glide church in San Francisco one finds;
“Since the 1960s, Glide Church has provided various services for the poor and disenfranchised. Glide currently runs 87 various social service programs. Through their Daily Free Meals program, Glide serves three meals daily, amounting to over 750,000 free meals a year. [10]
In 2007, Glide provided 750,000 meals per year through their community clinic, which serves more than 3,000 homeless people. They provided over 100,000 hours of licensed childcare and quality after-school programming to over 325 clients in 2007. They provided emergency supplies to 2,190 individuals in 2006. And they booked 5,707 shelter beds and helped 120 homeless persons move into permanent housing in 2007. [11] According to their website, Glide’s daily Free Meals program served 934,000 meals in 2009. [12]
The church also provides HIV testing, mental and primary health care, women's programs, crisis intervention, an after-school program, creative arts and mentoring for youth, literacy classes, computer training, job skills training, drug and alcohol recovery programs, free legal services for the homeless, housing with case management, and much more. “(Wikipedia)
They are two very different organization, both of which I respect and admire. Purely from a business standpoint the organization which I think is long term going to do more to address the issues which lead people to needs its services is Glide church and Foundation.
In the past I, have focused too much of an aspect on the overhead such as salaries and not enough on what the organization is accomplishing in reducing the needs for its services. I am still not convinced that an MBA degree worth so much more to society than a masters in social work, education or clinical psychology. I am not convinced that anyone needs a salary of $400,000.00 per annum or more to feel good about the work that they are doing, but, on the other hand, if I found out that the director of all the programs at Glide Church was making a $400,000.00 a year I would feel significantly better about that then I would when I look at the results of some other non-profits including some community mental health centers.
Once again, I am blessed to be challenged to think outside of my little box. In that case my little box has to do with analyzing the overhead of non-profits. Thanks to Mr. Pallotta, my mind has expanded just a tiny bit again today.
Written March 23, 2017
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