Americans Issue with Overhead in Nonprofits
In 2013, Dan Pallotta delivered a TedTalk in Long Beach that presented ideas on American’s views about financial overhead in non-profits which are still relevant today.
The premise of the presentation is that as a society, we view our nonprofits in the wrong light. We’ve been trained to think of “overhead” in a nonprofit as negative.
When he discusses overhead, he is referring to aspects that we take for granted in the American for-profit industries. Aspects such as marketing, public relations, and digital media are often considered wastes of funds when utilized by non-profits.
In several cases it is. However, without a long term strategy employing techniques that take skill and patience, it will be that much more difficult to generate the necessary scale.
In fact, Charity Navigator, the advisory group on finding trustworthy organizations, released a document named “The Overhead Myth”, which essentially demystified nonprofit overhead with the statement, “Charities don’t need low overhead; they need high performance.”
Without so-called overhead, it makes it nearly impossible (or at least more difficult) for philanthropic groups and charitable foundations to communicate the work they are seeking to sew. Communication is the cornerstone for these groups to truly make the impact they are capable of.
The more the public is aware of the impact they are seeking to make, the broader the audience that will be receptive and affected by their work. Despite all of this information and data, little has changed in public opinion toward the subject of communication in the sector.
Nonprofits Are Integral to Our Society
Nonprofits were developed around the late 1700s in North America to avoid the extreme problems of Europe. Citizens would organize to meet the needs of the community that the for-profit and government sectors couldn’t reach and has been encouraged by the U.S. government since the days of John Adams.
Today, there are over $1.9 million nonprofits that employ 10% of the workforce. Though boards of the nonprofits are unpaid and voluntary, full-time staffing of nonprofits is paid.
As time moves on, and as history repeatedly shows, these powerful notions for good could be soured by misinterpretation and greed. In Western Civilization specifically, guilt has been employed as a marketing tactic.
Wealth grows and lines of what is “charitable” begin to blur. In response, the power of social reforms begins to be taken from religious groups and undertaken by the government.
This creates a massive financial burden. Lines begin to be drawn over who deserves help and which of us do not.
The depiction of the poor began to be of those of low moral character and that their actions had brought about this status. Benevolence can start to go out the door for statistics and bottom-lines.
The depiction of the poor began to be of those of low moral character and that their actions had brought about this status. Benevolence can start to go out the door for statistics and bottom-lines.
From 1970 to 2009, the number of nonprofits that really grew, crossing the $50 million annual revenue barrier, is 144. In the same time, the number of for-profits that crossed it is 46,136.
As American society formed, it was aware that the government could not supply all the needs of the new country. Voluntary and philanthropic groups were given the freedom to grow, as did our notion for what it meant to be a benevolent American society.
Much like today’s notion of “Business for Good”, American entrepreneurs such as Andrew Carnegie practiced a “Welfare Capitalism”, uplifting their workers and giving them the tools to create a better life for themselves.
After the crash of 1929, the Great Depression had charities overwhelmed. This saw the bloom of the New Deal and the establishment of large government programs for the benefit of society.
After the crash of 1929, the Great Depression had charities overwhelmed. This saw the bloom of the New Deal and the establishment of large government programs for the benefit of society.
Through the 1960s, Lyndon Johnson began to create social programs to attack poverty, attempting to pull American citizens up instead of weed them out. However, President Reagan cut these programs back, giving the power of social welfare from the federal government to state, local, and nonprofit organizations.
Expounding on the belief that states and nonprofits were better suited than the federal government to deal with social problems, George H.W. Bush called for the American people to volunteer, or “a thousand points of light” helping humanity.
We Can Address Social Issues More Adeptly
That leads us to the present day. We now sit in a unique period of time. A time where history has shown us certain pathways.
Though it visibly able to see that attitudes are swaying and leaning toward the benevolent side across more and more sectors and populations, there are still stigmas around how an organization can best make its impact? Is it best to commit all funds towards the cause or is it best to invest those funds in the best way to solve the cause?
We can see that the power of benevolence will always rest in the hands of the people. If a government, business, and private citizens can all work under the precedent of humanity, then would poverty exist at all?
After all, “We The People”, we ARE the government and the government works for us. If the government has the power to protect us and provide our freedoms than it absolutely should. It is often easy to forget that American citizens are who are truly in power to make these decisions and changes we want and must-see in our society.
If businesses have the power to build and nurture thriving communities than they should. Ultimately, it comes down to all of the citizens, all of humankind, providing for each other the tools to create our real freedoms. Giving each other back our fire is a beautiful thing.
We're dealing with social problems that are massive in scale, and our organizations can't generate any scale. All of the scales goes to Coca-Cola and Burger King, not the drivers for social change. The stigma has long been that a company cannot be benevolent and cover all of their stakeholders without sacrificing potential large funds and create the most capital for the stockholders.
Charitable giving is 2% of GDP in the United States. That's about $300 billion a year. Only 20% of that, $60 billion, goes to health and human services causes. The rest goes to religion and higher education and hospitals, and that $60 billion is not nearly enough to tackle these problems.
If we could move charitable giving from 2% of GDP, up just one step to 3% of GDP, by investing in that growth, that would be an extra $150 billion a year in contributions, and if that money could go disproportionately to health and human services charities because those were the ones we encouraged to invest in their growth, that would represent a tripling of contributions to that sector.
That would be the framework for scale and the potential for real social change. It will not happen by forcing these organizations to lower their horizons to the demoralizing and hindering objective of keeping their overhead as low.
It will take a change of thought in how we approach all of our nonprofits and for-profits. It will take allowing nonprofits to spend what is necessary to communicate their mission without depriving any funding of the cause they are seeking to solve.
It will take for-profits employing and communicating their generosity until it becomes the social norm for our society. Then we’d have a real watermark to leave for all those in the future from our generation.