Give Charities a Chance (to Operate)

One the one hand, we have a TED Talk with Dan Pallotta making a very strong case for injecting some of the evils of the private sector – high executive pay, persuasive marketing, high overhead – into the veins of philanthropic organizations (http://www.youtube.com/watch?v=bfAzi6D5FpM). On the other, we have a recent CNN article (http://www.cnn.com/2013/06/13/us/worst-charities/index.html?hpt=hp_t1) uncovering the dangers of turning a blind eye to what a charity spends on overhead and other “non-mission-related” costs.

So where is the happy medium? Pallotta convincingly and correctly makes the case that a charity hamstrung by an inability to market, to “spend money to make money,” is at a serious disadvantage in accomplishing their mission. He also notes the discrepancy in compensation between the CEO of a $5m+ medical charity (~$233,000), the CEO of a hunger charity (~$84,000) and the average private sector Stanford MBA with ten years of experience ($400,000). People have expressed outrage over the pay of top executives at several notable philanthropic organizations – United Way and March of Dimes, to name a couple – but they are missing the point, which is that organizations, charitable or not, cannot expect to hire top talent for 25% of what they are worth. If the job posting of the CEO of Easter Seals offered $84,000 in total compensation, would it be reasonable to think that the best candidates for the job would apply? Possible, yes, but reasonable? No way.

Watchfulness is appropriate. Charities must be transparent when it comes to how donor money is spent. And we must do our part by allowing them to operate. While we don’t think of charities as being in particularly competitive positions, they are. They must compete not only with each other for your hard earned dollars, but also with everything else one could conceivably spend one’s money on – vacations, cars, college funds, retirement. In this, they are the same as the companies of the for-profit world. So why do we pretend that they don’t need the same tools?

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