In a TED talk published almost eight years ago, Dan Pallotta, an author, fundraising consultant, and charity entrepreneur, made an audacious proposal to the nonprofit industry. Dan challenged many preconceptions about how nonprofits should work and how donors should approach charity in the talk.
Dan's proposal, in a nutshell, is to rethink how we think about charity. As donors, we need to revise how we approach charities' use of funds for administration and fundraising, or as Pallotta refers to it - the "demonic label overhead." We also need to rethink how we view the impact, and we must review our treatment of charities compared to our treatment of commercial enterprises. According to Mr. Pallotta, we give all the advantages to for-profit organizations and all the obstacles to nonprofits while at the same time asking the latter to solve the most monumental problems humans face.
After listening to Dan's talk, it is clear that, in many ways, the popular beliefs on charity are flat wrong. Some serious reconsideration is in order. But the one takeaway on which I want to focus is brought out toward the end of the TED Talk. Pallotta makes a point on what donors should ask of charities when considering donating. Dan says, "The next time you are looking at a charity, don't ask about the rate of their overhead. Ask about the scale of their dreams… Ask about how they measure their progress toward those dreams and ask what resources they need to make them come true."
A shift of this nature, one interested in what a nonprofit believes it can do and how it will do it rather than how much it will spend to do it, would be a dynamic, course-altering change in the world of nonprofits, charity, and giving. Imagine donors focused on the impact bottom line rather than the financial bottom line. Pallotta calls this approach to giving a "generosity of thought," and he proposes that if we could practice such, the nonprofit sector would play a "massive role" in solving the world's problems.
I am 100% in agreement with Dan's proposition and his estimation of the potential impact of the change. However, unlike Pallotta, I think the most significant barrier to ever testing this hypothesis is not on the donors' side. I would not attribute the current charity MO to a self-denying, Puritan value passed down from ancient days as Dan does in his talk. To view the lack of "generosity of thought" as wholly a product of donor misconception, in my estimation, is to misdiagnose the ailment, which will lead to the wrong prescriptive change. If a method change to charity is ever to be realized, it will be because the donors have absolute trust in the charities they support.
Maybe somewhat contrary to Mr. Pallotta, I believe most donors fully support those who do the work, and they support their desire to accomplish the great work that needs to be done. However, there is a barrier of trust that prevents the generosity of thought in nonprofits and a donor approach absent from overhead consideration. This missed trust may be related to the use of funds or a lack of confidence in an organization's ability to accomplish what it envisions. The lack of faith may be cultural or based on nothing related to any particular charity, and it may backlash from a "pseudo-charity" practicing poor ethics. There are all kinds of reasons why people don't trust charities. But as long as only one in five Americans highly trust charitable organizations, we will never realize a test of "generosity of thought."
I would agree with Pallotta on the need for change in the charity approach and the potential impact if it were to be realized. However, if we are to call donors to make this change, we will, at the same time, need charities to revise their approach to awareness and accountability. The closer we come to true transparency in donor gifts, the more the world will benefit from charitable giving based on trust and centered around potential impact.