Charity Case

How the Nonprofit Community Can Stand Up For Itself and Really Change the World

Dan Pallotta

• Publisher: Jossey-Bass
• Year: 2012
• Print ISBN: 9781118117521
• eBook ISBN: 9781118237687
• Edition: 1
• Topic: Business
• Subtopic: Organizzazioni non profit e di beneficenza
• Index: Business

A blueprint for a national leadership movement to transform the way the public thinks about giving

Virtually everything our society has been taught about charity is backwards. We deny the social sector the ability to grow because of our short-sighted demand that it send every short-term dollar into direct services. Yet if the sector cannot grow, it can never match the scale of our great social problems. In the face of this dilemma, the sector has remained silent, defenseless, and disorganized. In Charity Case, Pallotta proposes a visionary solution: a Charity Defense Council to re-educate the public and give charities the freedom they need to solve our most pressing social issues.

• Proposes concrete steps for how a national Charity Defense Council will transform the public understanding of the humanitarian sector, including: building an anti-defamation league and legal defense for the sector, creating a massive national ongoing ad campaign to upgrade public literacy about giving, and ultimately enacting a National Civil Rights Act for Charity and Social Enterprise
  
• From Dan Pallotta, renowned builder of social movements and inventor of the multi-day charity event industry (including the AIDS Rides and Breast Cancer 3-Days) that has cumulatively raised over $1.1 billion for critical social causes
  
• The hotly-anticipated follow-up to Pallotta's groundbreaking book Uncharitable

Grounded in Pallotta's clear vision and deep social sector experience, Charity Case is a fascinating wake-up call for fixing the culture that thwarts our charities' ability to change the world.

1

And You Thought Public Perception of Congress Was Bad

Public opinion is a permeating influence, and it exacts obedience to itself; it requires us to drink other men’s thoughts, to speak other men’s words, to follow other men’s habits.

—WALTER BAGEHOT, “THE CHARACTER OF SIR ROBERT PEEL”

The money never gets to the people who need it.” That’s the familiar refrain we hear whenever the subject of charity comes up in casual conversation.

A Google search for “charities waste money” generates 3.6 million results—about twenty-five times more results than a search for the phrase, “charities use money wisely.” It hardly constitutes a scientific inquiry, but it probably means we can conclude that people who don’t trust charities outnumber people who do.

Similarly, people’s comments in the blogs, articles, and forums picked up on a simple Internet search reveal a pervasive public distrust of how charities conduct their business. One person wrote about not understanding why charities waste money on pens and note pads when they could be using that money to help the cause. Another devised a whole new (and very problematic) approach to giving—circumventing charities entirely—to avoid “charity waste”: “I never donate a dime to a huge charity. … What I like to do is direct donations into what I call ‘micro-causes.’ … For instance, if the NY Post writes about a house burning down in Brooklyn and [about] a now-homeless family—put [the family] up in a hotel. … [That way] you know that every dollar is being put to work exactly the way you want it to be.”¹

Other comments, like this one from a watchdog blog, were critical of specific charities: “The American Cancer Society spends 9.6% of its revenue on administrative expenses and another 21.8% on raising more money. Thirty cents out of every dollar you donate won’t go towards anything cancer-related.”² Really? Raising money to make cancer research possible isn’t cancer related? Although targeted toward a single charity, the assertion exemplifies the illogical yet widely held view that money not spent directly on what is perceived as “the cause” is money not spent on the cause at all.

Sentiments like these are available prefabricated for anyone in the market for an impassioned opinion on the subject, and they get distributed free of charge by the media and the masses. De Tocqueville said, “In the United States, the majority undertakes to supply a multitude of ready-made opinions for the use of individuals, who are thus relieved from the necessity of forming opinions of their own,” or, as a good friend of mine says, people are all too prone to mistake certainty for knowledge.³ He’s right. And because the demand for cheap, prepackaged oversimplifications of complicated subjects is very high and because, in some cases, people are looking for a quick excuse not to give, these off-the-shelf positions proliferate and quickly harden into stereotypes.

As a result, Americans are convinced, in large numbers, that charities waste money—they spend too much on “overhead” (never mind what that word actually means) and too much on executive salaries, offices, hotels, meals, trips, fundraisers, conferences, and staff. In the end, most people believe that the money donated doesn’t really go to “the cause.” Of course, “the cause” is defined extremely narrowly: if hunger, then soup—but not the spoon, the bowl, the stove, the fundraiser that got the money for the stove, or the postage on the thank-you note sent to the donor who donated the money for the stove. Just the soup molecules themselves.

A History of Suspicion

Studies and history consistently confirm this public sentiment. Documented public distrust of charities dates back to the mid-1800s. People were suspicious then that philanthropy was just a way for the wealthy to “atone” for their success and evade taxes.⁴ A few decades later, “charity organization” societies began to develop, not to provide services but to “monitor the aid that was being given and to uncover fraud.”⁵

In the 1970s, public concern about fundraising and administrative costs in charities grew.⁶ Historian Robert Bremner notes that by the end of the 1970s, “twenty states and numerous county and local governments had adopted laws or ordinances limiting charity solicitations to organizations that could prove a sizable proportion of the collection went for charitable purposes rather than for salaries and administrative costs.”⁷ (Many of these were subsequently rendered unconstitutional by U.S. Supreme Court rulings.)

Paul C. Light, a professor at New York University’s Wagner School of Public Service and an expert on public opinion on the sector, notes that things deteriorated further for charities after the attacks of September 11, 2001, when the media and others jumped all over the Red Cross for the speed and manner with which it disbursed donations to victims.⁸ The criticism, predictably, had a huge effect, even though it was unfounded. The Chronicle of Philanthropy reported in 2002 that a whopping “forty-two percent of Americans said they had less confidence in charities now than they did before the attacks because of the way charities handled donations.”⁹

Six years later, things hadn’t improved. In 2008, Ellison Research surveyed 1,007 Americans and found that “sixty-two percent believe the typical non-profit spends more than what is reasonable on overhead expenses such as fundraising and administration.”¹⁰ A March 2008 survey by the Organizational Performance Initiative at the Wagner School of Public Service also found that “Americans remain skeptical of charitable performance” and that “estimates of charitable waste remain disturbingly high.”¹¹ Only 17 percent felt charities did a “very good job” running programs and services.¹² The study also showed that an astounding 70 percent of Americans believed that charities waste “a great deal” or “fair amount” of money. Just 10 percent of Americans interviewed thought that charities did a “very good job” spending money wisely.¹³ To put that in perspective, even Congress, at its worst, fares better. In November 2011, Gallup reported congressional approval at an all-time historic low of 13 percent.¹⁴

It’s a sad state of affairs when you wish you had the approval ratings of Congress.

A Circular Mess

Despite the abundant evidence that the public believes charities waste a great deal of money, I know of no study—and certainly not one that has ever been distributed to the public—showing that charities actually do waste money. I’m not aware of any research showing that charities are ineffective at running programs or that they spend more than is reasonable on fundraising and administration, systemically or otherwise. Indeed no logical standard exists for what is reasonable.

I come from this sector. I have worked very closely with many dozens of humanitarian organizations for over three decades. I have worked with hundreds of leaders and professionals inside the sector. And I can tell you that there is no legitimate reason for so many people to have such a low opinion of charities. Robert Kennedy once said, “One fifth of the people are against everything all of the time.”¹⁵ If one-fifth of the people said they thought charities waste a lot of money, I wouldn’t be concerned. But 70 percent?

At the heart of this low public opinion is the power of suggestion. The word we hear most often when it comes to assessing charities is “overhead”: low overhead, high overhead, “ask about overhead,” overhead ratings, and everything-else-overhead. Now, if I tell you not to think of an elephant in a cocktail dress, you won’t be able to get the image out of your head. Similarly, if the first word that comes to mind when you think about charity is “overhead,” and if you are programmed to associate overhead with waste, it follows that waste and charity will become synonymous to you and the rest of the culture.

How do we change this?

Actually it’s not clear that public opinion is what we should be trying to change. Low public opinion is a reflection of deeper problems: the sector’s apparent inability to move the needle on huge social problems. So asking how we change public opinion is a little like looking at an X-ray that shows you have a tumor and asking how you fix the X-ray. But that’s not a perfect analogy because in the case of charity, low public opinion means lower contribution levels, which further inhibits our ability to address huge social problems. To continue the analogy, in the case of charity, the X-ray actually has the ability to make the tumor worse.

When we peel back the layers to examine how public opinion influences charities’ behavior, we see that it’s a circular mess:

• Charities’ fear of public disapproval pressures them to cater to public prejudices—mainly lowering overhead, that is, administrative salaries, fundraising investment, marketing expenditures, and so on.
• The more charities give the public what it wants—low “overhead”—the less those charities can spend educating the public about what they actually do. And the public considers any effort by charities to educate them about what the charities actually do to be wasteful overhead to begin with.
• The less the sector educates the public, the lower the public’s opinion of the sector remains.
• The more that charities give the public what it wants—again, low overhead—the less they can grow and therefore the less significant their long-term achievements. Long-term achievements require short-term spending, which yields zero short-term results but increases short-term overhead—which the public abhors.
• The less dramatic the sector’s long-term results are, the lower the public’s opinion of it.

These conditions are not new. For hundreds of years, charities have been forced to follow a rule book that doesn’t allow them to spend money on the things they need to achieve real change. Both despite this frugality and because of it, they are then accused of being wasteful. The humanitarian sector is not innocent in this. It has allowed itself to be victimized. In fact, it can be relied on to allow itself to be victimized.

The sector must reject the role of victim. We must work to improve the sector’s public image while simultaneously having the courage to spend money on the things we need to create real change. This will, ironically, have the effect of improving public opinion. Positive public opinion and effecting real change are inexorably linked—and they are at the heart of our dreams for humanity.

This book is about finding the way forward to make our dreams for humanity a reality. It’s about confronting the four-hundred-year-old rule book by which all organizations fighting for worthy causes—from disease to poverty to injustice—are forced to play. It’s about retiring it—putting it in a museum alongside fossils of the earliest known vertebrates and diagrams of the sun revolving around the earth.

We need a civil rights movement for charity—and this book is about how we start one.

How I Got Here

Forensic investigation of structural dysfunction in social change wasn’t what I originally intended to do with my life. I wanted to be a goalie in the National Hockey League. Then I wanted to be the next Bruce Springsteen. But I had neither the reflexes for the former nor the melodic prowess for the latter. And in any event, I got distracted from...

Table of contents

• Cover
• Praise for Charity Case
• Title page
• Copyright page
• Dedication
• Epigraph
• Preface
• Special Note
• 1 And You Thought Public Perception of Congress Was Bad
• 2 Build an Anti-Defamation League for Charity
• 3 Create a “Got Milk?” Campaign for Charity
• 4 Build a Legal Defense Fund for Charity
• 5 Enact a National Civil Rights Act for Charity and Social Enterprise
• 6 Organize Ourselves
• 7 You Cannot Stop the Spring
• Thank You
• About the Author
• Index