The debate around what is happening in the NPO sector is
a good and healthy.
For some serious pushback against the critique of the charity sector by Mr. Dan Pallotta (which I’ve mentioned here and here), check out the article by Mr. Phil Buchanan at Huffington Post: Getting the Facts Straight About the Nonprofit Sector.
If you have been following the conversations in the NPO community, you really ought to check out Mr. Buchanan’s article.
Here are my brief thoughts on three of his four critiques of the critique:
First, Pallotta says the sector has failed because we haven’t “ended” homelessness or poverty.
Mr. Buchanan wonders that if that’s the standard, then perhaps the NPO community should get full credit for improved infant mortality.
My concern is the threshold for measuring success.
“Ending” poverty, or homelessness, or the bad thing that you perceive as a social injustice, is an extremely high threshold that is not going to happen in a complicated, interconnected world. That’s a full discussion by itself, but ‘ending poverty’ won’t happen.
Furthermore, if we look at the very broad range of what one person or another defines as a social injustice, we can find situations where the proposed plans to solve that problem are considered by other dedicated, well-meaning people to be the cause of another social injustice.
If given the freedom to connect dots as one wishes, many people find one social injustice that was in fact caused by trying to solve other social injustices.
Third, Pallotta argues that nonprofits are ineffective in marketing themselves, suggesting that this explains why giving has been basically flat as a percentage of GDP.
Mr. Buchanan suggests that maybe holding giving constant as a percent of GDP is a victory, not a defeat.
At its core, this is criticism of the inputs – there aren’t enough dollars being spent. The comment ignores the effort and time of volunteers & legislators raised by NPOs to address an issue. It also avoids discussion of the results achieved in the nonprofit sector. That critique is actually part of the overemphasis on hard numbers in financial statements, ignoring not only the outputs but also the outcomes of the sector.
Fourth, Pallotta argues — rightly — that percentage of budget spent on overhead is not generally a good measure of nonprofit effectiveness. But he takes his argument to an extreme that ignores the fact that it is isn’t always irrelevant either.
The functional allocation of expenses is a tool. As a tool, it can be misused. If I use a hammer to shorten a piece of wood or a saw to place a screw, I will have a mess.
The overhead ratio is a tool. It is normally overemphasized in our culture.
At the same time, it cannot be ignored. The Tampa Bay Times series on America’s Worst Charities makes that exquisitely clear.
As I said earlier, if you are following the very healthy discussion of the charity sector, you’ll benefit from reading the full article linked above.