An attack on common percents

October 18, 2009
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In Friday morning’s session of the Next Audiences Summit, sponsored by the Arts Council of Indianapolis and Next Generation Consulting, speaking Don Pallotta, author of “Uncharitable: How Restraints on Nonprofits Ruin Their Potential” made a compelling case that our priorities are warped when it comes to funding non-pofits.

The biggest problem, according to Pallotta: We put too much emphasis on the “overhead” question.

Overhead, he said, doesn’t take away from the cause—it can be an important part of what creates impact. Pressure to keep overhead down can force non-profits to go without the things it needs to make progress. Plus, he added, it doesn’t tell you anything about what your dollar is buying.

If, he hypothetically presented, 90% of every dollar goes to soup at soup kitchen A as opposed to 70% at soup kitchen B, that does not mean that the first is doing a better job than the second. “If you visit you might find that A is in dilapidated facilities with burned out staff serving rancid soup while B has state of the art facilities, friendly staff, hearty nutritious soup, and great case management. What percentage went to the cause would give you none of this information," he said.

He finds the problem epidemic, noting studies that show that, when asked what information donors want to know, 79% said they wanted to know what percentage goes to program. Only 6% said they want to know if it makes a difference. “We’ve trained people to think the two are the same. If overhead is low, it’s a good charity that’s making a difference. But the level of overhead doesn’t tell you that. We don’t do this anywhere else in the economy. If Jonas Salk spent $10 million to raise $20 million and found a cure for polio, we wouldn’t say ‘This guy has 50% overhead, that’s bad.’ His result is a cure.”

So why do we keep asking it?

Pallotta points to Attorneys General who warn the charitable not to donate to charities that use more than 35% of your money in administrative costs. He points to organizations like Charity Navigator that are constantly quoted in the media but by their own admission don’t evaluate program effectiveness.”

The talk was clear in identifying a problem, but not strong on solutions. Pallotta encouraged the non-profit honchos in the crowd to stop using the word “overhead.” He said we need to build a national database to get narrative information about charities. And he encouraged attendees to “return to our wildest dreams. I the end, we have to have the courage to be true to our most daring ideas…with a focus on vision, this ideology will crumble under the weight of their magnificence and our determination to make them real.”

Your thoughts?

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  1. A Tilted Kilt at a water park themed hotel? Who planned that one? I guess the Dad's need something to do while the kids are on the water slides.

  2. Don't come down on the fair for offering drinks. This is a craft and certainly one that belongs in agriculture due to ingredients. And for those worrying about how much you can drink. I'm sure it's more to do with liability than anything else. They don't want people suing for being over served. If you want a buzz, do a little pre-drinking before you go.

  3. I don't drink but go into this "controlled area" so my friend can drink. They have their 3 drink limit and then I give my friend my 3 drink limit. How is the fair going to control this very likely situation????

  4. I feel the conditions of the alcohol sales are a bit heavy handed, but you need to realize this is the first year in quite some time that beer & wine will be sold at the fair. They're starting off slowly to get a gauge on how it will perform this year - I would assume if everything goes fine that they relax some of the limits in the next year or couple of years. That said, I think requiring the consumption of alcohol to only occur in the beer tent is a bit much. That is going to be an awkward situation for those with minors - "Honey, I'm getting a beer... Ok, sure go ahead... Alright see you in just a min- half an hour."

  5. This might be an effort on the part of the State Fair Board to manage the risk until they get a better feel for it. However, the blanket notion that alcohol should not be served at "family oriented" events is perhaps an oversimplification. and not too realistic. For 15 years, I was a volunteer at the Indianapolis Air Show, which was as family oriented an event as it gets. We sold beer donated by Monarch Beverage Company and served by licensed and trained employees of United Package Liquors who were unpaid volunteers. And where did that money go? To central Indiana children's charities, including Riley Hospital for Children! It's all about managing the risk.

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