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. I had read earlier this spring that Noodles & Co was going to open in the Fishers Marketplace (which is SR 37 and 131st St, not 141st St, just FYI). Any word on that? Also, do you happen to know what is being built in Carmel at Pennsylvania and Old Meridian? May just be an office building but I'm not sure.

  2. I'm sorry, but you are flat out wrong. There are few tracks in the world with the history of IMS and probably NO OTHER as widely known and recognized. I don't care what you think about the stat of Indy Car racing, these are pretty hard things to dispute.

  3. Also wondering if there is an update on the Brockway Pub-Danny Boy restaurant/taproom that was planned for the village as well?

  4. Why does the majority get to trample on the rights of the minority? You do realize that banning gay marriage does not rid the world of gay people, right? They are still going to be around and they are still going to continue to exist. The best way to get it all out of the spotlight? LEGALIZE IT! If gay marriage is legal, they will get to stop trying to push for it and you will get to stop seeing it all over the news. Why do Christians get to decide what is moral?? Why do you get to push your religion on others? How would legalizing gay marriage expose their lifestyle to your children? By the way, their lifestyle is going to continue whether gay marriage is legalized or not. It's been legal in Canada for quite a while now and they seem to be doing just fine. What about actual rules handed down by God? What about not working on Sundays? What about obeying your parents? What about adultery? These are in the 10 Commandments, the most important of God's rules. Yet they are all perfectly legal. What about divorce? Only God is allowed to dissolve a marriage so why don't you work hard to get divorce banned? Why do you get to pick and choose the parts of the Bible you care about?

  5. Look at the bright side. With the new Lowe's call center, that means 1000 jobs at $10 bucks an hour. IMS has to be drooling over all that disposable income. If those employees can save all their extra money after bills, in five years they can go to the race LIVE. Can you say attendance boost?

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