On Tuesday 23rd November LSE Volunteer Centre hosted a lunch at which we watched the TED Talk “The way we think about charity is dead wrong” by Dan Pallotta, this was followed by an open discussion about the points raised in the TED Talk. It’s worth noting that this TED Talk was recorded in 2015. The aim of the discussion was to explore how people view charitable donations, should these views be challenged, and would that raise greater funds for the charity sector in the future? This discussion was hosted in the lead up to Giving Tuesday, a day with the focus of giving back following of Black Friday and Cyber Monday. Giving Tuesday is taking place on Tuesday 30th November this year and LSE Volunteer Centre and LSESU RAG will be hosting a number of different events in the marquee outside the Centre Building, and we would love to see as many people there as possible.
Pallotta’s view on charities, the way they function and the way that people donate to them, is that they should be treated more like for-profit organisations in order to make as much revenue as possible. During Pallotta’s talk he raises five main points outlining why US non-profits are currently not turning over revenue to the same degree as for-profit organisations.
The average salary for the CEO of a charity compared to the average salary for the CEO of a for-profit company is several times smaller, Pallotta questions why this is and how this needs to change. If the for-profit sector can offer such higher salaries people will be pushed away from the non-profit sector and therefore take their talent with them. This salary difference also means that it could be more beneficial for someone to work for the for-profit sector and donate a large proportion of their salary to charity rather than working for the non-profit sector.
- Advertising and Marketing
Pallotta makes the point that if charities invest in their advertising and marketing they can reach more people, therefore encouraging more people donate and ultimately amplifying the amount of revenue that can be made. Investing in marketing and advertising not only encourages more people to donate but also raises people’s awareness of the charity more generally. However, at present he says donors do not want their donations to be invested in such activities. They would prefer their money to be spent directly on programmes for the organisation’s beneficiaries.
- Taking Risks
Another point Pallotta makes is that if members of the public are donating to charity they have an expectation that 100% of that money will go directly to the cause however non-profits should have the autonomy to invest that money into the business and take risk, as any for-profit organisation would. There’s a level of accountability that non-profits are faced with that for-profits aren’t, Pallotta suggests this needs to be addressed in order to allow charities to grow. This means that non-profits are often reluctant to be brave and take risks.
Similarly, non-profits are set against a standard that doesn’t allow them time to grow, if the money isn’t going directly to the cause immediately then people may view this as a failure. If charities were given the ability to have time for growth they might not invest any money into the direct cause for a couple of years because the focus during this time is growing the business, and therefore maximising revenue, until any money was directed towards the cause itself. There needs to be a long term objective focus from all stakeholders to allow non-profits to be given the time they need to scale, and then start making a greater impact.
- Profit to attract risk capital
Charities can’t be on the stock market and therefore are limiting in the amount they’re able to scale, another reason Pallotta states as to why non-profits are on the back foot compared to for-profits. The limit on ability to scale contributes to the fact that only 144 non-profits having had over $50 million revenue compared to 46,136 for-profits, evidence that non-profits cannot scale as well as for-profits.
This TED talk sparked a lot of interesting discussion points among our students. Many said that they had never considered the comparison between non-profits and for-profit organisations, and the ethical burden and stigma that non-profits carry. One student raised the point that they previously had the expectation that donated money should go directly to the cause and the service users however they have now revaluated this viewpoint and recognised that non-profits have a level of guilt when they are spending donated money, thus potentially limiting their growth. When comparing the two, students also highlighted that fundraising is fundamentally a sales task as the aim is raising money and revenue for the organisation and therefore non-profits need to be more entrepreneurial in their approach.
The final point raised in the discussion was Pallotta’s focus on scaling, the counter point was made that not all non-profits need or want to scale to the extent that Pallotta discusses. Many charities have a very small, direct focus and therefore they don’t necessarily need to the grow to a billion-dollar revenue in order to help the people that they’re focussed on. It was acknowledged that growth is required for most charities in order to meet the demand of the issues that charities are working towards solving. The students ultimately agreed that there is generally not enough understanding of the inner workings of a charity, which is a large contributor towards the expectations of non-profits to only put money towards the cause rather than investing back into the charity.
The discussion with the students was fantastic and we want to thank everyone for coming along. To find out more about the other events that LSE Volunteer Centre are running visit our events page.
If you’re not currently volunteering because you’re not sure how to get involved the following can help:
- visit our website to learn more about what we do book a one-to-one appointment to discuss how we can help you find a suitable role browse one-off and ongoing opportunities on CareerHub. Volunteering has the potential to transform a university experience for LSE students and we look forward to inspiring many more to get involved in the upcoming academic year.