His argument is important for people working in the health nonprofits.
He makes five key points:
- The for-profit sector pays people for producing value, but the not-for-profit sector does not
- Charities are discouraged from spending money on advertising even though it is an effective means of increasing donations
- Expectations for success are unrealistically high
- The expected time frame for success is unrealistically short
- The nonprofit sector is forbidden from paying investors a financial return to attract their capital.
Something is wrong when Coca-Cola and Burger King have a potential for growth that we deny, on principle, to the Boys & Girls Clubs and the National Breast Cancer Coalition
It’s certainly true that program managers often struggle to achieve deliverables that are set out by the funding agency rather than the experts in the field. It’s impossible, for example, to eradicate HIV in sex workers in Tanzania within one funding cycle, but NGOs must make it look like they achieved something tangible even if the reality is far more complex.
It’s also true that most fundraising for charities is done through low-yield initiatives such as social media, direct mail and the occasional benefit dinner. And although professionals can make a living working in the non-profit sector, the gynecologist who works for Planned Parenthood will never make the kind of money her colleague earns at a private health facility.
Pallotta’s fundamental argument is that nonprofit organizations aren’t being allowed to benefit from capitalist structures, and that if the nonprofit sector were deregulated and the association with high salaries and spending on self-promotion were to be destigmatized they would be far more effective tools in the fight against global poverty and health disparities.
As he says,
Business can’t solve all the world’s problems. Capitalism can — but only if it is permitted in the nonprofit sector. If we free the nonprofit sector to hire the best talent in the world, take fundraising risks, use marketing to build demand and invest capital for new revenue-generating efforts, we could bring private ingenuity to bear on those problems and would not need to look to government to fill the gaps.
It’s an interesting proposal.
But is quality of staff really determined by money? Would more pay really attract better people or just people who wanted more money? Would deregulating the nonprofit sector really make it more effective, or would it open it to more corruption? If NGOs were motivated by financial stressors, would they only take on issues where they knew they could succeed?
What do you think?