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Uncharitable: How businesses co-opt nonprofits and undermine their potential

Dan Pallotta, whose TED talk, “The way we think about charity is dead wrong,” spoke at the Nonprofit Technology Conference this morning.

His arguments, which are not particularly new, are that nonprofits are under restraints — some culturally, and some self-imposed — that limit their potential. If only charities were run more like businesses, he says — with high executive pay and less belief in large “overhead” being a stand-in for inefficiency — they’d be able to do more.

Dan follows in the long tradition of successful businessmen (it’s almost always men) arriving on the nonprofit scene talking loudly and listening rarely.

His ideas are wrong almost by design, because Dan isn’t interested in making nonprofits more powerful; he’s interested in making society more receptive to unrestrained business — nonprofits, in this case, are merely a proxy.

He is not a credible defender of nonprofits because he doesn’t seem to really care for them. He appears not to grasp the notion that markets fail—and that one of nonprofits’ primary roles is to address those failures, not mimic corporations. He has consistently disparaged nonprofits. In a Harvard Business Review blog, he wrote that he’d be hard pressed to think of any business that wasn’t making more of a positive difference in society than nonprofits.”

Phil Buchanan, The Chronicle of Philanthropy

Just as he makes a fetish out of unrestrained capitalism, he makes a fetish out of cash over other means of securing happiness and satisfaction at work. How insulting to think that, if we make less pay than our for profit counterparts, we must be less creative, talented, intelligent and less capable of helping others.”

Ken Berger, Charity Navigator

The entire approach is based on the scarcity-model, zero-sum game that people like to play with charities. In the past I’ve referred to this as nonprofit deathmatch.

Yet lots of research has shown people who donate once are more likely to donate again, even to other organizations in the same field — it’s why some nonprofits sell their lists. And the same principle is at work with advocacy: get people interested and they’ll keep taking action.

Getting away from the scarcity model allows organizations to build movements instead of just lists.

It’s not suprising that his views are so limited when he consistently groups all organizations into “nonprofits” or “charities” without recognizing the huge differences among them.

Service organizations have very different goals from advocacy-based organizations, to say nothing of institutional nonprofits like universities, hospitals and museums. But they’re all just the “nonprofit sector” to him.

To Mr. Pallotta, it’s the total amount of funds raised that is the ultimate measure. His defense of CEO pay justifies compensation in the context of revenue, apparently assuming that a charity that has more money will inevitably get better results.”

Phil Buchanan, The Chronicle of Philanthropy

Myth #1: There are $400,000 talents. The first falsehood is that there are people who are just worth more. Defending wide inequality relies upon the notion that some people are worth much more, based on training, ability, or certain special qualities. This notion makes inequality appear legitimate to people at all levels, and thereby harder to redress. The use of the phrase ‘low-wage worker,’ instead of ‘worker who is paid a low wage,’ hints at a peculiarly American sleight of hand: Someone’s place in the wage structure is an indicator of their true merit.”

Michelle Kweder, Gerald Denis, and Maureen Scully, Stanford Social Innovation Review

Dan also has little use for any vision of social change, or any apparent understanding of social movements, since none that could be called successful have in any way fit his vision. Because Dan’s vision isn’t one of social change, it’s one of a perpetuation of wealth, with nonprofits simply one more business sector in which to advertise.

.@danpalotta The ? I have is, why should NPOs be more like biz? Isn’t what’s necessary to change the game, not make more of the same? #13NTC

— Jenn Yoo (@jooy8) April 12, 2013

“He makes more references to Steve Jobs, Apple, and its products—the index lists seven, though I counted more—in Charity Case than to any nonprofit organization. Yet he says he is rising to the defense of nonprofits: comparing the ‘movement’ he seeks to lead to the civil-rights movement.”

Phil Buchanan, The Chronicle of Philanthropy

Capitalism isn’t the solution. It’s the problem, and many of us are fighting it.

Capitalism created inequalities, but we won’t let NPOs use capitalist tools to address them—missing a logical step? #13ntc

— Jenn Yoo (@jooy8) April 12, 2013

“[A] theme in the book is Dan’s idealization of capitalism almost as a God that can lead to self fulfillment and ‘stunning change’ through the wonderful motive of personal gain.”

Ken Berger, Charity Navigator

#13NTC Lots to agree with in Dan Palotta’s plenary, but as an anti-capitalist I want to destroy the system, not compete w/it.

— Laura Shapiro (@laurajshapiro) April 12, 2013

He co-opts our national conversation about income inequality to advance his goals and the goals of a socio-economic elite that is content to believe in meritocracy and their own meritoriousness. We argue that it is misguided to base the pay of executives in inequality-alleviating nonprofits on ideological myths that have done much to reproduce and legitimate inequality.”

Michelle Kweder, Gerald Denis, and Maureen Scully, Stanford Social Innovation Review

It’s no wonder Dan is so popular among the TED crowd — business leaders and wealthy technologists who can see a product in every social trend.

What’s more mystifying is why Dan Pallotta would be popular among nonprofits, activists, and social changemakers. It’s clear Dan has no substantive message for them.

Image credit Flickr user beckytappin