Uncharitable – a Truly Different Approach for Nonprofits

I present a minimum of two new synopses each month.  One, of course, is a business book for the First Friday Book Synopsis.  The other is a book related to the nonprofit/poverty/social justice arena for the Urban Engagement Book Club sponsored by Central Dallas Ministries.  (Companies and other groups then bring us in for longer versions of these synopses for their groups).

These two worlds occasionally overlap, and I suspect will do so more frequently as more and more people seem to be seeking deeper meaning in their work life, and thus opt for nonprofit careers.

Uncharitable by Dan Pallotta

Recently, I was asked to prepare a synopsis of the book Uncharitable: How Restraints on Nonprofits Undermine their Potential by Dan Pallotta.  I presented this at the annual gathering for the Conference of Southwest Foundations.  This group consists primarily of people who work for foundations, and the people/family members who set up the foundations themselves.  It is a wonderful group!

Uncharitable is quite a provocative book.  The author is arguing for a whole new way to approach the nonprofit questions.  I mean, a really whole new way.  He writes:

We give money to charity because we do want progress…  Why do things seem to stay pretty much the same?  Why have our cancer charities not found a cure for cancer?  Why have our homeless shelters not solved the problem of homelessness?  Why do children still go hungry on the streets of America?  Why have the pictures of the starving children in Africa not changed in five decades?
Our system of charity doesn’t produce the results we are after because there is a flawed ideology at work.

He states that what we are now doing is simply not reaching the ultimate goal:  actually eliminating problems.

There are some great success stories out there.  Norman Borlaug, father of the Green Revolution, is credited with saving the lives of 1 billion people with his great discoveries/innovations in crop yields, significantly funded by the Rockefeller Foundation.  And vaccines developed by Jonas Salk in 1952 and Albert Sabin in 1962 led to the virtual elimination of polio, a truly crippling disease.

So – success has been achieved in some major areas, and there is much to celebrate.  But there is much more to accomplish.

Dan Pallotta believes that we can do better, and his innovative approach, in his view, would lead to far more actual victories in the battles for better lives for people all across the globe.  Here is his summary of his view in table form (taken directly from his book):

For-Profit Rule Book	Nonprofit Rule Book
Compensate according to value. No limits on financial incentive. Effect:  attracts top talent for life	Don’t compensate according to value Strictly limit the use of financial incentives. Effect:  discourages top talent.
Buy advertising until the incremental effect is zero. Effect:  Saturate the market with your offer, build maximum demand.	Don’t advertise unless the advertising is donated. Dollars spent on advertising could have gone to the needy. Effect:  Minimal ability to build demand.
Manage and reward risk. Effect:  Discover new opportunities for growth.	Don’t take risks.  Donated dollars are earmarked for programs. Effect:  Discover few opportunities for growth.
Invest in the long-term. Effect:  Builds long-term value.	Don’t invest in the long-term – must meet short-term “efficiency “ standards. Effect:  Institutionalizes problems.
Unlimited permission to pay return on investment to attract capital. Effect:  Trillions of dollars of capital.	No permission to pay return on investment to attract capital. Effect:  no surplus capital.

(table from page 42)

If you work for a nonprofit, if you contribute to nonprofits, if you follow philanthropy, this book might be one to put on your reading list.  It is not without controversy, but it certainly does stretch the envelope for the way to approach some of the biggest problems facing us.