‘Think Boldly and Have Audacious Goals’

Controversial fundraiser Dan Pallotta believes that in order for charities to do their jobs and do them well, they must operate more like the private sector: Salaries must be comparable to those in business, donations should be spent on advertising, and nonprofits should be permitted to invest in the long term.

Unfortunately, Pallotta says, the system of values that nonprofits are expected to follow is preventing them from accomplishing their goals. He explores these ideas and ways to overcome them in his book, “Uncharitable: How Restraints on Nonprofits Undermine Their Potential.”

“There is a certain irrationability when it comes to charities,” Pallotta says. “There is this dividing line between charity and business. Charities can’t spend on advertising, they can’t pay their staff. Hollywood can make a multimillion dollar movie that fails, but a charity can’t experiment with a new fundraising tool without fear.”

Pallotta’s event-planning company, Pallotta TeamWorks, pioneered the concept of the multiday charitable event, and is responsible for walks and bike rides that have grossed $556 million in contributions and netted more than $305 million for breast cancer and AIDS-related charities over nine years. More than 182,000 people walked or rode in one of the events.

Pallotta’s philanthropic life started while he was in college. He graduated in 1983 from Harvard University, where he created Ride for Life, a transcontinental bike ride in which he and 38 of his classmates rode 4,256 miles from Seattle to Boston to raise money and awareness for Oxfam America.

Pallotta says the problem begins with “nonprofit ideology,” which, he says, has its roots in 400-year-old Puritan ethics that removed self-interest from the realm of charity. Today, charities are monitored by watchdogs and rated according to “efficiency” measures.

“People are looking at what percentage of expenses goes into administrative costs, how much goes here, how much goes to charity — and not what really matters,” Pallotta says. “Nonprofits are shooting themselves in the foot. The book is about liberating nonprofits from this set of irrational constraints. Instead of asking how much is going to overhead, ask, ‘What do you need to eradicate poverty in the city?’”

Charities also are at a real disadvantage because they’re expected to allot less money to salaries than for-profit companies.

“There is a double standard,” Pallotta says. “The private sector is allowed to pay the best people the salary they deserve. That does not happen at charities. You need to convince board members that you need this executive leadership to eradicate problems. You need to enroll people with dreams. A higher-priced CEO brings more talent to the table.

“Charities have to start to get back to their dreams and forget about operating at certain efficiency ratios,” he says. “Start to think boldly and have audacious goals.”

Melissa Busch is associate senior editor for the Promotional Marketing Publishing Group at NAPCO.