Strangled By Ratios of Our Own Creation

Comparison of organization performance has become an industry itself. US News and World Report claims to present the authoritative compendium of college costs, graduation rates, and alumni giving and puts that data in formats intended for mass consumption, not just for professionals in higher education. Professional fundraising associations like AFP, AHP, and CASE offer benchmarking and comparative reporting services with broad participation. Fledgling development officers seeking career path advancement are now taught very early how and why to calculate net revenue, cost-to-raise-a-dollar (CTRD), and return on investment (ROI). These and other examples have been widely adopted because those of us in the sector have given these ratios such attention and fealty.

In Uncharitable1 and Charity Case,2 advertising executive and charity advocate Dan Pallotta argues that we’ve long fed the media a steady diet of the very ratios that are widely adopted and used as yardsticks of success but now seem to hem us in. He notes:

“The public wants charities to spend as little as possible on overhead….What the public doesn’t realize is that low overhead is not a path to the end of world hunger or a cure for cancer. It’s the opposite….Demanding home runs on every charitable fundraising endeavor discourages innovation and keeps charities small and in fear. The very things the public has been taught are good and ethical—low overhead, low executive pay, funneling all donations to the cause—are practices that are killing us.

The public doesn’t know this is wrong because the nonprofit sector, government regulators, and the media keep telling them that these are the things that matter. Thus we are trapped in a vicious cycle with the public: we keep telling people what they want to hear about how their charitable donations should be used, and they keep parroting that back to us. But it’s not true, and we need to take the first step within the nonprofit sector to make that known.”3
                                        

Pallotta, D., (2010). Uncharitable: How Restraints on Nonprofits Undermine Their Potential , (Medford, MA: Tufts University Press, 2008).
Dan Pallotta, Charity Case: How the Nonprofit Community Can Stand Up For Itself and Really Change the World (San Francisco: Jossey-Bass, 2012).
Dan Pallotta, Amazon.com review Q&A with the author. Retrieved November 17, 2013 from http://www.amazon.com/Charity-Case-Nonprofit-Community-Itself/dp/1118117522/ref=sr_1_1?s=books&ie=UTF8&qid=1364047869&sr=1-1&keywords=Dan+Palotta
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