Can Charities Be Run Like Businesses?

I’m finishing out my second week working with Charities Review Council, and I’m very excited to propel our mission of building up the nonprofit sector. Being relatively new to the nonprofit world, I've been spending a lot of time reading various thought leaders' takes on where the sector is going, what needs to be changed, and what practices are downright broken. One big hot-button issue right now is “the overhead ratio,” or the ratio of money a nonprofit spends on its mission versus employee salaries and other operating fees.

My colleagues here at Charities Review Council have written a great deal in our blog about the overhead ratio, pointing out that the overhead ratio is generally just a data point; it is a poor measure of a charity’s overall performance or effectiveness when taken alone.

One of the loudest champions of overhead ratio reform right now is Dan Pallotta, whose recent TED Talk illustrates how investing in leadership the way for-profit companies do can create unparalleled results in nonprofits. He goes beyond the argument that overhead isn’t an effective measure for nonprofit performance, suggesting that donors should accept charities taking on large risks in fundraising projects the way for-profit companies do. Recently, Pallotta has seen a barrage of backlash from respected leaders in the field.  

One of Pallotta's biggest critics is Phil Buchanan, president of the Center for Effective Philanthropy, who recently sounded off in opposition at Huffington Post. “Fact is, donors have a legitimate interest in understanding what proportion of their dollars ends up in the hands of for-profit fundraising professionals,” Buchanan says He worries that charities under Pallotta’s model can become “little more than shells for for-profit fundraisers.”

Pallotta argues that fundraising professionals should have every opportunity to make a fortune as their peers in the for-profit world. He promotes a meritocracy of fundraisers, where the most effective fundraisers get paid a competitive market wage. It’s easy to see how donors are wary of this mentality, especially with some of the more extreme cases of recent charity fraud—CNN reported this year that Florida-based Kids Wish Network spends less than three cents per dollar raised helping dying children and their families.  

Ken Berger and Robert Penna of Charity Navigator said in Huffington Post “We believe his message has gained tremendous popularity for one simple reason — he ultimately is arguing that charities should be held to virtually no accountability standards.” They don’t believe he has explained in enough detail how to measure the success of a charity, and whether the gains were worth the amount of donations expended.

@danpallotta Wow. Really? Most Americans think corporate CEO pay is out of control and too often disconnected from performance.
— Phil Buchanan (@philCEP) September 26, 2013

It’s also arguable that Pallotta’s ideas on charity have become popular because of the current reality of the nonprofit landscape. Organizations have been faced with increased need and decreased funding, so it’s easy to see the appeal of a charitable model that promotes capital growth on par with for-profit companies.

As this conversation continues, debate will likely center around something along the lines of “can a charity be effective and responsible while taking greater risks and providing increased personal gains for individuals?” The answer isn’t necessarily cut and dry. The increased capacity of a charity run like a business comes with unprecedented barriers of donor trust. If Pallotta’s vision, or something like it, is ever to become a reality, it will require innovative standards of nonprofit performance that foster relationships between donors and charities. If Pallotta truly wants to change the way we think about charity, his first concern should be donor trust.  

Matt Beachey joined the council in September 2013, working on marketing and engagement. He graduated from Gustavus Adolphus College in 2010, and has since been living in the Twin cities. Matt served in AmeriCorps with the nonprofit Hunger Solutions and interned with Twin Cities Habitat for Humanity in their Marketing and Communications department. He also volunteers as the managing editor of Pollen, and as a blogger for FINNEGANS.

Welcome Our New Fall Intern!

Welcome Madeline Severtson, who joins us this fall as the Development and Communications Intern. This spring, she graduated from St. Olaf College with majors in mathematics and religion. Read on to learn a bit more about her.

1. Where are you from?
I grew up in St. Anthony Village, which is a very small first-ring suburb of Minneapolis located between NE Minneapolis and Roseville. A surprising number of people in the Twin Cities don’t know that it exists.

2. How did you end up as an intern for the Charities Review Council?

During my last year or two at St. Olaf, I started exploring career paths in the nonprofit sector. I was intrigued by development work, so I was excited when the opportunity arose for an internship with the Charities Review Council. I had not heard of the organization, but I believe the Council plays an important role in the sector, both for nonprofits and donors.

3. What’s the best gift you’ve ever received?
A beloved Christmas tradition in my family is to eat copious amounts of See’s chocolate while opening presents on Christmas morning. Last year, I was on a semester-long study abroad program that had me spending Christmas in China. My parents surprised me by sending a box of See’s, and it meant so much to me to be able to continue the tradition even though I was far from home.

4. If you could go back in time or leap ahead to the future, which would you choose and why?

I would choose to go back in time because I am always curious about the way things used to be. Books, photographs, and other historical documents and records help to some extent, but they can never fully communicate what life was like in the past. I have often thought about the possible consequences of time travel, and I think it would be best if only observation were possible. It might be tempting to interfere in certain historical situations, but it would be impossible to know whether that interference would cause more harm than good.

5. What are you currently reading?

I’m reading The Sisters: The Saga of the Mitford Family, by Mary S. Lovell, which is a biography of the six Mitford sisters. They were prominent in England during the early- to mid-20th century, and the family was divided when each sister chose a different political ideology. I’m also rereading one of my favorite books, Life of Pi by Yann Martel, because it contains beautiful passages about religion and the nature of God, and the story as a whole challenges the definition of truth and reality.

6. What are you most excited about learning/experiencing during your internship?

So far, I have enjoyed experiencing the inner workings of a nonprofit organization in general, and I look forward to learning more about the development process. I am also excited to understand more about the issues surrounding nonprofit accountability.

7. Do you have a favorite cause that you support?

I am passionate about interreligious dialogue because I believe there is a deep need for understanding and acceptance in American society. I have not yet determined what role this cause will take in my life, but I hope to help create a culture in which all religions are valued and celebrated.

Paying Tribute on Patriot Day 2013

Twelve years ago today, the tragic events that transpired in New York, Pennsylvania, and Washington D.C. led to a collective American response of passion, bravery and hope. There was a clear call to action, and the American people responded with an outpouring of support. More than 1.4 billion dollars was donated to 9/11 charities in the aftermath of the attacks.

In the years since, Americans have further developed a tradition of community service and philanthropy as a tribute to the victims, survivors, and volunteers who responded to the tragedy. In 2009, September 11th was federally recognized as a National Day of Service and Remembrance with the goal of uniting Americans across the country in service. This recognition highlights the value of donations of all types, including community service and monetary gifts.

Now, twelve years after the attacks, it is not always obvious where to direct commemorative donations so that they will be of the most help. For those wanting to make a 9/11-specific donation, look for an organization that directly benefits survivors, first responders, bystanders, and their families by providing support with ongoing physical and mental health care costs, as well as scholarships to fund college education. The September 11th Families’ Association maintains a list of organizations that provide this type of support.

Additionally, countless veterans of the resulting wars in Afghanistan and Iraq need assistance with housing or health care. Many nonprofits work with veterans in our community to ease the transition back to civilian life. For example, the Minnesota Assistance Council for Veterans aids veterans affected by homelessness, and the Minnesota Veterans Medical Research and Education Foundation conducts research on physical and mental health conditions in order to improve veterans’ quality of life.

Another approach to commemorative giving is to address an issue raised by the attacks and their aftermath in your own community. For example, the timeline of events and number of people involved highlight the importance of disaster-preparedness, and incidences of racial profiling after the attacks reveal the need for cultural awareness and diversity education. Here in Minnesota, many organizations work in the areas of health care, emergency response, and diversity awareness. Some of these organizations include:

Health Care

• Hennepin Health Foundation
• Mental Health Association of Minnesota
• Hazelden Foundation

Emergency Preparedness and Response

• ECHO Minnesota
• McLeod Emergency Food Shelf
• St. Louis Park Emergency Program

Diversity and Cultural Awareness

• Diversity Council
• Hmong Cultural Center
• Minnesota International Center

Today marks a day of remembrance and honor. It’s important that we all take a moment to reflect on what happened on September 11, 2001, but consider taking it a step further this year by supporting those nonprofits working to help victims, survivors, veterans, and our own communities.

Back to School: How You Can Help Make It a Successful Year

The smell of freshly-sharpened pencils is in the air. Back to school season is upon us as children all over the country pack their backpacks with brand new notebooks, crayons, folders, and glue sticks. But some kids enter their classrooms on the first day of school without these necessary supplies.

This time of year often presents a financial challenge for low-income families. Many parents have to make tough decisions; school supplies or breakfast? Pencils or bus fare? Though school supplies might seem like a trivial expense that doesn’t fall under the necessity category, the long list of supplies can be overwhelming and impossible to fulfill for some, leaving kids feeling inadequately prepared for learning. Just like at a job, having the tools you need to complete a task are imperative to successful implementation and completion.

Many nonprofits recognize the implications that come with ill-prepared students and seek to equip children with these necessary items by holding school supply drives and collecting donations. Several of the organizations on our list of the Most Trustworthy Nonprofits work to ensure that every child’s school year starts off on the right track.

Here’s how you can help:

Union Gospel Mission has backpack drop off sites all over the metro area. Simply fill a backpack with items from their list of supplies and drop it off at the location most convenient for you.

St. Louis Park Emergency Program (STEP) distributes school supplies to St. Louis Park children. According to their website, “Our goal is for every St. Louis Park child to have a fresh start to the school year by providing a new backpack and grade appropriate school supplies.” In 2012, STEP provided supplies for 451 St. Louis Park students! To help with this year’s effort, drop items off at their St. Louis Park office.

Keystone Community Services holds a school supply drive each year. Though the official drive dates have passed, Keystone accepts school supply donations all year at their St. Paul office. They provide a list of the most-needed supplied to make your shopping easy.

Community Emergency Assistance Program (CEAP) is a community-based program that helps meet the basic needs of families living in the northern part of the Twin Cities. Every year CEAP hosts a Supplies for Success event, matching children in need in Anoka County, Brooklyn Park, Brooklyn Center, and East Champlin with age appropriate school supplies to help them in the coming year. In 2012, CEAP distributed 1,400 backpacks filled with supplies to children in need! CEAP invites community members to host a Supply Drive or make a monetary donation.

C.R.O.S.S. serves individuals in Northwest Hennepin County. They provided school supplies to more than 800 children in 2012 and are collecting supplies this year in Rogers and Maple Grove. You can also purchase tickets from the Rotary Club of Northwest Hennepin County for $20 to provide a backpack filled with school supplied to one child in need.

Even though school has started for most, all of the nonprofits listed above welcome supply donations throughout the year and gladly accept cash donations, as well. It’s never too late to help provide school supplies, as needs often arise throughout the year. Check out our list of trustworthy and accountable charities for more ways to help families in need.

Donating school supplies is a simple, tangible way for the entire family to get involved in giving back to the community. Next time you find yourself at Target or Walmart, pick up a few extra boxes of markers or spiral notebooks for those children who don’t get to pick out their own. A small donation can make a big difference for students in need this school year.