While watching the inspiration channel (aka TED.com) the other night I saw Dan Pallotta’s passionate and convincing talk ‘The way we think about charity is dead wrong‘. He’s talking about something that is very dear to my heart – the double standard that exists for the profit and not-for-profit business worlds.
Dan argues that there are 5 key areas in which we discriminate against the not-for-profit sector and hence undermine its success:
Dan explains the double standard, “you want to make $50 million making violent video games? Go for it. We’ll put you on the cover of Wired magazine. But if you want to make half a million dollars curing kids of malaria you’re considered a parasite yourself.”
2. Advertising and Marketing
“If we tell the consumer brands you may advertise all the benefits of your product but we tell charities you cannot advertise all the good that you do, where do we think the consumer dollars are going to flow?”
3. Risk taking in pursuit of new revenue
“Disney can make a new $200 million movie that flops and nobody calls the Attorney-General but you do a little $1 million community fundraiser for the poor and it doesn’t produce a 75% profit to the cause in the first 12 months and your character is called into question.” This is dangerous, Dan warns, because “when you prohibit failure you kill innovation.”
Businesses, especially start-ups, have grace periods during which they can run at a loss or with limited profitability in order to build market dominance. Charities, on the other hand, are not able to invest in long-term growth because they must constantly and consistently deliver significant profit margins.
5. Profit to attract investment
Being unable deliver shareholder profits, charities cannot attract risk capital for investment in the future. This severely impedes their growth potential.
Dan is smarter and far more articulate than I am, so I’ll let him do the explaining.
Whether you work in the not-for-profit sector, support charities, or even if you are a bit of a charity skeptic, please watch Dan’s talk:
*I’d love to hear your advice and inspiring stories too, please comment below and connect with me on Twitter @cassandra_nz