“The Way We Think about Charity is Dead Wrong” by Dan Pallotta on TED Talks (2013) sparked an essential discussion about the disparities between non profit and for-profit organizations. Pallotta highlights five critical areas where non profits face discrimination: compensation, advertising and marketing, risk-taking on new revenue ideas, time, and the ability to generate profit to attract capital.
He persuasively argues that society needs to rethink its unrealistic expectations of the nonprofit sector. While conversations about this issue continue, progress is being made. If we truly value the role of non profits in aiding those in need and advancing society, we must change the way we view non profit spending.
The way we approach non profit management has long been flawed, limiting their ability to create meaningful change. Organizations that invest significantly in fundraising and salaries are often criticized for “wasting” funds that could have gone directly to the cause. However, this mindset prevents them from attracting top talent and scaling their impact effectively.
The For-Profit vs. Nonprofit Dilemma
Consider the difference in treatment between for-profit and nonprofit organizations. Businesses are encouraged to generate as much revenue as possible, even if their products or services do not benefit society. Some corporations even sell harmful products while rewarding employees with generous salaries for meeting sales targets.
Meanwhile, non profits are scrutinized and often labeled as “scams” when they invest in infrastructure or operational costs. But how can they achieve ambitious goals if every dollar spent is met with judgment?
Pallotta’s insights reveal why many non profits struggle to make a lasting impact while for-profit businesses operate with greater freedom. To drive real change, we must shift our perception of non profit spending in key areas.
Compensation
Many believe non profit executives should accept lower salaries simply because they work for a charitable cause. While non profit CEOs earn far less than their for-profit counterparts, there is an expectation that they should work primarily out of goodwill, undervaluing their expertise and dedication.
But how many professionals would willingly earn 75% less than their market value for their entire career? Rather than accepting lower pay, they might choose to work in the corporate world and make charitable donations instead.
To attract and retain top talent, non profits must offer competitive salaries comparable to those in the for-profit sector.
Marketing
Would you donate to a charity you’ve never heard of? The most successful non profit organizations—like United Way, the Salvation Army, and St. Jude Children’s Research Hospital—excel at fundraising because they invest in marketing.
Yet, charities are often criticized for spending money on advertising, with many donors requesting their contributions not be used for promotional purposes. However, effective marketing directly influences a non profit’s ability to generate funds.
Since the 1970s, charitable giving has remained at a steady 2% of GDP. This stagnant figure is largely due to the reluctance to invest in marketing efforts. If non profits were encouraged to advertise, they could expand their reach and increase donations significantly.
Time
Donors often expect immediate results from their contributions. Many want to see a direct impact, such as a child benefiting from their $20 donation within a week. However, if that $20 were invested in fundraising and infrastructure, it could generate $160 over a year, amplifying the organization’s long-term impact.
Nonprofits are not afforded the same flexibility as businesses to achieve long-term growth, even when there is clear potential for substantial success.
Taking Risks
“Take the risk or lose the change.”
In the business world, risk-takers are rewarded for innovation. Even when an initial venture doesn’t yield high profits, companies are often given second chances to refine their strategies.
Conversely, nonprofits face intense scrutiny for taking risks. Many avoid launching bold fundraising initiatives for fear of failure, which could jeopardize their credibility and future support. This discourages creative thinkers from joining the nonprofit sector, limiting potential advancements in fundraising and outreach.
Profit
Donations are generous contributions, often rewarded with small tokens like branded notepads or address labels. However, charities are not allowed to invest and multiply funds the way for-profit businesses do.
For-profit companies can reinvest money, generate substantial returns, and distribute profits among investors. Meanwhile, nonprofits are restricted from participating in financial markets in the same way, limiting a valuable source of capital.
Shifting the Narrative
Changing perceptions about nonprofit spending starts with us. We must move beyond the outdated belief that those working in charities should earn minimal salaries. Nonprofits should be empowered to invest in growth, pay their employees competitive wages, and scale their operations to maximize impact.
At the International Fellowship of Christians and Jews (IFCJ), President Yael Eckstein understands the importance of fair compensation. She is committed to ensuring that The Fellowship attracts and retains top talent by offering salaries that reflect employees’ experience and contributions.
According to Yael Eckstein, “Salary, benefits, and incentives motivate talented and experienced professionals. At The Fellowship, we have worked hard to foster a meritocracy where outstanding employees can be appropriately rewarded for their contribution to our organization’s mission, while staying within reason of industry standards. Our compensation is reviewed by an outside firm and deemed ‘reasonable’ based on similar roles, positions, and size of organization.”
In 2021, The Fellowship raised over $200 million and provided aid to more than two million Jews, proving that strategic spending leads to impactful results. Yael Eckstein salary and approach demonstrate that it is possible to drive meaningful change while ensuring fair compensation for those who dedicate their careers to nonprofit work.
Produced in association with The International Fellowship of Christians and Jews (IFCJ).
