Challenge The System? Or Open A Bar?

From comments to The American Society of Business Editors and Writers at George Washington University.

After 35 years as a journalist, I have moved from the objective world into the subjective, activist world of nonprofits. I am starting my own, Charitable Words Scholars, which provides internships to college students interested in humanitarian work. I have been able to match a dozen or so with our modest family foundation. But Charitable Words needs to achieve 501(c)3 nonprofit status, write grants and get funding to scale up and do more.

I think it’s a good idea. We’ll see if the funders agree,

You see, the Millennials currently in college are a generation hungry to help.

Today’s college students, including my three, grew up with the images of wars, 9/11 and Hurricane Katrina. But they did not hide under their desks in fear. They went to work. Volunteer rates for ages 16-24 doubled in the 90s through the 2000s, according to the Corporation for National and Community Service, the federal agency that oversees Americorps and other programs. Three in five 18-24 year olds surveyed by the Harvard University Institute of Politics said they were interested in public service.

But this is a generation burdened with school expenses. Today’s college students will graduate with an average student loan debt of $26,500. Half face unemployment when they get out of school. The nonprofit sector is underfunded and understaffed, but there’s work to be done in 1 million agencies that represent 10 percent of the U.S. workforce and growing. Studies by Intern in Ohio also show that 65 percent of interns transition into a job and 83 percent stay in the same region as their employer when they graduate.

A generation hungry to help, in need of support, connecting with nonprofits who need their talents and passion.

It’s a win-win-win. Or so you’d think.

But as I write grants I am trapped in a paradox that unfairly burdens the nonprofit sector. If I were to do this right, I would begin with an investment of say, $80,000 for an executive director, $30,000 for a contract grant writer and fundraiser, a few thousand in office space. No way will funders support thinking that way.

But if I were opening a wine bar, I’d likely be eligible for government small business loans and grants and positioned to attract venture capital and crowdfunding. If 75 percent of my startup costs went to a bar manager, a good chef, sommelier and experienced help. I’d be praised as an entrepreneur who should be rewarded for taking risks. If my “overhead” included attractive ambiance and high grade products, no one would question that a quarter of the startup’s budget ended up in the products placed on the table.

But in the nonprofit world, those tables are turned. I am required to think that from day one, 75 percent of my budget is going to “programs.” Now how does one build programs without infrastructure? So if I am lucky, I may be able to fund a few students each year and await outcomes to include in grant proposals to beg for more.

That’s just wrong.

As my friend Dan Pallotta says, we need to change the way we think about changing the world.

Pallotta is the founder of the Charity Defense Council (I am on his advisory board) and the author of Charity Case: How the Nonprofit Community Can Stand Up for Itself and Really Change the World. He would like charities to compete for top executives, advertise and employ other business strategies so they can build a strong financial base and afford to make a significant impact for their causes.

In recent years he’s been on the circuit at nonprofit sector conventions. But if you are not directly involved in the business – and certainly if you cover nonprofits — you would benefit by hearing his message, too.

Last month, a video of his talk at a TED conference went viral. It’s now topped 1 million page views. Pallotta says he would have had to give five speeches a month for 30 years to reach that size of audience.

I highly recommend you view it. And if you are covering, investigating, a nonprofit, consider giving the Charity Defense Council a call to get another side to the story. Indeed, there are legitimate stories to be done regarding fraud and extravagance in the nonprofit sector, as evidenced by recent scams in nonprofits professing to serve veterans and other isolated abuses. But too many nonprofits are tarnished by the same brush and all face the burden of the unfair obsession with executive compensation, fundraising and overhead costs.

As Pallotta pointed out in his previous book, Uncharitable, the top five CEOs in for-profit health insurance made 74 times what the CEOs in America’s health charities made. “It’s an upside down world that prioritizes the affordability of disease this high above its eradication,” Pallotta wrote.

If you are running a company that sells expensive sneakers to inner city kids, makes violent movies, or pushes sugary snacks and junk food to millions, your salary is tied to the scale of your business. But if you are running a charity to find a cure to a disease, for safer streets or healthier lifestyles, it’s quite another story.

A few things to consider, from a recent Pallotta Q and A with The Fiscal Times:

Watchdog agencies don’t tell you much – so beware your trust in them. Americans give away $300 billion a year to nonprofit organizations and charities – with little or no infrastructure in place to help figure out where or how that money can be most effective.

There are 1.2 million nonprofits in the U.S. – and “yet the biggest of the watchdog agencies only looks at 7,000 charities. All they do is share tax information with you and maybe tell you a little about whether the charity has an adequate board of directors or not. None of the watchdogs – not Charity Navigator, not the Better Business Bureau, not Charity Watch – none does any real research on the effectiveness of a charity’s programs. GuideStar, which has a much larger database, also doesn’t do any research on a charity’s effectiveness.”

Hopefully, that landscape may change as watchdogs move to a more constructive model that considers investments in strategic research, technology and people as important to nonprofits as the for-profit world.

In a March 19 segment, National Public Radio’s Diane Rehm explored “Choosing Effective and Efficient Charities” One of her guests, Ken Stern, chief executive officer of Palisades Media Ventures, recently published “With Charity For All: Why Charities are Failing and a Better Way to Give.”

“To their credit…(Charity Navigator) is going to launch Charity Navigator 3.0,” Stern said. “It’s not going to be about compensation, it’s not going to be about overhead. It’s going to be about results these charities can show.”

“That’s exactly where the system needs to go.”

We can hope. But until it gets there, the overhead obsession dominates the public’s view of charities.

“The public doesn’t like to see high executive salaries. “The public wants every gala dinner and walkathon to send 100 percent of its money back to the cause,” Pallotta says. “But what people don’t realize is that low overhead is not a path to ending world hunger or curing cancer.”

As much as I applaud that big thinking, I imagine I’ll have to play the overhead game to have a shot at making Charitable Words work.

If I would be brazen enough to challenge the system, you can see what I would be up against.

I may be better off opening that bar. I could help a few students, at least, wash dishes and wait on tables.

Or should I just go for it, fearlessly and full speed, with the “overhead” that comes with that?

I’d be interested in your thoughts.

Tcallinan@charitablewords.com

Discussions also on Charitable Words Facebook page and LinkedIn.