Leadership in the Nonprofit Sector: It’s About Vision—Not Money

I met Howard Freeman on Twitter, and we had months of interaction before meeting in person in New York City earlier this year. Howard and I share many things in common, including a passion for helping cities and communities flourish, a belief in the importance of using public spaces well, and even a common birthday. After Holly posted her recent piece on what she learned in Uganda, referencing Dan Pallotta’s 2013 TED talk on charitable giving, Howard reached out to us via Twitter to say he had some additional thoughts on that perspective. Always eager to have this be an interactive space, I invited Howard to share his perspective as a guest blogger. Here’s part one of what he had to say.

– Christy Tennant Krispin

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bigstock_Falling_Money_669153Before his 2013 TED Talk, before this piece in The Chronicle of Philanthropy became the third most read post in 2009, there was Dan Pallotta’s write-up on the HBR Blog Network in May of that year.

In it, Pallotta was as eloquent as most of us have come to know him more recently both in writing and in speaking.  Yet, in his HBR post, unlike his TED Talk and the concomitant articles, he wrote primarily about the economics of working for a nonprofit versus working in the private sector.  He says:

“By what economic rules must [college graduates considering a career path] be constrained in their efforts? We give young people horrible mutually exclusive choices. We tell them that they can pursue their dreams of helping the world’s neediest citizens or they can pursue their dreams for their own economic futures, but they cannot pursue both.”

Toward the end, he writes:

“we must right the injustice that allows a baseball player to be paid $5 million a year and have it celebrated in Forbes, but cries ‘foul!’ when the guy running the charity trying to cure cancer makes $400,000.”

To be clear, Pallotta is not so much criticizing well paid private sector stars as he is criticizing charities that don’t pay their stars, and he’s calling attention to our blindness.  For this, I say, “Amen.”

Further, Dan Pallotta’s core point in the TED Talk about viewing a nonprofit’s “overhead” costs—and his criticism even of defining functions like fundraising as “overhead”—is shared by many fundraisers and nonprofit professionals, myself included.  He argues, more eloquently but in effect, it takes money to raise money, which is what every fundraiser has to convey when negotiating a salary at a new job or creating a new position as a development manager.

Yet the area he led with in his original HBR post, and at TED, is what I most fervently disagree with him on: Compensation.

In the TED blog, Kate Torgovnick quotes Pallotta as saying:

“We have a visceral reaction to the idea of people making a lot of money helping others. Interestingly, we don’t have a visceral reaction to the idea that people should make a lot of money not helping other people. It gives a stark, mutually exclusive choice between doing well for yourself and your family and doing well for world.”

Now, having worked as a fundraiser and fundraising consultant in the nonprofit sector for 18 years, being the sole provider of a family of five including three boys who will be in college at the same time, and living in New York City where a gallon of milk here costs as much as the whole cow across the river in New Jersey, I have nothing against earning a good living.  I am all for it. But there are several problems with motivating nonprofit leaders and employees around money that I want to address below.  The first is simply his faulty premise, based on recent industry data.

People who raise money for nonprofits are not motivated by money.

The Association of Fundraising Professionals conducted its 2013 Compensation and Benefit Survey of fundraisers and uncovered some interesting facts.

For starters, the top three fields from which our profession draws new hires are school/recent graduates (21%), public relations/marketing (17%) and education (10%).  This confirms something I’ve seen over almost two decades: people in sales, financial planning, and similar professions are not crossing over into nonprofit work at the same rate.  In fact, they often fail because of contextual differences.

Most importantly, the survey found that the primary reasons cited for choosing one’s current position were: (1) the position offered more challenge or scope (26% of respondents) and (2) the position provided an opportunity to do more meaningful work (24%).

Challenge and meaning.  Not money.

In fairness to Pallotta, the survey did find that people leaving the fundraising profession cited earnings as a key factor (39% of respondents who left a nonprofit said so), versus those who left to get more responsibility (34%), or because they were frustrated by the work environment (29%).  At the same time, those who were asked on a scale of 1 (very dissatisfied) to 5 (very satisfied) how they felt about their pay and benefits, the overall average of respondents was a 3.58, certainly above average.  (They responded with an aggregate 4.44 about being aligned with the organization and 4.2 about their fundraising career—high marks for people who are paid below market rate.)

[Subscribe to the blog or check back tomorrow for Part 2 of this article.]


2 thoughts on “Leadership in the Nonprofit Sector: It’s About Vision—Not Money

  1. Christy Tennant Krispin says:

    Thanks so much for taking time to share this insight, Howard. In 2007, I left a corporate job and took a 30%+ pay cut to work for a nonprofit whose vision I loved. After a couple of years making “good money” and enjoying discounted stock options and lots of free beauty products, I just dreaded going to work each day because I wanted to be doing something that “meant” more to me. I never regretted it for one second. For me, challenge and meaning were part of the value equation. That said, I still needed to be earning a livable wage. Money does still matter! It’s just not the fundamental driving factor for someone who joins the nonprofit sector. Today, I run my business with a “for benefit” mindset. I want to be profitable, but I also need for my work and the environment I cultivate for my team to be meaningful as well. Thanks for some good food for thought. I look forward to sharing “Part 2″ tomorrow!

  2. Thanks for sharing your story, Christy. I know an attorney here in NYC who left corporate work to be an assistant DA for much the same reason: she was mission-minded even though she was getting paid a third of what she made in the private sector. She cared more about the work at the new job. That said, I agree with you about livable wages and that money is important. The book “Nonprofit Sustainability” makes a great argument on why nonprofits need to make a “profit” (even if a small one), so stay in the black and stay in business. It’s the best book on fundraising I’ve read in a long time. What I primarily disagreed with Pallotta on was saying in essence that quality nonprofit leadership requires paying top dollar (my example of The Salvation Army in Pt 2 will bear that out).

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