Nonprofits Should Try to Learn From Business

To the Editor:

I was disappointed in Phil Buchanan’s article attacking Dan Pallotta (“Nonprofits Need a Stronger Voice, but Not From the Wrong Messenger,” Opinion, October 4.) Mr. Buchanan makes some very important observations, but it appeared to me that he was making a caricature of Dan’s points in order to oppose them.

There’s no doubt that Mr. Pallotta is provocative. He gets people’s attention. His ideas resonate with some people while others are put off by his combative tone.

Clearly, Mr. Buchanan has joined the ranks of those who do not like Mr. Pallotta’s tone. It also seems that he is highly distrustful of capitalism and corporations and is therefore offended by Mr. Pallotta’s suggestion that nonprofits could ever learn anything from corporations.

But even so, let’s not throw out Mr. Pallotta’s most important points:

Nonprofits need to be measured by impact, not by overhead. Who among us would invest our retirement dollars in a company which boasts that it spend the least on management and marketing? No one.

Such a company would be doomed. Nonprofits are tackling some of the most important issues of our day—shouldn’t they apply the strongest management and marketing possible?

Is it better for a food bank to spend $1-million to raise $3-million or to spend $5-million to raise $10-million? The fundraising ratio is much better in the first example, but the net revenue is much better in the second.

The key question should be: Which one allows you to feed more hungry families? You can’t feed people with ratios; it takes net revenue.

We in the nonprofit world need to do a far better job of educating the public (including the media) about the realities of fundraising and the complexity and importance of nonprofit management.

Finally, there are indeed many things that nonprofits could learn from for-profit companies, just as there are many things that businesses could learn from charities. Let’s not be so insecure about our culture that we fear learning from others.

Tom Harrison
Chief Executive Officer
Russ Reid
Pasadena, Calif.