Having recently watched Dan Pallotta’s Ted Talk on social entrepreneurship and innovation at our bi-monthly team learning sessions, we were struck by the powerful truth that how we think about charity is actually undermining our ability to change the world.  As a society, we don’t like the fact that charities use money for overheads such as marketing, personnel, advertising or fundraising in order to create an event or promote a cause, which has the aim of generating or multiplying money for the cause.  We like our dollars to go directly to the cause.  However, you need to spend money to make money.  This is something the for-profit sector knows and does every day, and a model that would work extremely well for the non-profit sector if it was allowed to do so by changing the moral and ethical perceptions of donors and investors.

Dan Pallotta has been involved in numerous charities from AIDS to breast cancer with the system of spending on overheads such as staffing, advertising and marketing in order to multiply the initial capital investment and provide even higher returns to the people who need it.  In fact, one of his charities generated over half a million dollars in revenue for the cause by spending on effective advertising in high exposure magazines and TV channels, instead of just posting a flyer in the local Laundromat.

Spending money strategically on marketing and advertising can vastly increase the share for the cause and improve sustainability of the non-profit organisation.  In these terms, it’s confusing as to why this is seen as socially or ethically wrong.

Overheads are not negative or detrimental when it comes to charities and non–profits, its part of the cause, especially if used for growth.  There is a difference between morality and frugality, and allowing your donations to be spent on marketing, advertising and fundraising initiatives with clear business objectives and regular reported growth, will allow for scale and real change.

Dan tells us that from 1970 to 2009 the number of non-profits growing and making more than US$50 million annual revenue was 144, compared with 46,136 for-profit companies during the same period. It’s time non-profits started running their organisations like for-profits and for society, investors and donators to support this system, if we want real effective change to happen.

Listen to Dan Pallotta’s TED talk here: The way we think about charity is dead wrong