It’s been 10 years since his hugely influential TED Talk, and Dan Pallotta still can’t stop talking about overhead.
The fundraiser and activist’s new film Uncharitable, a polemical adaptation of Pallotta’s 2008 book of the same name, once again takes aim at the so-called overhead myth, the dogma that nonprofits ought to be rewarded for minimizing their overhead costs, even for essentials like salaries, rent, or insurance.
Pallotta’s 2013 TED Talk tackled that subject and seemed to make an impact. It has been viewed millions of times and helped spark reforms and debates over how foundations and the government should compensate nonprofits for their indirect costs. It also spurred criticism for urging charities to adopt corporate-like business models and made him a polarizing figure in the nonprofit world.
Today, Pallotta still slips into soliloquies about the need to measure nonprofits not by their overhead but by their ambitions. While the philanthropy world has evolved, he says, the public remains skeptical of charities whose executive salaries seem too high or whose advertisements seem too flashy.
He wants Uncharitable to change that.
The film, now showing in select theaters, intersperses Pallotta’s message — and original songs — with personal accounts from aggrieved figures in the nonprofit world, including Steve Nardizzi, ousted CEO of the Wounded Warrior Project, and Mark Tercek, who resigned from the Nature Conservancy amid a sexual-harassment investigation. Both are members of Pallotta’s Charity Defense Council, a group built to counter negative media coverage of nonprofits but that itself has encountered some criticism.
The movie isn’t especially interested in looking at merits of the cases against such figures; instead, it sees their ouster as emblematic of a nonprofit culture that prizes purity over effectiveness — a long-running thesis of Pallotta’s that has earned him no small measure of skepticism. Phil Buchanan, writing in the Chronicle, argued that Pallotta “stands to do more harm than good because, as it turns out, he isn’t interested in fighting for nonprofits. Instead, he wants to replace them with something that looks much more like the business world.”
Pallotta’s own for-profit venture Pallotta TeamWorks — originator of the AIDS bike ride and three-day breast-cancer walks — came under fire for the cost of its fundraising before closing its doors in 2002. Soon after, he launched the consulting agency Advertising for Humanity and wrote the book Uncharitable, which argues that nonprofits should be able to leverage for-profit strategies to pursue their missions.
We spoke with Pallotta about his new film, how the nonprofit world has (and hasn’t) changed since his TED Talk, and how to measure a charity’s impact — without overhead.
The interview has been edited for brevity and clarity.
Why did you decide to release this film now?
I decided to make this movie in 2009 — it just took 14 years to make it happen.
When I was writing Uncharitable , I was starting to go to TED in the days before TED was online. I saw Ken Robinson give his wonderful talk on education. I saw Al Gore give his talk on climate and then eventually turn that into a movie. I just thought the issues in Uncharitable would lend themselves to a documentary as well. That’s the ultimate medium for reaching the public.
I was naive early on. I thought it would be easy to raise the money and do this. I did the TED Talk in 2013, and I did a lot more speaking and didn’t have any time to really think about a movie. Steven Gyllenhaal, the film’s director, asked if I would help him with some marketing ideas for a movie that he and his wife at the time were working on called In Utero. I said, “I will — if you help me with this Uncharitable movie.”
That was the beginning of it. It took six years, because I think it’s really hard to raise money for documentaries on an esoteric issue like this one, and Covid hit us in the middle of it. That’s the reason that it’s coming out now. And I think it’s as timely as ever.
Did the content of the film shift at all during that time?
Originally, when I wrote the book, what kind of movie could you do? An Inconvenient Truth was kind of a talking-head movie with a lot of graphs and maybe some contemplative shots of Al Gore in a barn, right? So, we thought Okay, we’ll do something like that.
In those intervening years, other people like Jason Russell and Invisible Children, the nonprofit behind the Kony 2012 video, got crucified by the media for overhead and other issues. Wounded Warrior Project got crucified by CBS News and the New York Times for spending millions on travel, conferences, and PR. CNN did this exposé on the salary of ex-president of Boys & Girls Clubs of America Roxanne Spillett, ex-president of Boys & Girls Clubs of America. The Red Cross got pilloried by ProPublica for raising a billion dollars and only building six homes in Haiti. [Editor’s note: The 2015 ProPublica report concluded that less money reached those in need than the Red Cross has said.]
So, that’s where the idea came from — from the human side of this. You have these people achieving incredible things, and they get destroyed by these anachronistic ideas.
Some still wince at CEO salaries, but it does seem that funders today focus less on overhead. In the years since your TED Talk took off, what do you think has changed and what hasn’t?
I think the most important thing that’s changed is that it’s now a conversation. Whether it’s accepted or it’s debated, it’s talked about.
After I did the TED Talk, Better Business Bureau Wise Giving Alliance, GuideStar, and Charity Navigator issued this press release on what they called the overhead myth. A couple of years later, Darren Walker, president of the Ford Foundation, issued a brave press release in which he said that the overhead ratio is a charade and we’ve been willing participants in it. He went on 60 Minutes and then the MacArthur, Open Society, Packard, and Ford foundations joined hands and said, “We’re going to double the rates at which we fund overhead in order to destigmatize this.” [The Ford Foundation and MacArthur Foundations are financial supporters of the Chronicle of Philanthropy.]
Those things have been changing. But — and it’s a big but — sometimes we’re very insular. Just because the Ford Foundation is talking about it, and MacArthur is talking about it, and we call five or six institutions philanthropy, we think that it’s widespread.
In fact, it really isn’t. If you go beyond institutional philanthropy, even the frontline staff at a nonprofit hold tight to many of these anachronistic ideas. If you go to the general public, it’s pretty much the same.
Donors don’t do this on purpose. They’re not nefarious. We just haven’t taught them any differently. In fact, we’ve reinforced the old ideas, because we’re so frightened of violating any of these canons. We keep showing the overhead pies on our websites, and we keep putting seals of approvals from organizations that demand low overhead.
You’re saying that even though the conversation seems to be changing, everyday donors and workers still see overhead as a bad thing?
Yeah, I think so. Go out on the street or ask a couple of your relatives — what do you think about when you’re giving to charity? When I see people canvassing out in the street, just to see how they react, I’ll ask — what’s the overhead on this? They get so defensive — there’s fear in their eyes.
Trust-based philanthropy has become a major trend for some larger funders, who offer general operating support through a lens of equity and shared power. Now that’s very different packaging, but do you view trust-based philanthropy as an extension of your work?
Only partially. We’ve trained organizations not to spend money on overhead, so if you give them unrestricted money, they’re not likely to change their behavior very much. Only fundraising has the potential to multiply the amount of money that you put into it.
Most institutional funders — and I don’t say this in a pejorative way at all — are functionally illiterate when it comes to fundraising. The Ford Foundation and MacArthur don’t have to raise money because they have a massive endowment. They haven’t internalized the mechanics and the value of fundraising the way a nonprofit on the ground does.
So, it’s not just about overhead — it’s about fundraising?
Fundraising has to be singled out — not just capacity building, not just more money for overhead — but money for growth, if you’ve got an organization worth growing.
Let’s find out where the innovation is happening and grow that. That’s where big donors, whether it’s a family or a big foundation, want to be putting their money. Stop putting money into programs. Find the organizations you love and start working with them on a carefully vetted business plan. Is the plan solid? Do you have a good team?
I single out fundraising because I’ve seen its power.
You’ve talked about funding the nonprofits that work, regardless of overhead. How should we measure what works?
I wouldn’t even measure results or impact. You might have served 92,000 bowls of soup last year — great, but what’s going on with hunger and homelessness in your community? That’s much harder to make progress on.
What I would measure is intention.
First, what are your goals? If I go to an organization, and they tell you we don’t really have goals, just a budget goal for this year, that tells me there’s not a lot of intention to impact the problem.
Second, can others in the organization communicate that goal? I can guarantee you that everybody at Tesla knows what the goal is. Everybody at SpaceX knows it’s the goal to colonize Mars.
Third, what progress are you making towards those goals? I don’t actually care if you’re not making any progress because you may be experimenting. What I want to know is — are you interested in whether or not you’re making progress? Do you measure it in some way? How do you improve?
Those are the things to really look at. Those are hard questions for a donor to ask.
This is tough stuff. We want simplicity — we’re addicted to simplicity. People will say, “Well, I’m going to use the overhead measure because it’s the only measure we have.” That’s like taking your kids’ temperature with a broken thermometer because it’s the only thermometer you have in the house. You might kill the kids.
High overhead doesn’t indicate fraud. It may indicate a cause that’s really hard to raise money for. People committing fraud are not generally laying it out in line-item detail on their IRS Forms 990s.
A lot of nonprofits today are struggling with staffing shortages. People don’t want to be a case manager because they can make more at Walmart. Why focus on executive compensation instead of salaries across the board? How much should nonprofit CEOs really get paid?
I think the question that has to rule is: What do you want to achieve? If you want to end hunger, you better start looking around for the talent that you think can do that. I wouldn’t say whatever it costs, but in the spirit of whatever it costs, if those are the stakes, if that’s what you think can be achieved.
The argument that people make is you’ve got to worry about money contaminating people’s motives. That argument doesn’t hold water for me.
Tom Brady makes millions and millions of dollars a year, and that guy sure seems like he wants to win football games. Bruce Springsteen makes millions of dollars a year — that guy sure seems like he wants to wow that crowd every night and get on Top 40 radio. David Hockney makes millions and millions, and he still seems to want to get a portrait in the National Gallery.
What is it about people in the nonprofit sector that the minute you’ve introduced financial incentive and a chance to send your kid to private school, take care of your parents in their old age, and put a pool in your yard, all of a sudden, they no longer care about the cause?
Take Elon Musk — does that guy seem like he doesn’t care about the cause because he’s the wealthiest guy in the world? I just don’t buy it. Everywhere you look, there’s this Puritan standard that the nonprofit sector is held to that I’m just sick of.