Uncharitable: How Restraints on Nonprofits Undermine Their Potential

by Dan Pallotta

Uncharitable goes where no other book on the nonprofit sector has dared to tread. Where other texts suggest ways to optimize performance inside the existing paradigm, Uncharitable suggests that the paradigm itself is the problem and calls into question our fundamental canons about charity. Author Dan Pallotta argues that society's nonprofit ethic acts as a strict regulatory mechanism on the natural economic law. It creates an economic apartheid that denies the nonprofit sector critical tools and permissions that the for-profit sector is allowed to use without restraint (e.g., no risk-reward incentives, no profit, counterproductive limits on compensation, and moral objections to the use of donated dollars for anything other than program expenditures).
These double-standards place the nonprofit sector at extreme disadvantage to the for profit sector on every level. While the for profit sector is permitted to use all the tools of capitalism to advance the sale of consumer goods, the nonprofit sector is prohibited from using any of them to fight hunger or disease. Capitalism is blamed for creating the inequities in our society, but charity is prohibited from using the tools of capitalism to rectify them.
Ironically, this is all done in the name of charity, but it is a charity whose principal benefit flows to the for-profit sector and one that denies the nonprofit sector the tools and incentives that have built virtually everything of value in society. The very ethic we have cherished as the hallmark of our compassion is in fact what undermines it.
This irrational system, Pallotta explains, has its roots in 400-year-old Puritan ethics that banished self-interest from the realm of charity. The ideology is policed today by watchdog agencies and the use of "efficiency" measures, which Pallotta argues are flawed, unjust, and should be abandoned. By declaring our independence from these obsolete ideas, Pallotta theorizes, we can dramatically accelerate progress on the most urgent social issues of our time. Pallotta has written an important, provocative, timely, and accessible book a manifesto about equal economic rights for charity. Its greatest contribution may be to awaken society to the fact that they were so unequal in the first place.

Genres: Nonfiction, Business, Social Science, Economics, Social Justice, Poverty, School

336 pages, Paperback

First published September 15, 2008

About the author

Dan Pallotta (born 1961) is an American entrepreneur, author, and humanitarian activist.

Reviews

[Karen · Rating 2 out of 5]

I feel very conflicted about this book. I agree with most of the author's criticism of the nonprofit sector's current environment. I was especially intrigued by his theory that the for-profit sector represents traditional puritanical male roles (competitive, innovative, etc.), and the non-profit sector represents female roles (selfless, martyr complex). His analysis of the starvation cycle due to arbitrary overhead spending limits was spot-on.

However, I am skeptical of his idea that capitalism will solve everything. I don't have a problem with profit per se, but our current system of capitalism is extremely exploitative and is one of the root causes of most of the problems nonprofits are trying to address. He even quoted Ayn Rand several times, which made me throw up in my mouth a little bit. Pallotta continued to treat the "poor and needy" and other intended beneficiaries as silent objects in the debate. It seemed to never occur to him that they just might be the experts in their own lives and have innovations and solutions for the problems they face.

A much better take on the nonprofit industrial complex is "The Revolution Will Not Be Funded" by INCITE Women of Color Against Violence.

[Eric · Rating 2 out of 5]

This books main points is that charities need to be able to act like for-profit companies in some respects in order to maximize their effectiveness as a charity. The author has six main points. 1. Charities can not compensate their employees properly and therefore can not attract top talent. 2. Charities are not able to take calculated risks because if they fail it is perceived as an unacceptable use of money that could have gone to the needy. 3. There is little long-term planning because charities have to spend the money immediately. 4. Paid advertisement is discouraged because it is perceived as a waste of money. 5. Charities can not receive investments and pay out returns which limits their ability to raise capital to enact positive change. 6. We use efficiency as our measure of how good a charity is at delivering its services, when efficiency is a useless measure of how effective an organization is.

I liked this books main points. All of these I think are true and the measuring by efficiency is especially something that caught my attention because I have definitely done that in the past. The main reason I did not like this book that much, though I'm glad I read it because I learned a lot is twofold. First, the author has a brief history lesson at the start of the book where he explains how the perceptions that charities operate under is all related to the puritans, beginning 400 years ago. It is a totally incomplete history and he would have been better to leave it out because it does not seem to be believable to blame the entire problem on a group that originated 400 years ago. Secondly, his only examples in this book are from his company, which ceased to exist in 2003, which was trying to raise money for charities in a for-profit manner. His company essentially folded because the pressure from society on efficiency did not allow him to continue. I would have liked to see other examples from other groups because he comes across as bitter and even though I think most of his ideas are dead on, I have a hard time listening to him for 200 pages.

[Jennifer Avers · Rating 4 out of 5]

I rate this high because Pallotta's ideas, concerns, and data related to our nonprofit sector are existentially important. Outside of academic/intellectual/philanthropic-niche publications and paid subscriptions, there isn't much discussion in the public space about how we care for one another and our world (and don't) via nonprofits. Though I vehemently disagree (and history does too) that capitalism is self-correcting, and I challenge that some profitable business practices for Coca Cola and the like can/should be replicated in the nonprofit space, much of the concerns and cautions Pallotta raised in 2008 remain in 2023. I'm eager to view his upcoming documentary and see how his thesis has evolved. As someone who has worked in this sector for over 20 yeas, I am encouraged by the following (more recent) field progress to address some of Pallotta's criticisms:
- More foundations provide more core support and multi-year funding and more donors understand why/how this is critical
- More collective giving groups are amplifying their gifts to nonprofit causes
- The trust-based philanthropy movement has traction
- Recruitment, succession-planning, and professional development in the field is valued (more than it was)
- More of us have access to social impact investments (not just for the ultra high net worth) -- approaches and products to invest in social good efforts and outcomes with different sorts of ROI
- Diversity, equity, inclusion and belonging education and actions in the nonprofit and philanthropic space have helped to unpack bias and held us more accountable for history, suffering, and other damaging ideologies and paradigms Pallotta references

What is missing from Uncharitable, and this is not Pallotta's focus or fault, is the role and function of government and public service to help. Nonprofits are far too often the scapegoats for bad public policy and practices, tax codes, and the erosion of public trust.

I would love to moderate a panel of a diverse group of nonprofit leaders on the frontlines of social change -- those doing the work in often difficult and resource-constrained spaces -- and then have Dan Pallotta, Anand Giridharadas, and Mackenzie Scott respond to their questions.

[CTEP]

The backstory

Dan Pallotta was the owner and CEO of Pallotta TeamWorks, a for profit organization that was designed to fundraise for nonprofit organizations. His organization started shortly after he left college. Dan made a country wide bike trip with some friends of his during college to raise money for the Harvard Hunger Action Committee. This experience gave him an idea, he could organize events like this for other organization to raise money. After college he started Pallotta TeamWorks, their first event was organizing a bike ride from San Francisco to Los Angles to raise awareness and money for, the epidemic level, AIDS problem in the United States and called it the California AIDSride. The business model that they used for this event was pretty ground breaking. The individual who participated in the bike ride would be required to raise a minimum of $2000, they used high end advertising to get people involved and donated a majority of the money made to AIDS research. This was ground breaking because it asked the donors to not give the minimum but the maximum, three days of physical effort and a large monetary commitment.

Pallotta TeamWorks took this business model and applied it to a number of different events; the Susan G. Komen 3day walk, AIDSrides across the country and a 26 mile walk through the night for Suicide prevention. Of the $556 million dollars they raised in total donor contributions they donated $305 million to nonprofit organizations. In 2002 they donated $81.9 million in unrestricted funds to charity which is more than the annual giving of Exxon Mobil and General Motors Foundations combined. While the model was working nonprofits stopped partnering with Pallota TeamWorks because of some bad press regarding the amount of money that they were taking in to pay their employees.

The book

Pallotta begins this book with a reference to a sermon given on the Arabella, a ship headed from England to the New world filled with Puritans. John Winthrop explained to his audience that while the new world would be ripe with profitable business opportunities, making money was shameful, to combat that shame we should all engage in direct giving to the less fortunate. This sermon plays a big roll in how we have built our ideas of both charity and nonprofit organizations. The problem with this definition is that we no longer work on a face to face giving system instead we have built service providers to administer the money that we donate to the less fortunate. Pallota argues that it is because of this definition that we have a problem when we see nonprofit organization's employees making salaries similar to their for profit counter parts. He also argues that because we limit the amount that nonprofit organization's employees make limits their ability to recruit creative minds thus limiting the good that they can provide.

While this may be a hard idea to understand, when it is broken down it makes a lot of sense. The Pallota TeamWorks case study proves that this idea is not just a flash in the pan but has quite a bit of weight.

Pallotta continues the book by taking each and every question or gripe he has heard about his business model and breaking down where each of the errors are. From "I'm donating this money to help the less fortunate, as much of it as possible should go to the less fortunate." to "people who make money in charity are doing it on the backs of the poor."

The author then spends an entire chapter discussing the question "what percentage of my donation is going directly to the poor?" He explains that the organizations that we employ to provide services to under served individuals are doing what they can to provide for the less fortunate so if 100% of your dollars go to advertising and that advertising increases the number of people who seek services from the organization or increase individual donations by 25% then 100% of your money was put to good use. Why are you worried about how much of your money went directly to the poor?

The addendum is a case study regarding the Pallotta TeamWorks company. This is probably the most interesting part of the book, detailing exactly how they did what they did and how successful it was. I have included a summary of this portion at the beginning of my report because of my interest in this section.

Overall I am entirely in love with this book. It is a frank and honest observation of the way that our current nonprofit system works and doesn't work. I think that it is a great read for anyone working in the nonprofit sector because it brings a different point of view to the world we live in, one that I have not heard until Dan Pallotta. I would and have highly recomeneded this book to others because of it's refreshing view on the world I have committed myself to.

Uncharitable is a 2008 work by Dan Pallotta, who was actually the Saturday morning keynote speaker at the NTEN conference. I was very struck by the talk that he gave on the limits imposed on nonprofits, and after months of waiting on a library wait list I went ahead and ordered it and definitely don’t regret the decision. As my 2nd year of CTEP approaches, I’m working to do all I can in terms of career and vocational discernment, and Pallotta’s ideas are central to my understanding of where I fit into the nonprofit world.

Uncharitable is a work that’s both very radical and mainstream. Radical in that he promotes the reevaluation of very mundane considerations within the nonprofit world, and mainstream in that he believes that “the system,” capitalism, that is, can work to the benefit of all and the solution of the world’s major problems of hunger, disease, etc. but that currently the rules of capitalism are disallowed in the nonprofit sector, stabilizing it perhaps, but also limiting its potential.

Pallotta begins by rewinding several hundred years to the arrival of the puritans in the new world. The Puritans, Pallotta contends, were great capitalists, but struggled with the conflict between faith and acquisition of wealth. Charity In North America originated with their effort to repent for their perceived greed. Charity then, was originally conceived of as the opposite of self-service, and Pallotta views that this understanding continues on today through the attitudes and institutional constraints forced on the nonprofit world by the general public and the nonprofits themselves.

During his introduction Pallotta cites Adam Smith’s Wealth of Nations, famous for it’s description of the self serving and mechanistic nature of capitalistic world. Pallotta, however, also cites Smith’s far less known The Theory of Moral Sentiments, which is an essential companion piece to the other work. In it, Smith explores the nature of human sympathy towards others’ suffering, and how that is affected and manipulated by intellectual interference. Sentiments sets a very different tone for Wealth of Nations from popular understanding, where people are naturally inclined towards the service of others as well as of self, and this synthesis sets up a world that as Pallotta contends, can solve its greatest problems through the proper channeling of human instinct. This argument is particularly exciting for me because one of my senior papers was on Sentiments, and so my agreement with Pallotta is clearly more than mere coincidence.

The two chapters that follow and make up the bulk of the work focus on specifying how nonprofits are constrained and just why these constraints are misplaced. His premise may be summed up in one particularly eloquent quote, that “one hundred percent of the money we donate to charity goes to charity…” Charities are constantly hounded about what percent of the dollar goes towards “the cause” as opposed to overhead, because in the puritan sense people want to cure cancer, but they don’t want to pay for the salary of some advertising bigwig. In a world with limited funds towards charity this makes sense, but in our world the funds aren’t limited, or at least we haven’t come anywhere to approaching whatever limits there may be. The organization that spends fifty percent of its budget on advertising could raise many times more than the organization spending very little. This principle applies to many more areas including the hiring of executive talent and other resources. The truth is that overhead limits, though, are arbitrary and have little to no bearing on the efficiency or the success of any particular group.

As someone determined to work in the nonprofit sector, these concerns are very close to heart. I want to work in the nonprofit sector, to make a difference on important issues and to contribute to the world in which I live. I also want to have a career in the nonprofit world, one where I am able to employ my best thinking and not be charged a premium for a good heart, as Pallotta writes. I have the professional sensibilities of my lawyer father, but the empathy of my Episcopal deacon mother, and I don’t think I should have to choose one or the other as I pursue whatever career I may. I love direct service, but I also want to be able to work on a bigger and bigger scale as I am able, and to do so means confronting many of the questions Pallotta raises in this work. Uncharitable is incredibly thought provoking and a must read for any of you for which some of these same concerns might ring true.

[Brian · Rating 1 out of 5]

I found this book pretty infuriating. It's mostly a rant about how unfairly the author was treated when his company, Pallotta TeamWorks, went out of business and how much worse off the world is without it. He makes some valid points about the problems in how the efficiency of non-profits are evaluated, but it's nothing that hasn't been pointed out before, and he offers no solutions except "everyone needs to stop doing this." He reiterates the same points again and again, page after page. He had only one interesting premise - that it should be possible for donors to see a return on investments in nonprofits. I fundamentally disagree with it, but I was interested enough to see if I could be persuaded by his argument. Finally, after a hundred repetitive pages, he spends two suggesting people should be able to put up money for fundraisers and get a cut in return, and that a market could be created to trade in such investments. He offers little detail and doesn't address any of the obvious flaws in such a plan. I disagree with his fundamental premise, and with his severely pro-unregulated-capitalism point of view in general, but there are intelligent arguments to be made for his arguments. He doesn't make them.

[Whitney · Rating 3 out of 5]

Let's just say there were things I liked about it and things I didn't like. I've been working in the non profit sector for almost 5 years now, and feel like our organization has very talented people who are committed enough to the cause to stay for the long haul.

I agree it's tougher to keep top managment in place at a salary that CEOs in the corporate world would laugh at, but there are some great ones out there, that are willing put aside their own wants and desires for the greater good of humanity.

I like his bit about the marketing piece, as I see first hand the struggle - people complain about the mailings, however, when ROI's are 2:1, why would we stop doing something we're getting a good return on. I do think the watch dog groups have a great value, but do need to consider other variables, like how much of their revenue is actually gift in kind, and then weigh out how much cash they receive vs. GIK, then look at the expenses.

It's an important book in the non profit world and I'm glad I read it.

[Hans · Rating 4 out of 5]

There is a lot of passion in this book (and clearly some anger and disappointment that seems well-earned).

My nearly 15 years of experience in the nonprofit sector tells me that the author clearly identifies some key problems and has a good line on the source of the problems. The solutions don't feel as fully formed, but that simply means that there is more work to do.

[Scott Williams · Rating 4 out of 5]

At the beginning of this book I found myself frequently nodding my head in agreement and then getting angry because what the author was saying very accurately reflected some of my negative experience of working for a non-profit. But, as I read on, I found the book becoming very repetitive and defensive. By the end, I came to the conclusion that it had largely been written in response to the author’s own for-profit fundraising company going out of business.

If I disregard the bruised ego and defensive style, I agree with the author’s assertions about how our model of charity has developed in North America and how we might engage in a paradigm shift that would make both more sense and more money for the causes we care about.

[Robert Bogue]

It’s heretical. What would happen if we applied free market capitalist ideas to charities? What would it be like to have non-profit organizations operate with the same (or similar) rules as commercial organizations? Uncharitable: How Restraints on Nonprofits Undermine Their Potential explores this from the perspective of a former fundraiser – someone who used the power of marketing to gain funds for charities – but in the process spent a lot of money.

Read more

[Beth · Rating 3 out of 5]

I've wanted to read Pallotta's book since I heard his TED talk several years ago. I run a charitable foundation and feel that we need to do more for those who are doing the most difficult work in running nonprofit organizations. His stance is controversial for sure, but tracing our charitable benchmarks back to the Puritans is, I feel, genius. We should give out of love instead of guilt. The book is less engaging than the TED talk, and I felt the same statements were used again and again. However, it is illuminating some of our bad habits in evaluating charities.

[Erin · Rating 2 out of 5]

This has been sitting on my shelf since studying nonprofit management in 2008. Most of it is emotionally-charged defensiveness of the author’s philanthropic successes and criticisms. There are a few very important points he makes about the nonprofit industry as a whole, but it reads like angry journal entries and I don’t think I will be keeping it. I may try his later books and hope after getting this out of his system that he has organized his thoughts into applicable suggestions and best practices.

[MariMel · Rating 3 out of 5]

Pallotta makes a lot of good points, but he offered few solutions to changing the nonprofit starvation cycle. The book was well-researched, but didn't really need to be a whole book; he has a TED talk that covers the most important points of the book. Even though it was unnecessarily long, Pallotta has certainly contributed a lot to a discussion on how to move nonprofits from 'charities' to 'systemic problem solvers.'

[Nitin Dani · Rating 5 out of 5]

No matter how imperfect it may seem to others, to me Uncharitable is one of the most relevant and important books of our current times. It completely changes the way we think of charities, even for 'educated', socially-focused, nonprofit folks like me. Take it in a positive stride, focus on the intentions and problems highlighted, rather than imperfections or what may seem unrealistic. I cannot recommend this book enough.

[Jules · Rating 2 out of 5]

I put this forward for a non-profit book club years ago, and it made for interesting discussion. I felt some of the information on Quaker history of charity was interesting. It also illuminated some of the cycles of non-profit work that can be frustrating. The discussion from the book club illuminated the uncomfortable bargains offered in the book. It’s like the more money we come across, the more problems that we see.

[Philip Beverly · Rating 3 out of 5]

Pallotta’s book raises important issues about the dichotomies in standards for nonprofit and for profit industries. It’s an important read. However, his historical analysis of the roots of the problem falls well short of compelling. Likewise his simplistic solutions to allow the free market to solve the problem is not convincing. On balance, though, Pallotta calls attention to important disparities that cause real problems and sabotage nonprofit effectiveness.

[Lori · Rating 3 out of 5]

Thought-provoking book about how nonprofits could thrive if they were less constrained by rules and regulations. Interesting insights into how puritanical culture influenced the beginnings of nonprofits in the U.S. The book is a little hard to read at times because of technical jargon and statistics, but worth the read for its fresh perspective.

[Sam Rogers · Rating 3 out of 5]

Must read, especially if you work in the sector. But too long winded and I found much of his solution to simply apply the principles to unfettered capitalism toward the non-profit sector very troublesome. Thought provoking stuff that should be read and discussed however.

[Hannah · Rating 2 out of 5]

Good points and some good charts distinguishing myths between for-profit orgs and non-profit orgs but feel like the points could have been made in an article. The writing tone was also pretty exclamatory the whole time and doesn't depart from a capitalist viewpoint or critique that really.

[Rainey · Rating 3 out of 5]

He has some great points...that he essentially states over and over and over again. I think what he saying is super valuable, but in fewer pages. Getting to the finish line was tough!

[Nicholas Matthews]

An interesting read-some bold ideas and some good review of the nfp context

[Abbey Harlow · Rating 2 out of 5]

Agree with the premise but it was repetitive, defensive, and not well researched

[Dion Zukiwsky · Rating 3 out of 5]

Well written book that expands perspectives if you can get past the arrogance and entitlement left wing views

[Tim · Rating 2 out of 5]

The ideas put forth in the book were spot on, but the presentation was sub-par. I was turned on to this book because of the excellent TED Talk on the same topic (well worth the watch) and wanted to explore further. The book sheds some very interesting light on the origins of the nonprofit ideology and of how we are holding back nonprofits by imposing artificial moral limits on them and how we allow them to operate. Not allowing nonprofits to utilize the tools of capitalism has held them back and will continue to limit their potential, which means we may never solve the most pressing human social services issues like homelessness and hunger. Preventing nonprofits from taking a longer-term view and focusing only on short term gratification, not allowing them to spend for paid advertising in order to build demand, disallowing paying higher salaries for better talent, and not allowing risk-taking in order to innovate, among others, have prevented progress in the nonprofit sector from ever getting beyond a crawl.

And the most egregious error in our thinking? Percent overhead, the "efficiency measure." I.e. using the percent of each donation that is spent on programming as a proxy for quality of the charity. Luckily, since the book has been published, all three major charity watchdogs in the US, Charity Navigator, Guidestar, and the Better Business Bureau Wise Giving Alliance, have come together in opposition of using only this measure to rate the performance of charities, and have published public letters to donors (in 2013) and nonprofits themselves (in 2014) saying so.

But while there were a lot of great points, the book is unfortunately incredibly dense. Pallotta repeats himself repeatedly (see what I did there), and the readability is not helped by the sometimes condescending tone and extreme overuse of italics, which makes it seem as if everything the author is saying is the most basic and obvious fact and to think differently is blasphemous. Additionally, Pallotta comes off as a good bit whiny and defensive, rather than reflective and proactive. He certainly has a reason to be bitter, in that his company was forced out of business by media scrutiny, but I would have liked to see more introspection and humility, as well as some well-thought out solutions.

For example, when discussing the fact that Pallotta TeamWorks was eviscerated (unfairly, for the most part) in the media for not meeting efficiency measures, Pallotta argues that any positive net gains to charity should be celebrated, especially at the scale at which his company was operating. While I think he's right to a large degree and that the sheer amounts raised were undoubtedly impressive and so useful for the charities, I think some humility would have served well, in admitting that perhaps they should have listened to the feedback and evaluated ways to bring the costs of their events down - especially considering that PTW had taken full advantage of the capitalist tools that nonprofits previously (and since) were forbidden to use. This is especially true I think for the scale of the events PTW was running - economies of scale surely should have come into effect and driven down costs, but their costs kept rising, which in my mind brings into question the ability of the management. By paying heed to the critics in this case and slowing down to ensure the stability and affordability of the events, Pallotta TeamWorks could still be functioning today.

Additionally, I think that given the environment and the nonprofit ideology, which Pallotta seems to understand so well in the book, he should have been slightly more sensitive to how his company operated and the sensibilities and norms they were alienating. Pallotta seems to have been keenly aware of the fact that decisions that they company made flew in the face of convention at the time, even while running PTW. My question is - if the solutions he came up with were so obvious and innovative, then when his company was forced to close its doors, there should have been countless imitators, regardless of the risks and bad press - indeed, he would have sparked a revolution in thinking about nonprofits. But, it didn't happen. Which says to me that Pallotta should have been more sensitive to how difficult it is to change a mindset, especially one shared (for better or worse) by just about the entire world. However, to his credit, Pallotta has been attempting to ignite the fire ever since, starting with this book, and I really do hope for (and plan to work toward) the change in thinking that we desperately need if we are to affect real change.

[jess ~has abandoned GR~ · Rating 2 out of 5]

The true value in this book lays not so much in the answers it provides, but in the questions it asks. Why are we disturbed by the pay charity CEOs receive, but not disturbed by the pay that for-profit CEOs receive? Why do we insist that charities "rough it" rather than spend a little more on infrastructure and investments on increased efficiency? That being said, the book's argument is weakened by two poorly-made points early in the book that affect the strength of his later arguments.

Perhaps the number one shortcoming in this book is the order in which his arguments are presented. By starting off with the argument that nonprofit CEOs do not make enough money (only up to a measly $400,000 or so a year!), the author loses some credibility from the very beginning. At one point, the author argues that CEOs have diminished abilities from their pay being so much lower than CEOs of for-profit firms, due to the fact that they cannot afford to join the same country clubs, yachting clubs, attend the same $50,000 a seat galas, etc., as their for-profit competitors. By not being able to run in the same obscenely wealthy social circles, they're not able to lobby for the same kinds of funds they could if they were accepted into that crowd. That's a tough sell. The author repeatedly mentions his Ivy League education and the fact that he could have made dozens of millions of dollars a year in the private sector instead of martyring himself to the nonprofit cause for only about half a million dollars a year. It makes the argument sound a little whiny with an edge of bitterness, and may seem very distasteful to anyone who identifies as lower or middle class. Interspersed throughout this argument are claims that the capitalist system is faultless and should be unrestrained for maximum benefit. In the wake of the Great Recession, it makes the argument sound weak. The several Ayn Rand quotes peppered throughout ensure that he has irritated everyone left of center by the first few pages of chapter two.

The second weak point is his oversimplification of the history of nonprofits and charity in the United States. He overemphasizes the stern values of the Puritans and completely disregards the enormous impact of Catholicism, Judaism, and other non-Puritan forms of Protestantism - not to mention the history of non-religious charity and nonprofit work revolving around different immigrant groups or people with shared values. He also completely disregards the often scandalous nature of nonprofits in pre-WWII America, and how they were at one point generally believed to be a hiding place for wealth. In doing so, he completely ignores the reasons why nonprofits were ever regulated. His omission of other, less self-punishing religious traditions also ignores the "love thy neighbor" theme that led to the lower pay and lower resource use common in charity.

These two rather large mistakes are regrettable, as the rest of his argument is rather sound. Nonprofits should be able to allot more money to advertising, if they feel it would bring in much-needed resources. Nonprofits should be able to take risks and invest in their infrastructure, considering they are competing for the same disposable consumer income as big brands like Apple or Sony. Perhaps most importantly, skewed watchdog group standards deemphasize the effectiveness of charities in favor of an oversimplified "overhead" percentage that false, underregulated reporting could wildly distort. He provides good evidence for this incorrect data reporting, citing the wildly varying "overhead" reports from similar charities over the same years. His argument could be furthered (ironically, considering his disdain for regulation and oversight) by advocating for the implementation of some sort of federal oversight for compiling reliable data on the work of charity agencies and streamlining what kinds of figures they report. However, as useful as these suggestions by the author are, many readers may have given up on the book after his first two mangled points.

[Matt · Rating 2 out of 5]

A very long-winded critique of the limits and constraints placed upon non-profits by donors as well as the court of public opinion. The most interesting part is the HBS case study on the rise and fall of Polatta Team Works, the author’s for-profit fundraiser that netted over $300 million in unrestricted funds for AIDS treatment, breast cancer research, and several other causes over the course of 7 or 8 years and then went bankrupt as public scrutiny over efficiency rates - % of raised dollars spent on overhead – drove away the company’s largest partner charities.

As one might expect from that description, a huge portion of the book criticizes the (over)use of these efficiency ratios in the rating of non-profits, arguing that charities should be judged by what they achieve and not just their overhead and fundraising cost. This makes perfect sense, but I think it’s illustrative that Pallotta can only go so far in applying his arguments to the story of his own company. Sure, he raised millions per event when others were raising thousands, in many cases for stigmatized causes like teen suicide prevention and HIV/AIDS treatment (not yet a popular cause in the early ‘90’s). Can he say that those dollars helped prevent __ more suicides per year or that ___ progress on a vaccine was made because of the money he raised? Not really, but who could in a similar situation? My point is, his alternative of judging non-profits based solely on their net impact is easier said than done.

The overarching problem with the body of this book though isn’t the material, it’s the lack thereof. Pallotta re-verbalizes the same assertions over and over again, with more meat in the 30 page case study than in the preceding 180 page body of the work. Somewhere out there is an editor that didn’t do his or her job. Or was totally ignored.

[Sandra Sims · Rating 5 out of 5]

This book is a must read for anyone working or volunteering for charitable causes. His TED talk is along the same lines as the keynote that I heard him give at the 2010 DMA Nonprofit conference and serves as a good introduction to the topic:
http://www.ted.com/talks/dan_pallotta...

Pallotta creates a well researched and defended position on how success is hampered by risk-averse culture that often exists at charitable organizations. I have worked in the nonprofit sector for several years and know first hand of the culture that he speaks of.

The author tends to over emphasize the points, however, and some parts of the text are repetitive. I found myself skipping paragraphs, thinking, "yes, I know, you have said that several times." Furthermore, I think he takes the application of capitalism in the social benefit sector a bit too far. I don't believe that the only way for charitable causes to succeed is to become as ruthlessly capitalistic as the world's most profitable for-profit companies.

There is a middle ground where nonprofits can become more innovative by fostering a culture of calculated risk-taking. Nonprofits need to be able to invest in infrastructure and cultivating committed employees. Long-term planning and strategy is discouraged in the nonprofit sector because reporting structures focus on "overhead" costs on a yearly basis. Pallotta gives several examples of how this short term accounting focus works against charities.

Overall, the book is well worth the time, and at the very least should help those working in the nonprofit sector begin thinking and discussing these issues.

Edited: This is a related post I wrote on nonprofit salaries:
http://guidingvision.com/nonprofit-jo...

[Vicnotes · Rating 3 out of 5]

This book offers a different perspective for non-profit organizations. Why should non-profits sacrifice salaries and modern technologies because of old-fashioned notions about nonprofit staff "should" be working for the sheer love of the work; to help others and not make money; to sacrifice the living wage as if your willingness to sacrifice such will help the bottom line? It's a sure recipe for failure for many smaller businesses doing great and important work: overwork, stress, burnout, quit, retrain dedicated individuals and go through the same old story. Let's not forget that nonprofits ARE businesses and that they need to pay competitive salaries so people don't have to choose between jobs that help others and jobs that allow them to put food on the table. Guidestar and 990s are not helpful when nonprofits are downgraded and/or potential funders are told that more than 10% on administration/employee costs is not good practice. A competitive and reasonable salary for a development manager can bring in many, many times the cost of that salary yet not be reflected in these watchdog reports. Giving nonprofit staff health insurance and vacations may actually provide healthier and more dedicated staff to fulfill the mission! Donors need to personally spend time with a nonprofit org; knowing the mission and values on the ground will give a better idea than any written report. I'm not naive. The reports can give some good information but can't replace human interaction and relationship with a cause that you believe in. Even that provides no guarantee that money won't be wasted or used in ill-advised ways but it can certainly inform you in a way that a report can't. Bottom line: it's okay for nonprofit workers to make a living wage, dare I say a good wage?

[Anna · Rating 4 out of 5]

This book is controversial, and I can see why. I think the author has some very good points, and the discussion he's trying to start could be extremely useful for the non-profit community.

The book is fairly repetitive -- you might prefer to watch the Ted Talk.

The author does something that always bothers me, which is to assume the science and engineering are the same thing. In my opinion, his message is still completely valid, but it makes me cringe when people assume that if they just raise enough money, they can cure cancer. The total lack of understanding about how basic medical research is funded is tough for me to read, too.

Another thing worth mentioning is that I think it is important to remember that the for-profit sector screws it up quite frequently, and that just because something does work in the for-profit side doesn't mean non-profits should adopt it. I think the author would agree with that, but the general tone is that for-profit practices are good.

Those caveats aside, I'm glad I read this book and I hope that more people who are involved in charitable work read it. As somebody who doesn't enjoy 3-day walks or big galas, it was good for me to read about how successful these things can be, and to be reminded that charities are in the business of selling just as much as McDonald's is. People have discretionary income that they can spend on designer jeans or on a 100 mile bike ride, and society is probably better off if they choose the bike ride, particularly if the bike ride raises money for a charity. (And even if the producer of the ride gets rich.)

[Barrett Merrill · Rating 4 out of 5]

Having worked with several nonprofits over the years, “Uncharitable” was a refreshing critique of certain (often unspoken) rules that have found their way into nonprofit culture.

Generally speaking, Pallotta tries to expose these core breakdowns and fallacies in how we look at, construct, and lead 501(c)3’s, which is that we often expect them to have: a lower quality product; minimal investment capital; passivity in advertisement; censorship/limitation of overhead expenses; and an emphasis on short-term reactivity without margin for long-term R&D.

This book makes the case that all of these constraints are artificially grounded and counterproductive (the root word for “profit” means “progress”... meaning this business-type is literally defined by what it’s not, i.e. it’s lack of progress).

Whether or not this is the primary impetus to the modern, regressive framework we have of most charities, I appreciate how the author connected our contemporary lens to the negative influences of 17th century Puritanism, which fundamentally taught: “Your piety could come from your wealth, but your wealth could not come from your piety.”

While well-intentioned, this 4 century old philosophy attempting to guard charitable workers against greed (greed being something of which I am vehemently opposed) has also often limited nonprofits to making splashes in ponds, instead of waves in oceans.

Overall, books like this compel me to broaden what I think is possible in seeking social justice in the context of business. The goal is not, as Pallotta puts it, “need[ing] the poor as an object of [our] benevolence,” but rather leveraging assets to solve problems.

[Molly · Rating 2 out of 5]

Didn't love this book. It might be because I felt constantly insulted by Pallotta's view of the charitable sector:

"The system is oppressive. Threatened by any possibility of real change, it suppresses discourse. It intimidates with a moral stick. It discourages thought, inquiry, truth and possibility. This is doubly dangerous, because nonprofit are supposed to be society's agents of change. Instead, they are coerced into a kind of servitude to the status quo" (p. 17).

He's pretty bleak about the nonprofit sector and HOO-ray for the for-profit sector throughout the book. Like, the only reason nonprofits haven't solved world hunger is because they can't IPO their organizations to raise enough capital. If that was the case, why hasn't Conagra or some other bajillion-dollar corporation solved the problem of world hunger?

Basically, Pallotta got burned by the sector in a big fundraising scandal in the early 2000s, and now, like a spurned lover, is making a case for why he was right, and trying to take all the sector's friends with him in the breakup.

Anyway, it is well-sourced and has some interesting ideas, but he has drunk so much of his own kool aide that it is hard to take the good ideas without being annoyed at yourself for agreeing with him.