Nonprofits Rolling in Luxury

Posted by Laura Otten, Ph.D., Director on November 2nd, 2015 in Thoughts & Commentary

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The front page of the October Chronicle of Philanthropy had an alarming headline: “1 in 3 Americans Lacks Faith in Charities.” It just as easily could have said, “2 in 3 Americans Have Faith in Charities.” But it chose the statistical spin that would make the heart beat faster and bordered on yellow journalism. There are enough media outlets in this country that spin the worst about nonprofits, it shouldn’t also come from within our own ranks. But that’s not the (main) point of this blog.

The data came from research that was done this past June by Princeton Survey Research Associates International and is based on responses from 1,000 adults, 18 years or older. The data show that 62% of this group has a fair to great amount of confidence in charitable organizations. (That figure rises to 69% when asked just about the nonprofits in their own community).  By contrast, only 19% of respondents said that they trust government in Washington to do what is right most of the time or just about always. Not sure that using Washington is the best barometer by which to judge anything, but there it is. Nonprofits trust nonprofits three times as much as government. Now, there is a headline.

And it isn’t just that Americans trust nonprofits, they actually think we are doing a pretty good job at what we do. More than 4/5 (82%) think we do well to really well in helping people and almost 3/4 (73%) say we do the same with running our programs and services. We dip lower to 60% thinking we do a good job of spending money wisely. But, what does “spending money wisely” really mean.
Raised by parents who came of age in the depression, I was brought up to buy high quality, high priced goods only when on sale that would then last a long time; that, I was told, was spending money wisely. Others, I know, were brought up to spend as little as possible on goods and when they wore out, replace them with new low-cost items; that, they were told, was spending money wisely. So one person’s wise spending is another’s irresponsible behavior.

But here’s where it gets interesting: when asked where specifically money is being spent unwisely, the number one item—at 37%–was administrative costs. The same old classic lament about nonprofits. Could we please move on? (The fact that we haven’t says that not enough people have watched and discussed nor been moved to action by Dan Pallotta’s TedTalk, “The Way We Think About Charity is Dead Wrong,” nor has the Overhead Myth, now in its third year, made one iota of difference.)

Would someone please explain to me—using real, current data, where the problem lies? Of this 37%, 26% pointed to salaries as the source of the problem: 15% were bothered by salaries in general (what, that nonprofit employees get paid?) and 11% complained about executive director salaries. In truth, if we boil down the lament, it isn’t that nonprofit employees get paid too much, because with rare exception, if you look at what nonprofit employees get paid versus what for-profit employees get paid, an honest person would be hard pressed to say a nonprofit employee gets paid too much. The problem is that the vast majority of people still hold on to an extremely arcane notion—the origins of which are hard to pinpoint—that those who work for nonprofits don’t want or need to be paid, but rather we do what we do about of our commitment.

The absurdity of this is beyond description, and it is more than time to eradicate this delusion from everyone’s thinking. Forty-one percent of respondents said that nonprofit leaders are paid too much. On what information was this decision reached? The salary of one nonprofit leader who was the subject of some media outlet’s “expose”? It is equally absurd that 34% thought leaders of charities are paid “about the right amount.” If we had to rely on the independently wealthy to run the nonprofit sector—the fifth largest sector—where would we be? Certainly nowhere near where we are today.

Just for laughs, here are some of the other ways American’s think nonprofits use their money unwisely. Advertising was the third more frequently noted (11%) area of waste. In the last month, I have easily asked a good dozen to a dozen and a half nonprofits how large their marketing budget is. (To be clear, advertising is just one piece of marketing, as marketing is the larger category of which advertising is one part.) The answer I got from 90%? Zero, as in their organizations have budgeted absolutely no dollars for pushing their brand and organization out there, for promoting their existence, services, value-add, etc. (The other 10% answered “tiny”.) The vast majority of nonprofits don’t even advertise until, perhaps, it is time to advertise their big fundraising event. But spend dollars on advertising their services?  No.

But my two favorite areas of waste of which we in the nonprofit sector are guilty are “spending on luxuries/travel” and “don’t know/can’t think of any specifics.” I hope you all are guffawing! What luxuries? What travel? And yet 6% cited this expenditure as a waste. Since when did working on a 10-year-old computer on a hand-me-down desk while sitting on a hand-me-down chair count as luxurious? And travel? To where? To the extent that nonprofits had professional development budgets that allowed staff to travel to a nearby or distant annual conference or even to a local workshop, that money disappeared in 2008 and has been exceptionally slow to reappear in nonprofit budgets.

But truthfully, my favorite area of waste of which nonprofits are guilty was the second most frequently noted (20%): “don’t know/can’t site specifics.” Well, if you don’t know and can’t finger the culprit, then how the heck do you know nonprofits are wasteful?

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