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Nonprofit Management

Persistent Poverty in a Smug Meritocracy

A response to Dan Pallotta’s TED Talk on nonprofit executives’ pay.

Nearly 1 million people have viewed Dan Pallotta’s recent TED Talk, “The Way We Think About Charity Is Dead Wrong.” One of his most lauded and controversial assertions is that compensation in the third sector is too low to attract the talent necessary to solve the world’s most pressing problems. His resonant phrase is: “The $400,000 talent will not work for $84,000.”

Pallotta’s case for paying higher wages has wide appeal—it echoes deeply held beliefs about pay and merit in the United States. We want the neurosurgeon, the cancer researcher, and the bridge designer to be well paid, because that reassures us that they are well qualified and performing their life-or-death tasks with vigor. Pallotta’s vision rests on stubborn myths about meritocracy—and it is precisely these myths that impede efforts to address poverty and inequality in the United States.

Myth #1: There are $400,000 talents. The first falsehood is that there are people who are just worth more. Defending wide inequality relies upon the notion that some people are worth much more, based on training, ability, or certain special qualities. This notion makes inequality appear legitimate to people at all levels, and thereby harder to redress. The use of the phrase “low-wage worker,” instead of “worker who is paid a low wage,” hints at a peculiarly American sleight of hand: Someone’s place in the wage structure is an indicator of their true merit.

Myth #2: The best people become the $400,000 talents. This is appealing if we believe that anyone can become a $400,000 talent. Faith in meritocracy requires belief that we all stand equally at the starting line. However, a high volume of data shows that upward mobility is increasingly rare in the US. The institutional infrastructure and structural racism that surrounds poor versus rich children means that there is not an equal contest for the $400,000 jobs. By embracing Myth #2, we can neither rest assured that we have found the best talent nor address the root causes of inequality and poverty.

Myth #3: The top person does the work that generates the value. The willingness to pay top money for top talent is based on the idea that executives have the “special sauce” that motivates others and generates results. Interestingly, this idea collides with an increasingly popular view of “a leader in every seat.” Indeed, “dispersed innovation” comes from all levels of an organization, including front-line workers paid low wages. In the third sector, these workers bring insights about root problems and connections to the community that generate trust, and, in turn, real change. Why not pay them more?

Myth #4: It’s relative pay that matters. Pallotta’s plan is appealing, in part, because $400,000 really isn’t that much when compared to private sector CEO salaries. Average top executive salaries at nonprofits range from $84,000 to $232,000. Meanwhile, CEO pay in the private sector averaged $12.9 million dollars in 2012, and it keeps ratcheting upward as top executives focus their comparison game on one another. What gets lost is the absolute numbers that should shock us. A $400,000 salary is a lot when compared to $18,720 (which Obama’s proposed minimum wage would yield) or $45,000 (twice the poverty threshold for a family of four and the income on which some 45 percent of families subsist, according to research).

Myth #5: The talent won’t work without the big prizes. It’s just not true. In the nonprofit sector, the mission-focused ethos has drawn many top executives to work for $84,000. Let’s consider cancer researchers again. They face a salary cap of $179,700 placed by the National Institutes for Health. Pallotta would argue that the best talent would therefore not be drawn to study cancer. However, talented cancer researchers who love their work have made much progress (while puzzled economists have concluded that “scientists pay to do science” when they forego higher pay in the biotech sector). The breast cancer mortality rate has dropped substantially from 100 percent sixty years ago to 23 percent today, a success that did not hinge on big salaries for talent. In fact, much of this success hinged on funding from the sector that Pallotta did not even mention—the public sector.

Pallotta offers an easy, market-based solution, putting the captains of charity on par with the captains of industry. He co-opts our national conversation about income inequality to advance his goals and the goals of a socio-economic elite that is content to believe in meritocracy and their own meritoriousness. We argue that it is misguided to base the pay of executives in inequality-alleviating nonprofits on ideological myths that have done much to reproduce and legitimate inequality. Let’s shine the light directly on the problem of inequality and poverty, not on those who need some additional economic incentives to get involved. Let’s pay living wages to “the great mass of humanity” and end the applause for those who think their wealth is proof of merit.

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COMMENTS

  • Robin Lynn Grinnell's avatar

    BY Robin Lynn Grinnell

    ON March 22, 2013 10:24 AM

    THANK YOU.  If one more person sends me the link to “that amazing TED Talk” I think my head will explode.  You have illustrated, most directly and eloquently, only ONE of the issues I have with Dan Pallotta and his views.  As always, SSIR is SPOT ON.

  • Michelle Kweder's avatar

    BY Michelle Kweder

    ON March 22, 2013 10:58 AM

    Thank you, Robin.

  • Jason Cox's avatar

    BY Jason Cox

    ON March 22, 2013 11:17 AM

    SERIOUSLY, THANK YOU!  This has been bothering me for the past several days, since one of the event companies I work with posted it on Facebook with a note about how amazing it is.  Again, this is a just ONE area where I disagree with this approach (comparing non-profits with Amazon was another place where my jaw hit the floor).  I am entering my 15th year in the non-profit world, I have no aspirations to go out and ‘make as much money as possible’ (even though I guess that is what my Puritan ancestors were all about), and it is nice to see someone articulating thoughts about this talk with something other than “OMG THIS IS AMAZING!!!1!

  • Michelle Kweder's avatar

    BY Michelle Kweder

    ON March 22, 2013 11:45 AM

    Thanks for your comments, Jason.  Please help us share our counterpoint through your social networks.

  • Melissa Sines's avatar

    BY Melissa Sines

    ON March 22, 2013 02:53 PM

    I get where the authors are coming from, but I disagree. Not with the basic point (we like to think we live in a meritocracy, but we don’t), but with the idea that this was really where Pallotta was headed or that this was the basis of his argument. If it was, I missed it. He hit on a number of points that resonated with me – and apparently a lot of other people in the sector. Investment in our nonprofit infrastructure and talent is necessary. I didn’t just hear that we should pay “the captains of charity” more, I made the leap (which I didn’t think was that big of a leap) to assume that program managers and front line service delivery workers should be paid more as well. I have a real problem with people arguing that “that person shouldn’t get paid more because so many people make less.” That’s a common line of bull-hocky that the truly elite just love to hear us tell each other. What you should really be arguing, and what I pulled from this TED talk, is that that we should all be making more. It’s clear that $10 minimum wage is not enough. The poverty line is a joke. So, say that. Don’t point the finger at Pallotta as if he is single-handedly perpetuating inequality. Say, “Great point, Dan. And another thing…  while we’re spending money on increased salaries and overhead and telling our stories and taking risks, let’s not forget that we do this in service of addressing injustice for all of us.”
    The overhead argument is one that we’ve been having for a long time, and one that, I think, is what most people are responding to when they say, “This is amazing.” We need to keep this issue at the forefront, because the anti-overhead mentality doesn’t just manifest itself in depressed wages. It also means being 5-10 years behind the technology curve, working on out-dated computers in out-dated systems, and lacking the ability and capacity to track our impact and tell our stories. Can it go too far? Sure. However, for the vast majority of nonprofits who don’t have rock star status, it’s nice to hear a “rock star” tell the world that we all deserve better. We shouldn’t let this over-arching point get lost just because the messenger may not be the preferred messenger. Inequality and unequal opportunity are really big problems that will warrant really big solutions – bigger than any one nonprofit or any one executive. Mission, not organization, yes. But also: no money, no mission. We can’t implement big solutions on a shoestring. “Shining the light” on inequality and poverty is hard to do when you can’t pay your electric bill. Charity will never be a substitute for justice, but that’s no excuse to subvert the nonprofits and the nonprofit employees that are working for justice.
    Trust me, I get it. I’ve seen slick ad campaigns that rake in big dollars for terrible nonprofits (which is a different conversation on accountability). I’ve seen hundreds of 990s of colleges and hospitals and museums and medical or health-care charities and had the thought that it’s not fair that their executives and program managers make so much while I have to budget for a doctor’s visit or food, for gas or new jeans to replace the torn ones. But what I don’t do is look at those executives and think that they should be brought low. I wonder instead why my work – and the work of many others - is so under-valued. I’m with you. Living wages for everyone. Even nonprofit executives.

  • Nicole Woo's avatar

    BY Nicole Woo

    ON March 22, 2013 03:00 PM

    THANKS so much for this!  I’ve worked in non-profits since the 1990s, and this TED talk also made my head explode.  I hope you’ll a summary and link to this in the comments section on the TED page.  Folks need to see it!

  • Cosmin Atanasiu's avatar

    BY Cosmin Atanasiu

    ON March 22, 2013 05:22 PM

    This is a FANTASTIC post and ideologically I agree with what you’ve said 100%.

    What I find very interesting as well is that nobody seems to bring into discussion the lack of accountability in nonprofits. If a private sector CEO is paid $11 million and doesn’t deliver, the shareholders have the power to fire them and hire someone else to get better results. In a nonprofit, if CEOs are paid $120,000, do they get fired for lack of good results ? Who would be evaluating and potentially firing one of these CEOs ? The people donating to the charity ? Of course not.  Even determining what can be considered good results in a nonprofit is more of an art than an exact science, and you can’t just do anything in order to raise more funds. How those funds are invested in creating meaningful social change is also hard to quantify but meaningful to evaluating a charity.

    Another overlooked fact is that the people donating to charities would be considered ‘customers’ should the salaries be the same as in the private sector, because the CEOs would be making an income from getting more donations (similar to how a gaming company’s CEO makes his income by selling more and more games). However, the donors are not and never have been customers, they should be nothing short of shareholders because their donations keep the charities alive, right ? This I believe is another ideological hypocrisy in Pallotta’s speech

  • BY Dan Pallotta

    ON March 22, 2013 05:35 PM

    So, you’re basically saying, “leave things as they are, it’s all working fine. ” Sorry if my TED talk has made some peoples’ heads explode. See, the thing that makes my head explode is people arguing - passionately - for a status quo that us woefully ineffective, when they are not the ones paying the price for it. Stop being so frightened by a new idea.

  • Maureen Scully's avatar

    BY Maureen Scully, UMass Boston

    ON March 22, 2013 06:49 PM

    @Melissa.  Thanks for your thoughtful engagement with our ideas.  You’re right that it’s a subtext of Dan Pallotta’s talk that sparked our attention.  It’s a subtext that troubles us.  When ideas about meritocracy become taken-for-granted, the changes that we are all working for become more difficult to make. That’s the irony and the danger. Non-profits are often stuck cleaning up after the for-profit sector, when labor markets based supposedly on merit fail to provide livelihoods. Non-profits are often in the role of raising funds for issues that are under-funded by the public sector, where a healthy commons should be our source for addressing major social issues. Non-profits active in the community often generate smart and nuanced ideas for policy changes, but these get impeded by lack of political will. Public sector and policy remedies are impeded when disdain for paying taxes and helping the vulnerable is fueled by the belief that any redistribution compromises the putative meritocracy. That’s the rub. Even lurking in the subtexts, assumptions about markets and meritocracy can do harm. So it seemed to us that a root cause analysis was needed: Why is inequality broadly uncontested and poverty persistent in the first place? Let’s all be vigilant about comfortably assuming the tenets of meritocracy (like the “best people” are distinct from the rest). Your points that the non-profit sector should be better resourced—from tools to do the work to living wages across the board—are spot on and really well said.  We’re all on the same quest, and it’s great that Dan Pallotta’s TED Talk has sparked such lively discussion in so many quarters.

  • Maureen Scully's avatar

    BY Maureen Scully, UMass Boston

    ON March 22, 2013 06:54 PM

    We’re don’t like the status quo—but ideas built on the dominant paradigm that legitimates the status quo—these may not be the ideas that can really change the status quo.  Letting the “market” metaphor colonize all the domains of our life—not “new”—but scarily old and familiar.

  • Tamara Fagin's avatar

    BY Tamara Fagin

    ON March 23, 2013 06:50 AM

    I am frankly dumbfounded by this post. I feel that it is a distraction from the main point of Dan Pallotta’s TED Talk which is:  the sector is an inefficient mess and MUST change if we want to see real change with income inequality, cancer, etc. type problems during our lifetimes. And, it goes a long way toward helping potential and current donors (individuals, corporate foundations, social venture funds, etc.) change their mindset regarding non-profits and the disproportionate value that too many place on LOW operating budgets/overheads. 

    Non-profits are incented to keep their overhead down but at the expense of achieving the broader mission.  Since there is no NASDAQ for non-profits, donors focus too much IMHO on how lean the organization is and not enough on whether this “indicator” of an organization’s health/attractiveness is indicative of whether or not the organization will be successful. For “shining a light” on that issue, I applaud and am grateful to Mr. Pallotta. Rather than focus on the executive comp issue, I think we all need to focus on the “value” of solving the various problems.  To do that, we need better organizations, more informed donors and better cooperation with the public sector and the corporate sector.  For some in academia, focusing on comp and advert, etc. numbers may not be appealing.  However, numbers are the language of business, policy and the REAL world.  I think you need to know you audience (and he nailed it!), and I think THAT is why EVERYONE is talking about Mr. Pallotta’s TED Talk.

    It seems to me that the non-profit sector is ripe for major consolidation and change - there are simply too many little non-profits chasing the same dollars, duplicating efforts and not moving the ball forward fast enough. Rather than pay 100 CEOs $75k to run programs that raise money for local charities working on problem X, let’s consider consolidating overhead and deploying more people to fix the problems (less people to raise $, handle legal, accounting, etc.).

    I was hoping for Stanford’s Innovation Center to post something helpful and innovative. I was hoping to see some ideas on how to take some of the energy from Mr. Pallotta’s talk and turn it into a positive reform movement or to increase donor participation in the sector.  But, unfortunately there was none of that in your piece. I don’t see how this moves the ball forward one iota.

    And, what is the point of this? You make it sound like he stood up there and said he was for income inequality!

    Myth 1:  “Defending wide inequality relies upon the notion that some people are worth much more, based on training, ability, or certain special qualities ... Someone’s place in the wage structure is an indicator of their true merit.”

    What the heck else are you going to base it on? Do you pay more for organic or local food? Do you pay more to eat at a nice Boston restaurant than McDonalds? Do you pay more for a cancer specialist rather than a GP? Why? Could it be that they have special training, abilities… “or certain special qualities[?]” Does that add to the income inequality problem? Why not just go to a nurse or a P.A.? Should they all be paid the same? Have you seen what it costs to go to medical, law or business school these days? For kids who do not have wealthy families, you can easily graduate with $200-300k in debt.  As long as it costs that much to attend school and one needs to “intern” or do a fellowship, etc. for so many years, there should be “income inequality” - if you mean a state where folks are paid according to those attributes.

    Try flipping this - why should there be inequality between the for-profit and non-profit sector? If we as a society place a “true value” on the work of the non-profit sector, then the “compensation” should be the same.  Rather than attack the $400k figure, let’s talk about a CSR-expansive concept of value.  Let’s look at how to shift value to those who toil in the sector by encouraging student debt forgiveness, housing assistance, etc. so that “working” folks or folks who didn’t make a gazillion dollars at a start-up or marry someone who did (or have parents who did), can afford to work in this sector and live within 50 miles of Stanford’s Center for Social Innovation. (You say in Myth #2 that “upward mobility is increasingly rare in the US[,]” I wonder how rare it is in the non-profit sector).

    Finally,  you close with: “Let’s shine the light directly on the problem of inequality and poverty, not on those who need some additional economic incentives to get involved. Let’s pay living wages to “the great mass of humanity” and end the applause for those who think their wealth is proof of merit.”

    How do you propose to achieve that? Keep non-profits the same?

  • Monica Meeks's avatar

    BY Monica Meeks

    ON March 23, 2013 07:00 AM

    Dan, please don’t be dismissive of this feedback.  Get in the game, mix it up, make your case, and please address the concerns raised here.  Let’s get both sides out there with equal star power and address each concern point by point.  Cosmin has a great point that we can’t raise funds from our primary client.  The market does not serve them because they often can’t pay.  So all things aren’t equal.  I want to hear more vigorous discussion please, not less, because I have a stake in the conversation as both a nonprofit executive and nonprofit client.

  • BY Jerry Barney

    ON March 23, 2013 07:02 AM

    Merit = Inequality?  Apples, meet Oranges.  Drop the “ocracy”.  That’s pejorative.

    Merit does equal expertise. A small part of Dan’s larger thesis is that merit is NOT the status quo in the nonprofit sector.  Donations, for example, should be unrestricted, so they can be used where merited, by the people with the expertise.

    People of real merit merit a reward.

  • David Levy's avatar

    BY David Levy

    ON March 23, 2013 08:04 AM

    and in universities, we see how huge salaries for the ‘top managers’ drains resources and demotivates the creative, productive underlings. Organizations can be run effectively without copying the corporate hierarchy and pay scale!

  • Michelle Kweder's avatar

    BY Michelle Kweder

    ON March 23, 2013 09:49 AM

    Hi all,

    It’s great to be having this conversation in the SSIR space.  We did only address one of the many points in the TED talk—compensation as it relates to the meritocracy.  Word counts are always limiting…

    I do have to politely disagree with Tamara when she says “the sector is an inefficient mess and MUST change if we want to see real change with income inequality, cancer, etc. type problems during our lifetimes.”  The sector has its problems yet unlike the business sector, it didn’t bring the US economy down with it.  I’ve been a long-time staff person (at all levels of organizations from entry level to Executive Director to Board Member) and consultant to the sector working with all-volunteer, small, and mid-sized organizations across issues such as corporate accountability, health care, domestic violence, public education, and homelessness.  I’ve seen “inefficient messes” but I’ve also seen scrappy, innovative, life-saving work that truly changes the world for communities and individuals each and every day.  That good work should not be forgotten in this conversation. 

    Here’s a point of clarification.  Dan talks about charity; I talk about social justice organizations.  I don’t want to just cure cancer but I want to cure cancer while addressing the structural issues (such as sexism, racism, classism, and homophobia) that mean that some groups of people face environmental hazards that others don’t, that some people get better preventative care than others, and that some people get treatment and live and some don’t and die.  Social justice work also involves working in deep partnership with those in communities who have the lived experience of the disease (or other social problem). 

    Like Dan, I agree that change is hard work, that overhead isn’t a measure of success, that contributions should come as unrestricted (and perhaps even anonymous) gifts to experts in the field.  I’ve helped clients consider and implement mergers but they aren’t always the answer.  Small, grassroots, community-based organizations do work for and with those often most unheard in our society and are vital for our well-being.  We must continue to nourish them and not just collapse them into larger, stronger entities. 

    Many, if not most, effective non-profits don’t need a fancy branding campaign, a high-paid CEO, or a bunch of administrators too busy to talk to program participants or answer the telephone.  Scale and growth—concepts borrowed from the private sector largely to bring down overhead costs—don’t often serve communities well. 

    And, although my goal is systems change I do think about what I can do and try to do it.  As a consultant, I ask myself three question before taking on a new client:  1) Is this doing to change the world?  2) Am I the right person to do this work?  and 3) Is this good for me?  “Good for me” wasn’t about compensation but balance including a balance between paid and unpaid work. As a salaried employee, I capped my own salary based on the pay of my lowest paid colleague; as a manager, I advocated for living wage salaries for all of my employees.  We can, and should, act in ways that change the world. 

    If we’ve done nothing else with this post, we’ve pointed out that compensation matters.  That’s why we are all talking about it. 

  • Emily Woodard's avatar

    BY Emily Woodard

    ON March 23, 2013 12:14 PM

    The CEO/Executive Director’s salary sets a bar for determining the salaries of other workers. If the CEO is making $80 K, then the mid and lower level employees are making much less. Dan’s argument about compensation affects the “leaders in every seat”.

    It seems to me that the main concern expressed here is fear of the nonprofit model copying a for-profit model that has caused social problems and inequities. But I feel that this concern is a big leap from the Dan’s basic assertion that overhead costs are necessary for growth. There is a huge difference between recognizing the need for growth and sacrificing all moral values (worker rights, environmental protection, basic honesty) for the sake of money.

    Let’s talk about how to improve the metrics we use to hold all organizations accountable.

  • Michelle Kweder's avatar

    BY Michelle Kweder

    ON March 23, 2013 12:18 PM

    Hi Emily,

    If the CEO is making $80K, why are mid- and lower- level employees making much less?  If everyone is a leader, why isn’t everyone making $40K or $60K or $80K at that organization.  Why do we assume the model of Wall Street vs. our local cooperative enterprise?

    Again, agreed about metrics.  And, let’s remember that not all metrics are quantitative.  There are qualitative ways to measure change.

    MIchelle

  • Doug Jacquier's avatar

    BY Doug Jacquier

    ON March 23, 2013 01:18 PM

    With respect to the authors (and those whose heads are exploding), I have an overwhelming sense that you have taken the vehicle of a ‘rock-star’ YouTube response to Pallotta’s address (and there is a sense you resent that in itself) to get attention for a different agenda than the one he had. I don’t agree with all that Dan said but it sure as hell made me think, and that’s always a good start to any conversation. I’m with many of the points made by Melissa and Tamara and I too am disappointed that SSIR has taken an important issue out of context to promote a very different position on a ‘sub-text’ (albeit to promote a position I probably share). It’s part of a disturbing trend I am seeing in many forums (X’s post is about squirrels but the real issue is my elephant in the room and how dare X promote squirrelism etc). No wonder Dan doesn’t want to ‘mix it up’ in this space.

  • Marc Lavine's avatar

    BY Marc Lavine

    ON March 23, 2013 05:30 PM

    I find much that is useful in this piece and in Pallotta’s talk.  It also seems to me that there is more agreement between the talk and this response than meets the eye.  This possibly complementary terrain seems especially useful to move the conversation forward. 

    Agreement that Adequate Pay is an Issue: I take Myth #3 as acknowledgment by Kweder, Denis, and Scully that the sector should indeed pay more—just not concentrate these gains solely on top level executives.  I would be astonished if Pallotta didn’t agree.  I’m reminded of The Equity Project, a New York City charter school, that pays all teachers $125,000 (and, notably, the same to the school’s principal) because it wants a salary level that attracts top talent, and because the schools seeks to diminish the perceived opportunity cost for professors and professionals who would normally face a steep pay cut to teach at a high school level.  Pallotta could as easily have made his core argument with this example but it successfully supports his argument while also responding to Kweder & Co.’s point that livable wages need to be distributed more pervasively, not just at the top.

    Of course this still leaves questions about how much pay is too much, how much is enough, what the practical outcome of different set points may be and the implications for those excluded. There is also a risk that it implies that there isn’t high talent in teaching now, when there undeniably is. Nevertheless, I think there’s agreement among the two parties that a conversation about adequate and increased pay is warranted and that not addressing it hinders the sector. Current nonprofit norms don’t only contribute to some talented people staying away or exiting prematurely, they also narrow participation in some instances thereby privileging those who have independent financial means to work in the sector because such workers can supplement their income, enabling them to work for less. It is also true that executive pay in nonprofits often sets the cap for overall organizational pay levels. So, one argument for healthy top-level pay is, in fact, that it often makes higher pay throughout the organization more legitimate and possible.

    Agreement that Markets and Market Metaphors have Limits and Influence our Social Priorities: This is a central contribution of this blog post and subsequent commentary.  Because Pallotta compared norms across the private and nonprofit sectors without much critique of private sector practices, there is a particular risk that market logic and myths of meritocracy are perpetuated rather than problematized. Yet, I think there are glimmers of suggestion to the contrary. Early on, Pallotta points out how the marketplace, even of social business, isn’t up to the task of addressing many social problems. He also notes that some important social outcomes don’t lend themselves to easy actuarial measurement.  Each of these statements suggest that he sees that something more than “easy market-based solutions” are necessary even if his analogizing and comparing the sectors makes this distinction blurry. 

    Perhaps the most interesting statement in his talk as it relates to this blog posting is something he says almost in passing. He notes that it’s “interesting that we don’t have a visceral reaction to people making a lot of money not helping people” and he goes on to note that we’re quick to celebrate those who make huge riches while treating much less high pay of nonprofit leaders as circumspect. Setting aside the nonprofit comparison, Pallotta appears to say that it’s notable that we treat high wealth generation as if it’s inherently meritorious even when it may be generated doing something socially problematic.  To my ears, that sounds in line with much of the critique in this blog post.  It indicates that high pay may be excessive and that it’s socially problematic to treat high earnings as inherently meritorious, rather than considering how they were generated. Granted, this wasn’t the focus of his talk so his limited comments benefit from the blog post.  His comments may also suggest some level of critique of private sector behavior but not a similar consideration of these issues in the nonprofit sector. Nevertheless, there seems to be some level of agreement on these points.

    Agreement that Scale is Important and Overhead Cost Shouldn’t be So Constrained: Kweder, Denis, and Scully don’t go after what Pallotta arguably spends most of his time on:  the notion that organizational overhead shouldn’t be met with disdain, that spending proportionally more money to expand the pie or accelerate the pace of change has a place , that we need organizations of greater scale to address problems of great scale.  I’m guessing that the absence of a response on these topics signals substantial agreement. If I’m wrong, I look forward to them saying more about these topics. Alternately, perhaps this blog effort will motivate others to respond in kind by offering thoughts about how we can simultaneously expand, improve, and accelerate positive social outcomes while lessening waste and improving accountability in non-stupid, non-Puritanical ways.

    Finally, let me offer a challenge about how we all might think about this going forward.  Borrowing central planks from the TED talk and this blog response: surely inequality and poverty are central among the great social ills facing humanity. So, if our aim is to create living wages for all, to end poverty, and reduce inequality what needs to happen in the nonprofit sector and beyond to realize these social goals?  To what extent do nonprofits need to “be the change” or, conversely, to what degree does the sector need to cast off aspirations of frugality and purity to achieve these goals?  I believe that satisfactory answers to these questions require us to make use of the insights from Kweder, Denis, Scully and Pallotta.

  • Maureen Scully's avatar

    BY Maureen Scully, UMass Boston

    ON March 24, 2013 07:11 AM

    We did indeed focus on just one theme.  The blogosphere and beyond is alive with discussion that supports the increased overhead thesis.  There was no gap there.  We took a different direction, not an unrelated tangent.  Where there is a big rush toward agreement, it seems worth asking: Where is the catch?  And more deeply: Is this thesis being accepted so easily because it stands on taken-for-granted aspects of the status quo, rather than shaking the status quo?  What could derail our shared quest for change?

    We also wrote for a deeper reason.  We kept hearing from colleagues in the non-profit sector that they felt they ought to like this TED Talk – big, bold, audacious goals for their sector – but somehow it sat awkwardly with them.  They couldn’t quite put it into words. They felt uneasy, unseen, unheard, somehow diminished, especially those working in the trenches for radical structural change to support the most vulnerable.  Why?

    We thought about a tiny non-profit organization struggling to help poor people who, as renters or owners, had lost their homes to foreclosure.  It’s a hard issue to tackle – because the basso continuo of meritocratic logic in our society makes it easy to blame the homeless.  Rich bankers are not rushing to donate funds – or more important, support new policy initiatives – that would help poor families out of this housing crisis.  If we don’t name the root problem of “blaming the poor” in an individualistic meritocracy, it seems that no amount of rebranding or exhortations to donate will make a lasting fix.

    Surely we can do remarkable things to boost food pantries that are quadrupling their efforts to feed poor families, and spending more on overhead to bring food to the hungry is worthy.  But we could get distracted. Why are they hungry? Why don’t the jobs of the working poor pay enough for them to live? Why, if they are unemployed, aren’t public supports adequate?  We all remember the line, “When I feed the hungry they call me a saint, but when I ask why they are hungry they call me a communist.”

    Questioning meritocracy quickly gets one called a communist: What, you think everyone should just be paid the same?  Of course not.  But in the United States, we lack a discourse of all the reasonable alternatives that lie between flat equality and steep inequality.  Models like an organization with pay grades ranging from $40,000 to $80,000 need much more attention.  We are nimble at naming the merits of doctors.  But not so nimble at naming the meritorious (not charitable) basis for paying more to front line workers – their tacit knowledge, daily engagement with unique challenges, dedication to showing up with no flex time, etc. We need to practice telling these stories. We can readily defend the pay of doctors who are repaying high medical school loans – and are less good at wondering why the U.S. lacks affordable public higher education so more people can study without incurring high debt. Are we happy if the rich give philanthropically to avoid paying the taxes that would fund public higher education, and the commons in general?

    In closing, our post does not represent the SSIR perspective on Dan Pallotta’s TED Talk.  Rather, they gave us space to share the particular perspective that we took in our 600-800 words. I’m sure they’d welcome other posts with other angles. And we are delighted to have stimulated additional points of view that extend, integrate, question, push.  We need to talk about meritocratic myths more often – they run so deep and only poke their heads up for examination now and again.

  • Daniel Bassill's avatar

    BY Daniel Bassill, Tutor/Mentor Institute, LLC

    ON March 24, 2013 09:24 AM

    I’ve been following this discussion on several Linked in pages, and here at SSIR. Last week I emailed Dan to encourage him to set up a space to aggregate all of these different discussions so they might connect to each other in a larger, on-going discussion. 

    When I first read “Uncharitable” more than a year ago I created a concept map to outline the different chapters and topics in the book, realizing that some would be so controversial that they would keep many people from focusing on some of the most important points in the book. http://cmapspublic.ihmc.us/rid=1K093X8BT-217BYXR-20WS/Discussion of ‘Uncharitable’.cmap

    One topic Dan focuses on is advertising. The smaller organizations in the social sector don’t have the advertising dollars it takes to get the attention of massive numbers of people and educate them to think and act differently in solving social problems, which includes building the needed flow of resources into thousand of locations so each has the tools and flexibility to constantly improve the work they do.

    If someone were to put a dollar value to the reach of the TED talk, and to the many different places where people are posting their own thinking, what would this add up to in real advertising dollars?  After a few weeks or months, after people forget the TED talk, who will have the advertising money, or the celebrity stage, to keep people focused on the issues Dan raises? More importantly, who will be working to innovate new solutions to some of the issues he raises….or that others entering this discussion from obscurity .;.. might propose?

    Dan talks about increasing revenue from 2% to 3% of and of focusing most of that to social service organizations who don’t have the fund raising muscle of colleges, hospitals, political organizations, faith groups.  In another Linked in discussion one person suggested that depending on where you are in the NPO sector you will look at Dan’s ideas far differently than how others in the sector view these.

    Thus, it would be great to see one or more universities map the sector, based on budget size and type of organization, to show how opinion differs in each sector, or how relevant Dan’s comments are to different parts of the sector.  Such mapping might encourage sub-groups to form among those form whom Dan’s comments resonate. 

    It would also be great to see a few benefactors step forward with advertising funds, or personal leadership, to do their own TED talks, or to create music, movies, or other media that seeks to keep this discussion going and expanding for the next 5 to 10 years. Perhaps someone who has put millions of dollars into political campaigns might see this as an investment in the future of America that is worth supporting.

  • Gerald Denis's avatar

    BY Gerald Denis, Boston University School of Medicine

    ON March 24, 2013 12:47 PM

    Thank you all for such intelligent and well considered responses to our initial submission. I’d like to contribute my own thoughts as a cancer researcher.

    Big men don’t make big science. The plutocrat-directed model for scientific research was very popular among Renaissance princes, who were proud of their position as patrons. Now we have peer-reviewed research built around a taxpayer-funded model that is directed by the NIH. The shared funding and review structure provides checks and balances that work well, as long as they are well funded by tax dollars.

    Medical research should not be run like a business, led by a visionary CEO. In practice, the hierarchical model of top-down discovery is highly inefficient and completely lacks innovation. The best scientific insights occur in the conversational space between two investigators who are close to the data, each challenging the other’s assumptions, turning over the results in an ego-free zone where reputations are not handled with kid gloves. I know of a few cases of major breakthroughs that began with an out-of-the-box question from a postdoc unfamiliar with the work, who happened to be sitting in the audience of a research seminar. Check out the current issue of Time magazine for a more detailed view.

    ‘They’ are not going to find the ‘cure for cancer’ with better direction and incentives. There is no such thing as the ‘cure for cancer’. Cancer is more than 150 extremely different diseases, some of which, like testicular cancer, now have a survival rate of about 95% (not a cure, but tantalizingly close), whereas others, like pancreatic cancer, are still essentially a death sentence. This story is not like penicillin.

    In summary, I urge all the deeply committed professionals in the nonprofit sector who read these posts to ‘stay close to their data’. No one has all the answers, and no one knows the needs, resources, distribution issues and communication problems like an experienced hand.

  • Lisa Hammert's avatar

    BY Lisa Hammert

    ON March 25, 2013 10:24 AM

    This post and alot of the comments really remind me of the reason artists Jean-Michel Basquiat and Al Diaz created the graffiti tag “SAMO©”  in the streets of New York City in the early 1980s.

  • Dave Patchin's avatar

    BY Dave Patchin

    ON March 27, 2013 09:18 AM

    The author’s main issues focus around merit, incentive, and inequity which are inherent in capitalistic societies. Pallotta argued cogently that shifting some of our thinking toward a more free-market approach to charity would benefit the sector by raising more funds. I didn’t hear him argue that research should be run by a plutocracy or by corporate ceo’s. He argued that if a charity can create more value (ie. research funding) the team should reap greater rewards in doing so.

    The authors wish to shift the entire economic sector more towards the charitable sector’s morals by eliminating the notion of merit and incentive. While Pallotta found it odd that we vilify people for making more for doing good, the authors wish to vilify a society where anyone makes more.

  • BY Maci Berkeley

    ON March 27, 2013 09:56 AM

    Oh - you totally nailed all my problems with his talk. My husband and I (‘75) choose to work for free in a mission to which we are committed. Many others to the same, or certainly for more love, less money at least. It is just not always about money, loved your example of the cancer researchers. Thank you!!

  • Morey Bean's avatar

    BY Morey Bean

    ON March 27, 2013 09:45 PM

    Your critique doesn’t sway me at all from the value of Dan’s hard earned philosophy in action. Intractable problems are perpetuated by your myth busting attempts.

  • BY Toby Eccles

    ON March 27, 2013 11:39 PM

    This article struck me as being in a great non-profit tradition. As soon as someone gets attention, gets a strong positive response from outside the sector, we find the need to bring them back down again. The sector can’t ever have a coherent voice to policy makers or the outside world on an issue because it’s too busy arguing amongst itself. I compare it to the effective lobbying of the banking industry and it makes me weep. Their voice comes through clearly and coherently, they have their arguments in private and then defend the indefensible incredibly effectively.

    Keeping admin costs down has been a pernicious lens through which to understand the non-profit sector for time immemorial. Dan Pellotta wasn’t saying anything we didn’t know, but he said it well and it reached a wide audience. I am delighted to have it mentioned to me by a potential donor as a fantastic talkbecause it helps me haveamoresensible conversation about how to understand our organisation.

    Yes the concerns raised in the article have some merit, sure. But the non-profit sector is not one sector but a heap of different types of organisation bundled together. Many of us, including my organisation, are significantly restricted in our ability to hire the people we need to hire because of the amount we are able to pay them. It’s not that they aren’t mission driven enough, it’s simply that in comparison to their friendship group and peer group the income sacrifice is too great.

    The tradition of taking people to task on individual strands, and arguing like cats in a sack, rather than working out how we support each others messages to get them heard is a significant failing of the sector. Whether it comes from the traditions of academia, or journalism, or a wish to go and find indie music when your favourite band “goes too mainstream”, I’m not sure. What is certain is that it keeps the sector from having a coherent voice and getting understood on its merits, rather than on its admin costs.

  • BY Patrick Taylor

    ON March 28, 2013 11:21 AM

    I think Palotta’s argument that overhead is not the end all be all and that it costs money to make money are important. Also, while I agree with the authors’ thoughts on compensation, I think it is a bit unfair to ding Palotta for making the point about the disparity between for-profit and nonprofit salaries. He’s pointing out that, under the current system, they are unequal. The fact that the current system is flawed isn’t his fault.

    I had a bigger issue with Palotta’s endorsement of the idea that bigger is better. One of the many complaints I heard about Komen before the Planned Parenthood debacle was that they were dominating the conversation around breast cancer with messages that many in the community disagreed with or found overly simplistic. Since they were the 800 lb pink gorilla in the room, they diverted a lot of the money that might have gone to other charities working on breast cancer issues that were doing equally important if not more important work. The name brand ends up with the money, and perhaps they end up tailoring their message and their work to appeal to the most amount of people, regardless of whether that is the best approach. That’s one of the tragedies of the charitable sector- the sexy, easily digested causes get the most money, while many worthy groups whose work is harder to sell struggle for funding. The counterargument to this being that Komen attracted donors to the space who would have never been interested in breast cancer research had it not been for Komen’s co-branded pink KFC buckets and handguns.

    In regards to overhead, charities need to be careful that they are not in the business to exist and pay their staff. I agree that donors and foundations need to be more flexible regarding overhead rates, but charities can’t get into the mindset that by simply existing they are doing the world a favor. I see this time and time again with charities that struggle to exist without asking whether it makes sense for them to exist in the first place. Every charity is potentially taking money from other charities, so they have to be conservative in how they spend that money and what gambles they take. If a for-profit goes belly up, their investors money disappears. If a nonprofit goes belly up, they are taking some portion of the small pool of funds donated to charities down with them.

  • Peter S's avatar

    BY Peter S

    ON March 29, 2013 12:03 PM

    How peculiar it is to read a critique of a speech that does not actually include any quotes from the speaker. Imagine writing an article on the Gettysburg address without even a single quote from Lincoln! The authors’ critique is based on a single quote never actually uttered by him: “The $400,000 talent will not work for $84,000.” To be very clear, what he did say is: “Now, there’s no way you’re going to get a lot of people with $400,000 talent to make a $316,000 sacrifice every year to become the CEO of a hunger charity.” So instead of basing their critique on something he actually said—that not many CEOs with an MBA will choose the relatively low pay of a charitable organization—they have twisted his words into something quite different, instead fixating on the $400,000 figure over and over.

    To refute the quote they’ve invented themselves, they use one, single example of the non-CEO, non-MBA government-funded cancer researcher whose salary is capped at $179,000. We are supposed to believe this disproves without question that “talent won’t work without the big prizes.” Would you like some apples with those oranges? Mr. Pallota has only said there’s no way you’re going to get *a lot* of talent—particularly in leadership roles in charge of fundraising—without those big prizes. If the authors can actually refute this particular statement using facts, by all means, please do. They then claim that these “cancer researchers who love their work have made much progress,” as if to imply that Mr. Pallotta would argue such progress is impossible on a $179,000 salary. Again, despite their insinuation, he has made no such claim.

    To their credit, the authors do write that “the mission-focused ethos has drawn many top executives to work for $84,000.” Again, if they have data to show that “many” executives with MBAs work in the nonprofit sector –enough to contradict his assertion that “not many” will be drawn to this sector—please write about this in greater detail, as it would make for an interesting read. Instead, they have crafted an entire article fixated on a distorted retelling of what he said about a $400,000 salary.

    Lastly, the authors bemoan the fact that in his 3,000 word talk about the private, charitable sector, he didn’t spend enough time praising the glorious public sector. Throw in a reference to Obama’s minimum wage, call it a “falsehood” that some workers deserve to be paid more than others, and it’s clear the authors are statists who would prefer a tightly controlled “market” and a society where “needs” and “merit” are determined by some all powerful state regulator.

    Thanks but no thanks. While you’re worried about the salary of a nonprofit CEO beholden to his or her donors, I’ll be worrying about Washington’s out of control corruption and abusive spending.

  • Lalita Booth's avatar

    BY Lalita Booth

    ON April 3, 2013 09:48 AM

    As a high school dropout who grew up to perpetuate the cycle of intergenerational welfare, AND also as nonprofit manager who went on to earn an MBA and a Master of Public Policy both from Harvard, I come to this argument wearing three hats: The face of the issue of inequality of opportunity that seems to be up for debate here, the “underpaid” policy wonk and nonprofit manager, and the Harvard MBA who values ruthless efficiency and economic analysis. My perspective is that there is an important disconnect between the point Dan Palotta makes in his TED talk and this SSIR rebuttal.

    This rebuttal addresses the question of intrinsic value, and Dan was talking about real-world, OPPORTUNITY COST.

    I don’t think he ever made the argument that one person is intrinsically worth any more than the other, or that the work that a highly-compensated employee performs intrinsically generates more value. That wasn’t even in the subtext for me. The overarching point is that people who go into public sector jobs face a breathtaking opportunity cost in terms of lost income. It’s not about how much they think they’re intrinsically worth. It’s about how much income they can reap, and the cold hard fact is that given two alternative ways to deliver $100,000 in value to the nonprofit sector, the more efficient of the two is to go work for a hedge fund, give $100,000 to the nonprofit AND keep some income in your pocket with which to pay the astronomical student loans that you had to take out to be competitive for a $400,000 a year job in the first place. It’s not about right or wrong. It’s about what happens in the real world. This is how people make decisions about whether or not to pursue careers in public service, and the calculus is problematic.

    I also don’t think he ever proffered the argument that no one is willing to go work in the public or social sectors when a lucrative for-profit alternative is available. Sure, some people are. But how much talent is the nonprofit sector missing out on every year because the pay isn’t competitive? And it’s not just about whether you have the meddle to stomach a pay cut. For those with nuclear and extended families to care for, children with special needs (like myself), large student loans to pay off, and other extenuating circumstances, going to work for peanuts in the public or nonprofit world isn’t just unappealing, it’s not an option at all. I watched cadres of talented, newly-minted MBA’s in my class run the numbers only to conclude that they could not afford to survive and meet their student loan obligations on a public or social sector salary.

    Status quo? No thank you.

  • Rafael Henrique's avatar

    BY Rafael Henrique

    ON April 8, 2013 11:18 AM

    My humidity opinion:

    Maybe the most resonant Dan Pallotta’s phrase should be corrected for: “The $400,000 talent DON´T NEED to work for $84,000 to help the world”…

    Both the charity and social business are effective tools to promote the only way that exists to change the world: CHANGE THE HUMAN BEING. The question is know how to use them properly and on time.

    There’s plenty to question (eg: “under what negative impact these gentlemen on the private market build their wages of $ 12MM per year”), but is utopia to think that we can change the world before change the people and therefore to be effective, we must play with the rules of the game and escape on the tangent to start promoting the changes we, people engaged with social causes, are capable to glimpse.

  • Patton Shaw's avatar

    BY Patton Shaw

    ON April 9, 2013 08:17 AM

    The writers of this response to Dan’s TEDx talk are obviously very smart (and apparently well intentioned) but are so wrong on so many levels.  They picked one piece out of his presentation and made it his entire presentation.  I am sure they are fine people but the views them seem to be espousing are closer to communist than capitalist.  How’s that worked over the last 100 years…
    To think that there are not effective leaders that are $400k+ talents is ludicrous.  Most people are not, and many that get paid that much might not be, but that is not the point.  If nonprofit leader can successfully run a program that helps lift people out of poverty (e.g. helps them earn a higher wage), creates a lasting measurable impact, and does it consistently over the long haul with lots of people, who says that person should not make $400k+ or is not a $400k talent.
    I fear that our country has a bounty of smarts and is anemic when it comes to wisdom.  Class envy (along with hypocrisy) is rampant especially on college campuses with those that tend to have a lot of initials after their name.

  • Samara McCullough's avatar

    BY Samara McCullough

    ON April 18, 2013 08:43 AM

    “According to a study by the TIAA-CREF Institute and Independent Sector, about 45 percent of all employees in the nonprofit sector are not confident with their ability to prepare financially for retirement.”  Also, roughly one half consider leaving nonprofit work to find positions with higher compensation.  I am one of them.  We need to stop pretending that money doesn’t matter.  It matters a lot.

  • Is there a thing that so many people have to find a problem with Pallotta’s talk?

    Stop focusing on the minutae. The point isn’t whether $400,000 should be the base salary. The point is, the organziations that succeed, regardless of size, industry, nationality, of profit-status, understand the basic axiom that quality talent should be compensated.

    This compensation isn’t solely measured in dollars and cents, but this idea that people will work for the “warm fuzzies” is killing our best organizations and derailing their noble missions.

    The people who work for these organizations need to eat, need to educate their children, need to be able to rent/mortgage. Asking them to go without for the sake of the mission is a rank injustice.

    If they can do these things for $84,000, great. If not, we shouldn’t be so beholden to the idea of the poor nfp leader that we make no reasonable change for evolving needs.

    That was the point of Dan’s talk.

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    ON June 13, 2013 06:59 AM

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  • BY Elizabeth Johansen

    ON October 16, 2013 06:54 AM

    I like this thinking - it is important to point out that every person has value beyond the salary they can command in this random market in this random system at this point in the history of humanity. I still totally agree with Dan in the way he presents this issue in his TED talk: there are people who may have engaged in more charitable work, but the math just didn’t make sense. The nonprofit sector still manages to attract many great people despite this issue, but I think there could be so many more!

    Kweder Dennis and Scully have their eye on the long-term game: where we eventually want to go as a society. Dan Pallotta has his eye on the next step to get there. Give more opportunity for people to be exposed to global inequality, even by paying a healthy salary for them to work in a nonprofit. If we do this, our crazy meritocracy can only last so much longer!

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