‘Dare to spend money in order to make real impact’

Boudewijn Poelmann will hand over the chairman’s gavel to Sigrid van Aken with effect from March 2020. This will make her the new CEO of the social enterprise Novamedia/Postcode Lotteries.

Activist, reformer, author and speaker Dan Pallotta wants non-profits to focus less on overhead and more on investing and taking risks.

‘The way we think about charity is dead wrong.’ With this TED Talk in 2013 Dan Pallotta really shook up the (non-profit) world. His talk was seen by over 6 million people. However, breaking old patterns and counter assumptions isn’t easy, since Pallotta’s theme is still current today. Invited by the Postcode Lotteries he talked an hour exclusively to the lotteries beneficiaries, ambassadors and employees. “You need to think and act as a pro-profit company if you really want to change the world. Dare to spend money in order to make real impact.”

Funding philosophy
Pallotta is a supporter of the funding philosophy of the Postcode Lotteries. “We don't have anything like you in the United States. You are giving away as much money as the Ford Foundation, but their donations aren’t unrestricted. It’s incredible to have a resource this large that is willing to finance dreams in an unrestricted way. Everyone should realise how important it is to invest that money in your dreams. Don’t be shy about actually articulating your dreams to the full measure.”

It is not only the amount of money that the Lotteries raise each year and the unrestricted way of financing that makes an impact on the work of charities. Postcode Lotteries have a partnership based on trust, which often lasts for years and the charities can decide how to spend the money, trying new things, taking risks, joining forces.

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'Charities get rewarded for low overhead, that's the opposite of solving problems'

'Let’s focus on impact'
Pallotta rhetorically asked the audience why nonprofits aren’t changing the world the way we hoped they would. “Because it isn’t what we ask them to do. We ask them to keep their overhead and salaries low. Making a huge impact, has become secondary. Nonprofits get rewarded in the media and in the public domain for having low overhead and low salaries. That is the opposite of the path for actually solving problems.”

Pallotta argues charities should indeed invest in people.“We need more talented people’s full-time attention to solve problems instead of making all the talent go into the for-profit sector.”

Advertising and fundraising
He also argues that nonprofits should use the same playbook as the for-profit sector and spend more on advertising and fundraising. “Companies like Coca Cola and Apple are telling their story every day. If we don’t allow nonprofits to talk in the marketplace how do we think they will ever grow to meet the size of these problems?”

And he advocates risk-taking in fundraising. “We allow the for-profits to take risks, chasing after new revenues. Disney can make a 200 million dollars movie that flops. They just keep trying to figure out which movies will sell, and which ones won’t. Nonprofits can’t do the same. If you invest 1 million dollars in community fundraising and it doesn’t produce a 90% profit of the cause the first time, it’s considered a failure and your character is called into question.”

'It all starts with fundraising'
The consequence? “Nonprofits are terrified of trying any gigantic new fundraising ideas, for fear that if the thing fails, their reputation will be dragged through the mud. How can you ever learn anything if you can’t fail? I can't emphasize enough the need to invest in fundraising if you are a mature nonprofit and you have a solid idea that is worth growing.”

To donors Pallotta advices: “If you want to give, find a great organization and give it to the fundraising operations of that organization so that it can grow and it can be independent of the need for your money.”

 

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Hundreds of lotteries beneficiaries, ambassadors and employees joined the conversation with Dan Pallotta, hosted by Novamedia's Martijn van Klaveren en Judith Lingeman.