Turning Philanthropy Upside Down

Turning Philanthropy Upside Down

Michael Jacobs

Atlanta Jewish Times Editor Michael Jacobs is on his second stint leading the AJT's editorial operations. He previously served as managing editor from 2005 to 2008.

Editor’s Notebook

Much of the General Assembly of the Jewish Federations of North America was exactly what you would expect in a gathering of communal organizations that together collect and disburse almost $1 billion a year for the good of the global Jewish community.

We heard about threats to our future, whether here or in Israel, and programs that are working against those threats. We heard about new ideas and venerable efforts. We heard young people explain why they were drawn to the Federation system and older people explain how much Federation meant to them at crucial moments in life.

We heard Israeli Prime Minister Benjamin Netanyahu’s optimistic if militaristic view of the U.S.-Israel future, and we heard Israeli opposition leader Isaac Herzog’s less clear ideas for how the United States and Israel should work together.

We heard ideas to raise more money and better ways to spend it on community needs.

But one presentation stood out as a potentially game-changing idea for Federations and other Jewish communal agencies.

Michael Jacobs
Michael Jacobs

Dan Pallotta, who created the AIDS Ride and the three-day breast cancer walks and thus has been responsible for raising more than half a billion dollars, asked a simple, powerful question: What if everything we believe about charitable fundraising is wrong?

It was not a new topic for Pallotta, whose ideas are captured in his book, “Uncharitable: How Restraints on Nonprofits Undermine Their Potential.” But it was new to me, and to judge from the reactions among the nearly 3,000 people in the ballroom at the Washington Hilton, it was new to most of them.

When we evaluate charities, we focus on their efficiency. We want almost none of our donations to be spent on overhead and administration so that almost all can go to the cause. For example, the Jewish Federation of Greater Atlanta gets a four-star rating from Charity Navigator because 89.9 percent of its total spending goes to programs and services rather than administration and fundraising.

It’s worth noting that, if anything, the insistence on efficiency and transparency in charities is stronger in millennials who are just entering the donor pool. David Koonin, 28, said during a Birthright Israel gala Monday night, Nov. 16, that his generation is skeptical of Jewish philanthropy and wants to know where every dollar is going so that nothing is wasted.

Pallotta, however, would argue that we’re making a false division between spending on the cause and spending on administration and fundraising. He drew a contrast with the for-profit business world.

Apple, for instance, spends billions on marketing and research and development to improve products, increase demand and drive more sales.

Big companies dare to make mistakes, recognizing that one big success more than makes up for several failures. But charities aren’t allowed to take risks, and a single failure is enough to cause an uproar.

The top executives at philanthropic organizations are paid well compared with, say, the welders and philosophers Marco Rubio talked about at the last Republican presidential debate. But they’re paid a pittance compared with executives with the same abilities and responsibilities in the corporate world. And those corporate executives are rewarded for bringing in new sales and profits, while their nonprofit friends don’t have a profit-sharing motivation.

Under Pallotta’s vision of applying the approaches of innovative for-profit companies to the nonprofit world, a charity would spend a smaller percentage of its money on programs and services, but that smaller slice would come out of a much bigger pie. And 60 percent of $10 million ($6 million) is a lot more than 90 percent of $1 million ($900,000).

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