NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, May 16, 2016

In The Business of Good, serial and social entrepreneur Jason Haber intertwines case studies and anecdotes that show how social entrepreneurship is creating jobs, growing the economy, and ultimately changing the world. In this edited excerpt, Haber explains three ways charities are failing donors — three things your social business can do differently to really make an impact.

There are three basic characteristics of the Charity Industrial Complex. First, it holds that charities should be meek in overhead but mighty in intentions. Second, it presupposes that guilt is the most effective tool to build donor support. Third, charities reward the act of giving without tying directly to impact.

It’s a common refrain: “How much of my money will go into the field and how much to overhead?” Overhead is the bane of charities’ existence. They must keep it as low as possible or face public shaming. Charities have been hampered by their own approach and by societal expectations.

“The things we’ve been taught to think about giving and about charity and the nonprofit sector are actually undermining the causes we love and our profound yearning to change the world,” Dan Pallotta said in his powerful 2013 TED Talk. He was referencing our aversion to overhead.