I’m Honnie Korngold the producer of the nonprofit documentary BROKEN FOR GOOD: The Way Charity Works in The United States of America. I’m here with CineVantage’s film director Cory Carroll and today we’re going to be doing a little Q&A with Jimmy LaRose, Chairman of National Development Institute and co-founder of National Association of Nonprofit Organizations & Executives. Together we’re going to explore whether or not the nonprofit sector is truly BROKEN FOR GOOD? Take it away Cory!
Cory Carroll: All right, It’s good to be here, thank you Honnie. Jimmy I’m just going to start firing questions at you so answer away. Why don’t we start with, “What is the purpose of a charitable organization?” “
Jimmy LaRose: Thanks Cory. Fundamentally, the purpose of a charity is to make money just like any other corporation. The difference between a for-profit business and a nonprofit business is simple. For-profit companies have owners (sometimes shareholders) and as monies are made they’re returned to the owners in the form of dividends. In a nonprofit, monies are made and instead of going to shareholders they’re invested in social impact, education, the arts, human services, welfare, the environment, etc. So allow me to say again THE NUMBER ONE FUNCTION OF A CHARITY IS TO MAKE MONEY! Furthermore, the number one indicator of a charity’s ability to accomplish its mission is measured by how many staff members it’s adding. If you’re not adding staff you’re not growing. In order to add staff you have to be financially sustainable. Nonprofits who achieve their goals know that money is more important than mission. Let me put it another way, nonprofits who succeed commit to revenue generation over program services. If we create a healthy flow of cash (which is what every successful small, medium-sized or multi-million dollar business does) then we grow mission exponentially. Simply put, WE HAVE A PRIORITY PROBLEM in the nonprofit sector. Individuals are more concerned about the rain forest, the student, the family in need, when in reality none of those causes or individuals are their customers. Why? BECAUSE THEY AIN’T GOT NO MONEY. Your primary customers are the donors who want to purchase a stake in your meaningful cause. So why aren’t we putting money first?
Honnie Korgold: Cory, can I just interject with a little question here? Hey Jimmy, why is it that it’s like “nails on a chalkboard” when you tell nonprofits to “put money first?” Why is that so–it’s like they just, they go insane, they can’t hear it, they don’t want to hear it. Why is that?
Jimmy LaRose: There’s certainly a piety around money isn’t there? Have you ever heard the line “there’s things more important in life than money.” Okay, I will grant you that money in and of itself is not impressive. But air, oxygen, like money, isn’t impressive but it’s absolutely necessary for the sake of living life. Many of us don’t have the money other people have and we end up projecting on others this piety around the acquisition of cash as though it’s lowbrow, as though it is pedestrian. Families put money first, small businesses put money first. We all prioritize our financial lives so we’re able to take care of the people we love. Author John Horak, co-founder of the The Alliance of Nonprofit Growth & Opportunity is fond of saying, “Charities ceremoniously HIDE BEHIND MISSION as an excuse to neglect the harder work of acquiring the cash they need to achieve significant impact.”
Cory Carroll: Wow, OK, here’s the next question, how would you sum up the nonprofit sector’s NUMBER ONE PROBLEM.
Jimmy LaRose: Cory, the number of things wrong with the charitable sector ARE COUNTLESS. I suppose that’s why you and Honnie are making this nonprofit documentary. Let me take a stab at this, OK, CHARITY’S NUMBER ONE PROBLEM is…hundreds of thousands of nonprofits are being run by well-meaning people who are unqualified and have no business being in charge. Let me put it another way. Why would you ever let a medical doctor head up a hospital…a therapist oversee a counseling center…a social worker head up children’s home…or an educator provost a college? UNLESS THEY ARE EXPERT CEOs WITH A PROVEN RECORD OF MAKING MONEY. Simply put, strong nonprofits replace “do-gooders” with aggressive entrepreneurial money-making CEOs who can grow their organization! BUT WAIT…IT GETS WORSE we then saddle charitable leaders with a group of disengaged volunteers we call BOARD MEMBERS who may or may not have a history of growing an enterprise or have any experience serving a particular population. Simply put, the nonprofit sector is being run by people who shouldn’t be in charge.
Corey Carroll: Okay, in your opinion, WHO IS KEEPING THE NONPROFIT SECTOR BROKEN?
Jimmy LaRose: Thank you for asking. THERE ARE FIVE GROUPS THAT MUST BE CONFRONTED (which is why this nonprofit documentary is so important):
I’ll share just one of many examples. United Way is the worst offender. Why? They don’t provide direct services but use their well-known brand to convince for-profit corporations to give them money. WHY? So the corporations can avoid dealing with the charities directly. You see, CORPORATIONS USE UNITED WAY AS A BUFFER so they can deny inquires from real nonprofits. Corporations get the benefit of SEEMING CHARITABLE by giving to the United Way without accomplishing ANY real impact. Corporations pay off the United Way so they don’t have to concern themselves with problems in their community. THERE’S NOTHING CHARITABLE ABOUT GIVING TO THE UNITED WAY! United Way keeps half or more of the cash they take in and then doles out what’s left out in amounts so tiny that they keep all the charities POOR. Nobody gets enough money from the United Way to be financially sustainable. I’m begging donors to look at the 990’s of your local United Way and find out that one third, sometimes half your gift goes to keeping their money-making machine going when it would serve you better to give your entire gift to the charity you love DIRECTLY. READ MORE: Why I Withdrew My United Way Donation and Donated Directly!
I know “intermediaries” is a strange term, but I think I can explain this. Most States have a nonprofit association (TANO, LANO, OANO, SCANPO, [e.g. SCANPO stands for South Carolina Association of Nonprofits, OANO stands for Oklahoma Association of Nonprofit Organizations, etc.,etc,.]) SCANPO has something like 600 members (small to medium charities) throughout South Carolina. That makes SCANPO an intermediary organization. An intermediary is a nonprofit who has organized a group of other nonprofits. But wait, it gets worse, there’s another layer. You see SCANPO, TANO, LANO, OANO are all members of The National Council of Nonprofits. The National Council of Nonprofits is another NONPROFIT WHO HAS ORGANIZED THE STATE NONPROFITS WHOSE CUSTOMERS ARE THE LOCAL NONPROFITS. It’s literally insane. Why? These ancient organizations sell members the same failed PowerPoint Presentations they wrote in 1989. Their rules, regulations and so-called “best practices” haven’t worked in decades. THESE ARE THE GROUPS THAT TRAIN OUR SECTOR LEADERS. They’re bereft of substance and keep the sector paralyzed. How do I know? They’ve had five decades to demonstrate their value and each year the charitable sector keeps going backwards. Your State Association is failing you. When’s the last time SCANPO raised you any money? NEVER. WATCH 2 MINUTE VIDEO BELOW:
#3 PRODUCT SELLERS:
Though there are hundreds of vendors misleading nonprofits Blackbaud and their donor database management system “Raiser’s Edge” may be the worst offender. They brazenly sell naive charities (and uneducated boards of directors) an overpriced product they don’t need and doesn’t work. Charities mistakenly believe that Blackbaud makes money by charging you enormous prices to use their software. THAT’S NOT WHERE THEY MAKE THEIR MONEY. When you sign a contract with Blackbaud you’re locked into their high-priced credit card processing system. THEY’RE MAKING MILLIONS on you, your donors, and sales by holding onto your money and charging you the highest FEES in the industry. Ever since they began trading on the NASDAQ their sales team’s “sheep-shearing” tactics have gotten worse. Go to any nonprofit conference event their sponsoring and you’ll see what I mean. VISIT HERE: Is BlackBaud Predatory?
Consultants keep nonprofits in a state of paralysis by prescribing solutions that deal with symptoms, rather than healing the systemic issues. Consultants make more money by keeping charities sick so they can continue to prescribe solutions they say will work BUT DON’T. If a consultant tells you, “your board needs training” RUN. Who in their right mind would spend thousands of dollars on training their own bosses. No amount of board workshops is going to turn a group of unqualified, disengaged volunteers into enterprise leaders. Simply put, if you have to train your board YOU’VE GOT THE WRONG MEMBERS. If a consultant tells you, “in order to fund raise you need a feasibility study” RUN. The charitable sector has an organized “drug dealer” and “drug user” problem, rooted in a well-known (yet secret) agreement between intermediaries, consultants and industry rags. Consultants will be paid large sums of cash to perform unhealthy acts of triangulation with your donors because they’re experts and will really find out what your donor’s are thinking. IT’S HOGWASH. Donors who make big gifts share their concerns directly with leadership. Donors who make big gifts do not use a third party to reveal their secret anxieties. Feasibility study consultants brazenly sell the dysfunction of triangulation as one of the most important features of their product. $35,000 dollars later the consultant comes back with their report and shares. “You’re not ready for campaign.” You don’t need to spend tens of thousands of dollars to find out what you already know! WE MUST DISRUPT THE FLOW OF MONEY FROM CHARITIES TO CONSULTANTS. They’re defrauding our sector. VISIT HERE: Consultants & Feasibility Studies – The Crack Cocaine of Nonprofit Consulting
#5 MEDIA OUTLETS:
The media outlets are the worst offenders of all. There’s this circle of corruption between the aggregators, intermediaries, product sellers, consultants and media outlets who pay one another to foist their failed offerings on naive nonprofits. Volunteer boards simply don’t know any better. Consultants and product sellers buy-off the intermediaries by sponsoring their state and local “training events” and then pay the industry rags to reinforce their value. Furthermore, the media outlets attack anybody that questions these outdated solutions. Remember Chronicle of Philanthropy and Nonprofit Quarterly are schilling for product sellers and consultants in exchange for AD revenues. It’s a never-ending circle of deception designed to dupe unsuspecting charities.
So there you go Cory. The AGGREGATORS, INTERMEDIARIES, CONSULTANTS, PRODUCT SELLERS and MEDIA OUTLETS COLLUDE WITH MALICE AND FORETHOUGHT have to be stopped. It’s a never-ending machine that makes money for everyone except the charity.
Cory Carroll: Well Jimmy, that was both illuminating and horrifying. You’re really pulling back the curtain on this whole mess. What if I asked you to go a different direction by simply asking, “What’s the answer for nonprofits? What do they need to do to get out of this dysfunction?”
Jimmy LaRose: Cory, we’ve provided nonprofits a STARTING POINT. Here’s three steps:
Cory, joining NANOE will save your life. First, you’ll discover you’re not crazy. Second, you’ll experience relief when presented with new knowledge sets that finally make sense. Third, you’ll become the thought-leader our sector so desperately needs. Social, cultural and environmental issues such as hunger, homelessness, mental illness, substance abuse, ethnic and cultural conflict, ethnocentricity, loss of some species, rise of oceans, and poverty show little signs of improvement. While good is happening on a small scale, too few nonprofits have the capacity to significantly address pressing, complex conditions such as poverty, hunger, homelessness, lack of water, loss of species, violence, bullying, school shootings, child abuse and neglect, and more! Charity has settled for serving these complex issues instead of eradicating them. While there will always be room for good people doing good things in a small way, NANOE concentrates its efforts on those nonprofit leaders who want to accomplish their organization’s missions at a scale that results in significant impacts and transformations. We need courageous, competent, willing leaders to lead and organize their nonprofit to achieve impact and transformation. It’s time to fully eradicate the pervasive social, health, cultural and environmental issues that are devastating our lives, and replace them with a new and better world.
Honnie Korgold: Cory & Jimmy THANK YOU FOR A WONDERFUL HOUR. This discussion both boggles-the-mind and will change the hearts of people who care about charity.
The new nonprofit documentary film BROKEN FOR GOOD is based, in part, on Jimmy LaRose’s RE-IMAGINING PHILANTHROPY and the work of Dr. Kathleen Robinson of Clemson University. BROKEN FOR GOOD also features Melinda Gates of the Bill & Melinda Gates Foundation, Dan Pallotta of the Charity Defense Council, Juanita Wheeler of Full & Frank, Nat Ware of 180 Degree Consulting and Diana Ruano of the UN Refugee Agency. Nonprofit documentary film maker Honnie Korngold is the founder of CineVantage Productions, a full-service television production company, supplying reality and non-fiction programming to networks in the US and internationally. With offices in Los Angeles, California and Denver, Colorado, the CineVantage staff of talented and creative producers, directors, photographers and editors offer consummate expertise in all areas of TV production with a special emphasis on documentary, travel, lifestyle, faith.