Dan Pallotta Argues for Nonprofit Overhead Spending

Every now and then, we hear rumors of a nonprofit executive who is extremely well-compensated. We see other nonprofits get lambasted in the media for not a large enough proportion of expenses going to their core programs.

I think this attitude of vilifying well-compensated employees and vendors is dead wrong. Dan Pallotta agrees with me and explains why that attitude is wrong far more eloquently than I ever could.

I chose to show the video from TED’s youtube channel for embedding reasons, but the video on TED’s own website has over 4 million views. Yet, at least in my experience, this attitude still has yet to change much.

Lack of Industry Standard for Nonprofit Expenses

I think a part of the reason is that the nonprofit community doesn’t set a clear standard for what is an acceptable proportion for programmatic expenses. I’ve worked in the entertainment and legal industries in the past and both have very powerful unions and trade associations that dictate behavior in those industries (George Lucas left the Director’s Guild and went 22 years without directing another film over a dispute concerning his opening credit sequence).

Though some of the staunchly Republican lawyers I know would balk at the insinuation that they are members of a union, the power of their state bar association protects their privileges as workers with an alarming amount of power. The bar association prevents me from owning a law firm and competing with their business because I am not a certified lawyer. Even if I am not the one doing the legal work, I cannot found, purchase shares, or earn shares as part of compensation of a law firm due to state bar rules. That’s a pretty impressive worker protection. Imagine if Ford was owned only by factory workers.

Even for those who are certified lawyers and paying members, the state bar has the power to take their license away if they act unethically. This organization whose officers are not elected by the people, or even appointed by someone elected by the people, is in a position to tell someone that they are not allowed to do a certain type of work. This not only preserves power for those in good standing with the organization, but it also keeps the government and media scrutiny off of their back.

Nonprofits don’t have that. They don’t have a nonprofit organization that can certify who is allowed to do what type of work. They don’t have a set of standards for what nonprofit expenses and activities are acceptable. They have no tools to discipline those who act in a way that deteriorates the trust people have in nonprofits, which dissuades people from donating. It’s hard enough to convince people to part with money they can easily spend on themselves; it’s even harder when those people have heard many stories of how nonprofits spend that money frivolously and without accountability.

Impact of the Fear of Unnecessary Nonprofit Overhead

But I’m not trying to write a Nonprofit Union Manifesto. I’m trying to illustrate the impact on nonprofits of not having the same industry-imposed standards that other organizations do. And the impact of that is a fear to take risks, particularly with anything that isn’t programmatic.

With no agreed upon marketing spend thresholds, nonprofits are left to their own judgment. In this situation, they make decisions to avoid criticism rather than take calculated risks that could pay off big time but may not come to pass immediately, if ever. This criticism that they attempt to avoid might come from the media, major donors, those above them in the organization hierarchy, or even from themselves. Everyone has a moral compass, and even those in nonprofit communications feel a duty to preserve money for programmatic expenses, which might outweigh their desire to take a risk on a communications tactic they’ve never tried before.

To avoid criticism, nonprofits spend small amounts on meeting expectations with tried and true methods. A good example of this is the website. Though it’s not programmatic, almost every nonprofit has a website because it is perceived as a necessity of every organization. It’s commonly referred to as an online storefront, and in 2018, not having one seems about as ridiculous as not having an address.

But what value does your website really bring you? Have you looked through the analytics and determined that it’s a worthwhile tool to get more people involved in your organization? Or is it simply an online brochure that can be found only by those who already know where it is?

Unclaimed Free Resources

There are many great resources, such as Salesforce and AdWords, that are regularly underutilized by nonprofits even though nonprofits receive massive discounts or free access simply by nature of their nonprofit status. Why is this? Each specific organization has their own reasons, but from my research and experience as a nonprofit volunteer, in-house staff, board member, and now outside vendor, I find that in general, it is a desire to avoid the criticism that they would receive if the project did not work out as hoped, which is magnified by these attitudes about nonprofit overhead.

For-profits regularly pay full price for the resources I included in the links, as well as several more marketing products that I haven’t included, but nonprofits who get these for free are hesitant to put in the expense of staff wages or outside vendors to use these tools.

Google Grants

I’ll cover specifically Google Grants because that is the resource I am most experienced in. Google gives nonprofits who enroll $120,000 a year to spend on AdWords. Only 35,000 nonprofits are enrolled. That’s enough to show this program has legitimacy, but when you consider how many nonprofits exist in the world, that is an infinitesimally small percentage of those who could benefit.

And AdWords isn’t some obscure product that is only beneficial to a few. It accounts for the majority of Google’s $89 Billion in revenue. For-profits pay that amount to Google, but also regularly pay the industry standard of an additional 15% of that to that to various AdWords experts to manage their account. Yet Google offers nonprofits $120,000 a year on this hugely popular platform for free, and nonprofits, in large numbers, don’t bother applying. Further, the money is allotted as $329 a day that is use-it-or-lose-it, which should be enough to make an application a priority as every day they drag their feet, they are missing out on money. But nonprofits still don’t pursue it. If that same amount was removed from a nonprofit’s bank account, there is no way that they would allow that to continue.

This program has existed for 15 years, which means that any nonprofit that has not enrolled but is eligible has turned down $1.8 million dollars in free advertising on the most popular advertising platform in the world. You may think that nonprofits have no need to advertise, to which I would reply with examples of the many revenue generators that my clients include on their website and promote with Google Grants.

However, even if your nonprofit doesn’t have anything that you can include on your website and generate revenue from, AdWords still has value. Thinking of AdWords only being valuable for sales is a generalization that stems from it’s most common use with for-profits. All AdWords does is send people who search something related to your organization from Google’s search engine to your website. This tool can and should be used to reach the people your organization wants to help. Organizations spend a lot of time and money building and updating their website, but for just a little more, they can get their website seen by 5,500% more people.


Even though I explored one reason for why these freebies go unclaimed and I have plenty of experience speaking with potential clients about this free opportunity, I’m still shocked every time a nonprofit does not have a Google Grants account and has no interest in getting one. Even though I have a lot of confidence in my ability to manage Google Grants accounts, I’m humble enough to admit that I’m not the only who knows Google Grants well (though admitting there are others in my league may be considered by some to be Kanye-level humility). Some of the clients I pursue choose to work with talented vendors other than me, and I wish them luck. But the clients I pursue who choose to take no action toward getting Google Grants are still mind-boggling to me.

Though I think a nonprofit union that disciplines itself would be helpful in solving this problem, I don’t have all the answers. I am not a trade association representative, a nonprofit management consultant, or even an Executive Director of a nonprofit. I’m a digital marketer who knows first-hand how this attitude hurts a nonprofit’s ability to do good in the world on a larger scale. I wish Dan Pallotta and other thought leaders speaking and writing on this issue luck in changing how we all view nonprofits.

Michael Rasko is a nonprofit marketing consultant who specializes in Google Grants. If you work with or for a nonprofit who is interested in starting or improving a Google Grants account, contact him to learn more about a one-month, no-commitment free trial. Included in the free trial is application assistance for new accounts and re-activation assistance for accounts that have been suspended for policy violations.

You can contact him for this reason or any other reason by filling out the contact form below or calling (503) 558-6500. If you do call and get voicemail, remember to leave a detailed message to differentiate yourself from the many robocalls that publicly listed phone numbers receive.