A must-watch video explains why it’s wrong to focus on non-profits’ overhead

In a great TED talk, Dan Pallotta explains that the way we think about non-profit effectiveness is wrong. We should focus on the results an organization achieves, not on the percentage it spends on “overhead,” he says:

We’ve all been taught that the bake sale with five percent overhead is morally superior to the professional fundraising enterprise with 40 percent overhead, but we’re missing the most important piece of information, which is, what is the actual size of these pies? Who cares if the bake sale only has five percent overhead if it’s tiny? What if the bake sale only netted 71 dollars for charity because it made no investment in its scale and the professional fundraising enterprise netted 71 million dollars because it did? Now which pie would we prefer, and which pie do we think people who are hungry would prefer?

This is very similar to Jim Collins’ argument in Good to Great and the Social Sectors, which is a must-read for those who work at non-profits.