Pallotta Teamworks is a bit of a special case. As a private, for-profit company who raised money for AIDS and cancer non-profit organizations, they had a business model that was quite controversial. While their rides and walks were popular with the participants, and they raised a lot of money, the entire non-profit sector was ambivalent about them. They loved the money but hated the commercial message, hated the profit angle, and was not happy with the percentage of revenue that made it through to actual research. I would bet this was a major factor in Avon taking control of their fundraising events.
This seemed like an interesting story so I dug into it a bit more because the notion of a for-profit charity organization was unfamiliar to me.
But detailed information seems very scarce. The article states Avon were sued for breach of contract - but mentions no damages, despite an apparently successful claim. This seems very strange - clearly the founder was passionate about his cause, so why not take whatever penalties were paid out and use them to restart the cause?
From reading the Pallotta Teamworks (PTW) site (http://www.pallottateamworks.com/about_pallotta4.php), one can infer there was apparently an arbitration (IANAL, how do you go from "suing" to "arbitration"? I thought suing can only happen after arbitration but there's no mention of a lawsuit...) but even on that site there is absolutely zero indication of PTW receiving anything despite "winning". This story just doesn't add up.
KomenWatch, which seems rather biased, but still adds another angle to the story, suggest that Avon severed ties with PTW because of growing criticism (http://komenwatch.org/history-politics/avon-3-day/).
Anybody have a reference to a more objective discussion of these events?
"Avon Products Foundation, Inc. (the “Foundation”) has been a defendant in an arbitration proceeding brought by Pallotta TeamWorks (“Pallotta”) in September 2002, before Judicial Arbitration and Mediation Services, Inc. Pallotta asserted claims arising out of the Foundation’s decision to use another party to conduct breast cancer fundraising events. In July 2005 the arbitrator issued a Partial Final Award in this matter, awarding Pallotta $3.0 [million ] in net damages, after an offset for Foundation counterclaims. The arbitrator also instructed the parties to reach agreement on three outstanding issues: (i) pre-award interest; (ii) costs and attorney’s fees; and (iii) possible liabilities under Pallotta lease agreements. In October 2005 the Foundation entered into a settlement with Pallotta and paid Pallotta $7.5 [million] in exchange for a release of Pallotta’s claims. The Foundation is a registered 501(c)(3) charity and is a distinct entity from Avon Products, Inc., which has not been a party to these proceedings. The Company has not determined whether to make a contribution to the Foundation to cover all or part of the settlement.
I thought suing can only happen after arbitration but there's no mention of a lawsuit...) but even on that site there is absolutely zero indication of PTW receiving anything despite "winning". This story just doesn't add up.
Arbitration is an alternative dispute resolution mechanism for lawsuits - it replaces a court trial. Its particularly used frequently in contract disputes. (Sometimes taking a case to arbitration as opposed to court is dictated in the initial contract).
Arbitration can occur at any time during a dispute/lawsuit, sometimes ordered by a judge, or agreed to by the parties in their own settlement negotiations.
Why exactly is profit / commerce considered a bad thing - especially here?
Is it an ideologic war waged by charities?
I could believe such feelings to be popular in Europe, but in the US - some deep ideological changes (of the business-unfriendly kind) must be happening :-(
I haven't found this mythical EU/US difference in overall attitudes, either in history or the present, except on specific issues. Europeans generally have higher taxes and better social-welfare systems, but not particularly different attitudes besides that. Both pro-business market-oriented views and skeptical-of-business populist views have long been common in both places. Heck, many American founding fathers fought in the French Revolution, and some (like Thomas Paine) wrote some of the more famous "left-wing" documents left by that revolution. And Denmark has some of today's more successful multinational businesses (Maersk, Lego, Carlsberg), which are quite popular domestically. Yet somehow Europeans generally assume that Americans are all Randians, and Americans assume that Europeans are all Marxists.
There's a pretty obvious conflict between nonprofit fundraising and profit-making. It's quite difficult to make the case that profit-making would be beneficial in the long run, even if true.
I'm not sure that's true. Most charities spend large amounts of money to put these events on. They pay for advertising, for software development, for consumables, for staff.
None of these things come for free, and the people providing them are doing so to make money.
A similar feeling happens when hospitals put their cafés out to tender and the WRVS[1] who had been running the café lose the bid, and a commercial firm wins.
It can be hard to mix for-profit and non-profit activities.
If everyone on a joint project is in a for-profit mode, competing within the limits of reputation, ethics, and the law to advance their own interests, then people generally figure the dynamic tension balances out. Everyone gets what they need or deserve, or the participants will move along. And, if someone manages to make out with a bit more, well, good for them, everyone was trying for the same.
If the joint project has non-profit characteristics, or some participants are maximizing a cause rather than their own financial interests, then every bit of profit can become suspect. How much is the right amount? Couldn't that be ceded to the cause? At some level there's a 1-for-1 tradeoff of profits-vs-monies-raised. People understand and tolerate that sort of zero-sum division-of-surplus competition in the for-profit realm, but that same dynamic can be toxic to the motivations of those donating effort for a cause/community. ("I donated my time and money so that company X could have a another record quarter?!?")
Those considering a for-profit startup to service non-profit causes/entities should keep this in mind: there may be a rather low cap on how profitable you can become before partners start to suspect your motives and margins.
The problem can be somewhat avoided if there's a large competitive market for the services with understood prevailing rates. In such a case, each side can take a more arm's-length/take-it-or-leave-it attitude towards the other, trusting the market prices as roughly 'fair'. (The non-profit doesn't mind paying a provider with competitive rates; the for-profit provider could easily serve other for-profit or non-profit buyers with the same capacity.) This didn't seem to be the case for Palotta Teamworks' fundraising projects: each party seemed completely dependent on the other, making the entire profit-margin-vs-program-revenue pie-splitting open to review and mutual suspicion.
Why exactly is profit / commerce considered a bad thing - especially here?
I think it's because a lot of the people who work in nonprofits and public agencies are at best ambivalent about profit and commerce, and at worse openly hostile to them, and such feelings are based primarily on emotions. So asking "Why?" in a way designed to elicit logical / intellectual reasons is unlikely to yield a lot of productive opinions (Jonathan Haidt discusses the role of non-logical emotions in cognition in his book The Righteous Mind, which is completely brilliant and ought to be read by everyone[1]).
Incidentally, my family's consulting firm provides grant writing services for nonprofits and public agencies (see http://blog.seliger.com if you're curious), and we face a lot of the profit / commerce ambivalence too. I even wrote about the issue in a post about the grant funding system and the role specialization and gains from trade play: http://blog.seliger.com/2012/03/25/why-fund-organizations-th... . A lot of people feel like nonprofits and public agencies are not supposed to be like other businesses, even though, in reality, they are a lot like other businesses except, obviously for the profit drive.
So, like other businesses, a lot of nonprofits buy goods and services they can't productively make or do themselves. We use the analogy of a plumber: most nonprofits do not have one on staff, and, when their toilets clog, they hire someone to do the job. That's fairly straightforward. But many do feel that grant applications are something like a college admissions essay, in which hiring a consultant is somehow cheating. [2] We obviously don't think so, but, nonetheless, a lot of people have that feeling and don't really think grant writing is like plumbing. But nonprofit and public agencies who submit better proposals tend to get funded more often than those who don't, so to some extent those feelings get weeded out by the "market," which still exists.
We've also argued before that there's no reason why a nonprofit grant writing agency can't exist, but in practice none do, and, if they did, the demand for their services would far outstrip supply, because grant writing is very boring, difficult, and tedious—a troika that makes for a great business, but doesn't give people the good feelings they might get from, say, doling out soup at a soup kitchen, or providing pro-bono legal work.[3]
Maybe. Many nonprofits are good at delivering human services, and less good at writing proposals, and the skills do not necessarily co-occur. Sufficiently large nonprofits will usually have a grant writer on staff, but smaller ones may not, and a really good grant writer will probably cost at least $70,000 per year in salary, and probably much more, which helps explain why relatively few small- to mid-sized organizations have one.
This is a specific instance of a more generalizable question about whether one should hire a consultant, learn a skill, hire an employee, or not have it performed, and we've written about that issue too: http://blog.seliger.com/2009/09/12/consultants-employees-and , which recurs in the business world.
