On Monday, I went to the Doctor, and on the way there, I was listening to the Midday talk show on WYPR, and they were interviewing Dan Pallotta, who gave a TED talk (no link, ever) about how we need to spend lots of money on high powered executives and self promotion, and not be so concerned about overhead costs.  (Link to this show)

I called into the show (you can hear me at 41:05), and made two points, both from experience:^* That aggressive fundraising and growth as a strategy will take place at the expense of the core function of that organization, and that studies have shown that very high levels of compensation actually decrease performance.

Pallotta spouted banalities about the use of “appropriate metrics” when discussing how a high growth focus won’t distract , and for the studies showing that excessive pay decreases performance, he pulls out the straw man about whether we should stop paying real estate agents after their 3^rd sale.

The reality is that his failed for-profit event promotion business died because it became excessive expensive, and the self aggrandizement of its CEO, Dan Pallotta.

In it’s own way, this is TED Talks in a microcosm, it is all about comforting the comfortable.

After all this, I Wiki the motherf%$#er and found this “clearly-written_by-his-publicist” article:

Pallotta TeamWorks
Pallotta built his for-profit company Pallotta TeamWorks. His company employed 400 full-time people in 16 U.S. offices and was raising $169 million annually by 2002. In total, the company raised $582 million from 1994 to 2002. The company charged a fixed production fee for its services. It did not do commission-based fundraising or get a “take” off of the top. One hundred percent of all donations went to lock boxes under the charities’ exclusive control. The charities then reimbursed the company for its expenses on a dollar-for-dollar basis. Pallotta TeamWorks fees, in a hindsight calculation, amounted to 4.01% of funds raised.

As is shown below, this is a bogus number. It refers only to direct fees, and not the expenses of putting on the increasingly lavish events.

Palotta was criticized for the large amounts of money Pallotta TeamWorks was making each year and the $394,500 salary he was receiving, described as “stratospheric” for the aid world.[ His annual salary ranged from $150,000 in 1994 to approximately $425,000 in 2002. Palotta commented that “We allow people to make huge profits doing any number of things that will hurt the poor, but we want to crucify anyone who wants to make money helping them”.

In 2002, the company moved into an innovative headquarters that it had outfitted, The Apostrophe. For years Pallotta TeamWorks was located in poor offices spaces in Hollywood. A new and completely empty 47,000 square-foot ’tilt-up’ warehouse was located in Atwater Village, Los Angeles. ………

Shut-down of Pallotta Teamworks

……… At the time the Breast Cancer 3-Day program was the company’s largest fundraising event series. For five years the Avon Products Foundation had been the beneficiary of the events, which netted $194 million in unrestricted funds for the Foundation in just five years. In 2002 Avon informed Pallotta TeamWorks that it would no longer be associated with the company’s events. Pallotta TeamWorks began negotiating with another charity to become the beneficiary of the events. During that period, Avon announced a nationwide series of multi-day breast cancer fundraising walks, each with a four-figure pledge minimum, in many of the same cities in which the 3-Days had been conducted and, in many cases, on very similar dates. As a result, the new charity with which Pallotta TeamWorks had been negotiating, fearing that the events would cannibalize one another, decided against partnering with Pallotta TeamWorks on the 3-Days. A few days after the news, on August 23, 2002, the company laid off its entire staff nationwide and closed the doors on its new headquarters.

So, they got dumped by their charities (more below), and they tried to set up competing events to keep their gravy train rolling.

But we can look at the Internet, where nothing goes away, and see what was being said of Pallotta Teamworks at the time:

Published on Tuesday, August 27, 2002 in the Washington Post

Expenses Eat Profits Of District AIDSRide

by Carol Morello

Expenses ate up at least 86 percent of the $3.6 million raised in June for the annual D.C. AIDSRide organized by Pallotta TeamWorks, a rate that is expected to increase when the tally is complete, the benefiting charities said yesterday.

If the riders had not raised more money than required, the event might have lost money. Per-rider expenses averaged $400 more than the $2,400 each rider needed to raise to participate. But the event turned a $500,000 profit only because riders raised an average of more than $3,200, according to preliminary estimates made by the two charities that co-sponsored the ride.

“Disappointed doesn’t even begin to describe how we feel,” said Cornelius Baker, head of Whitman-Walker Clinic, one of two charities benefiting from the ride.

When the audit is completed in the fall, the return may be less than 14 cents on the dollar.

………

Critics of Pallotta events said the return on the D.C. ride was indicative of problems that have beset the company this summer.

“The returns are abysmal,” said Wayne Turner, an AIDS activist with the D.C. chapter of Act Up. “People are beginning to wake up to the fact these AIDS rides are not about raising money at all. They’re about building Dan Pallotta’s empire, which is now crumbling.”

This year, Pallotta TeamWorks was to have run 23 charitable events across the United States and in Africa and Europe. Pallotta’s fee for each AIDS ride runs from $225,000 — the amount for the District ride — to $450,000. Locally, it also has organized the Avon Breast Cancer walk, held in May, and a night walk this month from Fairfax County to the District to raise awareness of suicide prevention.

Pallotta had been one of the country’s most successful promoters of charitable events. But criticism grew as the company expanded and began aggressively promoting itself. Its events are characterized by emotional opening and closing ceremonies, slick marketing and creature comforts for participants, including cucumber eye masks and massages. Expenses run into the millions, though net proceeds are often high, too. But recently, many riders and walkers have complained that the events’ purity has been clouded by excessive promotion. At walks and rides attended by survivors and relatives of people with breast cancer and AIDS, vans were set up marketing the company’s other events and selling books by founder Dan Pallotta.

………
Pallotta, though, has lost numerous clients this year.

This spring, Avon Products announced that it would no longer use the company to produce its three-day breast cancer walks and would launch its own walkathons. After seven years of collaboration, Food & Friends decided to hold its own bike event next year. The huge Heartland AIDSRide across the Midwest also is being dropped.

So he is a f%$#ing serial narcissist who put on lavish charity events for the purpose of his own self-aggrandizement, and so his business imploded.

His response is to go on TED and suggest that the way to improve our charities is to throw more money at those overpaid narcissistic sociopaths who are our looting class.

Just beautiful.

^* My background:

• I audited my university (UMass Amherst) as a part of a student government committee.
• I founded a not-for-profit, and successfully took it thorugh the 501(c)3 process.
• My experience was that a laser-like focus on aggressive growth and increased prestige is achieved at the expense of quality services.
• That, as numerous behavioral economics studies have shown (Dan Ariely, for one), very high levels of compensation are associated with DECREASED performance.