Thoughts on the Overhead Beast

By John Phin

Ask a random stranger what their number one problem with charities is. Chances are good they will say they are bugged about something to do with overhead, fundraising, and administrative costs. Oh, and they are certain charities waste donor dollars.

That is the disconnection that needs repair. Charitable organizations have invested decades improving the effectiveness with which they deliver impactful programs and services. They have had to. Missions are always to move the needle on a human problem or community concern.

Today, the interventions of skilled professionals are how they will do it. This is a massive shift from charitable models of the past and a welcomed response considering how complex our modern world is. It’s certainly a relief for those who depend on philanthropically motivated support. As people committed to humanitarian causes, we know there is a cost to achieving the impacts and outcomes of valuable programs and services. Let’s not keep this a secret any longer.

Like business, charitable organizations are at their best when they operate as whole entities. They are complete when service delivery, management, fundraising, and other functions come together to achieve a vision. Each of the parts gives an organization its power and each must be delivered at high, professional levels. At its most basic, this means investing in the engine that drives philanthropic activity. Because Canadians demand solutions.

A new way of thinking
Full disclosure, I am influenced by writers and thinkers who challenge conventional notions of philanthropy. Is the work of charitable organizations too costly to deliver, and do expensive organizations waste donor dollars? No, yes, and maybe, but these opinions must be forcefully met with the knowledge of what it takes to change a life. We know what that is and it’s time to say so.

One who influences me is American entrepreneur and activist, Dan Pallotta. Read his 2008 book Uncharitable and watch his 2013 TED Talk. Pallotta argues (and persuasively) that charitable organizations are unfairly handcuffed by a new “non-profit ethic”. I am not convinced the handcuffs are particularly new but appreciate Pallotta’s view of a double standard at work between charities and commerce.

He argues that when it comes to inputs that might be effective, philanthropic organizations are unfairly restrained and that these restraints prevent them from being truly effective forces for social good. Three key factors are:

1. Compensation & Pay: Charities are often broadly criticized for staff compensation practices. Pay scales have to be kept to a minimum to combat beliefs of personal gain. This means talented, enthusiastic people with the potential to move an organization closer to achieving its mission avoid working in charitable organizations for employment in the private sector.
2. Marketing & Advertising: Marketing and advertising are indispensable in business, but a waste of donor money in charitable organizations. The result is that our messages and voices, many of which are in dire need of the public’s attention, go unheard.
3. Punishing Failure & Constraining Innovation: Many business startups with great, innovative goals go years without making a profit. Many more just fail in the attempt and our society has no issue with this. We sense that innovation and great achievement requires big, long-term thinking. Yet we demand that charities spend donor funds at once and we’re deeply skeptical when money is set aside for bold projects that might flop.

Pushing back
What I want the average random stranger to ask is, how much more effective would charities be without these constraints? What kind of big hairy audacious goals could we achieve with a full set of tools? Outdated thinking will not be fixed overnight, but if philanthropy and its outcomes are a priority, we need organizations to take brave steps.

Here are 5 things to consider:

1. Invest in talented people: An organization staffed with talented, creative people is a force to be reckoned with. Hiring is an ongoing process and HR must constantly have eyes open for new, and diverse talent. Bring them on board before it is an emergency. Invest in good people and give them challenging projects. Pay them what they are worth. Work hard to ensure they feel valued, respected, and appreciated.
2. Market the organization and advertise its impacts: The importance of your Mission may be obvious to you, but the average citizen often does not have a clue. Explore ways to get your message out. If nothing else, invest in community engagement.
3. Nurture a culture of innovation and “no stupid ideas”: In his book Alchemy, Ogilvy UK Vice Chair, Rory Sutherland, discusses the ways marketing is hamstrung by “conventional thinking”. He argues for a greater sense of openness, playfulness and experimentation. Often, it’s the weirdest ideas that produce the greatest results. Cultivate this attitude in your organization. Encourage wild ideas. Some may just work.
4. Think about the long-term: Don’t be confined by what your organization can accomplish this year. Think about what it must do in ten, fifteen, twenty years. You might not be around, but your organization’s vision will. Paint mental pictures for your donors of what’s possible. It’s what your Case for Support is designed to do.
5. Be honest, be bullish: Level with your donors and other supporters. Talk about what your overhead and other costs are and why your organization exists. Tell them what you are planning to do with the money and how each dollar affects the cause. People are not stupid. They’re capable of understanding the complexities of modern philanthropy if you to take the time to break it down.

So, what
My issue with the assumption charities waste or misspend money isn’t only that it ignores a double standard. It’s more that this attitude gets in the way of solving the overwhelming problems impacting the most vulnerable in Canada. That’s a waste. Solutions require tremendous resources, innovation, and visionary leadership. We need to get away from the idea that organizations should stay, as Pallotta says, small and humble. I expect business to invest in itself. It’s the price of doing business. Among other things it means growth, impact, creativity, and innovation. With all the really important things we have to do, shouldn’t charitable organizations be able to invest in the same things? Time to change the narrative.

John Phin is Regional Manager of Western Canada for BNP Goldie. Phin has more than 35 years of experience as a professional fundraiser with diverse experience through many roles and organizations. He is an accomplished consultant, teacher, and expert in the art and science of fundraising.