Ok, so I’m probably not going to add anything new here to the discussion, but I have a rant.
Read this article on CNN. In short, it basically makes the case that for every dollar that gets donated to the Red Cross, 4 cents goes to Administrative Costs and 5 cents goes to fundraising, and that this is a bad thing (though they do call out that the Red Cross is one of the “better” non profits in terms of cents on the dollar that go towards the actual cause/aide). The article also calls out crowd funding sites like Fundly, Go Fund Me, and Give Forward, saying they take 5-8 cents on the dollar towards individual aide (which are all for-profits).
Let’s talk about why administrative costs are not a bad thing. And about scale. Even if your organization’s “work” is entirely done by volunteers – someone has to manage those volunteers. Even if you’re distributing donated goods – someone has to manage intake and logistics for distributing those goods. And even if you’re donating cash through a website – someone has to build the website, pay credit card processing fees, and pay to keep the servers running. If you don’t advertise/fundraise/market – people won’t know your service is available, so the pool of money to help with aide is actually smaller. Efforts done entirely with volunteers (on the administrative side) tend to have problems with consistency and attrition – the lack of defined commitment/contracts makes it easy for folks to not show up, or for work to get done at a slower pace that may be detrimental to the end cause/impact.
The cents on the dollar that goes directly to aide/cause is a statistic that is flawed – it hides the real discussions we should be having. Instead of percentage of dollars going to aide/cause vs administrative costs, we should be talking about effect and impact per dollar. $.91 cents to cause/aide at organization A might be less effective or impactful than the $.60 cents on the dollar to Org B that is taking risk in innovation, hiring the best people, and using data to measure their impact (and stopping activities that aren’t having the impact they want). It’s a different story entirely if we say Org B is able to feed 100 people with the $.60 that goes directly to cause vs the 10 people Org A is able to feed with $.91 cents. So many non-profits just keep doing what they’ve been doing for years without measuring if it’s solving the problem (or because they can’t imagine taking away a service they’ve been providing for years, because remember in the end we are talking about people’s lives, livelhoods, or other heart-wrenching cause). I was appalled by the technology available for early childhood education programs/schools – the whole field is lacking reasonable technology choices to track their program work (I would conjecture it’s because there hasn’t been appeal/funding for a serious technologist to design good software for them; there’s definitely a gap between software available for the “public”, for “business” and for “non-profits”).
There are some models that flip this on their head – Charity: Water only uses private donations for their operational costs, and are able to pay technologists salaries that technologists deserve because they know technology is critical to their mission. They’re able to say 100% of their public donations/public cause marketing campaigns go to the real causes. They’re lucky to have private donors that understand the importance of administrative costs. It’s also worth noting that Charity:Water is JUST a fundraising arm. They don’t do the water work themselves, but send the money to existing NGOs and partners in the field – not that this is a bad thing, but as we talk about non-profits and the program work, Charity:water isn’t the organization holding the “work”. I don’t mean this as a critique of their model, just to point out that as we compare them to other NPOs, they really don’t have the program piece in house. Their model that funds some amazing work – because they can say 100% of public donor funds go to the work, they are probably able to raise more money because of that public perception than if their administrative costs were “baked in” to donations. My question would be if that money is going to administrative costs for the NGOs on the ground in the developing world as well. I’d be curious to see how their real administrative costs compare to a “traditional” NPO of a similar size – my guess would be that they’re actually spending substantially more on the administrative side because they can.
I think Charity: Water is probably a good example of a start towards what happens when you answer some of these questions : What if we actually doubled those numbers given to administrative costs? Paid the employees a higher salary – not to give the same people more money, but to bring different people to the industry? For things like aide we will never eliminate the problem (catastrophes will always happen) – but shouldn’t we be bringing the best people in to the roles to solve the biggest problems? What if we could deliver aide more efficiently with people who have proved they are experts in logistics and process? For things that aren’t aide – what if we had the brightest minds working on eliminating the problem?
Geekin' Out 