There is a cold war in the charity world.
On one side are the public and the vast majority of donors. The public don’t like admin costs, overheads and waste and they don’t like to think of their money going to anything but the charity’s cause. Our research at nfpSynergy shows this antipathy to costs and overheads very clearly. People typically think about 10% of their donation at most should go on admin and around 20% be spent on fundraising.
They see admin costs as worse than fundraising costs. Their top worry is how much of their money goes on ‘the cause’. They are also concerned about high salaries for CEOs and are more likely to see them as admin costs rather than the cause.
The average member of the public is very conservative about wanting their money to be spent on anything other than the cause. We may not like what the public think, but as donors they should not be ignored.
In the opposing corner are those who hate it when donors and philanthropists tell them how they think charities should be run. The very same people who would claim that it’s important to be donor-centric then bust a blood vessel when those donors tell them a home truth they don’t want to hear. Donors should be seen (giving) not heard (complaining).
I describe it as a cold war because for the most part, these two differing views on admin and overheads don’t get discussed much. Only occasionally does a skirmish break out that symbolises the whole debate. One such skirmish was the recent interview with philanthropist Gina Miller.
When people like Gina Miller, as a substantial donor, raise concerns about the levels of salaries and admin costs, it unleashes an outpouring of anger and venom from people in the sector. Yet from my experience and our research, her perspective is very close to many members of the public.
The polarised and subterranean nature of this debate is both sterile and unhelpful. The public appear to want no money to be spent on admin at all, while various sector commentators end up sounding like its fine for a charity to spend all its money on it.
There’s no doubt that we have managed to end up with admin costs branded as the kind of organisational stain even Cillit Bang couldn’t remove, rather than the lubricant that makes charities work effectively. But in my book, any charity whose formal accounts indicate administration costs of more than around 10% and fundraising costs of more than 20-30% has probably got the balance of its expenditure wrong.
My views matter little though – it’s the public and donors we need to persuade and telling them there’s ‘no such thing as admin costs’ is hardly likely to change many minds.
So, here are my five steps for moving the debate forward:
1. Let’s define admin costs. One key problem is admin costs appear to be poorly defined. The amount of money really spent on ‘admin’ is fluid. Is the CEO admin? Is the administrator to a team of service-delivery staff admin or the cause? What about the cost of buildings and offices? The list of queries is almost endless. The level of admin costs for a charity is currently what the charity wants it to be. The Charity Commission need to fix this; hopefully the forthcoming SORP consultation will help.
2. Let’s stop talking ‘admin’ and start talking ‘management’. We need to rebrand admin costs to indicate that they are a vital ingredient of effective charity management. As long as we give the appearance of admin being a waste we can’t quite eradicate, we shouldn’t be surprised that the public don’t like it. I must confess that charities that go on about every penny going straight to the cause don’t help – particularly when they have admin costs similar to most others, whether they like to admit it or not.
3. We need to explain more and attack less. In a battle of charities vs. the public, it will be charities that need to do most of the work to change attitudes. Whatever we call admin, we need to explain why it’s a necessary cost and why without it, donors’ money would be less well spent. We cannot expect that the average donor will have their views changed on overheads if it isn’t charities that tell them. It’s a fantastic opportunity to engage donors and supporters and explain how a modern charity works. So try this simple test - count on your fingers the articles by charities explaining why they spend what they spend on fundraising and admin. Bet you didn’t need two hands!
4. We need to come up with new indices to judge charities by. We can’t be surprised that the public judge a charity by its admin or fundraising costs since those costs are readily available and can be understood instantly. Compare that to the lengthy and usually turgid annual or impact reports that charities produce. If we want people to stop judging charities by admin or fundraising costs, we need to give them alternatives that are as simple and available as those they replace.
5. We need to admit that charities can spend too little on the cause. Recently, a charity rang me asking for money and it only spent 5% of its income on the cause. For me, that’s way too little and I sincerely hope that it would be too little for most people in the charity sector. I would suggest that the alarm bells should start ringing if any charity spends less than half of its income on the cause. There are exceptions to this, like charities with high levels of trading income and, on average, smaller charities. We could start with a clear analysis of the typical level of fundraising and admin costs for the largest fundraising charities. That way, we’ll know what the norm is.
We could rant and rave about people who criticise the levels of admin costs in charities. But I’d rather we accepted that their views are typical of many and work to change them. Shouting at outsiders for their ignorance may satisfy a feeling of righteous indignation, but it will do little to change anybody’s views. And if we want people to donate more, we need to understand where they are coming from, not just tell them where we want them to go.
Are you Russian to agree with us? Or did you hit the Wall reading this? Leave us a comment below.