Overhead Shouldn’t Be A Dirty Word

Canadians have been misled into believing that administration spending is the best indicator of an inefficient charity. In fact, most charities are not spending enough.

Have you ever been dissuaded from giving to a charity because you thought its overhead costs were too high? Was that the only factor you used to make your decision?

You wouldn’t be alone. If you ask charity leaders to name the biggest myth in the sector that they just can’t shake, it’s that charities spend too much money on overhead. No matter how often we make the case that this singular measure is not a realistic way to measure effectiveness or present data that shows that overhead spending makes up only a very small amount (9%) of overall expenses, the myth persists. And that myth is hurting us all.

When we evaluate businesses for investment, we look at a multitude of factors. Yes, we look for profit, but we also look at the results that the business has delivered, products sold, customers gained, profits generated, investments in research and development, and the company’s track record over time. We would never look at a single factor like overhead, or general and administrative expenses (which can easily be 50 per cent of total net sales, depending on the business context, stage of growth, business model, and the nature of the product or service) to make such an important decision. In business, we all understand that investing in capacity generates results.

Canadians, by and large, recognize that charities are a necessary part of our social fabric. Canadians regularly and generously donate time, money, and goods to charities that enrich their lives, serve communities they care about, or simply do good things they wish to support. But when evaluating charities, many donors want their support to go exclusively toward program delivery and not into staff, operations, technology, or training and development — as if the two are completely unrelated. This means that charities are afraid to invest in themselves, and are capacity, technology, and infrastructure-starved. This lack of investment makes charities less effective, which is completely contrary to the shared goals of donors, charities, government, and society as a whole.

As government priorities and spending shifts, charities often step up to fill essential gaps. Small charities, in particular, are often on-the-ground providing many programs and services that individuals rely on, addressing unmet needs and working to solve social problems or contribute to social betterment. It’s often a small, local charity that ensures a child in need has a warm jacket or breakfast to start their day. It’s often small charities that provide on-the-ground support for those who are going through tough times, whether it’s transportation to receive essential medical treatment, counselling services, or a warm meal for someone living on the street.  There are small charities that use art as a tool for engaging at-risk youth, and small charities that empower youth to teach life skills to their peers. Charities are everywhere. They are your daycare centres and your places of worship, your theatres and your festivals, your hospices and grief support, and your outreach services and your animal rescues. How can we not evaluate charities primarily on the incredible work they do when it is truly all around us?

So my challenge to you is this: next time you are researching the charity you want to support, look for metrics and stories that enable you to evaluate how well they are achieving their mission. And then ask yourself, if they invested in themselves more, could they have a greater impact on the world?

If the answer is yes, show your support to that charity with your money and your voice. Tell the charity you want them to invest in themselves so they can achieve more, and then also tell your friends and family about your decision. We cannot change this myth if discussions of investment, capacity-building, and impact only continue in an echo chamber of voices from within the charitable sector; we need donors like you to speak up and change this mindset in the world.