Deciding Which Charities to Donate to: Does Overhead Matter?
We’ve all read the articles — you know the ones. The pieces that list out how much the CEOs of various nonprofits make and ask you to only donate to the charity that spends the least amount on salaries. To do any different would mean that the organization is wasing your money, right?
But wait a minute. Have we really thought that through? Doesn’t this mean that anyone who wants to help people and change the world is limited to jobs with crappy salaries that most of us wouldn’t even consider?
Why is that? Why does someone who wants to end hunger or homelessness or domestic violence — or any of the other problems we have in society — have to sign up for near poverty just to prove how dedicated they are to social change?
Charity Overhead Isn’t Scary
Dan Pallotta has given this very question quite a bit of thought and has quite a different paradigm when it comes to non-profits making and spending money. His article in the Harvard Business Review is titled “You Should Be Able to Get Rich in Charity,” and it tells you a lot about where he is coming from. He has also given a TED Talk on the subject that is quite informative.
“Why should a person who wishes to bring the world a better mousetrap be able to know that he can get wealthy if he does it, while the person who wants to end world hunger must know that he cannot?” Pallotta asks in his article.
There are several issues with choosing which charities to donate to based on what percentage of your money goes to the cause rather than overhead.
“First, it makes us think that overhead is a negative,” Pallotta says in his TED Talk. “That it is somehow not part of the cause. But it absolutely is — especially if it’s being used for growth.”
We have been taught that charities should spend as little as possible so that much money as possible can go toward the cause, he says. However, in the for-profit sector, we would never advise a company to stop hiring top-notch talent or scale back advertising. If a business wants to grow, it needs to do the exact opposite!
And the same is true for non-profits. Want to end world hunger? How about investing in an organization that has big dreams and the fortitude to spend some money advertising their upcoming fundraiser so that they can actually raise some money?
The Bottom Line
“Our generation does not want its epitaph to read, ‘We kept charity overhead low,’” as Pallotta aptly says. “We want it to read that we changed the world, and that part of the way we did that was by changing the way we think about these things.”
Should you investigate which charities to donate to? Absolutely! Should you donate based on their overhead expenses? Probably not. Take a closer look before making a decision!