THE BLOG
11/05/2013 03:19 pm ET | Updated Jan 23, 2014

Stop Thinking About the Overhead Ratio

I am embarrassed to admit, but I was once that person who said "I will give, but only if 100 percent of my money goes to the programs and not to overhead." I felt holier than thou and smug in the knowledge that no CEO would be taking home a six-figure salary from my donations.

When I read about the recent survey in the Globe and Mail that talked about how fewer and fewer Canadians trust charities to effectively manage their donations, it became obvious to me that I was not the only one.

Looking back, it's clear to me now I wasn't thinking. I merely parroted what I had heard so often from others -- that all donations should go to the cause not to administration. In hind sight I was seriously delusional to think I could separate the people who raised the money from the actual programs they were supporting.

We need to STOP. Stop using the Overhead Ratio as a deal breaker when deciding to invest in a charity. If you are only interested in donating for the sake of donating, then choose the charity that makes you happy. But if you are interested in high impact philanthropy, where you are funding systemic change and making a lasting impact on the issue, then you must ask different questions and look at more than the Overhead Ratio.

Overhead isn't negative. Just like a business, if it is being used for growth it's a good thing. The idea that the less money you spend on fund-raising the more is available for 'the cause' is ludicrous. We're not dealing with a pie that only has a certain amount of slices. We are dealing with dough. The more you knead it the bigger it grows. Fund raising and experienced knowledgeable staff are the two things that can make money grow and can ensure that the money is having the greatest impact.

NGO's are experts in their field. Let's let them hire the best people, the smartest people, to do the most efficient and productive work in conditions that foster strategic and innovative thinking and more precise problem solving so that they can eradicate whatever community horror they are working on. We have social problems that are massive in scale and we have NGO's that can't generate scale because of this arbitrary bench mark we, as donors, hang over their heads.

The goal of keeping your overhead low is demoralizing for NGO's, and a misguided strategy for donors. If we want to change the world we need to change the way we think about a growing sector that is well positioned to do this job.

When I managed a retail operation, if you had demanded of me that I make an impact, but not pay my staff well, train them, equip them with computers, market my product to the public, take chances on new innovative ideas and occasionally fail, I would have asked you what planet you were from. Why are NGO's any different?