What is Administration or Overhead cost and why is this word important for the charity sector? “Administration” or “Overhead” costs are traditionally defined as the costs associated with paying staff salaries, fundraising and marketing budgets. Things that are not the delivery of service and yet vital to delivering the services that embody the mission and purpose of the organisation. There are two ways to think about this.
The first is that charities are different from businesses and should stay different. That is true, we do not deliver a consumer product, we deliver an emotional product, a service, or a solution to a social problem.
The second way to think about this is that charities should be able to use the same tools as businesses to have a greater impact on these social problems. If we are delivering a social good, why can’t we have the same tools to do so at a scale that large businesses use to deliver products that, to put it frankly, do not deliver any good at all, they are just “stuff.”
There was a great Ted Talk given by Dan Pallotta called "The way we think about charity is dead wrong" ten years ago - if you have not seen it, I highly recommend it - here.
In this talk, Dan Pallotta outlines five major areas of distinction that separate the nonprofit sector from the for-profit sector. These are compensation (it’s not okay to make money helping people, but it is okay to make a lot of money not helping people), advertising and marketing (as if the money invested in advertising couldn’t bring in significant amounts of money for the cause), taking risks on new revenue ideas (when you prohibit failure you kill innovation, when you kill innovation you prohibit growth and when you can’t grow how can you expect to solve a problem that is large in scale as are most causes within the nonprofit sector), time, and profit to attract risk capital.
The message that has stuck with me from this talk is the notion that it is okay for big corporations to spend money on bringing in customers, but it's not okay for charities to spend money (through marketing and fundraising) to bring in more money for their causes; to help solve some of the world’s largest social problems and to help more people. The misconception is that the less money we spend on fundraising the more money there is available for the cause. But that's not true because fundraising is the one thing that has the potential to multiply the money that is available for the cause that we support.
How does this relate to Hands? Well, the fact that Hands Across the Water, a charity that has existed for 20 years and only in the past four years has had to implement a 15% administration cost post-COVID-19 is incredible. See the history of our financial position here.
But that is not the focus of this piece, where I would like to draw attention to a better word, a more relevant word when it comes to talking about all of this and that is IMPACT. Isn't it all about the result? In his Ted Talk, Dan Pallotta uses the analogy of a bake sale to illustrate this point. There are two bake sales, one that has no overhead or administration cost, but raises $71 and a second one that has 40% overhead or administration cost and raises $71 Million. So which one do we think is better, no, which one do we think is going to have a greater impact? No doubt it is the latter, so where do we get tripped up here?
When the language we use isn't clear, when people don't see the use of their funds, when they can't understand it is our role as fundraisers, as non-profits to help them to understand because once you understand you can see the real difference that you can make and maybe, just maybe you can put the administration of it all aside and see the impact of your donation.
But it must happen across the sector, it must be a conscious effort and we must want to do the work. If I want you to trust me that my fundraising efforts will have a greater impact on your investment, I must show you what I am doing. Seeing is believing. And here we are in 2024 and there is so much ahead that we are working towards, but we want you here with us on this journey so that you can understand the impact that you can have, through your donations, to all of the areas in which we work, our programs, our awareness building, our good governance and of course the kids we serve. See it in the opportunities that we can provide them, and the brighter futures we are building for them.
Our CEO Claire Baines recently shared our 2024 strategy update here: have a read and let us know what you think.
We are only as strong as the support we get from our community; our impact is dependent upon the funds we receive. Ask us about where we want to go and we will tell you, ask us what we need to get there, and we will tell you. Together we can build brighter futures and a life of choice for children in Thailand whose lives would otherwise be left to chance. That is why we do it, it is not about the money, it is about the impact, but you can’t have one without the other in this world. Big business knows that, and it is time for non-profits to be allowed the same opportunity to see the scale of their dreams, of their impact to be realised.
