Overhead costs and NPOs

Recently I heard a TED talk by Dan Pallotta, about how the way we look at our charity is totally wrong and how we use double standards while looking at profit organizations (PO) and non-profit organizations (NPO). This talk was very informative and sort of an eye-opener for me. I am guilty of doing one of the things that he mentioned in his talk, I also used to judge any charitable organization based on how little they spend on overheads. I used to think overhead spending was a total waste of donated money, every donated penny should be used for the cause for which it was donated. People donate their hard-earned money towards causes they like because they want to see that change in society but can't devote enough time towards that cause therefore, they donate to some organizations to work towards such causes. This all requires a lot of infrastructure and people to make things work, and this is where this talk is very helpful, Dan does a really great job in explaining to us how we need to look at the spending of these NPOs.

I loved this talk not only because it demonstrated how flawed my attitude was but also because he made a very strong case about problems of non-profit organizations because of some unreasonable expectations from donors. Every donor has a full right to know how their money is spent and how it helped the cause for which they donated. At the same time, they all also need to understand that these organizations also need to hire talented and motivated people to work for them, for this they must compete with all these profit-making organizations to attract this talent and if donors expect them to work well then we need to accept that they are bound to have some overhead costs. We need to judge them based on their performance and not how much they spend. If they are working very well towards achieving their goals and spending reasonable money as overhead cost then we should not complain. In today's world social work can be a profession and like all professions, it also requires a lot of hard work, dedication, and commitment to become successful. People working with NGOs also need to have a normal life, they also need to have their own families and look after their needs and whether we like it or not this all requires some amount of money, and if they are engaged in full-time social work this work needs to generate that money for them and we must remember this context while looking at the overhead costs.

This talk has changed my outlook towards NGOs and all other socially active organizations. I do care about how much they pay to their employees and if it's a reasonable amount I don't feel cheated or feel that they are wasting my money. I do understand that they need talented and hard-working people to do this job and it's not easy to attract good talent without having a good or at least reasonable package. At the same time, these organizations need to be careful about how they spend their money as people like to see most of their money being used for the cause to which they donate. This can be a tricky exercise but these organizations need to do it to keep all donors invested in the mission. I hope this talk will help many people to understand better how these NPOs use or can use their money in a somewhat better or more efficient way by hiring talent that would work hard towards their missions.

Thanks for reading and please share your opinion about this topic.

[Copyright: Vinay Thakur. Please contact the author for re-posting or publishing]

Links:
1. TED talk of Dan Pallotta