December 1st, 2014

#GivingTuesday: Charitable Giving and the Delusion of Overhead

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December 1st, 2014

With #GivingTuesday just around the corner, a national giving day following Black Friday and Cyber Monday, charities are actively seeking much needed donations to support their causes, and according to a recent survey conducted on behalf of Imagine Canada, “a solid majority of Canadians will show their generosity of spirit this holiday season by giving to charity.” Except many are overly concerned that their donation will primarily support overhead. But is this what donors should be concerned with?

Charitable giving and indicators of effectiveness have sparked researchers to dive further into the topic of overhead. In association with the prestigious journal Science, correspondent John Bohannon published an article in November on how a simple tweak could nearly double the amount you give to charity. The article was in relation to a recent study demonstrating how informing potential donors that when overhead costs are covered by someone else, that it will increase donations overall.

The potential interpretation of this research (and the concerns of overhead in general) may actually produce more problems than solutions for charities and donors alike. For example, this “simple tweak” will likely produce a race-to-the-bottom among charities (where everyone adopts the overhead scheme) without ever producing any new impact. It also incentivizes “creative financing” that only serves to mislead donors. Perhaps even worse, it exacerbates the myth of overhead as an indicator of effectiveness and propagates the appeal of emotional-response donations over the much-needed shift towards results-based funding. Examples of some notable organizations working towards providing more information on results-based charities are Give Well and Charity Intelligence Canada. However, there is still much work to be done in this field.

Though the study published in Science identifies that basing donations on overhead is wrong, it does make clear that the primary motivation for giving is actually because it “makes us feel good.” Indeed, The Washington Post recently published an article on a team of Canadian and Australian researchers that showed people who give more of their time and money, do tend to be happier. However, it is safe to assume the reason donating makes us feel good in the first place is because we believe we are doing good, and if we learned that our donations were not doing good, we would quickly not feel good either.

Cofounder of Giving What We Can, Toby Ord agrees, suggesting rather than using a “trick” to make donors think they are more efficient, “charities should focus on improving their efficacy.” One of the researchers in an associated podcast clarifies the team’s point of view: “optimally, what you would want to have is a situation in which people understand overhead, understand what it means, and understand why it’s needed, and would be willing to donate even if overhead is high.” This speaks to the actual problem at hand, which is not about fundraising, per se, but about the culturally rooted delusion of charitable overhead.

Regarding Imagine Canada’s aforementioned survey results, President and CEO Bruce MacDonald explains the true measure of effectiveness for charities are, in fact, the impacts they have on their cause, “effective administration [i.e., overhead] enables fundraising, infrastructure and staffing that are essential to fulfilling a charity’s mission. Real impact requires real investment.”

What donors need more of is research and public support that push charities towards more impact, not more gimmicky fundraising tactics. This holiday season, if you are thinking of donating on #GivingTuesday, or anytime for that matter, consider being less concerned with overhead and more focused on charitable impact, so your donations accomplish the best of both worlds: feeling good and doing good.

  • Warren Walker

    I can do that research for you. I’m volunteering about 10 hrs/week and it will end soon. I’m Treasurer of two nonprofits.

  • Willy Ens

    I liked your article because it kind of address my predicament …. I have a significant and highly “Socially Beneficial” project; however … it is also ‘for profit’ yet will do massive “Good” in multiple ways … but … it does not fit into current funding mechanisms because it would not qualify as ‘only charitable’ since it is designed to “Pay Forward to Pay Back” for street people.

    The end result of $100,000 investment is an “Aquaponic” green house operation gainfully employing 3-4 people, with the help of soldier fly larvae reduce kitchen scrap land-fill destined garbage into 30,000 ponds of 100% organic vegetables annually.

    Generating an annual income of about $120,000 [whole sale value] it should be self sufficient and allow for a $15 – $20,000 profit.
    But how do I convince donors that this is equitable, as well as honorable [irrespective of the ‘overhead’] … and should be publicly funded with donation due to the ‘esteem building aspect’ … a “Feel Good” result.

    Re; . …https://www.facebook.com/pages/Growing-Hope-for-Humanity/347828952057138?ref=hl

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