Non-profits need to watch the dollars, and they should. Nobody wants to be the subject of an exposé about corporate salaries or extravagant travel spending by a ministry. But it’s easy for the pendulum to swing too far in the opposite direction — to be too focused on the pie chart and not on actual results.
The pie chart? Yes, that same pie chart that basically every non-profit is chasing. It’s got the smallest sliver in it, maybe 3%, going to administration and marketing. In fact, there are whole websites and surveys dedicated to helping donors find organizations that do the best on this single metric. While it’s admirable to try to minimize non-mission spending, I do think that people often go too far and miss the big picture. After all, this is a single metric. If I were investing for profit in the market, tracking a single metric would be a terrible idea. We all need to see the big picture. Here are three reasons the pie chart falls short:
1) It fails to address the whole picture
Remember that the pie chart is only showing percentages of a whole. Percentages don’t tell us anything about the total size of that pie. Let’s say you’re trying to provide relief and skill training to an underserved population. What if changing your administrative spending from 3% to 10% allowed you to do more outreach, raise more money, scale up your work, and help twice as many people? I would consider that to be money well spent, and I would rather help more people than congratulate myself on saving money on admin. The pie chart alone won’t help you think about alternatives like this.
2) It confuses the mission
I’ve helped many non-profits and ministries dial down a clear vision to organize around. One vision that has never come out of such an exercise is “Our mission is to reduce administrative costs.” But their day-to-day activity makes it appear to be their top priority. An over-emphasis on watching the pie chart takes focus away from the core mission, and it can cause you to drift off course. Many organizations find themselves taking on projects they probably shouldn’t, simply because a donor suggested and will pay for it. That project requires no admin/marketing and will look good on the chart. But it will also absorb staff attention and time that could have gone to a project that was closer to the core mission. The cost to the mission must be considered.
3) It often harms brand and relationships
The only way to keep admin/marketing costs low is with in-kind donations. I’m not against them; sometimes we make them. But if in-kind donations are your bread and butter, it’s very likely that your message is fragmented, and your relationships are shallow. If you choose between vendors based on who will give the deepest discount today, to them you are an extractor. If you have a core of partners, who are committed to your vision and to helping you spend wisely (not just minimally), you now have relationships. Extraction is always temporary, leaving you constantly scrambling for new deals. But relationships last.
The above might sound harsh. Understand that these are not hard and fast rules, but they are likelihoods that I’ve observed over time. I’m hoping to help you see a bigger picture that might be hard to accept at first, but is designed to move your mission further. Send me a note if you would like to further discuss how this might be affecting your organization and what to do about it.