Recently I was helping someone with my thoughts on the
role of the government in corporate social responsibility. This resulted in an
interesting discussion on the issues surrounding a new company bill introduced by the Indian Government. This bill requires companies above a 'certain' size to ensure that they spend at least 2 percent
of their annual profits on corporate social responsibility (CSR) activities. While the 'certain' size of these companies remain to be
answered, what got us talking about on a tangent was what would constitute as
actual spending on CSR focused activities vs the so-called administrative
support aka the 'overheads'.
Now I have been in the development/non-profit sector for
as long as I can recall and to me the word 'overhead' itself remains a highly
undervalued term within my field. When I develop budgets for my work, more
often than not, the question of administrative costs are reviewed a lot more
closely than the work that we actually deliver. Yes the current economic
scenario demands that in order to win programs, we ensure a competitive economies
of scale. The flip side, in that however, is that most often measurable impact
gets lost because then it becomes a matter of number game as opposed to the
real return on that investment. I disagree with the notion that for nonprofits to run a
successful activity, their overheads should be at minimum - that this should be
equated per the ratio of what goes into an organization's 'overhead' vs the
direct benefit of the activity.
It is thus exciting to learn about the recent initiative
by Guidestar, Charity Navigator and Giving Alliance wherein they mention that
"the percentage of charity expenses that go to administrative and fundraising
costs—commonly referred to as overhead —is a poor measure of a charity’s
performance". Or more importantly the simple clarification on what these
'overheads' could include - that "they are important investments charities make to
improve their work: investments in training, planning, evaluation, and internal
systems".
This campaign that they propose is long overdue for the
sector and I would be extremely keen to see how it unfolds in responses mainly
from those outside of the nonprofit sector. In the meantime, if there is a specific
charity that you are supporting - take a moment to review their work, their
accountability, the risk factors - and then assess the real return on your
investment.
