This is the third post in a five-part series. To see the first post, click here.
Myth #3: Charities with low admin costs are better.
Many people think that the mark of a good charity is one that spends a large proportion of its donations directly on the program. “Percentage administration costs” remains a popular metric for charity evaluation. In general, people seem to think that while it is sensible for businesses to invest in expensive staff, marketing and miscellaneous administration costs in order to maximize profits, charities will maximize impact by keeping these costs to an absolute minimum. It seems to me that this “double standard” arises from a squeamishness about applying “business techniques” to do-gooding, when the squeamishness should be reserved for the end goals of business (personal profit) and not the techniques they use to better achieve their end goals.
Giving With Purpose is impressively good at recognizing the legitimate need for charities to have significant “indirect” expenses. However, while this post is focused on the Giving With Purpose course, I wanted to include some comments on the Buffett family in general and I cannot ignore the recent New York Times op-ed by Peter Buffett, son of Warren Buffett. In this piece, Peter complains that, “with more business-minded folks getting into the act, business principles are trumpeted as an important element to add to the philanthropic sector”. (For an excellent commentary on the entire op-ed, see http://www.patheos.com/blogs/hallq/2013/07/warren-buffetts-son-is-almost-completely-wrong-about-charity/.)
Overall, I’ll give the Buffetts 1 out of 2 for their recognition of this myth.
Keep an eye out for next week's post on Myth #4 in this five-part series…