I feel like we have all heard it said, ‘You have to spend money to make money’. This is true on many levels, but how do we feel about that when it is used in reference with a not-for-profit organisation? Can charities say that?

Let’s think of it this way – if there is a charity that no one has ever heard of, they will not receive any funding. A charity that has second rate staff is not going to create trust and therefore will not receive ongoing funding. A charity that is not working effectively because of lack of resources is going to waste money and will not receiving ongoing funding.

Dan Pallotta called this issue out in his TED talk (you should really watch it). The way we think about charity is wrong.

“You want to make 50 million dollars selling violent video games to kids, go for it, we’ll put you on the cover of wired magazine, but you want to make half a million dollars trying to cure kids of malaria you are considered a parasite yourself.” Dan Pallotta

Somewhere along the line we have decided that we need to choose between either doing well for ourselves and our family or doing good for the world and that somehow these two outcomes cannot exist within the same paradigm. It’s a belief system that makes sure that charities and other not-for-profits don’t grow too big and challenge the power of the for-profit sector.

Dan points out that this mentality can be traced back to the religious experience of penance from 400 years ago. There is a long history of making money and then carrying a feeling of guilt because a profit was earned. Some of that guilt was warranted as the profit was earned off the backs of slaves and the poor, but some of the guilt was an unnecessary burden placed on people because of their understanding of who God is. Regardless of the reason, giving to charity was the method used to ease one’s conscience. Charity, therefore, could not turn a profit because then it would cease to serve the purpose of paying for the individuals ‘sinful’ money making. Whilst I would suggest that much of the thinking around business and turning a profit has changed, the feeling about charities spending too much money, getting too big, or their employees earning too much has not.

It is important to be wise with the money that people give but our thinking does need to shift. Overhead costs, including staff wages, are part of the program costs and ‘admin’ is not a necessary evil which we don’t like to acknowledge. It is part of the program itself.

If you pay peanuts you will get monkeys. It may not be true all the time. Some may take a pay cut to work in the nonprofit sector for a period of time but you will always lose the good ones eventually. Our society shouldn’t have to make the choice between doing well for themselves and their family, or doing good for the world. They are not mutually exclusive.