We Must Re-considerate Fundraising

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Donors love to hear how little a humanitarian organization spends on fundraising, and humanitarian organizations love to tell donors what they love to hear.

That’s utterly misguided — unethical, even.

The less an organization invests in fundraising the less it can grow. The less it can grow the more human suffering persists. We have institutionalized a mechanism for ensuring the persistence of human suffering and called it “charity.”

Here are what some of our favorite charities spend on fundraising, according to their own figures:

American Heart Association, 2009: $111 million, or 16.2% of expenses

Komen for the Cure, 2008/2009: $23 million, or 8% of expenses

American Cancer Society, 2008: $53 million, or 11% of expenses

Juvenile Diabetes Association, 2009: $20 million, or 11% of expenses

By contrast, what does Apple spend on fundraising? A decent proxy is its SG&A (Selling, General, and Administrative Expenses), which is about 11% of revenues.

So what’s the problem? The charities above seem to be in line with the second highest market cap company in America. That’s a percentage. If we look at it in dollars, it’s a completely different picture.

Apple will do about $60 billion in revenues this year. That’s about 40 times the combined revenues of the four organizations listed above. 11% of that is almost $7 billion. That’s 35 times more than the combined fundraising spending of the four organizations above. It’s nearly 70 times what the American Heart Association will spend. It’s about 300 times what either Juvenile Diabetes or Komen for the Cure will spend. And these are the largest charities in their fields.

But stop. Why would we use figures for what business spends on sales as a yardstick for what charities should spend on sales? The sales spending yardstick for charities that deal with life and death issues should be human mortality rates, and nothing else. And until those rates are zero, the fundraising spend should correlate to whatever it’s going to take to get to zero.

And that will be a lot.

We need a new normal — a complete re-think of what we should be investing in fundraising. If we are serious about the value of human life, then we have to start thinking about 50 to 100% fundraising rates for the organizations chartered to save human lives. Those organizations should take no pride in telling donors or anyone else how low their fundraising costs are. Quite the opposite. I want to support the organization that’s going to scale, not the one that’s stuck where it is. Why would I support a cancer organization promoting its low fundraising investment while cancer remains uncured? We have the whole reward system backward.

(Qualification: I’m not sanctioning inefficiency. That’s a completely different conversation. Everything I’m advocating assumes maximum efficiency.)

What we are doing is not working. A world in which 10 to 15% fundraising ratios are the norm is a world in which our charities are woefully too small to confront social problems on any meaningful scale. It’s a world where growth occurs – if it occurs at all – at the pace of molasses — the pace of death — and where human suffering continues on an unimaginable scale with no end in sight.

If we no longer want to live in that kind of world then we need to get used to a new one. Not a 15% world (which is an utterly arbitrary figure, to begin with) but a 100% world. One hundred percent is a figure that has real meaning behind it. It says we are WHOLLY committed to getting to the scale required to solve the problems we face.

How on earth will we ever explain this to donors?

Through leadership. And by asking donors a simple question — would you rather feel good about next to nothing getting done, about these social problems persisting into eternity — or would you rather see us eradicate some of these problems in your lifetime?