We gravitate toward objective metrics when evaluating complex problems.   For a new car, that might be horsepower, braking distance or towing capacity.  For non-profits, it’s often “fund raising effectiveness” or related metrics of “overhead” or amount spent on program.  On the surface, it seems a sensible approach:  after all, you want your donated dollars going to educate children or immunize infants, not paying for fund raising consultants or direct mail campaigns.

If I saw the following table, it would be hard *not* to choose Organization A.

Name % of funds spent on program % of funds spent on fund raising
Organization A 100% 0%
Organization B 97% 3%
Organization C 63% 37%

But there’s more to the story.

Imagine that you are the volunteer Executive Director of a small organization that provides bed nets to families in Africa to help stop the spread of malaria and other mosquito-borne illnesses.  Each bed net, with delivery and training, costs $15.

You have $15,000, and could serve 1,000 families.

You brainstorm with your team about how you could raise money to serve more families, and you come up with two promising ideas:

Idea Guaranteed Income Fixed Expense Net Profit
(pardon the pun)
Raffle / Silent Auction $16,000 $1,000 $15,000
Gala $40,000 $25,000 $15,000

What do you do?

Assuming that we had the staff to pull it off, why not do both?  We end up serving an extra 1,000 families for each of the fund raisers that we run.  Go for it!

Now, re-cap the financial impact of these choices:

Scenario income expense # of families helped % of funds spent on program % of funds spent on fund raising
Base level
(no fund raisers)
$15,000 $0 1,000 100% 0%
Base + Raffle $31,000 $1,000 2,000 97% 3%
Base + Raffle + Gala $71,000 $26,000 3,000 63% 37%

By choosing to increase our efforts, to help more families, we have transformed our organization from “Organization A” in the table above to “Organization C”. What seemed a clear choice with some information reverses when more information is revealed. In summary, yes, fund raising effectiveness is important, but keeping in mind the bigger context of how the money is being spent and how many people are being helped is also important.

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