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Greater Scrutiny of NGOs Demands Leaders' Focus on HQ Effectiveness

Richard E. Stearns | Outcomes, Nov/Dec 2007, Vol. 31, No. 6

"We're good people doing good things and that's good enough."

I have encountered this attitude a few times in my nine years as president of the U.S. office of World Vision as a response to scrutiny of charities. My response to this misguided philosophy is, quite simply, "That's not good enough."

One of the most significant trends facing NGOs and non-profit organizations generally is the increasing scrutiny by rating services, most notably, the Better Business Bureau, Wise Giving Alliance and Charity Navigator. In addition, there has been a heightened level of analysis by the news media, especially after the September 11 terrorist attacks, as well as the Asia tsunami in 2004 and Hurricane Katrina in 2005. While the Red Cross and FEMA took the brunt of criticism, all charities suffered from the public perception that millions of dollars in private donations and government funding were squandered after all three tragedies.

While some criticism is focused on field effectiveness, there is a growing demand for financial accountability and fundraising efficiency and transparency.

Overhead: Arbitrary Concept with Moral Implications

First, let's look at overhead—a very arbitrary concept with moral and ethical implications.

Suppose a hurricane devastates several countries in Latin America and the World Vision staff in those countries desperately need a lot of money quickly to respond to the needs of survivors. World Vision's senior marketing staff and I might have a hastily scheduled conference call with our board. The marketing team would explain that, over the next few days, there will be substantial media coverage of the disaster, thereby heightening public awareness, and World Vision likely could raise $2 million in cash donations if we spend $1 million on advertising. Board members—sensing an urgent need to make a decision—probably would give unanimous and emphatic approval to the idea.

Wait a minute: Hasn't the board just authorized an overhead level of 50 percent?

As a result, World Vision is faced with a moral dilemma: If we can raise $2 million to help those hurricane victims, shouldn't we do it? But by doing so, our organizational overhead rate of 13 percent would spike upward. How do you reconcile that?

This question leads to another: Who determined that 10-15 percent overhead is reasonable? Some non-profits perform excellent work for worthy causes, but their overhead rates exceed 20 or even 30 percent. Why should they receive a poor rating because of an arbitrarily set criterion for their administrative costs?