Nonprofit boards now FEAR spending money ... even when the point is to MAKE much more money, as organizations most definitely can.
But here's the thing: Spending of any kind lifts overhead.
And, in turn, higher overhead risks ratings downgrades from self-styled watchdogs like Charity Navigator, founded in 2001.
Charity watchdogs — with their crude yardsticks: the sanctified 20 percent ceiling on overhead, e.g. — have hamstrung the entrepreneurial impulses of US charity market for, what now, almost two decades?
And what have they accomplished?
To my knowledge, they've never uncovered any major charity fraud.
But they have had a deep impact on the philanthropic sector. They've inspired a generation of ledger-dermain on the accounting side ... and a lack of investment on the business-growth side.
Watchdogs have established at the C level and the board level a terror of censure.
Charities know that perfect trust is what donors expect. And on that issue, the charity watchdogs can giveth ... and the charity watchdogs can taketh away.
It's safest to spend as much as you can on programs and as little as possible on anything else, such as salaries capable of attracting serious talent.
The amazing thing is this: the watchdogs did all this crippling damage ostensibly on behalf of the donor!
"Heckuva job, Brownie," as George W. Bush might say.
You know who beat the watchdog system at its own game?
Charity: Water raised money for overhead as well as program, as two separate things. That way they could say with perfect honesty that 100% of a person's donation to program goes to work in the field.
The people that cover the overhead are donors, too, of course. And they know exactly what they're buying: incredible impact. Overhead makes programs possible.
From a sales point of view, Charity: Water did something well-known in the banking industry: they made their donors a No Fee offer.
Scott Harrison founded Charity: Water in 2006. Over the next decade the charity raised over $200 million for clean water projects in 24 countries ... promoting the No Fee offer.
Of course, other charities hate Scott Harrrison's 100% promise. In comparison, other charities look like spendthrifts.
And it makes Charity: Water look like some kind of magician doing incredible work in a glamorous high profile way without spending donor money on anything but delivering clean drinking water to needy people for the very first time.
Thus "proving" to a world that skips the details that great good can somehow come from thin air.
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