Since the beginning of the pandemic small communities across North America have begun to experience many issues that were once prominent in larger cities. Challenges brought on by a lack of mental health resources, inflationary pressure, and economic uncertainty have created a growing population vulnerable to addictions, homelessness, food insecurity, and undiagnosed or untreated mental health challenges. The need for charity and assistance has become huge.
Against this backdrop, a small town newspaper ran an article about a local charity that provides temporary shelter, meals, and other services for the homeless. It mentioned that over the past year, the volume of people seeking help has nearly doubled and that the shelter is now stretched thin; their building bursting at the seams with people who need help. Please, they ask, consider making a donation.
This article was shared on social media. Predictably, one of the first comments to appear was, “How much are they paying staff?” For those who work in the charitable sector, “how much do charities pay staff” is a common question. Sometimes it is asked by people seeking to understand how an organization works.
However, most of the time it is a question asked by individuals within a community who either have an axe to grind or have bought into misinformation about the charity. In an age where social media allows people to easily find any answer in support of their preconceived notions, this confirmation bias quickly creates a poisonous atmosphere, making it harder for charities to perform their mission.
As the question about charitable finances spreads, it always influences well-meaning people who hear second hand but don’t have the time or will to look into the issue themselves. The result is a recurring question that discourages people from donating.
Unfortunately, the society we have built in North America needs charity and charitable organizations. Those organizations can and should be examined. However, that should be done in a more thoughtful way than simply asking about expenses and staff salaries.
Why Do We Need Charities?
In our modern world, charity exists because neither private business nor government can provide or distribute sufficient resources for everyone. In a more equitable society, all businesses would pay wages that are above the poverty level, allowing people to afford housing, food, and recreation. This would in turn create a more productive workforce. The government would ensure that every citizen had access to a basic level of housing, food, and education. It would also ensure that health care would be comprehensive and high-quality, including mental health services.
Profitable business and fair wages being taxed to support a government that picks up all the people who fall through the cracks would be wonderful, but we are nowhere near that reality. It is those people who fall through the cracks driving the need for charity.
The Charitable Scramble for Dollars
Charities need money to operate and there are three significant sources, besides donations, that they can turn to. Foundations, either individual, corporate or private, amass mountains of money in investments, the proceeds of which fund their disbursements. Private businesses will also often make donations directly to charities in the form of corporate gifts or sponsorship of charitable events. Finally, governments on all levels offer a variety of grants for charities through an application process.
Often, the money from those sources is not enough for the charity to achieve its mission. In many cases, foundations and large corporate donors refuse to allow their gifts to be used for “overhead.” Using the money for such things as staff salaries, rent, building maintenance, and marketing expenses is often expressly denied.
Charities also run into criteria that require significant paperwork, reporting, and accountability. This means that most organizations need to hire someone who is qualified and competent to fulfill the funder’s paperwork requirements. The result is that in order for a charity to receive funds and comply with stipulations, they have to go out and find more funds in order to employ staff who are qualified to do the work to meet the requirements for receiving the money in the first place.
Government grants, and many foundations, too, will only cover a percentage of programming costs. The end result is that charities, in general, end up with a funding gap that can only be filled through donations.
A Quick Thought Experiment
Think about this system for a minute through the lens of a group trying to help the homeless. When people are homeless it means that they need shelter–buildings of some sort. Buildings charge rent or come with mortgages and maintenance costs. Yet many foundations and grants won’t help the charity cover that “overhead.”
When a charity devises a plan to help these people out, it gets complicated quickly. Often, foundations and grants won’t cover more than 50% of a program’s total cost. On top of that, receiving money from one source often disqualifies the charity from receiving funding from others, because they “already received money” from a different source.
Charities end up having to write time-consuming grant proposals to multiple sources in hopes of landing one. Each funding source is on its own timeline, so it’s impossible for the charity to get a bunch of offers to choose the best one. Again, often, charities are forced to take the first one they get approved for, even if its not the best fit. This will probably disqualify them from other grants they applied for, but taking the one you got is the safer bet than passing up and taking your chances on a better fit that may never get approved.
All of that is just to get partial funding in place. If the charity is lucky, the grant they get is a three-year grant which gives them some stability. Often, it’s a one-year term, which means going through the whole grinder again, year after year.
Returning to the thought experiment around homelessness, one of the more cost-effective solutions is employing dormitory-style housing. Individual rooms are private, but there are shared common areas. Since food security is an issue, the food needs to be provided. A grant from a foundation may help the charity buy the food, chairs, pillows and linen but they won’t pay for anyone to do the ordering, cooking, washing up inventory control, or health and safety.
Other things foundations and grants often won’t pay for include things like maintenance people, cleaning staff, addictions counsellors, and mental health professionals. They, will, however, apparently pay for a big heap of supplies to be dumped in the middle of the floor.
Charities are Held to an Unrealistic Standard
Walk into a government office or business and see if they keep their supplies in a pile on the floor. Most likely not. They have managers and workers, each with tasks tied to outcomes. The employees receive pay for performing those tasks, and some are rewarded more than others because of their responsibilities, skills and seniority. This is not, on the whole, a bad system.
Why then, is it different when charities pay staff? Why are their employees, both managers and staff, not supposed to be paid for what they know or what they do? If you think the answer is, “because I give them money, they don’t earn it,” you need to take a rethink.
The government doesn’t earn money either. They take it and then spend a lot of time creating layers preventing the taxpayer from seeing exactly how it gets used. Government should get a lot more scrutiny, but they have done such a good job of making it hard to get any information, most people figure that as long their stuff isn’t getting stolen or vandalized and the roads are passable, it’s good enough.
Business doesn’t “earn” money either. A customer who needs a widget will choose which place to purchase from based on a unique combination of factors involving your level of immediate need, the product price, and how well the company making the sale has created a level of trust in your mind.
Sometimes, all it takes to make a sale is a convenient location and a sign. Other times it takes education, time, advertising and cool packaging. The result, however, is the same. At some point, a consumer gives money in exchange for a product or service.
The people within a business–they do earn money by exchanging their time and talent for wages. From the shop floor to the top floor, each individual is doing a calculation about how much their time and talent are worth for the tasks required. Workers are offered pay based on the common value for the function they are being asked to do. individuals leave jobs when they feel their value is higher than their pay.
That is no different than what happens in the charitable sector. People are hired to manage, market, fundraise, and carry out the mission the organization has decided to follow. So, why shouldn’t they get paid for their time, talent, and expertise?
Charities Must Pay Staff and Operate Like “Traditional” Businesses
Charity needs revenue to carry out their mission. Donations fill the gap in resources that come from other sources. To get people to donate, or buy into the mission and outcomes of the charity, individuals need to understand three things:
A problem exists
What that problem costs society
The charity under consideration has a workable plan to fix or reduce the problem
That’s a marketing process.
Charities also compete for limited resources. It’s true. Do you know anyone with unlimited money? If no one has unlimited money, then by definition, monetary resources are limited. Government grants have limits, as do foundations. People give money, but not all their money and they don’t give to every charity. Limited resources create competition. Competition creates the need for marketing. Marketing attracts the resources needed for the charity to deliver its “product” otherwise known as “the thing they are trying to fix in society.”
Imagine a local charity that reports $1.5 million dollars in revenue. Perhaps they have a CEO that gets paid, say, $70,000 a year and a staff of 10 who average $45,000 per year. Holy cow! That’s nearly a third of their revenue taken up by staff wages!
For an organization that oversees $1.5 million of charitable donations and grants, wouldn’t you want a CEO who understands finance, law, management and HR at a minimum? The alternative, as a donor, is to be ok with financial mismanagement, and the likelihood that your donor dollars are not being used effectively. Charities need competent management at the top to keep the charity out of legal and financial trouble.
Now within the ten remaining staff, there is a need for someone who specializes in bookkeeping and finance. Let’s say it then takes 5 people to deliver on the mission the charity has taken on. If it’s working with kids, or homeless, or health, or addictions, or housing, or trees don’t you want competent professionals administering those programs?
In order to maximize the benefit they provide to society, the charity likely needs to hire professionally trained, educated and qualified individuals. Who would you rather have helping your aunt deal with her mental health challenges–a trained professional or just some person who was willing to spend a few hours there that day?
In order for people to donate, they have to understand what it is that the charity does, why it’s important, and how effective that organization is at delivering it’s remedy. To gather that information takes data collection, analysis and marketing. So, its probably worth paying some people there to make sure the numbers are accurate and community impact can be properly demonstrated.
Finally, the charity will need to finish off its staff with some fundraisers. A charity, handling big dollars, needs trained, professional people to maximize the reach of every dollar donated.
What Questions should be asked of Charities?
Instead of asking, “how much do charities pay staff” there are a set of much better questions which will provide better information for evaluating charitable giving. Try asking a charity:
What is your mission, what problem are you trying to fix?
How big of a problem is that in our society? How does it impact our community at large?
With the programming you offer or support, how much of an impact can you make? How do you measure those outcomes?
Seek to understand how effective the charity is. Ultimately, any problem we have in society is going to be expensive to address, so why not make effectiveness the most important criterion?
A charity should always be able to tell you what the problem is, who it impacts, and the cost to society or individuals. They should also be able to demonstrate how effective their solution to that problem is.
It does make sense to look at financials once they can be put into context. Most people in charities, particularly long-standing and wide-reaching ones, have sound financial reasoning for the staffing and programming choices they make.
In the end, it’s best, for the most part, for people to stop worrying so much about how a charity pays people. If they do a good job and have a significant positive impact, then they are probably a pretty good choice. Be on the lookout for ones who take in lots of money and don’t pay it out or are created for political purposes. Those are the ones to watch out for.
Evaluation based on mission and impact are the best criteria to start with. As a donor, once you find charities that do important things and can demonstrate they do it well, stick with them and even interact with them. Doing so is going to provide you with the satisfaction of knowing that you are helping skilled people do what is likely a hard and thankless job.