Tuesday, November 14, 2006

Stupid, stupid, stupid

I was reminded again last night how dumb it is for our sector to have "administrative costs" as its primary metric of goodness.

My class at Kellogg was on Organizational Development, and, of course, part of any good OD program is regular training for staff. But, as one student with experience as a nonprofit staff person said, "That adds to our admin costs...and that's the biggest no-no we have."

Another student chimed in...."You had us read on the need for better health care benefits, and I agree staff want them, but it adds to our admin percentage, and thus it will never pass our management council."

I kind of went off a bit, telling the students that grading a nonprofit based on its admin percentage is like grading a car based on its weight. Interesting, but meaningless.

Of course, the funders disagree with me, since admin is easy, sounds important, and seems to reduce non-mission spending. But there has never been a direct (mission) cost that didn't have an associated indirect (admin) cost associated with it. By hammering on admin, by setting silly percentage targets for the entire sector, we are hurting the sector in very real ways.

Whatever happened to "capacity building"--wasn't that all about building administrative (and mission) capacity?

One exception to this rant-measuring admin year over year at the same agency has some management value. But to say (as I have heard from foundation people) that an admin percentage higher than 12% is unacceptable is....idiotic. For starters, agencies vary widely. Second, I'll guarantee that the foundation's admin % is higher than that, third who picked 12%.? My guess--someone picked it out of the air.

Anybody think FedEx is well run? Nordstrom's? How about the "great"companies in "Good to Great"? I'll bet serious money that their admin percentages are way higher than 12%.....

Hmmm. That's a good task for my Kellogg students.....

1 comment:

The Craft Dilettante said...

The "trick" for a nonprofit is to realize that some of their admin expenses really relate to programs. So when an Executive Director is talking with a funder about a program, it's not an administrative expense, it's programmmatic. In my view, administrative expenses relate to cutting checks, performing HR duties, writing board meeting minutes, etc. If you're strategizing about a program it's programmatic.