Issue 1- Summer 2013: Canada’s charities deserve better

Maple Leaf

Canada’s charitable sector is perhaps our great country’s most valuable resource. it places human decency and kindness above all else. it is not surprising, then, that it has reacted to the recent focus on its cost structure with politeness, diplomacy and tact.

The sector has (correctly) pointed out that a charity’s fundraising cost ratio might reflect its fundraising efficiency, but may have little correlation to its ability to achieve its mission. The sector has been too willing to tolerate the use of fundraising and administrative costs as the only appropriate metrics, when it knows full well they are not. Impact is really the only thing that truly matters. Charities must take a positive approach to marketing their impact while promoting more appropriate metrics around societal improvement.

Towards a deeper analysis

When my colleagues at Mackenzie Investments analyze companies, they look at a variety of factors before they decide to invest. They ask questions like these:

As one senior portfolio manager told me, “if I were looking at a company, I would be looking at the trend of that market and I would be focused on the potential for growth.” The key is that while the numbers are part of the analysis, they are understood in a broader context. Yet when I asked the same portfolio managers whether they might give to certain charities, there was no analysis — no focus on profit or efficiency. Their decisions were thoughtful, but based on personal values around philanthropy and volunteerism rather than on quantitative factors.

As donors and media consumers, we’ve been led to believe that Shelter A is “better” than Shelter B, which in turn is better than Shelter C. But our sophisticated portfolio managers are quite astute even on matters relating to philanthropy. More questions arose when I asked them which charity would be their preference.

Examine the most important things

The focus on immediate fundraising and administrative costs virtually ignores answers to these important questions. If Shelter C is the only organization serving both women and children, shouldn’t that be important? If Shelter B were the only one serving your community, wouldn’t you choose that one over the others? Perhaps Shelter C wishes to purchase a newer, safer building, potentially increasing its fundraising costs. All these variables speak louder than a narrow focus on fundraising and administrative costs. The charitable sector does its job proudly and quietly, like your trusted colleague who always gets the job done quickly and properly with no fanfare. Perhaps charities need to respond more vociferously to those who diminish their importance by focusing primarily on fundraising and administration costs. Until then, they will be forced to defend themselves from those who devalue the significance of the entire sector.