Sunday column: Hauling out the checkbook, not the ball gown
Mercy Corps faces three questions as it grows from its Portland home base into a major player on the global humanitarian stage:
How much overhead is too much?
How much of the world can you save?
And when, if ever, is it OK to throw a swanky charity gala in honor of destitute people?
Mercy Corps' answers may provide relief to loyal Northwest donors worried about the organization getting too big too fast. They also offer general clues for people trying to sort out which charities to support this year, when the needs are great and money is tight.
Mercy Corps has expanded over the years from a small and scrappy relief effort into a $244million full-service humanitarian aid organization with roughly 120,000 current donors, 40 percent of them from Oregon and Washington.
It will move across town this fall from a hodgepodge of offices on Lair Hill into sleek new headquarters in Old Town. The well-respected organization now tackles everything from agriculture in Afghanistan to conflict resolution in Iraq, while also pouring money into interactive public-engagement centers in Portland and Manhattan.
These changes are both exciting and unnerving.
Mercy Corps' spending on fundraising and overhead has mushroomed by the millions in recent years. The organization once boasted spending only 5 percent a year on these nonprogram expenses. Now the rolling average is at 11 percent, hitting 13 percent for global operations in 2008, according to the organization's recently released financial report.
Meanwhile, Mercy Corps briefly considered throwing a "bit of a gala," as one senior manager put it, with dancing and the whole works, to celebrate the new digs this fall.
The idea didn't last long in this economy, yet it raised a sparkly red flag.
Sometimes, nonprofits start throwing big events right around the time they lose focus on their mission and switch into self-congratulation, self-perpetuation mode.
Mercy Corps CEO Neal Keny-Guyer says staying focused while growing quickly is a balancing act. "You can't do everything," he says; you have to stay nimble and pick your projects carefully, even when you're big.
As for overhead, he says, "We are trying very hard to stay between 10 and 15 percent," to stay competitive with peer organizations and attractive to donors. A smaller number is unrealistic for an organization of Mercy Corps' scope, he says: You need an internal auditing team, for example, when you're dealing with multiple grants in multiple currencies.
Experts in the nonprofit world back him up. They say too many nonprofits either starve themselves to keep their overhead down or cook the books to make their numbers look good.
As long as overhead and executive pay are within reason, potential donors should ask the more important question: Is this organization trustworthy and effective?
In the case of Mercy Corps, the answer is yes. But if you're not sure, then ask yourself this, says economist Renee Irvin, who directs the graduate program in nonprofit management at the University of Oregon: "Why donate to an organization you don't know and trust?"
If a charity seems focused and shows progress, write the check.
If it spreads money around with no clear strategy, hide the checkbook.
"A surprising number of nonprofits lack such strategic focus," according to a new analysis of nonprofits and ethics published in the Stanford Social Innovation Review. "Many operate with a 'spray and pray' approach, which spreads assistance across multiple programs in the hope that something good will come of it. Something usually does, but it is not necessarily the cost-effective use of resources that public accountability demands."
This brings us to the frivolous hypothetical of the day: Should Mercy Corps ever throw a glitzy charity gala? If money were no object, would it ever be prudent for a Northwest-based charity to host a lavish event in honor of suffering people?
Sure, says Irvin, if it raises money and awareness.
Probably not, says Keny-Guyer (though he laughingly adds he'd never turn down a "redemptive use of money").
I'd say no, in honor of all those change-averse, ordinary Northwest people out there who are more comfortable with low-frills operations.
We like our nonprofits to stay familiar, even if they get rich and big. Besides, we'd have nothing to wear.