The need to transform our perspective on charities is more critical than ever in addressing humankind’s most significant challenges. It has been a decade since Dan Pallotta’s influential TED Talk, “The Way We Think About Charity Is Dead Wrong,” yet unfortunately, little progress has been made.

To invigorate this conversation and tackle ongoing funding challenges faced by the sector in Australia, we recently convened funders and for-purpose leaders for a pre-screening of the documentary UnCharitable. This feature-length film sheds light on the darker aspects of philanthropy and introduces a groundbreaking approach to giving. It calls for a radical shift in how we perceive charity, moving away from viewing overheads as mere accountability tools and recognising them as investments in impact. The documentary serves as a powerful call to action, urging people to reconsider their giving mindset and remove constraints that hinder the full potential of not-for-profits.

Following the screening, our panel of leading philanthropists and charitable leaders, including Lisa Cotton, the Chair of Kennards Hire Foundation, Greg Hammond OAM, Director of Opportunity Australia and Chair of Anglicare Sydney; and Doug Taylor, CEO, The Smith Family, explored the challenges posed by this thought-provoking documentary for Australia.

IMAGE: Left to right – Greg Hammond OAM, Director of Opportunity Australia and Chair of Anglicare Sydney; Lisa Cotton, the Chair of Kennards Hire Foundation, and Doug Taylor, CEO, of the The Smith Family.

Similar to the United States, Australian charities face significant challenges due to a lack of funding for their core operational needs. This shortfall severely impacts their ability to provide essential services to disadvantaged Australians. Doug Taylor acknowledged the report, “Paying What It Takes: Funding Indirect Costs to Create Long-Term Impact,” conducted by the Centre for Social Impact (CSI) and Social Ventures Australia, which sheds light on this critical issue. “We know that most grantmakers will contribute 10 to 15 percent towards overheads. The Pay What It Takes report tells us, based on US data and Australian that indirect costs are more like 32 percent”, says Doug.

He noted that this big gap causes enormous challenges and feeds the not-for-profit starvation cycle. This cycle occurs when inaccurate expectations about overhead costs lead organisations to underreport their actual expenses to funders. Consequently, they lack the necessary core funding to address complex social issues effectively.

Our conversation after viewing UnCharitable revealed five areas where Australian philanthropists and not-for-profits can contribute to shifting perspectives on these issues:

  • Trust: Recognising the critical role of trust in these discussions.
  • Unity: Creating a collective front across the ecosystem to address these challenges.
  • Language: Introducing a more precise language for discussing overhead costs.
  • Leadership recognition: Acknowledging and rewarding not-for-profit leaders.
  • Board leadership: support for leaders to undertake their role to create impact.

Trust is important to moving the dial

The UnCharitable documentary underscores a trust imbalance in our society, favouring businesses over government, media, and NGOs. Greg Hammond emphasised the need to recognise this disparity when shifting mindsets.

When addressing the complexities of indirect costs, equal trust between funders and grantees plays a pivotal role. According to Lisa Cotton, forward-thinking philanthropists understand funders must trust non-profit leaders. They need to express, “I trust you, you know what you’re doing, you know how to invest my capital, I respect the fact that you’ve got the experience in that area”.

Greg Hammond agrees that maintaining and building trust with funders is the core to meeting the challenge. He noted the way to remedy this is to focus on two very simple things, “being very clear about your purpose.” Also be clear on “What impact do you want to make and how you demonstrate impact?”

A united front

Reflecting on the decade since Dan Pallotta’s initial call to action, our conversation delved into where Australia stands on these critical issues. Greg Hammond candidly shared his perspective: “My own view is things have gone backwards in that the focus of philanthropists and donors on grants submissions and acquittals – is actually driving overheads up. So, the real question becomes: How do we effectively disseminate this message across the sector?”

Greg further emphasised the challenge of communicating this message across Australia’s vast diversity of givers—ranging from large foundations to individuals making sacrifices to support causes.

The panel unanimously underscored the importance of a united front across the sector. Lisa Cotton, Chair of the Kennards Hire Foundation highlighted a need for involvement across the whole ecosystem from funders to media to government to non-profitable organisations and social enterprises to make a long-term change.

Lisa encouraged the sector to come together to “design a long-term, education and advocacy campaign with a suite of tools and tactics that can be broadly adapted across the sector. A big picture vision of what’s possible must also be backed up by providing tools to enable people to act on that vision”.

“A big picture vision of what’s possible must also be backed up by providing tools to enable people to act on that vision.”

Lisa Cotton, Chair of the Kennards Hire Foundation

Words matter!

Lisa Cotton, emphasised the need to reframe the dialogue and introduce fresh language to transform people’s perspectives. She pointed out, “We still talk in the old paradigm when we talk about non-profit”.

Rather than talking about overheads, Lisa suggests, “Let’s talk about resources”. She noted corporates don’t talk about overheads, they talk about properly resourcing a business. These are core costs or backbone costs rather than overheads.

Lisa suggests, “Let’s not talk about donations. Let’s talk about investments – you’re investing in people’s futures”. Reiterating a fresh new language will help shift mindsets.

Independent metrics and data regarding overheads have been highlighted as crucial in facilitating dialogue between funders and not-for-profit organisations. It is essential to recognise that many

individuals still lack a clear understanding of what constitutes overhead costs. Improved data in this area can foster honest conversations and provide a baseline for further discussions.

Support leaders to succeed

The documentary highlighted the disparity between corporate and for-purpose leaders’ salaries as a disadvantage to drive the best leaders to the sector to help address these societal challenges.

Lisa Cotton reflects, “If we could attract, 0.5% of the talent out there. Imagine how we’re going to be able to accelerate change”.

Greg Hammond said there needs to be a focus on people, “Recruiting to the sector, and training and developing leaders to be the best they can”. It was noted that attracting people to the sector is not all about money and a whole range of things that motivate leaders.

 “There needs to be a focus on people, recruiting to the sector, and training and developing leaders to be the best they can.” 

Greg Hammond OAM, Director of Opportunity Australia

The boards role in this conversation

The conversation highlighted the board’s critical role in supporting leaders mobilise this issue. “There needs to be trust in management and empowering management to get on with the job”, said Greg Hammond. “In the same way we’re asking philanthropists to trust. Boards need to function more like corporate boards and trust in management”.

Doug Taylor highlighted a crucial point from the recent Pay What It Takes report, addressing the evaluability bias. He emphasised that boards play a vital role in ensuring they focus on the right data to lead their organisation and not just data that’s available but may not provide a complete picture. His suggestion is to: “Shift the focus away from solely overhead ratios and instead focus on outcomes data that helps you understand difference you’remaking.”

As the conversation around indirect cost funding gains momentum in Australia, addressing this issue becomes crucial for the sustainability and effectiveness of the sector. Our discussion, inspired by viewing the film “UnCharitable,” has shed light on great initiatives that can shift perspectives. It’s time for the entire sector to mobilise and drive positive change. Together, we can make a lasting impact.

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How to be involved in the conversation:

By hosting this Private Pre-Screening the Australian Leadership Hub, along with the support of the Origin Energy Foundation aim to mobilise decision-makers across the region in philanthropy and the not-¬for-profit sector, to shift the discourse from overheads as a tool for accountability to overheads as an investment in impact.

The outcome we want to see is for people to change how they think about giving, removing the constraints on not-for-profits that undermine their full potential.

You can read more on this UnCharitable campaign at the Social Impact Hub webpage – see link here.

Or read the Pay What it Takes Report here.

ReframeOverhead.org.au:

The Pay What It Takes Charity Consortium released at Fundraising Institute Australia’s 2024 conference on 1 March 2024 new Australian research and a NFP Guide, to give fundraisers the data and resources they need to begin change the narrative and reframe overheads.

Get involved – make the pledge and read the report. www.reframeoverhead.org