The GiveWell Blog

Straw man? Or 75% of the population?

I’ve been ranting about how ridiculous it is to judge a charity by the % of its funds that go to administrative expenses, which I’ve dubbed the “Straw Ratio” because I was too lazy to find a prominent advocate of it so I just invented a Straw Man.

Well, it turns out there quite a lot of human men (and women) who make this mistake. Specifically, according to a recent study that I found out about from Gift Hub, 75% of high-net-worth households say they would give more to charity if less were spent on administrative expenses.

This aspect of charity got by far the strongest response out of anything the households were surveyed on. High-net-worth households care more about their money going to administration than they do about having more access to research (34%), or being able to determine the impact of their gifts (60%). See page 7 of the actual study if you think I’m lying.

Meanwhile, frustrated with the incompetence and disorganization I’ve seen in the nonprofit sector, I’ve practically been begging these guys to spend more on administrative expenses.

If these survey numbers are to be trusted, we’ve got quite a conundrum here. How do we convince people that this seductively easy-to-measure number is no more meaningful for a charity than for a company? How can we make people care more about accomplishing something than about pinching pennies from executives?

My initial ideas:

  • Yell
  • Blog
  • Insist on calling the program expenses / total expenses the “Straw Ratio,” banking on the negative connotation of straw
  • Start a project to collect all the meaningful information about charities that we can find in one place
  • Hold a protest! We could march around with straw hats on – it would be so symbolic!
  • Social networking


  • The GiveWell Blog - Exploring how to get real change for your dollar. » BRB on May 18, 2007 at 1:51 pm said:

    […] The Straw Man opened the series, dubbing “% of expenses that go to programs” as “the Straw Ratio.” I then proceeded (after grudgingly conceding a tiny bit of value in this metric) to rip him apart. I started with the obvious: even if the Straw Ratio were useful, there would be a lot more to do to find the best charities. I then argued that administrative expenses are valuable in running a charity (or anything) well, and pointed out that the obsession with penny-pinching has consequences for the quality of the sector’s people, technology, and evaluation capacity. The Straw Ratio isn’t just a silly number: it’s a mentality that has infected everything from the Internet to donors’ brains, and it’s a mentality that GiveWell exists to fight. […]

  • “Seductively easy to measure” says a lot. Once we have a measure, we manage to the number, even if the number itself is not that meaningful. One way to address this is to measure more things. Another whole thought process, though, is around personal engagement, where the donor gets active and sees where the money is going, meets the people served, gets a sense of the staff, and begins to see that the “expense” of facilities and staff and accounting are a cost of doing doing business. Another answer is for more enlightened donors to fund the basic “nut” of the organization, so that 100% of the money raised by direct mail, etc goes to projects. LDS Philanthropies operates this way, I believe. So does the Aga Kahn Foundation, I believe. It is darn good marketing.

  • Holden on August 5, 2007 at 4:47 pm said:

    It is darn good marketing, but that’s all it is – and it reinforces a pernicious and damaging mentality, rather than knocking down that mentality.

    I believe the Straw Ratio is a broadly, but not deeply, held bit of conventional wisdom. I haven’t met the person I can’t talk out of it in 5 minutes. I’m not arguing against getting personally involved with an org – there are many good reasons to do so – but I really don’t think it’s necessary for dropping the Straw fallacy.

  • Anonymous on March 7, 2008 at 10:54 pm said:

    free car quote…

    Excellent post. Keep it up!…

Comments are closed.