Waylaid Dialectic

May 9, 2010

In praise of high overheads

Filed under: Aid — terence @ 7:11 pm
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“Of course, the optimal [aid agency] overhead is not zero…” – so say Easterly and Pfutze (2008) [pdf]. Good point – although it’s a pity their paper goes on to rank aid agencies as if it were*.

Anyhow, conceptually, they’re on the right track.  Unfortunately, the conventional wisdom amongst politicians and the public tends to be that a dollar spent on aid agency or NGO overheads is a dollar wasted.

A dollar spent on overheads can certainly be wasted. On the other hand, not spending that dollar can waste a whole lot more money if it leads to overworked, overly-busy staff undertaking poorly scoped projects that aren’t properly evaluated.

By it’s very nature aid work is difficult. And the best chance of success comes through spending time and money to learn about context and by employing staff who aren’t too busy to do their work properly. Staff who are able to build relationships and consider carefully how their work is going. Staff who are supported by a well functioning back office.

All this costs money. Overheads.

A former employer of mine capped overheads at about 8% of aid spend. In my opinion, watching the haste with which most everything got done, that 8% was far too low.

Of course, it’s possible for overheads to be high, and no doubt this is an issue in some aid agencies and NGOs; but it would be great if in public discourse people spent as much time worrying about overheads being too low as they did about them being too high.

*I’ve got quite a lot more to say about this paper – that’s for another post though.

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3 Comments

  1. my supervisor asked me to write that he likes the sound logic here. HRI is occasionally unfairly criticized for our commitment to overheads and we need more people like you, he says.

    Comment by Nathan the intern — May 12, 2010 @ 12:35 am

  2. Ha! Thanks. That’s a pretty good rejoinder really. I.e. the ugly aspects of development that you satirize on the Hand Relief blog are all fed by overheads, and no one wants to see those increased. Can I modify my ‘campaign’ to More and Better Overheads?

    Comment by terence — May 12, 2010 @ 8:48 am

  3. […] Setting aside the fact that he’s actually talking about cutting funding to an umbrella NGO not bureaucrats (and that you’d kind of hope a Minister might know the difference between the two) his argument here is a classic example of the fallacy of low overheads. […]

    Pingback by Saving the world: one dollar at a time… « Waylaid Dialectic — June 10, 2010 @ 9:08 pm


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