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The Camelot Assumption

Problems with the idea that charities are best served if the people working for them don't get paid.

This is a curious misconception, believed by many people. At first it seems to make sense that the best way to make sure charities get the most money out of any particular venture is to give ALL the money to charity and to not pay any of the people doing the work any money at all.

The idea was first expressed at the time of the UK National Lottery first being started. The Lottery was run by Camelot, a company whose executives and managers were paid good money. Many people said this was wrong, and that the charities would get more money if the admin staff worked for nothing.

Sir Richard Branson, boss of Virgin, said that he'd do the job Free. He even had famous racehorse Red Rum there at a press conference to back him up on this. He may have been right, who knows? However, had he got the contract, the advertising would have been well worth doing the actual for no pay.

The people who made the decision about who should run the Lottery decided it should be Camelot who should run it. The reason for this is that what's important is the bottom-line; how much the charities get. If, by whatever means, the charities end up with more money from the project, then that's what matters, and it's irrelevant whether anyone else makes any money or not.

Let's put that in perspective by a simple illustration. Supposing you found a priceless painting in your loft, and decided for some personal reason that you would give the proceeds of this to charity. How would you best achieve this? One good way would be to appoint an auctioneer and have the work of art sold to the highest bidder and then give the money to charity. But who to hire as the auctioneer? A prestigious art specialist auctioneer offers to perform the task and suggests the best date for selling the painting at a grand public event in a snazzy venue. Estimated sale value 10 million. But wait, you say, the auctioneer is going to charge 2% commission, leaving only 98% to give to the charity. How greedy! No, much better to give 100% to charity. So, you appoint some generous well-meaning character who'll do the job for nothing, to flog the item at the local fair to the highest bidder! Unfortunately, the highest bidder there doesn't really offer much, and the charity ends up with all 100% of... not a lot!

Well, ok, it's an extreme example, but it illustrates the point! It's not whether the charity gets 100% or 98% or 90%, but the actual amount they really end up getting! And of course it is better to have 90% of a large amount than 100% of nothing.

A similar situation exists when large organised charities are criticised for paying their staff. Admittedly there are examples of inefficiency in an organisation and some would say that charities tend to waste some money on admin. However, even taking that into account, a big charity is a business whose profit goes to a good cause. So, to make the most money it makes good business sense to have people in charge who know what they're doing. Such people can get paid well in commerce, so it's unreasonable to expect them to do the same level of job without the right pay.

An analogy to this is the idea that to get a racing car to go faster, one solution is to lighten the load by removing the driver!

So, in the National Lottery, how much does the "driver" weigh? Last time I checked, the board of directors got about ten million pounds, which is somewhat insignificant in relative terms to the many thousands of millions that were earnt for the good causes.

If you don't agree, don't argue with me, argue with the mathematics. Consider carefully the "priceless work of art" scenario.

Also see other interesting misconceptions