By insisting on low percentage values for overhead, staff working in overhead departments is often overworked and understaffed. That does not mean to say that we should spend more on overhead, but we should rather spend less on activities that do not add value to the program goal. One good example to quote here reported by Mr. Cudjoe, director of Imani, a policy think tank in Ghana writing on world trade in the Wall Street Journal. Rwandan President Paul Kagame told Ugandan journalist Andrew Mwenda in April 2005 how there was this project worth $5 million to fight poverty. When Mr. Cudjoe looked at the expenses, he found $1m went to pay for cars, some as expensive at $70,000 each. Another $1m had been spent on office furniture, $1m more for meetings and entertainment, and yet another $1 million on salaries of technical experts, leaving only $1m for the actual expenditure on a poverty-reducing activity. What a way to fight poverty?
Some people intensive programs generate more paperwork and communications than just pure infrastructure. Spending $1m on expert services as a program input generates more work and overhead than supplying $1m of steel for instance. The best way thus to see the success of an aid project such as the tsunami is to value at cost the price of completed goods and services as a percentage as the total cost of expenditure. The difference would dispel the problem, that is, work not completed, and money spent on wasted effort or non-value added work. Services could be prices at local costs if local expertise could have completed that service. Globalization has shown how business will take advantage of lower wages in other parts of the world. In service aid organizations work-in-progress (WIP) is not a balance sheet value as required for manufacturing and construction. As much as business minimizes work-in-progress so should the social sector. As much as WIP ties up money in working capital in business it also means that social working capital is tied up in a development aid projects for unfinished work .For much of this the local governments must also assume much blame for unnecessary controls and bureaucracy and bad politics that get in the way of program implementation.
It is high time that donors think of money spent as activities (meetings, seminars) so that costs bring into perspective the cost not only of expenditure lines but the cost of activity lines to show the cost of “doing” activity x, y, z, etc. This expenditure analysis should not target only the overhead departments but the program service sector as well. Because business has a competitive edge, they look to reduced costs in people costs, processing costs and equipment. Not only is cost a factor but also improved quality, faster throughput time and better response to customers. With the same resources, if output increases then unit costs lower to smaller numbers, like doubling output keeping other resources equal, in reality halves unit costs... Productivity need to increase by working smarter (good planning and execution) and not making people work longer and harder. Attaching outputs to costs is more meaningful than looking at costs in a one-dimension.
Meetings are an invisible cost killer in aid organizations. Many management and support staff spend too much time on meetings, discussing status or chasing after laggards. Fixing problems takes more time than execution. As much aid workers are knowledge workers much more could be achieved in giving people more responsibility and making them accountable for their actions than spending too much time scouting and supervising their behavior. The assumption has to be that only well trained and competent people employ in aid organizations so that decentralization and minimum supervision is a practicable matter and not a slogan for efficiency.
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