Danger! Overhead!

The bane of a small enterprise – including a small political party – is overhead. Expensive tools, nice offices, and professional advice are all very useful, if you can afford them. If not, they are an incredible waste.

If you are manufacturing specialty cars, you are better off buying more labor and less fancy automation. High tech sports cars are generally built using more old fashioned hand labor per car than the cheap econo-boxes.

Time and time again I have seen the LP think big and crash because of overhead costs. When I first took note of such actions, I found them exciting. I, like many others, had bought into the Bifurcation Fantasy. The new overhead – be it a better office, better software, professional expertise, etc. – promised to increase overall productivity. And such things would, if there had been sufficient remaining funds to make use of such overhead. Otherwise, waste was the result.

I began to get suspicious when I attended my first LNC meeting as an alternate. At the time, my primary was there so I had no vote, and I was still a starry-eyed newbie so I thought the others fully knew what they were doing. Also, I didn’t, and still don’t, speak accounting fluently. Anyway, I saw big expenditures and budgets ratified at the same times as my calls for little experiments were ignored. I saw pointy-haired reasoning in action, reasoning which may have made more sense in a corporate environment. I saw the party’s reserve funds get depleted without action being taken in time to stop the monetary hemorrhaging. (The proposed solution was to have an exciting plan which would increase fundraising. This might have worked, but the Strategic Planning process took too long and didn’t produce enough excitement. I can take some of the discredit here. I was and am more interested in longterm strategy than generating short term excitement.)

The litany of examples of being sucked dry by high overhead is huge, including:

• The expensive Watergate office
• Presidential campaigns which spent most of their contributions on fundraising and airplane tickets
• Huge marginal costs for 50 state ballot access, for presidential campaigns which would get less than half a percent of the vote
• Wonderfully produced ads where the cost of producing the ads was on the order of the amount spent running the ads
• National conventions which lost money because insufficient hotel rooms were purchased by the membership
• Expensive database software that is incompletely tailored to the job
• Expensive marketing studies
• Huge numbers of press releases with limited pickup
• Campaigns which spend a large fraction of donations on headquarters, professional consulting and fundraising

There are some within the party who cry foul at the money wasted and opt to vilify and accuse well-intentioned activists of dishonesty. This is a major mistake.

All of the above would be useful to a bigger party. A prestigious DC location provides credibility and access to the press. Flying a presidential candidate around the country is a good way to raise money, if you can raise tens of thousands of dollars per stop. 50 state ballot access is very useful for a presidential campaign that is on the verge of credibility. A big national convention looks great on C-SPAN. Professional consultation, paid staff and a headquarters are practically standard for a winning congressional campaign.

But the Libertarian Party is small. So is the Green Party. So is the Constitution Party.

You don’t get big by pretending to be big. You get bigger by first being good at being small.

A small party should scrimp on overhead expenses even if that means a higher marginal cost going out. Fixed costs are hard to change when there is a funding downturn. Variable costs are easy to adjust. Furthermore, it is easier to raise money for variable costs. The membership loves to pay for advertising and publicity. Keeping the office staffed is boring. If you cannot do it with membership dues, then change is in order.

There are three primary avenues to slashing overhead expenses:

1. Just don’t do it. If you cannot do something well, perhaps you shouldn’t do it at all.
2. Eat the inefficiency. Sometimes it is better to have higher marginal cost in order to save on overhead.
3. Centralize to get economies of scale. I’ll save this one for the next chapter.

Were I in control, I would do things like:

• Move the office out to Arlington the next time the lease runs out. Might even go out farther if rent savings justify it.
• Maybe even consider scrapping the DC area presence and have the office in the center of the country. This would save big on mailing expenses. (Bulk mail is distance dependent.) Also, staffers could get around the country easier.
• Go for ballot access only in states which have an active affiliate, and maybe even drop some of them where the costs are too high.
• Do Rose Garden style presidential campaigns. Instead of recruiting an activist willing to crisscross the country at a burnout pace, try to find someone more prestigious even if all that person is willing to do is be a talking head and write some position papers.
• Hire a database guy instead of buying expensive not quite off the shelf software. Tailored SQL solutions aren’t that hard to do from scratch.
• Use my quiz2d data and the theories in Parts 2 and 3 instead of expensive professional marketing studies.

Such measures would cost the party some prestige. Gross fundraising would likely drop. However, I think the net usable funds for getting the word out, recruiting members and winning campaigns would be increased.

I could be wrong, but I would rather waste a smaller amount of donor money failing in a small way, than wasting big glops of money as has often happened.

And if I am right, the party/movement could eventually grow the point that it could afford to do more things the professional way.

Oh, before I leave, let me pass out a few kudos. Aaron Russo put together some cheaply made television ads and actually ran them in Atlanta during the 2004 convention. The LP voted to reduce its convention allocations during the 2006 convention. (I think this was Steve Dasbach’s idea.) Headquarters has produced/contracted training for local activists, Candidate Tracker to help focus donations on promising local campaigns, and Ballot Base to enlist volunteers to do Get Out the Vote phone banking for low level campaigns. Fortunately other people in the party are learning the same lessons.

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Copyright 2007, Carl S. Milsted, Jr. All rights reserved.