By Sara Beggs, Exponent Philanthropy
When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called “The Nonprofit Starvation Cycle.” We starve charities of the freedom they need to best serve the people and communities they are trying to serve. —OverheadMyth.com
Recently, I had a discussion about nonprofit effectiveness with my dad, a former Fortune 500 business executive and venture capital enthusiast. I was surprised to find someone so deliberate in his assessment of effectiveness in other realms to be so quick to judge a nonprofit’s effectiveness on a single factor: its amount of overhead. And yet he was. For him, the lower the overhead, the more effective the nonprofit.
Unfortunately, he’s not alone in his thinking. The nonprofit sector is plagued by this standard, but why? Why might we all be tempted to buy into the faulty logic that low overhead = effective nonprofit?
- We’re inundated with negative news that highlights nonprofit corruption. Hear enough stories like these, and our brains make an easy, though faulty, assumption that nonprofits are not trustworthy. As a result, we expect nonprofits to prove themselves by spending every dollar on programs.
- Constant news of budget cuts, a growing deficit, and global competition changes the way we think. With scarcity on our minds, waste is one of our greatest fears. As such, we elevate “reducing waste” above other important factors.
- The word “over” is often a negative. Overreaction. Overcrowding. Overrun. Over the limit. None of these words positive. Although accountants simply assign the term “overhead” to those costs that cannot be attributed to particular work or a specific product, the costs sound excessive or unnecessary.
- We expect passion to power nonprofits. Somehow we think that effective management and good administrative systems will fall into place simply because, well, because they should. We expect something from nonprofits that we would never expect from business.
- It’s difficult to measure social impact, so we settle for a financial standard instead. Although overhead alone isn’t particularly meaningful, it’s quick to calculate, and it gives us some satisfaction that we’re not spending our money on high-priced, mercenary fundraisers.
- It feels better to feed starving children than starving organizations. We’re wired to eliminate pain and suffering, and organizations are one step removed from those they serve.
Why do you believe low overhead has become the holy grail for nonprofit effectiveness?
My next post will make the case for overriding our deepest emotions and thinking differently if real impact is our goal.
- The Overhead Myth, a campaign to help support nonprofits
- If We Want Our Funding to Change the World, a video by Donors Forum to start conversations about the real costs of change
Senior Program Manager Sara Beggs currently focuses her time and energy on Exponent Philanthropy’s Getting to Impact Initiative, an effort to equip Exponent Philanthropy members with the information and inspiration to achieve greater impact over time. Her greatest philanthropic joy is participation in Blooming Kids for Kindness, a group of ten families that encourage their children to care about their communities and recognize that each can make a difference through local and international volunteer and fundraising activities.