By Sara Beggs, ASF

In my previous post on overhead, I discussed why funders might overvalue the concept of a low overhead ratio among nonprofits, including lack of trust in nonprofits, our fear of wasting the dollars we have, and our desire to quickly know we have impact. So, how can we ensure our giving builds on the best of those desires and leaves the rest the behind? Engage our minds.

Understand how overhead truly relates to impact. Recently, leaders at GuideStar, Charity Navigator, and BBB Wise Giving Alliance, the leading sources of information on nonprofits, sought to correct the misconception that overhead can stand on its own as an effective measure of performance.

In an open letter to the public, these leaders show data that reveal:

• Organizations considered the most effective often have higher overhead ratios. Givewell.org does an in-depth analysis of specific nonprofits, with significant focus on impact.

• Lack of investment in core operating support has several negative consequences, which ultimately reduce a nonprofit’s quality and sustainability. Watch If We Want Our Funding to Change the World to start conversations about the real costs of change.

Understand that there’s no substitute for knowledge when seeking impact. Ken Stern, author of With Charity For All: Why Charities Are Failing and a Better Way to Give, reports some discouraging data about habits of the average American donor: The average donor spends 8 hours researching a computer purchase, 4 hours researching a television purchase, and zero hours researching charitable giving decisions.

Understand that achieving impact demands time. I encourage you to figure out what you care about most and then invest your time and money there. Learn about the field, the organizations, the leadership, the impact. When you review overhead, as one metric among all the others, it is likely to retain its proper weight. And, if an effective charity, you’ll likely be amazed that people are accomplishing so much with so little.

As ASF member Suzanne Skees of Skees Family Foundation shared, when commenting on my previous post, “We at Skees Family Foundation believe that our grantee partners know best how to end poverty and equalize opportunity….If we don’t trust our grantee partners to balance their budgets in a way that most benefits their/our clients, then we should invest elsewhere.”

What steps do you take to truly know your grantees and their needs?

Related resources

• The Overhead Myth, a campaign to help support nonprofits
• ASF’s resources on impact

Senior Program Manager Sara Beggs currently focuses her time and energy on ASF’s Getting to Impact Initiative, an effort to equip ASF 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.