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Thoughts & Musings

The Truth About Overhead

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It happens fairly often…

At dinner parties or social events, when the discussion of “what do you do?” comes up, my response is often met with confusion...and sometimes concern.

"So...you only work with nonprofits?"

Many simply cannot fathom that nonprofits spend money on consultants to guide them with their strategy or technology needs, especially to the extent that people like me can make a living from it.

Or perhaps you’ve overheard in discussion about how “not all nonprofits can be trusted”, especially after a scandal breaks...or how so-and-so nonprofit has executives that make “hundreds and thousands of dollars”, implying how irresponsible that is.

Incidents like these remind me that despite the growing number of causes and social initiatives that are funded through nonprofits, few have any idea of what it takes for one to function and address society’s needs.

Although there have been rumblings about this from nonprofit community in tight circles for years, Dan Pallotta’s 2013 TED Talk “The way we think about charity is dead wrong” really put these issues on the map and broadened the dialogue about the double-standards that exists in society when it comes to nonprofits.  Pallotta’s argument defended the idea that if we want to solve major problems that exist in today’s society, we need to hire top talent, give respectable wages, fair benefits, comfortable working conditions, and feel comfortable to invest heavily in IT projects, consulting, and marketing - all of which ultimately help advance the organization’s mission...and solve more problems.  But still, too many clump all of these critical expenses as, you guessed it...“overhead”

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In Gail Perry’s Top 10 Fundraising Trends of 2018, #1 on the list is sobering, “Donors Are Not Sure They Trust You.”  Ouch!  Perry goes on to say, “Across the board, there is a steady decline in trust of society’s institutions, including nonprofit organizations. This emerging distrust carries over to your donors, who are generally wary about how NGOs are using their money.”

Therein lies the problem...how do we ensure as nonprofits we have the right tools and resources to solve big problems (largely deemed as “overhead”) yet still be honest and transparent about how funds are being used?  

Sometimes I wonder though...maybe we are part of the problem?

While at fundraising conferences, nonprofit professionals will scoff when the “overhead” discussion comes up...but it is these same nonprofits that claim on their website “100% of our donations go directly to our cause” or specifically call out “Your donation will not be applied to administrative fees or expenses.”  Other organizations vociferously defend their need for “overhead”, but have no problem accepting grants that restrict them from using the funds for it.  The truth is, if we really want donors, corporations, and foundations to embrace a new way of thinking when it comes to nonprofits and overhead, then we ourselves need to stop perpetuating the old ways.

I’m not sure how to solve this problem as a whole, but as a donor myself, or when I advise philanthropists, I encourage them to stay away from the overheard question, or at least minimize where it falls in their criteria.  In addition to questions on programmatic outcomes and fiscal transparency, I try to sprinkle a few of these in:  

  • Where does your pay scale rank compared to the national average for nonprofits?  Is it at least consistent with your peers?
  • Does your nonprofit have a generous vacation policy?
  • Can you share what benefits you offer your employees?
  • What type of wellness programs do you offer your employees?
  • What does your organization do to avoid burnout?

Personally, I’ve worked with nonprofits long enough to know that happy employees are more efficient employees.  And happy and efficient nonprofit professionals who are passionate about their work can do amazing things...so for me, that’s where my dollar will go! 

If we look at all the challenges that surround us in today's world, now is not the right time to proudly show how much we can do "on the cheap."  Let's all do our part to chnage this way of thinking, and ensure nonprofit professionals have all the talent, tools, and resources to accomplish big things!

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