Overhead is necessary in order for nonprofits to be able to serve people. It includes things like rent, utilities, insurance, marketing and communications, fundraising, office supplies, HR, technology, etc. You can’t deliver on your mission and vision if you don’t have strong infrastructure and systems in place. And some of this stuff is not optional! For example, bookkeeping and accounting, program evaluation, grant reporting, etc. Many donors want to know where their donations are going. Well, guess what, having someone figure that out, is overhead. Many donors want regular communications through newsletters, stories about how their money is making a difference. Guess what? Having someone manage the website, write the newsletters, etc., that’s overhead!
We love NonProfit With Balls. Their articles are right to the point. Here is their recent article regarding non-profit overhead (a full re-posting of their article below).
Around this time of the year, we nonprofits work to bring in year-end donations, incurring paper cuts and envelope-tongues in the process (seriously, the glue stick is your friend). Around this time also is when people start pushing “guides” about which nonprofits to give to, warning of shady nonprofits that spend too much on “overhead” and leave nothing for the people they are supposed to be serving.
These guides often sound like this: “Don’t give to these horrible organizations! Only 3 cents of every dollar goes to the people they claim to serve! The rest goes straight to the greedy CEOs’ salaries! They sit on crystal-encrusted chairs and feast on caviar and unicorn steaks! Meanwhile, their staff live in actual houses and drive cars! They are paying their mortgages and buying organic blueberries with your donations! Organic blueberries!!!”
Here’s an example of that. It comes back again and again year after year like some sort of aggressive toenail fungus, despite being debunked by fact-checking website snopes.com. WTF. It’s exhausting dealing with so much recurring ignorance. As if our work isn’t hard enough already, with many of us having involuntary eye twitches due to cash flow issues. So, let’s come up with a better strategy to handle this yearly irritation so we can focus on what matters: Writing hundreds of personal notes on our printed year-end letters and praying we don’t misspell donors’ names.
First, assume people mean well. I know it’s easy to get riled up by people who don’t know much about our work casting aspersions and judgment on us. But, let’s believe most people have good intentions, even those peddling this sort of blatant cluelessness about the nonprofit sector. If they didn’t care about the people we serve, they wouldn’t spend so much time and energy to ensure that money is being spent “properly.” Bless their little hearts. At least they’re trying. And trying is half the battle. Or something.
Second, stop apologizing for admin costs. There are still many of us in the sector who are apologetic about our admin costs. We are embarrassed when it gets above 15% or 20%. Some of us still say things on our websites and at our galas like “Please donate. 100% of your donations go to programming.” If half of us in the sector don’t believe in and advocate for core mission support, after knowing first-hand how important it is, how can we expect the general public to be behind it? Really, a lot of our work is not convincing well-meaning, ignorant people from outside our sector, but to convince the well-meaning, anti-“overhead” people inside our sector. (By the way, “overhead” is such a ridiculous concept that I’m encouraging everyone to use quotation marks whenever you have to write it.)
Third, brush up on counter-arguments: Nothing raises my blood pressure more than the “overhead”-needs-to-be-low argument, except maybe the all-nonprofits-need-to-run-more-like-for-profits argument. So let’s get all our bunnies in the same basket when it comes to counterarguments to use when we run into our friends and neighbors who may have these views:
- “Overhead is bad. Hiss! Down with overhead!” Counterargument: “Overhead is necessary in order for us to be able to serve people. It includes things like rent, utilities, insurance, marketing and communications, fundraising, office supplies, HR, technology, etc. You can’t serve people if you don’t have strong infrastructure and systems in place. And some of this stuff is not optional. For example, bookkeeping and accounting, program evaluation, grant reporting, etc. Many donors want to know where their donations are going to. Well, guess what, having someone figure that out, is overhead. Many donors want regular communications through newsletters, stories about how their money is making a difference. Guess what? Having someone manage the website, write the newsletters, etc., that’s overhead!”
- “OK, I understand that some of that is needed. But shouldn’t it be kept as low as possible?” Counterargument: “Trust me, most nonprofits are trying to keep it low. To the point that some of us have terrible pay and benefits and are sitting on crappy chairs we got donated that may have possums living in them. But think about your favorite restaurants. Do you care how much they spend on electricity or rent? You only care about the food, atmosphere, price, and whether they treat their employees well, right? Do you decide which restaurants to eat at based on how low their ‘overhead’ is? Same goes for nonprofits. Focus on the quality of their programs, and the value they add to the community. The more you focus on overhead, the more you force them to waste their time trying to reduce costs to dangerous levels instead of developing strong programs.”
- “Nonprofit EDs shouldn’t be paid well.” Counterargument: “Nationally, the average pay for an ED/CEO is $64,000. So trust me, not many of us are sitting at mahogany desks inlaid with Swarovski crystals and polished with foie gras. Nonprofit work is as complex as for-profit work. Most of the time, it’s even more complex. Many of us are addressing deeply entrenched societal issues that are the result of systemic injustice over hundreds of years. Think about poverty or failed education systems. And nonprofit organizations still have all of the same requirements as any other businesses: managing staff, payrolls, strategy, community perception, legal compliance, etc. But with fewer resources. Yes, leaders of larger organizations do tend to make more, but they may be managing hundreds of staff and a budget in the millions, which they often have to fundraise for, in addition to all their other duties. Why should a nonprofit leader get paid less than a for-profit leader for having the same or higher level of responsibility and stress? Also, we should reevaluate what we value in society. Movie stars, athletes, and CEOs of companies that produce sugary drinks or violent video games can make millions each year, and we’re OK with that, but we’re not OK with paying one tenth of that to a CEO of a nonprofit that is working to end homelessness or cure cancer, things that would benefit all of us?”
- “But…but, ya’ll are charities!” Counterargument: “The challenges out there are complex,
and nonprofits need to be equipped to handle them. Who do you think would do a better job serving people—an organization that underpays its staff, has a leaking roof, no website, no heating during the winter, a poorly paid leader, and everyone is terrified that the family of possums living in the cushion of the donated chair might escape? Or a nonprofit that pays its staff decent wages and benefits, has a modest but well-furnished office that is welcoming to its clients, an experienced leader who makes a salary that is on-par with their peers for the geographic location, funding for program evaluation and effective accounting, and chairs without marsupials living in them? If you knew someone who needed help, which organization would you send them to?”
Fourth, provide alternatives. “OK, I don’t want anyone to be bitten by possums. But if ‘overhead’ is not a good way to determine nonprofits’ effectiveness, then what is?” Response: “Because nonprofit work is so varied and so complex, there is no simple answer. It will take more investment of your time to figure out which nonprofits are right for you to donate to. One excellent resource is greatnonprofits.org, which uses the stories and testimonies of clients, volunteers, and donors who have had actual interactions with various organizations. [If your nonprofit is not there, go claim it, and ask your community to provide honest reviews]. You may want to talk to friends and neighbors about which orgs they donate to, and why. One of the best ways to get to know an org, is to volunteer there; you’ll get to talk to actual clients and people who care about the org, instead of relying on numbers that reveal very little about the organization or are actually misleading.”
Fifth, we all need to speak up more. We are too nice sometimes. Our sector tends to attract really nice and very good-looking people. We need to speak up on behalf of our sector when we see ignorance being perpetuated. Write comments on credible online articles. Write op-eds and letters to the editor. Call radio shows when they start talking about this stuff. An ED colleague in another city tells me around this time each year, her local newspaper publishes a list of shameful organizations with the highest “overhead.” Says my colleague, “We are deathly afraid every year that we will be on that list.” Instead of spending all that time and energy worrying about the list, how about writing an op-ed or letter to the editor about how dumb and harmful that list is? When we remain silent in the face of ignorance, we give it power. The list gained influence because nonprofits in that city try to conform to it instead of challenging the very validity of that inane list in the first place.
Every year around this time, the Overhead Zombie comes back to life. Yeah, it’s probably more irritating than actually harmful, but it is a sign that we have much to do to inform much of the general public about our work. Like possums, they often have terrible eyesight and can’t see very well. Let’s gently, but firmly, guide them toward the truth.
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