The False Preoccupation With Overhead
I am fascinated by the idea that it’s good to tell donors that 100% of their donation can go to program with none going to overhead.
charity: water is a nonprofit that makes this offer. Here is its description of the 100% model. The core point is that charity: water has a group of donors who fund overhead so that 100% of a donor’s donation will go to program.
As if overhead had anything to do with program — or that program could actually exist without overhead.
George Crankovic, Senior Copywriter at TrueSense Marketing, writes in a recent blog that the reader “has to admit that it's a pretty compelling idea. ‘Every cent of my gift goes toward doing good’ — not to salaries or other money-wasters, like electricity and pencils.”
George goes on to say that “the 100% model — the idea that 100% of funds raised will go to programs, none to overhead — attracts nonprofits as well as donors.”
It is attractive to donors who actually believe that overhead has no connection to program. Or nonprofits that are using this as a fundraising technique to raise money and supporting the idea that these two categories of work, program and overhead, can somehow be separated and valued differently.
It would be like buying a computer and expecting it to work without any wires to replenish its battery’s electricity. “What? I have to pay extra for the power cord? Isn’t that part of the computer?” It’s exactly like trying to run a business without sales, HR, legal, finance, rent, utilities, data processing. You can’t do it. It’s a critical part of the business. You couldn’t make a dime without all of that stuff.
You cannot have a business without infrastructure. You cannot run any nonprofit without infrastructure.
Jeff and I do understand that overhead has historically been a problem with donors, which is why some nonprofits lead donors to believe it’s under 15%. But we created the problem ourselves. Once upon a time, someone decided that unless the dollar given went entirely for the food that went into the hungry child’s mouth, then it was not spent wisely. They skipped over the fact that actually getting the food to the child, and all the back office things it takes to do it, would not have happened without an overhead component.
You can’t keep the train on the tracks shuttling people from A to B without all the maintenance and infrastructure to keep the train running. Just will not happen.
The reason why Jeff and I strongly object to this bifurcation of these costs — program versus overhead — is because it is not realistic. It is a false division of values.
Someone might say: “If we don’t watch those overhead costs, they will get out of control! The amount spent on overhead will far outweigh the good that is done.” That’s true.
But I have seen scores of programs in which money was squandered and spent irresponsibly. Why wouldn’t that same person say: “Yeah, but if we don’t watch out for the quality of the program delivery and if we don’t properly measure impact, a boatload of good donor money will be wasted and lost!”
If we are going to be obsessed with waste and excess, let’s look at the whole picture, not just one half. Plus the emphasis should be on impact and not this preoccupation with overhead.
The other thing is how some folks can spend outrageous sums of money on program — for things that don’t make sense and cannot be measured — and then barely pay their employees a liveable wage or skimp on support systems. This is not right. So because you are a nonprofit, you should work for nothing and not have the proper tools to get your work done?
This is what this preoccupation with overhead does. It shines a bright light on one part of the “business,” leaving the most important part out, which remains unaccountable, unmeasured and ineffective.
So, back to the 100% model.
We don’t recommend it. Instead, with the belief that overhead is an integral part of delivering mission, make sure that every donor offer you create carries its share of overhead. And then boldly and confidently tell donors that: “Your gift will change (insert compelling need) by (insert believable solution).” And get on with it, and deliver on that promise.
If you’re hanging with Richard it won’t be long before you’ll be laughing.
He always finds something funny in everything. But when the conversation is about people, their money and giving, you’ll find a deeply caring counselor who helps donors fulfill their passions and interests. Richard believes that successful major-gift fundraising is not fundamentally about securing revenue for good causes. Instead it is about helping donors express who they are through their giving. The Connections blog will provide practical information on how to do this successfully. Richard has more than 30 years of nonprofit leadership and fundraising experience, and is founding partner of the Veritus Group.