Real Talk About Real Costs for Nonprofits: Stepping Beyond the Overhead Myth | npENGAGE

Real Talk About Real Costs for Nonprofits: Stepping Beyond the Overhead Myth

By on May 20, 2015


overhead costs

Overhead.  It’s a dirty word in the nonprofit sector.  And, yep, I just said it.

In fact, I said it not just for myself, but also on behalf of my colleagues – Andrew Watt (of AFP International), Jacob Harold (of Guidestar) and David Whitehead (of AARP and the AARP Foundation) – who are joining me as presenters on the topic at the 10th annual Bridge Conference this July 7-9th in Washington D.C.

Why talk about overhead?

Isn’t that kind of boring?  Well, no.  In fact, it’s flat out essential and often both misunderstood and overlooked.  So that’s WHY we’re talking about it, to clarify what it means, to encourage a broader understanding of why it matters and, finally, to motivate nonprofit leaders to be proactive about how they dispel “the overhead myth.”

So where to begin? 

With this question – what’s impact and overhead anyway? In the cleanest and simplest of terms, impact is the actual good a nonprofit does – its ultimate end-game.  It’s a clean environment, access to basic human rights and education, art that inspires and engages, communities working together for peace.

Although vital to our world, these outcomes are hard to measure.  How are nonprofits measured instead?  Often, they are looked at as good or bad depending on what their Form 990 says, about how much money they raise versus how much they spend raising it.  And that’s where the word “overhead” comes in, too often as a negative weapon.  Instead of looking at the good being done, nonprofits are often evaluated by how much it cost to deliver that good (i.e. the overhead).  The problem is that costs vary, and to say 100% of the money an organization raises goes directly to mission, well, that’s just not realistic.  What about the people, the technology, and the goods needed to deliver a truly lasting, positive end result?  (No company would ever be expected to deliver a product or service without costs being incurred.)

This is the issue we’ll be digging into in our session – how overhead (and an overzealousness by some to get that % as low as possible) can work against the idea of impact (the good being done).  Striking a balance and spending wisely is important, of course, but it’s unfair to evaluate a nonprofit based on a number in a Form 990 without putting those numbers in context.  That means defining what impact means for the organization, defining the costs associated and working with like organizations not only to compare results, but also to develop best practices.

Why do this? 

Because nonprofits need to own the overhead issue and turn it into a positive, proactively conveying to donors what they do, how efficiently they do it and what their success rates are in the end.  They need to do this because the donors supporting nonprofits are changing, not just giving money, but also investing money.  And where there is an investment, there is a strong hope for a return.  Any nonprofit seeking funds today should own the responsibility for telling its own story, using data to show progress and keeping the focus on achievement, not costs in a vacuum.

Interested in hearing more?  Join Andrew, Jacob, David and me for an interactive discussion on Wednesday, July 8th at the Bridge Conference.

10th Bridge to Integrated Marketing & Fundraising Conference 

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Rachel Hutchisson is the vice president of corporate citizenship and philanthropy at Blackbaud, headquartered in Charleston, SC.  She is responsible for the company’s global corporate citizenship efforts, a role that allows her to leverage her 20+ years of experience of working with nonprofit partners.  She is a member of the board of directors for the Association of Fundraising Professionals (AFP) International, the Giving Institute (producers of Giving USA), and the Coastal Community Foundation.  She is also a Past President of the AFP SC Lowcountry chapter. Rachel is a graduate of Dickinson College in Carlisle, PA, and received a master’s degree from the University of Missouri School of Journalism.  A member of Phi Beta Kappa, she is a Renaissance Weekend participant and was the recipient of the Charleston Regional Business Journal’s Influential Women in Business Rising Star Award.  Rachel is an avid soccer fan and spends far too much time driving to remote parts of the state to watch her children play.  Connect with Rachel on Twitter at @RachelHutchssn or on LinkedIn.

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