In a previous post, we discussed the differences between program costs and admin costs. We know that admin costs should represent a small percentage of your overall expenses, as most of your money should be spent on furthering your mission.
So, if you see that your admin costs are too high, or you’re worried that they could be rising too quickly, here are some steps you can take to mitigate that and bring your admin costs back down:
1. Train Instead of Hire
For many nonprofits, salaries and benefits for staff make up the largest percentage of admin costs. This is exacerbated by the high turnover that is prevalent in nonprofits.
So what happens when, for example, your Accounts Payable clerk takes a position elsewhere? Your first thought should always be “Do I have anyone here already who could be trained to fill this role?”.
Cross-training an existing employee to fill a new or additional role almost always represents less up-front expense to your organization than advertising the position, interviewing candidates, conducting background checks, and so on through the new-hire process. Cross-training benefits both your organization through monetary savings, and the staff members themselves as their knowledge and skills expand.
Which leads directly to my next point…
2. Ensure Your Employees Are Flexible
What are the six most costly words for a nonprofit organization? “We’ve always done it this way.”
If your staff members are not open to change, this blog post is nothing but an academic exercise for you; lowering your admin costs will require your staff members to behave differently, both in terms of your organization generally and their own roles specifically. This will require a concerted effort on your part, through adopting specific change management procedures, asking prospective staff members during interviews to give you examples of how they have embraced change in previous jobs, or (most drastically) replacing certain staff members.
While this is certainly not pleasant, remember that you’re competing with every other nonprofit for a limited pool of donor dollars, and an ever-increasing number of donors are savvy enough to review a nonprofit’s admin cost percentage before donating. If you don’t make the hard choices, another nonprofit will!
3. Solicit For Volunteers
In today’s economic climate, many donors have more hours available than they have dollars.
Are you taking advantage of this by asking your constituents to donate their time to your organization, instead of their money?
If your Accounts Payable clerk takes a position elsewhere, try soliciting your constituents for volunteers who will donate a couple hours each week to entering invoices into your accounting system. You can even pitch this as a chance for your constituents to improve their own employment prospects through increased training and experience while they help your organization; everybody benefits!
If your organization is to remain a going concern, some admin costs will absolutely be necessary. If it were simply a matter of cutting admin costs regardless of impact, you could quit paying salaries, hand-deliver all newsletters instead of paying for postage, and turn off all the lights in the office and rely on candles. Paul Brest makes a great point – instead of simply minimizing admin costs, your organization should seek to optimize those costs.
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