I was surprised after my last post that I didn’t have any challenges as to why ratios within reason are a good thing.  So, I’ll just be my own devil’s advocate.
Of course, ratios that are reasonable make sense.  I’m not advocating that we just go out and spend blindly and do a little program work. I’m sure all of you know of those non-profits who seem to be more about marketing themselves rather than excelling at their “product.”
Those are the non-profits that give all of us a bad name in our sector and they should be brought to light and weeded out.
But, our industry has been strong-armed to focus too heavily on keeping our overhead costs so low that we end up with a “watered-down” product.
Think about it.

  • Low Salaries = less competent or qualified employees
  • Stingy benefit packages
  • Run down office spaces
  • Bare bones development, marketing and public relations staff
  • Old computer systems
  • Out of date, database systems
  • No evaluations of programs.

I could go on…
Now, having no money is one thing.  And, if that’s the case, then perhaps you have a completely different problem, but not spending money on the right people, systems and processes because your overhead will seem too high is shortsighted and will cost you dearly.
So, because of this magic ratio of overhead to programs cost that’s acculturated into our executive teams, board, watchdog groups, foundations and some donors, we’re basically getting by with a less than, or at best, satisfactory product.
Who wants to be just satisfactory?
We have lost sight of the fact that we really need to be about results and impact.  You think a major donor cares that your overhead is high when you’ve been able to exceed all your program goals because of their gift?
Not a chance. I’ve had these conversations with donors.  I think sometimes we forget that many major donors have had great success in business.  They understand that if you don’t have great people, a solid organization (think overhead) and a great product, the business fails.  They actually value overhead.
They get this stuff.
Now, I know there are major donors, foundations and government agencies that don’t get this.  They expect you to pull off miracles with pennies. Shame on them! Hopefully, in due time, as we start to focus more on results and impact, they too will  understand what is most important.
By being results and impact driven, you focus on the right things.  So even if a donor, foundation or corporation would say, “Gosh, your overhead seems high” You can proudly say, “perhaps, but we’re the most effective organization that does x and y in our city, region, state or country. No one comes close to the results we do.”
And, why were you successful? Because you had good, smart people who knew how to get things done and you paid them well for it. You had quality offices where your employees felt appreciated. You had top quality systems and equipment to do your work without losing precious time. You had program evaluators who were able to point out areas needing improvement and solid reports that help you communicate with your donors.
That’s pretty hard to argue with.
Jeff

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