The Unneeded Preoccupation with Overhead

Have I got a deal for you!

I am truly fascinated by the misguided idea some people have, that it is good to tell donors that 100% of their donations can go to program, with none of it going to overhead.

Charity:water is a nonprofit that makes this offer. Here is Charity:water’s description of their 100% model. Their core point is that there is a group of donors who fund overhead so that “100% of your donation will go to program.”

As if overhead had nothing 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.”

Exactly. Money wasters like finance and fundraising people. Rent. Utilities. Administration folks, etc. Money wasters, all of them.

George goes on to say that “the 100% model – the idea that 100% of funds raised will go to programs, none to overhead – attracts non-profits as well as donors.”

Yep. It IS attractive to donors who actually believe that overhead has no connection to program. And it’s attractive to the non-profits who are using this gimmick as a fundraising technique to raise money, while supporting the misconception that somehow 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.

It’s like a bank saying: “By the way, on that house you are building: we will finance all of it but the plumbing, heating and cooling systems, and the electricity.” Huh? You would not have a livable house.

You cannot have a business without infrastructure. You cannot run any non-profit without infrastructure.

Picture walking into your favorite non-profit and telling the receptionist: “Hi, Paul. Good to see you. So sorry you are not part of the mission of the organization. Love your approach to the public and how well you represent what we are trying to do, but you are overhead and, as such, you have very little direct contribution to making the mission of this organization happen. But thanks for your help.” What?!? Can you imagine saying that – or, worse, believing it?

Jeff and I do understand that overhead has historically been a bit of a problem with donors, which is why some non-profits lie about it and claim it’s under 15%. But we created the problem ourselves. Someone, way back, 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 required many back-end components – it would not have happened without overhead.

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. It just will not happen.

So the reason Jeff and I strongly object to the bifurcation of these costs – program vs. overhead – is because it is not reality. It is a false division of values. It doesn’t even make sense.

Someone might say: “Yeah, but 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.” Yep. That’s true – it can happen.

But I have also seen scores of charities where money was squandered and spent irresponsibly on program. 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. The emphasis should be on impact, not on this silly preoccupation with overhead.

The other thing that really bugs Jeff and me about this subject is how some folks can spend outrageous sums of program money for things that don’t make sense and cannot be measured, and then they barely pay their employees a living wage, or they skimp on support systems. This is not right. So because you are a non-profit employee, 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. Tragic and sad.

So, back to the 100% model.

Don’t copy it. Don’t do 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: “Your gift will change [insert compelling need] by [insert believable solution].” Then get on with it, and deliver on that promise.

Richard

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