More non-profit leaders, MGOs and donors will value impact and outcomes vs. overhead in 2015. That is the second trend to watch this year.
In an earlier post on reminding your donors about impact, I wrote about the need to focus on impact and outcomes rather than overhead. I wanted to help you answer the questions from donors you will surely face this year on this important topic.
On the broader platform of non-profit management and watchdog agencies, there is a growing discussion in this area with a number of good folks trenching into familiar and safe positions believing that they can defend a situation where they are reporting that they have 12% or even 8% overhead, while they sit on an organization that is accomplishing very little with the money donors are entrusting to them.
These good people (and I do believe they are good) are focused on the cost of doing business rather than the business itself, which is what the organization is organized to do – i.e. the business of service to humankind and the planet.
This always amazes Jeff and me – that intelligent, well educated, experienced men and women who lead these organizations can look at what they are NOT achieving in program, ignore it and then take pride in the fact (which usually isn’t true) that their overhead is “so low.” Amazing.
We had one overhead situation last year with a large national organization we were trying to work with (we didn’t get the business). We had done an audit of their work and discovered that virtually every chapter of this organization was reporting a higher overhead percentage than the published headquarters percentage. The managers of these chapters told Jeff and me that “I don’t know where headquarters gets their numbers, but when we audit ourselves the spread between what they report as overhead vs. what we KNOW is overhead is 10% or more!”
Now, I don’t think any these folks set out to lie about this. I do think they are trapped in the vortex of old thinking and old non-profit culture. And it’s pretty scary to venture outside of that world to the real world of outcomes and impact. So I understand this.
Here is why it is so scary. The whole idea of charity work has its roots in religious beliefs (“do unto others…”) and volunteerism, where people volunteered their time and gave of their extra or used goods in order to help others. A website documents this history which I have edited a bit here:
- Volunteerism in America began when colonists had to form support systems in order to survive the many challenges that came with relocation. From farming the land to overcoming devastating illnesses, togetherness was vital for survival, and that lesson was not only learned, but remembered by future generations.
- In 1736, Benjamin Franklin founded the first volunteer firehouse. This tradition still continues today, as many small towns and cities have a volunteer fire department that makes a huge difference in local community life.
- During the Revolutionary War, volunteers got together to raise funds for the war efforts, and organized boycotts of various products from Great Britain, showing both their philanthropic attitude and patriotism.
- The religious rejuvenations during the Great Awakening of the 1830s inspired young people to get involved with outreach work through various religious organizations. Local churches ran all sorts of relief programs, helping the homeless and those victimized by unforeseen circumstances.
- The now prolific YMCA also started in the mid 1800s, started on a college campus in Michigan, while the American Red Cross is established in 1881. Yet another still-recognizable charity, the United Way, begins in Denver and coordinates local services for people in need.
- While most volunteers of the 18th and 19th centuries found their assignments through their church or another private sector, the 20th century is where mainstream volunteer organizations really began to flourish. The first example of this is the start of the Rotary Club, which was founded in 1910. The Lions Club and Kiwanis were not far behind, as these were both established before 1920.
- Today’s soup kitchen concept was most likely created during the Great Depression, as the country experienced an overwhelming need for assistance with the simplest of things – namely food and shelter. Countless Americans and their families were helped by Depression bread lines.
- Environmentalism also found its place during the 1930s, as President Roosevelt raised awareness by helping the Conservation Corps plant approximately three million trees in a single decade.
- During World War II, many volunteer organizations went to work on supporting both servicemen and civilians in a variety of areas. And in the 1960s, volunteerism focused on a different kind of war – a liberal one against poverty, inequality and violence around the world.
- The 21st century causes include green living, animal welfare and equal rights regardless of race, gender and sexual orientation.
So this country is rich in its activities to give to others; you will notice that one of the key values was the giving of time and making sure that “most of the effort went to helping others” (program). And if you are reading this in other countries, I think you will find the same general idea operating – give of your time and goods to make good things happen. And spend as little as possible on non-program activities.
So you can understand how people would embrace the idea that low overhead costs are virtuous, and high overhead costs are evil. But all of this is starting to evolve to a situation where good non-profits are run like good businesses, with all the disciplines of accountability and performance measurement to assure that real impact and real outcomes are achieved. And this is good.
You will see progress this year in this area, as more and more non-profit leaders, managers and donors begin to value outcomes and impact, as opposed to overhead.
Jeff and I are excited about this trend because it means that more and more non-profits will get back to the business of really fulfilling their mission and focusing on making more good happen on the planet, rather than obsessing about the overhead.
It will also mean that more resources will be available to provide higher quality and more effective program and, in some situations, the staff will be paid a livable wage – which means more good talent will join the cause, and better solutions to the world’s pressing problems will be found.
This is so exciting, and we are looking forward to it. We suggest you join in the conversation however you can, as you journey through this year.
Series details: Trends to Watch in 2015
- #1: More Non-Profits Will Value Donors as Partners
- #2: More non-profit leaders, MGOs and donors will value impact and outcomes vs. overhead
- #3: All areas of non-profit work will see increased accountability and measurement
- #4: Nonprofits Will Increase Efforts to Package Budget for Donors