Dispelling the Nonprofit Overhead Myth

The COVID-19 pandemic has highlighted many issues that already existed. One of those issues is the financial pressure on nonprofits to operate on a shoestring. Donors can be laser-focused on having their gifts go directly to those in need. That’s a terrific goal, but nonprofits can’t magically deliver 21st century services to their community without any infrastructure cost, or overhead. That’s a myth!

Working with less often means lower results. Financially starving nonprofit operations inhibits  investments in the necessary people and systems to perform effectively. That point was made in a Tweet from The Bridgespan Group, a global nonprofit consulting firm that helps other nonprofits to develop strategies: “Underinvesting is expensive! Starving nonprofits leads to inefficient systems.” 

Data dispels myth. Candid, an information-driven nonprofit organization, used its GuideStar nonprofit data to form a business case to break the “overhead myth” about limiting overhead costs. They offer Five Steps to shift the conversation from “overhead” to the need to invest in people and systems: 

  1. Focus on the impact of service delivery to the community, not the cost ratio. 
  2. Shift the conversation from ratios to the true cost of hiring and retaining qualified, experienced people and of maintaining the systems to make it all run.
  3. Describe the nonprofit’s programmatic objectives and the capacity needed to deliver the services to meet those objectives. 
  4. Quantify the capacity investments needed to establish and sustain the necessary people and systems needed to deliver services and fulfill stewardship responsibilities.
  5. Share recent results and achievements, describe additional objectives and results that you want to achieve, and outline the funding needed to support future achievements.

You can read articles that describe the Five Steps in more depth here: https://search.candid.org/#/search/overhead%20myth/3. More tools and information to help non-profits re-direct donor conversations from the “overhead myth” to results are at www.overheadmyth.com

Nonprofits are working harder and incurring more costs to deliver services during this pandemic. Dispelling the overhead myth that pressures nonprofits to operate on a shoestring is even more important than ever. Shifting the conversation from “overhead” to the need to invest in people and systems helps nonprofits raise the funds needed to perform effectively and fulfill stewardship responsibilities.