Tuesday, June 18, 2013

The Overhead Myth

This letter has been generating lots of buzz on the internet... thank goodness!

The CEOs of Guidestar, Charity Navigator, and the BBB Wise Giving Alliance have written a letter asking people not to use overhead costs as the primary determinate of a charity's effectiveness. Check it out at overheadmyth.com.

They accurately point out that charities that scrimp on overhead expenditures suffer from:
  • High staff turnover
  • Inability to accurately monitor finances
  • IT breakdowns, which causes downtime and limited information sharing
  • Staff that is not as well trained as it should be
  • Inability to fully track outcomes

... and lots of other issues. In addition, many organizations that are reporting low overhead costs on their IRS forms are doing so inaccurately.

There are so many other ways to make decisions about which charities to support. Such as:
  • Is this charity doing something that matches my passions and interests?
  • Is this charity doing something that few, if any, others are doing?
  • Can this charity show results? Have they made a difference?
  • Is this charity willing to take calculated risks, to really make a change?
So many of the nonprofits I work with do AMAZING work and have what some might consider high overhead costs, mainly because they have invested in their staff. I think that investing in effective staff who will stay with the organization long term is a great investment, one that ultimately benefits the nonprofit's clients.

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