Are We Missing the Problem in the Nonprofit Overhead Discussion?

Donors Care More About How Money Is Spent Than Results…probably the third article I’ve seen on this topic. Each claiming donors really only care about how money is being spent, specifically when it comes to overhead costs, more than the impact spending has. We won’t get me started on that position. But I worry that by drumming on this message, it could incline people to say “Oh! Well I can solve that.  I’ll just tell em’ the money is for “x” and then we’ll divvy it up the way we need to later.”

Because yea, you shouldn’t do that.

And there has got to be another way. Right?

The Problem

I’ve started toying with the idea that the issue may not necessarily be “how money is spent” as it is “how spending is presented.”

I’m reading this really interesting book, Switch, that discusses practical ways to implement change. Because ultimately, that’s the best case solution here….changing the way society perceives how a nonprofit organization works. 

But how many TED talks will it take for that to happen? And who has the time to wait for the entire world to change how it sees nonprofits? Not this person. 

So one of the change methods discussed in the book is appealing to the two personality aspects of people, the “Rider” and the “Elephant.”

The Elephant is the side of us that gets pulled by emotion. Most organizations have this one down-packed. This would be those marketing video’s you create every year. You know, the ones with perfectly timed violin entries and pan-in’s? Individual stories captured beautifully. Nearly bringing audiences to tears…and then who else should walk out than Ms. Sally Struthers. And by the end of the clip people are literally grabbing for wallets and checks.

But imagine one day after showing such an emotional video you handed out materials, one of which stated that, “half of every donation goes to “overhead.”

*Record scratch*

Now the Rider side of us (the rational side of us) wonders what the heck does “overhead” mean? Does that mean the ED’s new car? Subsidizing a trip to Bermuda? Robot development?

A Solution?

But what if we all were more specific in our appeals, for example clarifying that “overhead” includes iPads. That these iPads allow your staff to become mobile and consequently reach “X” more people in a day? Why not illustrate how much time is spent kicking, screaming and clicking Cntrl+Alt+Delete on those 10 year old computers? Then relate that back to how many people that keeps you from helping every year. Or the dangers of having such old equipment (security, data loss, etc.) If capital expenses are tied to a certain program why not create a finance sheet that breaks down expenses by program and include them there, rather than throwing everything under a general “expenses” ledger?

Instead of taking the defensive approach, why not be proactive in educating donors on what overhead expenses are and not why they’re needed. Then relate those back to your mission and vision? The hope being that this implicitly ascertains the “need.” Be specific in how we solicit funds AND specific on what the spending does for the organization? For the mission as a whole? 

My point is we may not be able to change how donors see “overhead” in general….yet. But for now, perhaps you can change how donors see your overhead. Why leave the rationalizing up to the donors? Being honest, specific and proactively directing the attention on “overhead expenses”  could bring better luck and a better attitude. Strategically (within the bounds of the law) use financial reports. Accurately depict the what and how of your organization is spending. Include explanations in your 990 and Annual Reports. As the Switch writers point out, when it comes to the Rider giving direction and clarity is key.

Outstanding Legal Concerns

Bear in mind, you don’t want to be caught on the wrong side of deceptive trade practice laws or violate solicitation laws by misrepresenting how money will be used. If you say money is being raised for a specific purpose it should be used for that purpose. And limitations or restrictions surrounding restricted funds should still be abided by (with a few exceptions).

Other Posts You Might Like

Cause-Related Marketing Campaigns: The Legal Concerns With Each Step

Funding Conundrums: A Few Dos and Don’ts of Fundraising

Have You: Created a Gift Acceptance Policy?

Alternative Funding Series: Crowdfunding and The Terms You Fund On