Want to Solve the Overhead Myth? Stop Calling It Overhead.

“A rose by any other name would smell as sweet.”

The popular Shakespeare adage taught us that it matters what something is, not what it is called. But, if we renamed overhead as infrastructure, would it still seem so bad?

It is stunning that nearly a decade after the open letter “To the Donors of America” was written, we continue to hear nonprofit leaders bemoan the issue of the misguided notion that the effectiveness of nonprofits can be determined by the amount it spends on overhead costs.

  • We see organizations with massive program departments, yet little to no full-time positions in human resources, finance, IT, marketing, or development because they “can’t afford it” or “what will donors think?”
  • We see executive directors who go yet another year without a raise because of concerns about looking too top heavy.
  • We see hard-working staff trying to do their jobs with outdated computers, software, phones, and other systems that are inefficient at best.
  • We see finance committees and board treasurers looking at “cost per person” served or “cost of fundraising” ratios that are not the best measures of mission impact.

For years, thought leaders have written op-ed articles about the harmful impact of the perception of overhead on the nonprofit sector. In 2018, GlobalGiving shared how the overhead myth is hurting nonprofits. Earlier this year, Candid explained it is time, yet again, to dispel the myth.

Just last month, the Chronicle of Philanthropy shared a study that found nonprofit spending on overhead is not only needed to survive but thrive. The study showed that nonprofits that spent a third of their budgets on information technology, facilities, equipment, staff training, program development, and fundraising tend to be more successful than those that do not invest in these expenses to the same degree.

So, why is it so hard to dispel the myth? It could be that naming is a piece of the puzzle.

When we hear the word “overhead” we think of fluff, bloat, and non-mission-critical costs. But that could not be farther from the truth.

Overhead is really infrastructure, or the people and systems that animate the mission and create the impact that that organization is striving to achieve. It’s essential.

If the nonprofit sector began talking about infrastructure investments instead of overhead, then would the private sector and donors think differently about general operating support?

Donors understand infrastructure investments when it comes to facility improvements because the leaking pipes and well-worn buildings are visible. They show their age, and donors can get behind new facilities and naming opportunities.

But broken spirits and burnout are not as visible and not nearly as exciting as an architectural rendering. Nonprofit board members must begin to see administrative costs as fundamental. They must begin to make investments in the people and systems that drive the organizations that we care about.

I’m tired of seeing chief executives exasperated and in tears. And, most of all, I’m tired of breaking organizations and their missions down into ratios.

Let’s put the overhead myth to bed for good. It’s time to elevate the mission-critical needs of the sector by investing in infrastructure.

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