The Nonprofit Overhead Myth is Dying a Slow (but Steady) Death

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It happened to me again last week…… I was chatting with a friend (who I consider a dynamic business professional) and the topic of nonprofit management came up. I sensed a familiar statement coming, and then, sure enough, he said, “I always make sure that a nonprofit has low overhead before I consider donating to them.”

Yikes….. Despite steady education efforts over the last several years by the likes of The National Council of Nonprofits and Guidestar, our society still has a way to go toward understanding that nonprofits are businesses with the same overhead expenses as most for-profit businesses. The National Council of Nonprofits is doing a great job of promoting the fact that ‘operating a charity is not free (gasp!). It costs something to deliver a nonprofit’s mission.  In their piece, “(Mis)Understanding Overhead,” the National Council of Nonprofits makes the argument that we rarely question a for-profit business’s need to pay for insurance, accounting, utilities, marketing, technology, building maintenance (the list goes on…), so it’s time to stop pretending that nonprofit organizations don’t have these same valid expenses.

I’ve compiled a few of my favorite resources to help as you consider your next charity donations (two powerful videos and a great FAQ sheet):

  • Dan Pallotta’s Ted Talk titled, The Way We Think About Charity is Dead Wrong is well worth 18 minutes of your time. One of the many strong points he makes is that when the focus is on direct vs. indirect costs, nonprofits are rewarded for how little they spend, not for what they get done.
  • The Human Services Council of New York hits the (sad) nail on the head with their video, What If Pizza Shops Were Funded Like Nonprofits?Don’t let the humor in this video mislead you – anyone who has worked in the nonprofit sector has surely experienced some variation of this situation.
  • If reading FAQs is more your style, check out Overhead Myth – FAQs compiled by GuideStar, BBB Wise Giving Alliance, and Charity Navigator for clear and detailed facts about nonprofit overhead.
  • Now you’re ready to join the movement to dispel the overhead myth which has constrained nonprofits for too long. Spread the word!

    Donna Catalano, MS, PMP, with Eastlake Solutions, provides project management consulting and fractional COO services focused on helping nonprofit organizations maximize their results through streamlined operations, successful project management, and ongoing professional development for their teams and leadership.