leadership dot #1602: overhead

Yesterday I wrote about overhead projectors, and today I will share thoughts on a different kind of overhead -- specifically the one that non-profits use to categorize their administrative costs.

I recently participated in a webinar with industry professionals who are leading an effort to redefine the perception of overhead expenditures being automatically viewed as negative. These leaders maintain that by placing a disproportionate emphasis on the overhead radio (the % that goes to administrative salaries and office costs), non-profits are hesitant to invest in the infrastructure that could help them more effectively achieve their mission.  

The premise of the webinar was twofold: 1) that not all non-profits should be judged by the same metric -- as international networks have a very different cost structure than do research organizations than do advocacy groups, etc. and 2) that no single metric should be used to evaluate an entire organization. 

While the dilemmas may be clear, the answers to them are not. This was the first of a 3-part webinar series to discuss the matter and to help guide a conversation about how organizations should measure their impact, manage toward results and demonstrate the effectiveness of overhead expenditures. 

There was even talk of creating a new name to label overhead (examples: core funds, vessel funds, operational costs, a new word -- caust -- that combines cause and cost, or the tongue-in-cheek variant of "things-we-need-in-order-to-do-our-job-of-helping-people-damnit"), believing that overhead has such an ingrained negative connotation that it cannot be overcome.

Whether you are a member of an organization or a personal donor, the debate around overhead should matter to you. How do you measure whether your dollars make a difference in achieving the mission? How can you compare one organization vs. another, especially when they address similar causes (eg: breast cancer)? What does it cost to do good?

The struggle that non-profits are having relating to overhead has relevance to any group attempting to share data and meaning in a two-dimensional way. It is an ongoing tension between complexity and simplicity in the quest to communicate meaning. Pay attention to the overhead conversation to learn how your organization can find that balance in its messaging.

-- beth triplett
@leadershipdots

To learn more, download GuideStar's white paper: Six Tips for Busting the Overhead Myth

Information from GuideStar Webinar "How Much Does it Cost to Do Good? Conversations on Nonprofit Overhead, Part One; October 11, 2016