Giving Compass' Take:

• Old ideas about nonprofit impact revolve around lowering overhead costs. In the pursuit of lower operating costs, nonprofits cripple their ability to provide vital services, as philanthropy expert Sylia Obagi argues in this Medium post. 

• How can the conversation around impact shift to more meaningful criteria? What would be the best measurables? 

• Read honest answers to grant questions. 

We’re all on board with the mandate of mission-driven work. Funders and nonprofit (for-purpose) organizations get it — the mission is the reason the organization exists. But the traditional way we’ve focused on the mission is dangerously off target. After years of buying into a mistaken approach, both funders and nonprofits have unwittingly conspired to undercut their mutual ability to influence the issues their missions embrace.

For years, the focus on mission has been expressed through unrealistically low investments in the infrastructure of nonprofit organizations. Funders offer grantees a token for administrative overhead, or nothing at all.

Over time, that approach has produced a draconian set of rules that stigmatizes administrative expenses as bad. These archaic rules have sabotaged the ability of nonprofits to produce results and institutionalized the starving of organizations to feed programs. Nonprofits are now subjected to a rating and ranking game in which their quality is defined by the percentage of their overhead expenses rather than the value of their impact.

Starving organizations to feed programs has resulted in a nonprofit ghetto characterized by decaying infrastructure and economic inequity. The great majority of nonprofits operate on shoe-string budgets and survive by making do with outdated technology and inferior facilities, and by obliging staff to work long hours, accept low wages and flimsy benefits, and forego professional development.

There’s a lot at stake here. Underfunding administrative costs depletes philanthropy’s impact by destabilizing the organizations that do the work. When it comes to social change, nonprofits are at ground zero. They’re the muscle that turns dollars into results. Unless nonprofits are financially stable and have the necessary people and tools, they can’t feed the hungry, house the homeless, care for our children, combat climate change, confront the opioid epidemic, bring art to enliven our communities, or do the thousands of other things that so desperately need doing. They can’t do their job.

Read the full article about nonprofit impact by Sylia Obagi at Medium.