Giving Compass' Take:

• In this blog post written after Hurricane Harvey hit in 2017, Mary Calahane at Hands on Fundraising asks us to push back against the myth that overhead is the only thing worth measuring when it comes to nonprofit efficiency.

• The next steps are more difficult: Nonprofits need to be better at coming up with useful, reliable data to track impact, but also building better relationships with donors is essential.

• Learn why the overhead myth is hurting nonprofits in Puerto Rico.

For years, donors were carefully trained to look at one thing when evaluating their charitable giving: what percent of the organization’s spending went to “program” (mission) and what percent went to “overhead” (administration, fundraising, accounting, human resources…)

These donors aren’t at fault. In fact, the ones most likely to depend on this idea are the most thoughtful donors.

They consider. They do their research. They give with heart and head. But they’ve been so wrong.

Even the big watchdog groups that pushed the overhead myth have stepped back.

But it’s harder to step back than it was to put the idea out there.

Why? Because the idea of a simple ratio — one percentage number — is too attractive.

It’s beautiful in its simplicity.

It’s also dead wrong. The truth is harder: there is no simple way to judge all nonprofit organizations, at all times. No formula, not a quick report card.

If a donor wants to do the homework, well, they’ve just moved up to college-level work.

We need a way to measure and communicate nonprofit organizations’ impact and effectiveness. But how do you use the same method to evaluate your community soup kitchen and a regional theater?

How do you judge expenses for a brand-new organization against an established one? An organization with a tiny budget and one with tens of millions?

Or an organization that is stepping up their fundraising efforts (more expensive) versus one that is holding expenses down by cutting fundraising efforts. (Not smart in the long run, looks good by the overhead metric in the short-term.)

The problem is that overhead IS mission.

Read the full article about pushing back against the overhead myth by Mary Calahane at Hands On Fundraising.