Elevating other charitable organizations and propelling them forward to reach their full potential involves many moving pieces, including a solid team, transparency, and carrying overhead costs to run your charity like a company (to boost donations like revenue).
We must consider the overall impact nonprofits create as an alternative measure of their value, rather than simply pushing them to minimize overhead spend.
The PODvocate Project exists to amplify the impact of charitable giving, providing more than 1,000 hours of support to other organizations over the course of our time together.
The Overhead Myth
In the nonprofit space, there’s a belief that the fewer organizations spend on administrative and operational expenses, the more effective their efforts must be—a phenomenon known as the “overhead myth.”
- A 2013 Muttart Foundation survey found 74% of Canadians believe charities spend too much on salaries and administration.
- A World Vision survey shows 32% of people surveyed believe 100% of the money raised by nonprofits should go “to the cause.”
- A 2007 Statistics Canada survey showed 30% of potential donors believe money donated would not be spent efficiently.
While rooted in a desire to see donations stretch as far as possible, this stance overlooks the reality of running an effective and impactful organization. Let’s break down the “overhead myth” together.
The Importance of Investing in Your Team
“Nonprofits that spend too little on infrastructure have more limited effectiveness than those that spend more reasonably.”
–Imagine Canada’s Narrative Tool Kit
The success of any organization—nonprofits included—lies in its mission and the strength and expertise of its team. Having a skilled and invested staff is important.
A skilled team brings a wealth of knowledge, creativity, and leadership that transforms a nonprofit’s ability to address challenges and adapt to changes. Further, when employees feel valued, they are likely to go above and beyond.
The Cost of Good Employees
Investing in your team also makes financial sense—it costs much less to keep good employees than to replace them. By investing in employees, nonprofits can create an environment where team members are happy and want to stay, maintaining a higher retention rate.
Investments in staff should not be viewed as an outrageous overhead cost but as an important part of a successful nonprofit strategy.
The Role of Transparency and Trust
The pressure for nonprofits to maintain a minimal overhead also creates a culture where they hesitate to disclose their true operational costs. When organizations feel pressured to mask their real needs, it stifles an honest conversation.
Transparency means open dialogue about the reality of creating substantial change. It’s about frankly discussing necessary investments in skilled staff, technology, and innovation that are vital to address the challenges at hand.
By embracing openness, nonprofits cultivate deeper trust and understanding among their stakeholders, demonstrating that impactful work demands substantial investment, not minimal spending.
Defining Success by Impact
A narrow focus on low overhead costs misrepresents the effectiveness and real-world impact of a charitable organization’s work.
It’s time to consider defining success by another metric, one that prioritizes the outcomes and tangible changes that nonprofits bring about.
Spending ratios, while useful for ensuring financial accountability, do not provide a complete picture of a nonprofit’s efficiency and impact. A holistic approach considers the depth and sustainability of the change nonprofits create.
Success should be defined by how well an organization achieves its mission and contributes to meaningful solutions.
To redefine success in the nonprofit sector, organizations, donors, and stakeholders must embrace impact-focused metrics, like:
- A breakdown of changes made in beneficiaries’ lives
- Data on service reach and effectiveness
- Stories that share the real changes brought about by the organization’s work
Prioritizing outcomes over spending ratios ensures that nonprofits are valued and supported for the meaningful change they create in the world.
Moving Beyond the Myth
The most impactful nonprofits invest in staff, technology, and new services—all of which come with costs.
With a better understanding of how nonprofit success is measured, we can appreciate these investments not as wasteful overhead, but as an essential piece of creating lasting change. That’s why The PODvocate Project makes an effort to champion the causes that seek not just to exist but to make an impact. Learn more and help us support nonprofits by considering the broader context of their work and the tangible change they create in the world around us.
