Back before I started my career in prospect research in 1987 at The University of North Carolina at Chapel Hill, I was the assistant to the director of finance for the development office at the university. My responsibility was to help my boss Jean track all of the money the university received; she had to make sure it went into the right bucket and was distributed correctly.
Even then, back when fundraising offices were a relatively new thing, I remember tracking a fund where the donor had had the vision to endow a position in the development office. The donor’s money directly supported a fundraiser raising money for the graduate school where he got his degree. It’s the kind of investment that’s essentially a perpetual matching gift. For overhead.
Overhead has gotten a bad rap over the past decade by charity-raters who haven’t evaluated the right metrics, and by some in the press who have seized on salacious stories about indefensible salaries at a minority of mismanaged nonprofits. But news about ice storms in the south this week bring home to us that people will be temporarily without power, possibly for days. We don’t want to think about being without power, or telecommunications or even toilet paper for a day in our homes. Imagine trying to run a homeless shelter without those things. Without that critical overhead.
As charity thought-leader and AIDS Walk founder Dan Pallotta said in his disruptive, take-no-prisoners TED Talk, “The way we think about charity is dead wrong”:
“Too many nonprofits are rewarded for how little they spend,” he says, “not for what they get done.”
In yesterday’s Huffington Post, author Renee C. Herrell wrote a great follow-on article to Pallotta’s talk called “The New Four-Letter Word in the Nonprofit Sector.” In it, Herrell talks about foundation funders who understand and actually fund overhead. She writes:
Peter Ellsworth of the Legler Benbough Foundation, another San Diego based foundation, provides a majority portion of their funding each year to nonprofit overhead…
…While Ellsworth is happy to fund overhead, he won’t pay five times for the same service in five separate small nonprofits. Ellsworth suggests that collective overhead is the solution. “If small nonprofits can get together and utilize resources collectively, I will pay for that overhead.”
Efficiency appeals to potential funders. It doesn’t make sense for each small nonprofit to pay for someone to do their bookkeeping or payroll or prospect research, when professional companies exist with the right expertise to do just what’s needed, right when it’s needed. Once they’ve achieved efficiency of scale, that’s the time to bring it in-house.
That being said, even large nonprofits hire my company to help out on projects like wealth screening analysis, data analytics and finding prospective donors – times where many hands make quick, efficient work or when specialized skills are needed. We’ve even found funders for small nonprofits that cover capacity-building: overhead.
Many in the fundraising field have the impression that outsourcing is expensive. But I believe that investing in quality professional services actually amplifies an organization’s internal capacity.
And that gives you more of the precious commodity of time to do what you do best, and tell prospective donors everything that your organization is getting done.