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#325 How Much Is That Overhead Again? – A Thought Before “Giving Tuesday”

November 23rd, 2018

Richard Marker

I guess it was inevitable. We were attending a wonderful and illuminating dinner learning about a cutting edge and courageous program in one of the world’s most famous trouble spots. It was a low-keyed fundraiser, but more so, an opportunity for opinion makers to learn that positive developments are possible even amidst wrenching political settings.

The event was held in the palatial home of someone who had originally come from that part of the world and has become quite successful in the USA. Those of us who attended were moved and motivated by the presentations, and that is saying something since this was not a group comprised of naifs.

As the MC was bringing the evening to a close, one of the attendees shouted from her seat that she had a very important question and insisted that she have an opportunity to ask it.

“What is your overhead?” she shouted.

As it happens, the answer was very reassuring to this obvious skeptic, but it was such an unfortunate way to end the evening.

So, at the risk of revisiting a topic that those of us in the philanthropy world have addressed for years, a few observations:

• “Overhead” is a very problematic and misleading term. It implies that there are costs totally unrelated to the project. I prefer the term “infrastructure”. The term makes it clear that no project or program exists independent of the organizational context in which it sits. Someone has to turn on the lights, clean the floors, hire and supervise the staff, account for the finances, and so much more. Most [but not all] of us on the funder side know this and fully recognize that it is counterproductive to fund a program without assuring its likelihood of success. That requires support for the infrastructure. [In another place we can have a discussion about how to determine what that amount might be.]

• If we already know this, why did this potential contributor feel that her question was so important that the evening could not conclude without her asking about “overhead.” [It was noteworthy that the presenters barely alluded to the financing of this project; there could have been so many more relevant financial questions.]

We in our field deserve some of the blame. A few years ago, as information about non-profits became democratized, the rating organizations tried to develop tools for decision-making. Percentage of “overhead” seemed an easy one. After all, it was a seemingly objective number and would raise red flags to phony or exorbitant fundraisers. The problem of course, is that not every project is equal and not every organization is at the same stage of development. Most important, though, it implicitly reinforced a concept that those who were not delivering direct service are simply superfluous flab.

Those of us in the field know that, a few years ago, the primary rating organizations issued their own mea culpa on this. They realized that they had done an inadequate job of conveying what questions should be addressed before looking at fundraising ratios and, to their credit, and to our field’s benefit, they have worked hard since to make sure that the now readily available financial data is only one important indicator of the value and worth of a project or organization.

• The force of the question that evening demonstrated that we still have a long way to go. Philanthropic giving has not only become democratized through on-line fundraising and access to organizational tax returns and financial information. It has also become unmediated. The average donor or funder has the option to make direct contributions, a mostly healthy development, but most haven’t taken the kinds of seminars or courses that we and many others offer to learn how to make decisions. That evening reinforced for me that our role as philanthropoids and philanthropy educators must not be restricted to the cognoscenti. We need to be better about showing how good decisions can be informed and responsible. And we need to do so in accessible ways: the appeal of the “overhead” percentage metric is that it is quick and supposedly “objective”. If we are going to provide more useful decision-making tools, we need to do so in ways that are also accessible without forcing a level of due diligence that might paralyze a well-meaning and caring donor.

All of this is particularly important as we approach “Giving Tuesday” and end of the year solicitations. There are many wonderful and deserving causes out there, and, sad to say, some who are, to put it kindly, phonies. One should ask questions before writing that check or using that credit card. Make sure the organization you want to fund is legitimate and is not one that just sounds like one that is. For most, that means making sure that it has legal 501(c)3 status. Make sure that it is an organization whose mission and program is one that aligns with your own priorities. All of us can get caught up in emotional giving, but we don’t want to look back and say, “why did I do that?” And it is certainly relevant to look to see what criteria an organization chooses to demonstrate its success [Hint: how much you can give each day isn’t a very good criterion; what actual changes they are bringing about is.]

At this time of year, unless you are prepared to spend time doing real significant research, stick with proven non-profits. They may or may not be the most efficient, or the most cutting edge, but there is a pretty strong likelihood that your money will go to what you want it to go for.

For those who want to learn how to dig deeper, January or February is a much better time to learn how. And will lead make next year’s giving season that much more gratifying.

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