Image credits: http://dochasnetwork.files.wordpress.com/2012/03/panda.png
“I really liked the Wounded Warrior project, and was going to donate, but then I read that they only spend 65 % of their funding on programs, so I decided not to support them.” The comment came from woman from a military family, and it shocked me. She said she felt the 35% they spent on overhead must mean that the staff is being paid too well and their overhead was too high.
( I don’t know about you, but when I see their commercials on TV, their overhead is the last thing I think about….)
Well, what the hell is overhead anyway? Everyone talks about it, and I’ll bet there many different understandings of what that includes. What does it measure and how is it calculated? Where is the line item for overhead in a budget or return? Talking about something that has no definition does not help the conversation on how to make a change happen in the world.
Overhead has become the abused and misused word of the year, with people both inside and outside nonprofit flinging it around with abandon. The redheaded stepchild of development, it is something to be avoided or reduced to barest levels. We still need to raise the money to operate, but frequently have to avoid the word, or whisper it.
Let’s work on clarity about overhead. Overhead is cost allocation; it is part of all programming. If your program requires a professional, an office space, access to a computer and internet, those costs are not incidental; they are part of the requirements to effectively and efficiently deliver that mission.
We need to change the conversation about how we apply those associated costs: we need to really understand what ‘overhead’ is and includes, and how big a deal it is. Salaries are for specific work done toward the delivery of the mission, part of the programming, and separate overall expense.Being able to communicate and market is an essential part of the program, not simply a phone and internet bill.
Let’s be Clear
It is up to us to show that the concept of overhead has been misnamed and short-changed. Overhead is the cost of doing things. No one is suggesting that these costs be unsupervised or uncontrolled, quite the contrary. As nonprofits, constantly engaged in fundraising, it is our obligation to better define our program costs, what they include and require of our operations in order to make those programs successful and efficient. If we ask for an investment in our work, we need to show it is well, clearly and smartly applied.
Overhead is called that because it keeps the roof over our heads, so we can do the work of change.