The Overhead Myth

Three organizations that publish information on charities launched a campaign this month that challenges the perception donors have about operating costs.

GuideStar, Charity Navigator, and the BBB Wise Giving Alliance hope to move supporters away from relying heavily, or even solely, on overhead percentages when making decisions about giving.  The campaign includes a website, where you can sign a pledge to end the myth, and a social media blitz.

The three published an open letter to donors asking them to consider other measures:

We ask you to pay attention to other factors of nonprofit performance:  transparency, governance, leadership, and results.  For years, each of our organizations has been working to increase the depth and breadth of the information we provide to donors in these areas so as to provide a much fuller picture of a charity’s performance.

Many years ago, overhead percentages became a trendy barometer for donors to use when making decisions about giving.  This created the “Nonprofit Starvation Cycle,” as dubbed by the Stanford Social Innovation Review, a situation in which charities were left with no resources to direct to infrastructure.   Nonprofits are no different from corporations – they, too, benefit from investments in technology, experienced staff, development, and skills training.  In the end, according to the Overhead Myth, this “starvation cycle” has impacted charities’ abilities to serve people and their communities.  What do you think?

Have a question about overhead?  Ask Hammond.

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