Stop the War on 'Overhead': What Nonprofits Actually Need to Sustain Their Missions
The first year I started a non-profit, I ran an entire summer program for 60 children for $5,000. The entirety of that budget went to food, classroom supplies, and technology needs. I ended up with a "stipend" of around four dollars an hour for myself during the 6 months it ran. I had to work two other jobs at the same time as handling the finances, marketing, program operations, staff development (of an entirely volunteer team), and administration for the newly launched organization.
This is not a success story about a scrappy start-up. This is the sad reality of the pressure so many nonprofit and mission-driven organizations face. Do more with less. Don't spend anything on staff, just spend it on programs. But what does that even mean? My programs operated out of a donated space with donated equipment and basic provisions like lunches for the participating kids, but to be honest I could have run a program outside, on the grass, with nothing but a stick. I didn't need the laptops and space and resources. I needed myself, my expertise and training, and that of the other volunteer staff who joined me. People ARE the programs.
Yet through grant cycles and application after application, I kept finding restrictions like "no more than 15% of funds can be used towards 'overhead.'" or "cannot be used to fund staff salaries." (for context, the for-profit sector recommends overhead staying below 35%). So I bought new computers that were nice but not necessary, and then went without a paycheck. If I challenged this assumption, I was told in different ways that I should be doing this work because I cared about the mission, not to be paid a reasonable wage. It's no surprise that within three years I had to step down from the nonprofit I had started with my own two hands... I had utterly burned out.
Years later, having now been a consultant in the nonprofit sector for more than a decade, I wish that I could say things have improved. But the rhetoric of being "lean" or "efficient" pervades the nonprofit sector (you too, public sector. I see you). It comes from both donors and the nonprofit organizations themselves, and it's created a vicious cycle of underfunding that leaves nonprofits with weak infrastructure, poorly trained and poorly paid staff, and chronic burnout and turnover.
The irony is that what ultimately sustains organizations is efficiency, but reduced spending on administrative infrastructure and staff does not automatically make an organization more efficient. In fact, it often has the opposite effect.
Take employee transitions, for example. When an employee is leaving a role, there is seldom any overlap with the person being hired to replace them. But if in addition to that, there are no clear transition protocols or onboarding processes or documentation of standard operating procedures or well organized intranet systems, much of the institutional knowledge and technical processes are lost with the departure of the first employee. The next employee will have to build their own understanding and potentially reinvent systems that were already in operation. This is tremendously inefficient. Spending time and resources to build efficient, clear, transparent systems and train excellent managers ensures that employees operate at their best and don't waste efforts.
While I understand there are organizations with bloated management structures that could certainly use helpful parameters to curb their expenditures, a blanket percentage of overhead is not a useful way to determine this.
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