As any organization knows, you need funding for the basic operating costs of doing your important work. These costs are commonly called “overhead.” And as anyone who has tried to fundraise for overhead knows, it can be a tough sell.
But what is overhead?
And can we reframe the overhead ask in a way that is both accurate and enticing at the same time?
I believe we can. First, we’ll need to shift our mindset a bit and then determine the best way to communicate the need in a forward-thinking and sustainable way.
The term “overhead” is a catch-all phrase that is used to indicate the operating costs of keeping a business running. Typical expenses often include the salaries of administrative personnel, any accounting or bookkeeping expenses, rent, utilities, and a range of other basics such as insurance and legal fees.
Sidenote: If you are a nonprofit organization, your tax return will refer to three separate categories for all of your expenses: Management & General, Fundraising and Program Services. Overhead generally includes both Management & General expenses along with any expenses related to fundraising. It can also be called administrative, fixed, indirect or operating costs.
Overhead gets a bad rap. Blame it on the discovery that some executives of major nonprofit organizations (typically universities and hospitals) can rake in a million dollar salaries. The idea that donor dollars are lining the pockets of executives naturally doesn’t sit well.
Charity watchdog groups jumped on this and instilled the principle that organizations should spend as little as possible on overhead which gave rise to the familiar nonprofit fundraising slogan that “100% of your donation goes to people in need”.
All of which seems well-intentioned. Unfortunately, this mindset leads to an unsustainable model for accomplishing any mission of worth. Thankfully, there’s a shift happening.
Don’t call it overhead.
Overhead is a business term left over from the early days of the manufacturing industry. It is ambiguous, inaccurate and doesn’t serve the purposes of nonprofit and community benefit organizations.
It takes commitment to build a strong, sustainable organization that is equipped to take on the extraordinary challenges of our times. Qualified people, reliable infrastructure, and solid operating practices are all integral to a thriving organization and mission achievement. But these necessities don’t always sound as exciting or investment-worthy as program expenses.
However, there are many ways to phrase this in a manner that is truthful and empowering. A few to get you started: institutional strengthening, capacity building, organizational effectiveness, core support, leadership development, strategic planning, and systems grantmaking. Thankfully, there are a blessed number of funders who focus on supporting just these types of initiatives.
Ask for unrestricted support.
More and more, leading grantmakers are acknowledging that unrestricted funding is a far more sustainable model of support to nonprofit and community benefit organizations.
Ford Foundation, one of the top grantmakers in the world, announced a shift in 2015 from prioritizing project-specific support to unrestricted support. On what this would look like, Ford Foundation President Darren Walker wrote, “Whatever form it takes—depending on context and the needs of each organization—our aim is to ask not, “How do we make this grant successful?” but rather, “How do we help make this organization successful?”
Examine what would make your organization successful. Then ask for it.
Focus on impact.
Here’s the secret with impact: you define it. You know your work best. You are responsible for evaluating whether your activities are, in fact, furthering your mission. And it is your job to honestly and openly communicate that to your funders and donors.
When you ask for funders and donor to make a financial contribution to your work, make it clear to them that they are supporting mission-driven results and outcomes.
This is about trust.
The overhead discussion is not actually about line-items on a budget. It is not how much you spend on electricity or how you can justify hiring a graphic designer for your annual donation appeal letter.
The overhead discussion is about trust. You are not only asking for your supporters to put their weight behind your cause, but you are also asking them to place their trust in you, your work, your solutions and your accomplishments.
You are also asking them to trust that you are not wasting their money on extravagant expenses that do not further your mission.
Integrity and transparency will take you far here.
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