Often nonprofit executives are so focused on keeping our budget tight that we forget to ask ourselves, are we cutting corners? What could we do if we had more money? What opportunities to better serve our beneficiaries are we missing by being so fiscally conservative?
Most long-time nonprofit leaders have a “do more with less” mindset, and have had it for so long they don’t even recognize the consequences of doing so anymore. According to the article “The Nonprofit Starvation Cycle” in The Stanford Social Innovation Review, even new nonprofit leaders have adopted this thinking, most often due to the unrealistic demands of some of their funders.
Article authors Ann Goggins Gregory and Don Howard report that the result of “doing more with less” has been a hollowing out of nonprofit infrastructure that has crippled the ability of many organizations to fulfill their beneficiaries’ needs.
Their solution? Fixing funders’ unrealistic expectations about how much it costs to run a sustainable and EFFECTIVE nonprofit organization. Unfortunately, Gregory & Howard suggest that many grantees find it very difficult to be brutally honest about how much it costs, particularly in terms of overhead expenses, to run their organization.
I not only believe that with a little preparation grantees could easily show donors the importance of not cutting overhead too low; I believe this conversation is a great opportunity not to be missed!
First, grantees must shift their own focus, and then the focus of their grant-makers, from costs to outcomes. Gregory & Howard believe this shift is fundamental to getting away from the current culture of “low pay, make do, and do without” that has created dysfunction and low outcomes in many organizations. I have found that the best way to successfully do this is by providing a detailed comparison of your program, it’s estimated costs and outcomes with little to no overhead and with a “lean but healthy” overhead.
When your donor sees they can either keep the overhead too low (spending X to serve Y), or pay a little more in overhead to serve substantially more beneficiaries (spending X + 10% to serve Y x 10), they will not only pay for additional overhead, but will become a more loyal partner of your organization because together you both share the same goals.
Once goals are clear, donors and grantees should together honestly answer the question, “What will it take to deliver these outcomes consistently, or to deliver these outcomes at an even higher level of quality or quantity?” This is where many new opportunities lie.
Explore possibilities with each other, and consider ideas and impact without the constraint of cost. The donor may conclude that more money is needed to be most effective, or the grantee may realize there is a new option that is more effective. Either way, it will be a partnership where both parties have participated and feel comfortable that the donor’s gift is being used efficiently and effectively. This collaboration will not only solve your program’s overhead issue, but will show the donor they are a true partner and will further cement their ongoing loyalty to the organization!
“Outcomes, not overhead.” This statement gets beyond the question of money and refocuses the listener on the question of results. Because ultimately, none of us, neither grantee nor donor, is in it for the lowest overhead! We are in it for the outcomes!
- How to Strengthen the Donor-Grantee Relationship: A Roadmap to Collaboration (forbes.com)
- Non-Profits and Donors: Time for a new equation (kaushyk.wordpress.com)
- Interview with Author of Give Smart: Philanthropy That Gets Results (lawprofessors.typepad.com)