At a recent conference I attended, Antony Bugg-Levine, CEO of the Nonprofit Finance Fund, bravely took another stab and debunking the nonprofit overhead myth.
Antony’s simple framing was that we – as nonprofits, as funders, and as partners to both – need to decide which question we should be able to answer:
Question 1 is, “Are you efficient at delivering your programs?”
Question 2 is, “Are you effective at turning funding into results?”
Further paraphrasing the example Antony gave, he described two conversations a funder could have with a homeless services organization. In the first conversation, the funder asks the service provider, “If I give you this money, will you, in fact, put in 10 more beds to the homeless shelter, as promised?” Alternately, the funder could ask, “If I give you this money, will you make a dent in the homelessness problem?”
It’s easy for us to smile and nod and say, “Oh, but of course, it’s question 2!” but that is not how we behave. “Don’t waste my money” is the prevailing message coming from most funders who demand “accountability,” a conversation that often ignores the distinction between efficiency and effectiveness. And most social sector organizations are all too willing to play the game, communicating back, “Look! I’ve done what I told you I would do!”
This is such a low bar and is so fundamentally disappointing.
And while it’s easy to point fingers at funders who “just don’t get it” or at social sector professionals who either can’t be trusted to aim higher (so why are you funding them?) or who aren’t able to explain exactly how they are in fact delivering results (again, why are you funding them?), the truth is that the only way we get out of this dance is if we all truly pull up a seat to the table and do real work together.
The real work of deeply understanding the problem.
The real work of exploring what it would take to make progress on that problem.
The real work of recognizing that our organization, no matter how great we are at what we do, is probably not going to make much progress alone.
The real work of pulling together the people and organizations who could make some progress if they found the right ways to work together.
The real work of being honest about what we do and don’t know, about what part of the problem we are trying to chip away at right now, and about what success would look like now and in the future .
As we have these much deeper, more honest conversations, it will become clear that things like how much an organization spends on fundraising and management (aka “overhead”) could either be excellent or terrible proxies for judging the organization’s effectiveness.
For example, imagine you really, truly understand the problem you’re working on and discover, together, that you’ve got all the answers but are $100 million short of being able to make the change you’ve been trying to make. In that case, a massive investment in fundraising, or in a partnerships strategy, could be the single smartest thing you could do.
Or, imagine that you discover that what looks like an expensive and inefficient services model is actually a conscious strategic choice on the part of a nonprofit to focus on the hardest cases because that’s where they can make the most difference.
The list of examples goes on and on.
It’s time to stop talking about overheads and ratios, and it’s also time to stop talking about how efficient we are at doing what we said we would do.
We must hold ourselves to the much higher standard about turning money into solutions and about creating results, not activity. The people you aim to serve will thank you for it.