26 Dec The Truth Behind Non-Profit Overhead Spending
Through the Christmas season each year, this graphic pops up on social media over and over:
When over half of charities receive at least 25% of their yearly funding in the last month of the year and some receive up to 12% in just the last three days of the year, being listed on a viral picture like this could be damaging.
What fundraisers, non profit board of directors and non profit executive directors know is this picture doesn’t tell the whole story. In fact, most of the information here is outdated and just flat out wrong. (If you want to know the truth about the health of an organization, search for them on Charity Navigator or Charity Watch.)
The truth many donors don’t realize is they are being influenced as much by what these organizations spend on marketing, fundraising and salaries as they are by the work these organizations are doing.
Why an Organization’s Executive Director’s Salary Matters
First, would you really expect someone with the skills to manage a $300 million dollar budget to work for minimum wage? The best businesses and charities I know hire the right person for the job and pay them what they are worth. Sometimes that means hundreds of thousands of dollars will be paid to the top position, but when those dollars represent less than .25% of the total funds of an organization the pay is very often warranted. Donors expect their funds to be managed effectively. They expect to see the organization fulfill its mission. When an organization manages hundreds of staff members, complex government programs, international objectives, medical research, and many other issues, that organization needs a director who can oversee the work and ensure the mission is fulfilled. Paying the right salary to the right person will ultimately save the non profit many more dollars than it costs.
Where Good Marketing Matters
Convincing your non profit board of directors to pay your top staff the right amount of money may not be as challenging as convincing them to go through a rebranding, non profit website redevelopment or social media marketing program. After all, these all take money that could be spent doing the work of the organization. And your board of directors is right, those dollars could be used “doing the work”. Again we go back to your donors, the ones who make your work possible. A website from the 90s and a sporadic social media presence does little boost the confidence of your donors. In fact, professional marketing materials created and presented based on a strong strategy will increase your donations rather than turn people off. It’s all about telling your story. When your marketing tells the story of an organization meeting needs and fulfilling it’s mission, people will want to be a part of that. Sometimes that means updating outdated marketing materials. Sometimes it means implementing new strategies. Sometimes it simply means rethinking your strategy.
When a Nice Facility Matters
You’ve seen the pictures of the 70s style office housing a 40 year old charity. None of the furniture or computers or carpet have been updated in decades. Tell us the truth, what’s your thought about the organization? Equipment that hasn’t been updated in years hinders an organization’s ability to manage the finances, oversee shipments of supplies to its constituents, and to keep digital marketing up to date. In some cases, run down facilities can be a health hazard to the employees and the people you are helping. In other cases, updated facilities speak to donors by saying, “I want to be a part of this.” A $2 million facility isn’t the answer for every charity, however, if your facility leaves a bad taste in your donors’ mouths, it could be costing you a lot more than you realize.
Spending money on overhead is a touchy subject for most organizations. We certainly don’t advocate spending the majority of your funds on these necessities. To be considered a strong organization doing real work to help real people, most ranking organizations expect no more than 35% of an organization’s income to be spent on overhead expenses. We don’t want you to do less for your people, but consider how much more you could do if you were able to raise more money and create more talk about your organization. Don’t be afraid to hire the right person, create a professional marketing campaign or maintain your office effectively. Those are also marks of a good charity.