Non-Profits use metrics to illustrate effectiveness and efficiency. Metrics can show how much it costs to provide one meal to someone who’s homeless, how many malaria vaccinations were administered in a given year, or the reduction of teen pregnancies among populations who were educated about safe sex. Metrics are helpful. They show how an organization makes an impact.
For many non-profits, a key metric is the percentage of donations that goes toward programs versus the percentage used for overhead, which includes administration and fundraising. Non-profits use this number to illustrate how efficiently donations are used, because donors want their money to help people—to do the real work.
The challenge with this metric, then, is that non-profits must all but eliminate their non-program costs if they want donors to believe their money will be used properly. Hire fewer people to handle accounting or maintain facilities. Splinter staff responsibilities into multiple roles. Rent a cheap office space on the edge of town. Remind your staff that they’re here for the heart of the mission, not for the paycheck, and rally around that point. Don’t advertise or market your services.
Don’t. Spend. Money.
The problems with this are obvious. When the IT guy’s wife loses her job, he’s forced to look for another job where he gets paid enough to cover his family’s needs, and the web-slash-print-designer-slash-photographer becomes the IT guy for a while because he knows a little about how servers work. Development’s hands are tied when it comes to acquiring new donors, because to advertise the organization’s services or create a major campaign would waste donor dollars. Headquarters can’t move to a more strategic location where it can reach its constituents better, because the higher rent would raise eyebrows. Young staff move on when they realize their salary will barely budge if they stick around long-term. The organization can’t grow.
See the problem?
A while ago, a friend of mine who’s running a non-profit that’s running a business sent me a link to this TED Talk of Dan Pa llotta. It’s nothing short of brilliant. Give it a watch. Go ahead. Watch it twice.
Okay. Dan's awesome, right? He nails it.
The follow-up to that video is pretty strong (TED provides an update here). First of all, Dan Pallotta has started The Charity Defense Council, an organization whose mission is to promote the needs and effectiveness of non-profits. Sort of an Ad Council for the non-profit world. This is great, to have a foundational rallying cry for these important organizations.
But even more exciting to me is that three of our country’s leading evaluators of non-profits have rejected the overhead metric as a way of measuring an organizations’ effectiveness.
This is huge.
Charity Navigator, GuideStar and the BBB Wise Giving Alliance—groups you revere if you’re involved in non-profit development—all declare the value of overhead as a myth. On their aptly-titled site, OverheadMyth.com, they define overhead myth as “the false conception that financial ratios are the sole indicator of nonprofit performance.” Instead, they ask non-profits to focus donors’ attention on the “organization’s efforts to make the world a better place.”
Lest you interpret this as finger-wagging by these highly influential groups, remember that each of them has touted overhead as a critical measurement of organizations’ effectiveness as long as they've been around. To change their minds on this is as much as a tail-between-their-legs situation for them as it is for non-profits who consider eliminating that stat from their marketing materials, too.
So how does this play out for you?
Stop using the overhead metric. Be transparent with your donors about why you’ve moved away from it, and how you’ll measure success from now on. Trust them to understand the shift in your mindset.
Once you've done that, reconsider how your funds can be better used to grow your organization strategically, dynamically, and long-term. Spread the word about your programs. Go guerilla. Involve your donors. Go as deep as you go wide. Recruit smart, passionate, effervescent staff. Pay them well. Give them opportunities to grow. Stop reminding everyone they’re a martyr and they’re not doing this work for the paycheck. Tell them, instead, that what they’re doing is huge, and show them you mean it. Take their work and expertise seriously.
And if you really want to dream big, pursue designated gifts from individuals or corporations who value strong marketing and design. As you invest more funds in marketing than you have in the past, you’ll likely realize how far behind you are. Your marketing strategy needs a jump-start. There are people out there, with money, who are eager to invest in the strategic growth of your great organization. Go find them.
Give unrestricted gifts. Designated gifts are great, because your money goes toward something specific and awesome. But remember how expensive it is to turn on the lights, buy the stamps, heat the building. Consider the staff who are doing this for the heart of the mission, and make sure they stick around. Give openly. Give generously. Give often.
BLEEDING-HEART DESIGNERS (myself included):
Remember that doing work for a non-profit does not mean you do it pro-bono or at a reduced cost. In my 3+ years as an independent designer, I've found my best non-profit clients pay me well and take my work as seriously as any for-profit I’ve worked for. They give me time and room to do my absolute best work. They understand design and marketing as a strategy, not a luxury. Your clients should value your work, your time, your contribution. Study up and learn about the unique challenges of non-profits. Don’t go in blind—it's a unique field. But don’t sell yourself short in your pay or your efforts. If you do, your work will suffer. You won’t help them, and you won’t be able to sustain your well-intentioned career.