Nonprofit overhead costs: Breaking the vicious cycle of misleading reporting, unrealistic expectations, and pressure to conform

Abstract

Donors tend to reward organizations with the “leanest” overhead. So nonprofit leaders feel pressure to spend as little as possible on backbone expenses like human resources or IT, whatever the real cost to their overall effectiveness. This vicious cycle ignores the fact that some overhead is “good overhead” - the kind that enables an organization to invest in the talent, systems and training that create a foundation for healthy growth. A few critical questions can help funders and organizations shift the discussion, separate good overhead from bad, and focus on what matters most – achieving more for beneficiaries over the long term.