I recently listened to a speaker, who briefly mentioned that he has been doing missions work in Albania and Mexico for the past few years. After his presentation, I approached him to ask what organization he did his missions work through. I’ll never forget his response, “I do them through myself rather than an organization so I can keep my overhead around 3% rather than the 11% or 13% the ‘big guys’ use—that way more of the money people give goes straight to the needy I’m working with.”
As president of an organization whose “overhead” is more than this fellow’s thrifty 3%, I was a bit taken aback. Not only did I feel judged for dreaming big, strategically planning to accomplish huge goals, investing in talented and passionate professionals, and multiplying donations to further reach, I also began to think, “What happens when this individual falls ill or dies? The ministry he’s investing in now will die with him because there is no system in place to carry on his specific work and relationships. Where is the investment for the future?”
In a historic move, the leaders of the country’s three leading sources of information on nonprofits—GuideStar, Charity Navigator, and BBB Wise Giving Alliance—penned an open letter to the donors of America denouncing the “overhead ratio” as a valid indicator of nonprofit performance. Here’s an excerpt:
“When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called ‘The Nonprofit Starvation Cycle.’ We starve charities of the freedom they need to best serve the people and communities they are trying to serve.”
Dan Pallota, best known for creating the multi-day charitable events such as AIDS Rides and Breast Cancer walkathons, which raised $582 million in nine years, gave a convincing TED Talk advocating for a new ratio.
In essence, the old way of thinking about philanthropy is wrong. When you put more into fundraising you get more out of fundraising. While your percentage may be closer to 30% verses under 15%, which is currently the “magic number”, you will yield a lot more in donations and be better able to help the causes you are giving to.
So instead of generating $60 million with a 15% model, you may yield $80 million under a 35% model.
In addition to being a NPO, as a ministry we believe we are accountable to both God and man to be efficient, effective, and careful stewards of our time, energy and resources. Charity Navigator has honored OneHope with their top 4-star rating for financial transparency and accountability.
The subject of money and the expectations and restrictions placed on it in the non-profit world is highly controversial. Our intent is not to argue about money and percentages, our goal is to fulfill the mission we’ve been given.
“Our generation does not want its epitaph to read, ‘We kept charity overhead low.’ We want it to read that we changed the world.” Dan Pallota
What do you think about giving and overhead ratios? Is it any different than what you thought or how you operated 5, 10, or even 20 years ago?