So Over Overhead

Something that really drives me nuts about the solicitation of non-profit donations is that agencies publish the amount of money that goes to overhead expenses. Personally, I’d rather give to agencies based on the effectiveness of their programs, regardless of overhead expenses. Luckily, a new study by the University of Pennsylvania’s Center for High Impact Philanthropy found that I’m not alone in deemphasizing the importance of overhead costs.

The study was based on interviews with 33 wealthy donors who give more than $1.5 million a year. Interviews asked these donors about their thoughts on what is important to them when selecting an organization to donate to. According to this article in the Chronicle of Philanthropy, some of the donors said they “understood charities’ need for money to pay for overhead and other operating costs and were willing to provide it.”

Obviously the study is qualitative, but still, hopefully this will help some foundations and non-profits to back-off on the promotion of overhead expenses as a metric of success. I’m not saying that one should not look at an agencies expenditures when deciding where to donate.

However, my belief is donating should be more like investing. In investing we look at earnings per dollar. In donating we should look at social outcomes per dollar. Overhead costs is a meaningless and hopefully endangered unit of measurement in determining what agencies to donate to.