“Strategies for Social Impact” Makes the Case for “Good Overhead”: Investments in People, Processes

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) July 30, 2008 -- Pressured by individual donors, government sources, and foundation funders, many nonprofits feel obligated to direct as much of their financial resources as possible to the services they provide. But that can be a significant mistake, according to an article published in “Strategies for Social Impact,” a quarterly newsletter from the Bridgespan Group, a nonprofit organization bringing leading-edge strategies and tools to the challenges and opportunities facing nonprofit organizations and foundations.

The article, “Nonprofit Overhead Costs: Breaking the Vicious Cycle of Misleading Reporting, Unrealistic Expectations, and Pressure to Conform,” argues that nonprofits must work with funders to set more realistic expectations when it comes to indirect costs. In fact, when nonprofits make needed investments in staffing and infrastructure--so called "overhead"--they are better able to carry out their missions.

Based on in-depth profiles of four youth-serving nonprofits that have managed to expand their capacity in critical ways, authors William Bedsworth, Ann Goggins Gregory, and Don Howard, provide insight into the problems that funders and senior nonprofit leaders face. It also offers advice on how to break the cycle, including:

• Developing a strategy that explicitly recognizes infrastructure needs. Framing strategy discussions around goals and the investments needed to achieve them, for example, can be more effective than centering such conversations on costs.

• Communicating the logic for increased overhead investment throughout the organization as well as to the board of directors.
• Providing funders with better ways to measure performance than simply relying on the percentage spent on programs. Conversations about how various costs—including overhead--contribute to desired outcomes can be much more meaningful.

“It is an heretical position to suggest that nonprofits need to spend more money on overhead. But we have seen the impact that the pressure to hide the true cost of operating expenses can have on organizations, which can hurt the organization’s effectiveness, lead to staff burnout, attrition, and declining morale,” said Nan Stone, Bridgespan knowledge partner and editor.

The current issue of “Strategies for Social Impact” also includes several other features including:

• “Effective Organizations Achieve Superior Results,” an audio screencast with Bridgespan partner Kirk Kramer that discuss what makes for effective organization and where nonprofits typically face barriers as they seek to increase their effectiveness.

• “Getting Replication Right: The Decisions that Matter Most,” by Kelly Campbell, Mandy Taft-Pearman, and Matthew Lee, which argues that that the most important replication decisions are straightforward in theory and come with a host of conventional wisdom. They include selecting a legal expansion structure, determining where to open new sites, choosing new leaders, and deciding how to maintain quality. But the reality is more nuanced – and making the decision will lead you to consider finely tuned differences in choosing new sites, decision making roles, and more within your organization.
• “Building Blocks Post Quake for China Charities,” a Forbes.com op ed by Susan Colby and Nan Stone, shares Bridgespan’s perspective on just how nonprofits can develop strategic clarity around their theory of social change and the impact they seek to create.
• “Data Point: The Realities of Indirect Costs and the Unrealistic Expectations of Funders,” which examines indirect costs as reported by nonprofits (typically 10 to 15 percent) as compared to their actual indirect costs (17 to 35 percent).

• “Nonprofit Job Seekers: Finding the Right Job for You,” originally published in “Leadership Matters,” a publication from the Bridgespan Group’s Bridgestar initiative. This article offers best practices intended to increase the chance that a job seeker will find the right “fit” in his or her next position.

Subscriptions to “Strategies for Social Impact” and “Leadership Matters,” along with Bridgespan’s full collection of case studies, articles, and newsletters, are available free of charge at www.bridgespan.org.

About The Bridgespan Group

The Bridgespan Group (www.bridgespan.org) is a nonprofit, 501(c)(3) organization applying leading-edge management strategies, tools and talent to help other nonprofits and foundations achieve greater social impact. Established in 2000 and incubated at Bain & Company, Bridgespan works to build a better world by strengthening the ability of nonprofit organizations to achieve breakthrough results through three main activities: strategy consulting; knowledge-sharing; and recruiting through its Bridgestar initiative.

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