Confessions of an Overhead
2016 was an amazing year for ReachOut. We reached over 1.58 million Australians looking for help during a tough time and launched a new service for parents. I am incredibly proud of my team and what we achieved.
But I have a confession, I am an overhead; so are a number of my best staff like our finance team and HR manager. Each and every one of us is committed to ReachOut’s mission and critical to achieving it.
Many people believe that that there is a straight line relationship between overheads and impact - the lower the overheads the better the charity because more money gets to the “frontline”. Think about it though, would you donate to an organisation without a CEO or a functioning board? How happy would you be if the charity couldn’t tell you how your donation was spent because they had no finance team? Would you want to work for an organisation in a dilapidated office with a computer running windows 95?
The fact is overheads are critical to achieving the mission of the charity.
Rather than a straight line relationship between overhead and impact, the relationship is an inverted U curve. What this means is up to a certain point increasing expenditure on overheads improves organisational impact. If the proportion of money spent on overheads keeps going up, impact will start to decline. The challenge is to spend the right proportion on overheads.
So what can we do? First, charities need to be transparent about their overheads and the impact the organisation is making. At the very least, annual reports and audited financial statements should be easily accessible. Second, donors need to support the organisation’s overall costs as well as project specific costs. Third, we need to shift the conversation from cost to value, including the impact per dollar spent.
So to all those overheads reading this article, stand proud and know that your efforts are valued and you are making a difference. There is much work needed to articulate our worth but don’t stop trying.
Thanks for sharing such an important message with eloquence and clarity Jono. Love the title too!
Jono, as Chair of the Audit, Finance and Risk Committee of ReachOut, I'll say publically that you're one of the most valuable overheads we've got! :-) Terrific article and an insightful one for NFP's that are ever pressed by donors/suporters on the veracity of their expenditure. Important though for NFP's to clearly know, and be able to explain, where their overheads sit on the inverted U curve you mention above.
At last! Thank you for a great article. Well said.
100% on the mark Jono. Philanthropists we work with who are truly seeking impact at scale are starting to understand that funding capacity is the most important thing they may ever do for a social enterprise and that particular cause!
An old manager / mentor used to give the example that the people generating the income are literally carrying those who don't. This was a manufacturing plant and I was in the office so he made the point we in the office all were overheads. If there is too many in the office then the ones on the floor can not carry us. I have always remembered this in making sure what load I add is well balanced by the value I bring.