3 Indications of Success–NOT the Overhead Ratio

The Overhead Myth

Lately, the overhead myth has received more and more attention. For those of you who aren’t extremely aware of this, the overhead myth is that nonprofit organizations with small overhead to program cost ratios are better than those with larger ratios. This is simply not the case. In times past, people would look at the overhead ratio, and if it were larger than 15% they wouldn’t donate to the organization.

In a previous article I introduced you to Dan Pallotta and his argument about the overhead myth. I completely agree with his points and would like to encourage people to look at these other three indications of a successful nonprofit.

#1 Impact

Nothing tells more about a nonprofit than the impact they are making. How can you determine whether a nonprofit is impactful? Well, each nonprofit is different, but these days a lot of nonprofits show their impact through their social media and websites. For instance, Charity:Water has a map on their website where they show exactly where each water well is drilled. This is proof that they are accomplishing their mission and making an impact.

#2 Financial Transparency

Another great way to determine a successful organization is to look at how transparent they are. Most nonprofits are now leaning towards being more transparent, which is great for donors. We can go to an organization’s website or to their Guidestar profile and look at their financial statements, understand where their money is going, and decide if we want our money to go there too. Also, many organizations are opting to put their financial information directly on their website. Using Charity:Water as an example again, see how they post all of their 990’s in addition to other financial reports. This is an excellent practice.

#3 Leadership

I strongly believe that organizations with strong leadership are more successful than those without strong leadership.

Sometimes you have to really get to know an organization to understand whether or not their leadership is successful. For instance, there are leaders with a lot of credentials, but they aren’t very good at managing their organization. On the other hand, there are people who do not have much by way of financial success or education who are incredible leaders. They run incredible organizations.

One organization I admire for their leadership is Engage Now Africa. I talked about Engage Now Africa in an earlier post. The current Executive Director, Jennifer Hogge’s biography is as follows:

“Previous to coming to ENA she was a donor liaison for LDS Philanthropies with fundraising responsibility for Humanitarian Services and BYU-Hawaii. Jennifer has worked as the Director of International Family Policy and United Nations Liaison for a non-governmental organization in New York.  She also worked as a Consultant with the Middle East Peace Institute and a Performance Auditor for the Utah Legislative Auditors Office. Jennifer received a Certificate of Completion from Cambridge University that included course-work in European Economic and Social History and holds a Master’s Degree in Public Policy with an emphasis in international development as well as a Bachelor’s Degree in Political Science from Brigham Young University.”

On paper she sounds incredible, right? But, it doesn’t stop there. I was able to work with Jennifer Hogge personally and I know that she is a great leader and manager. She knows how to engage with the in-country staff in Africa. She has developed relationships with each of them and asks about their lives because she truly cares about each individual. The staff trusts her and works with her, not for her. Also, she is dedicated to the cause and is constantly working to strengthen the organization so they can impact more lives.

These are the organization’s that we should be donating our time and money to. They are the ones truly making an impact, sharing their financial information with the public so we can decide for ourselves, and they have strong leadership. Nonprofit organizations are much deeper than their overhead, and we should try to understand them on that deeper level.

 

Related Article:

TED Talks–Dan Pallotta

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