From Our Brains to Yours
Return on overhead investment
“I think my point is that we need to view all expenses as investments. You don’t invest in anything unless you at least have a target return in mind. If your annual report can articluate the return on all of your investments, including overhead, and that number improves over time, then you’re well on your way to making an impressive case for an increase in funding from investors.”
“Let us not, as a sector, fall into the trap of listening to critics who say that we should minimize the dollars, effort, brain power, and ingenuity that goes into everything but the “real” work (programs). In so doing, we risk forgetting that our role is BOTH to find solutions to the persistent problems of inequality and injustice and malnutrition and infant mortality and safe drinking water and AIDS and malaria…AND to figure out how to explain to the world that these problems matter, that we have the tools to solve them, and that if was have the tools to solve them, then we must all act.”
My very first post on this blog in January was a response to a post from Sasha Dichter about separating “program” expenses from “overhead” expenses. The non-profit world generally looks down on high overhead relative to program expenses. While program delivery is the key component for fulfilling the organization’s mission., my main point was:
“I think my point is that we need to view all expenses as investments. You don’t invest in anything unless you at least have a target return in mind. If your annual report can articluate the return on all of your investments, including overhead, and that number improves over time, then you’re well on your way to making an impressive case for an increase in funding from investors.”
As usual, Dichter is back on topic and says it even better:
“Let us not, as a sector, fall into the trap of listening to critics who say that we should minimize the dollars, effort, brain power, and ingenuity that goes into everything but the “real” work (programs). In so doing, we risk forgetting that our role is BOTH to find solutions to the persistent problems of inequality and injustice and malnutrition and infant mortality and safe drinking water and AIDS and malaria…AND to figure out how to explain to the world that these problems matter, that we have the tools to solve them, and that if was have the tools to solve them, then we must all act.”
I think a snapshot financial summary that separates overhead from program expenses but does not spell out the return on your overhead investment misses the mark. And when your data is incomplete, the decisions based on that data is likely to be less than optimal. Good enough -maybe. But room for improvement – definitely.
So the question for the week: what’s the return your getting on your marketing, fundraising, communications and administrative expenses (aka investments)? How do you know? Can you demonstrate it?