Move Beyond the Overhead Myth To Giving For Impact

Filed Under: Philanthropy - Posted @ 2:33pm

The end of the calendar year is a time when charitable giving is in the spotlight. Just as there are myths associated with many year-end cultural celebrations, there are also myths associated with philanthropy.

Some ideas about charitable giving are rooted in well-meaning, but incorrect assumptions about nonprofits. Other myths are holdovers from outdated approaches to philanthropy. Perhaps the biggest myth, the one you’ll see challenged in most every article on giving myths, is the myth of overhead.

consider not just overhead, but “transparency, governance, leadership and results”

In his new book, “Giving Done Right”, Phil Buchanan offers practical tips and strategies for givers at all levels. Phil has served as the President of the Center for Effective Philanthropy for the past two decades. He also uses lessons learned from some of the biggest givers to bust the idea that an organization’s overhead costs are an obstacle to real community impact.

For decades, donors were advised to ask this question, “How much of the donation will go to the cause and how much will go to overhead?” This is Phil’s response:

It’s a question that comes from a good place – no one wants their money wasted. But it’s the wrong question. It’s like judging a baseball team by their uniforms rather than their wins and losses. What matters are results. To achieve results, nonprofits need flexible support that allows them to make investments in getting better – in technology, performance management systems, or professional development, for example. They should make these investments regardless of whether those budget items are considered to be for “overhead” on the one hand or for the “program” or “cause” on the other. With few exceptions, it all goes to support the cause.

Buchanan goes on to encourage givers to get clear on their goals, find strategies that are likely to lead to progress towards those goals and then identify strong organizations doing effective work that aligns with your goals and strategies. Once that work has been done, give those organizations the kind of flexible support they desperately need.

Phil’s not alone. The leaders of GuideStar and Charity Navigator wrote an open letter to donors reinforcing this approach, asking givers to consider not just overhead, but “transparency, governance, leadership and results.”

The impact you’ll have is no myth, it’s a very real act of positive transformation.

Major funders, including GTCF and many of the largest foundations in the country, have also recognized the importance of fully funding organizations with an eye on community impact and an understanding about the real cost to effectively fulfill nonprofit missions.

Darren Walker, CEO, Ford Foundation put it this way:

We must trust those we fund, and fund them adequately to do what they believe is best, not what we think is best. This means putting ourselves in the shoes of prospective grantees and communities, treating them like partners rather than contractors, and entrusting organizations with long-term general support funding and project grants that provide adequate overhead. It means acknowledging the power imbalance that often makes our grantees reluctant to engage honestly and authentically.

Engaging in philanthropy has the power to change our community and our world for the better. Whether you are a major donor or a modest contributor, lean into those nonprofits that align with your vision by making an unrestricted gift. Your gift allows them to deliver on their unique mission. The impact you’ll have is no myth, it’s a very real act of positive transformation.


Further Reading

The Overhead Myth – Moving To An Overhead Solution

The Philanthropy We Need: Ford Foundation President Calls for Transformation 

The Way We Think About Charity Is Dead Wrong – A TED Talk 

8 Myths of US Philanthropy 

10 Charitable Giving Myths You Have The Power To Overcome 

The myth of double-dipping, and the destructiveness of restricted funding

Myths About Nonprofits 

10 Giving Myths Philanthropists Can Overcome


To learn more about achieving lasting community impact through your philanthropy, contact GTCF’s Philanthropy Department.