Ending the “overhead myth” is everywhere

overhead mythFor the last few years, I’ve come across snippets and whispers from non-profit thought-leaders about how we need to help donors change their views about evaluating a non-profit organization based on how little it spends on administrative and fundraising costs. It was mentioned in polite conversations. A few bloggers were chattering about. I even saw it on a website owned by a charity watchdog group.

Then a few years ago, Dan Pallotta published a book titled “Uncharitable,” and this discussion emerged from the shadows of the non-profit sector. For the last few years, everyone I know has been engaged in this discussion or pieces of it such as:

  • Executive compensation
  • Marketing & advertising
  • Risk aversion
  • Return on investment for donors
  • Spending on today versus tomorrow

The overhead myth has been building momentum for a few years now. I even jumped on this bandwagon a year ago with the following series of blog posts:


A few weeks ago I received an email from a dear friend of mine with a link to “Letter to the Donors of America” from the BBB Wise Giving Alliance, Guidestar and Charity Navigator. The letter was simple and straightforward. It asked donors to please stop looking at overhead when making charitable contributions. It was a case for support document. Pure and simple!

After this first email from a friend, I received another and then another. I started to see bloggers tackle the subject, and then non-profit agencies started talking about it on their websites. Before long, it was all over social media and everyone in my circles was talking about “the overhead myth“.

For the record, I’ve always thought that the idea of using overhead to evaluate a non-profit organization’s worthiness was silly for two reasons:

  1. Through the magic of accounting, every smart executive director keeps at least one eye on what donors consider the “percentage of overhead” and tweaks their allocation formulas to keep that percentage where it needs to be. So, this number really means nothing. It never has and never will.
  2. When I am purchasing goods and services, I never hold for-profit companies to this standard. When I hired a marketing firm to help me during the start-up phase for The Healthy Non-Profit LLC, I didn’t look at how much money they spent on administration, executive compensation or their advertising budget. Heck no! I looked at the quality of their work. As a donor, I like to invest in organizations whose programs are having impact regardless of how much they pay their executive director.

I’ve been asked by some readers of this blog to write something about the “overhead myth“. As flattering and tempting it is to weigh-in on a compelling subject like this, I’m going to use some self-restraint and decline. (Surprising? I know!)


Have you see how much has already been written out there? OMG!!! Everyone with a blog, website, Facebook page, and Twitter account has jumped on this bandwagon.

I’m will use the remainder of my space to post links to those other blogs, websites, etc. If you are very interested in this topic, please click your heart away.

Your thoughts?

Let’s start a discussion using the comment box attached to this DonorDreams blog post.

I personally don’t think anything is going to change as a result of this “overhead myth” campaign push.

I think donors are set in their ways. I believe Dan Pallotta was right about the Puritan influence on our culture. I don’t think “culture” and “values” and “habits” are easy to change. AND I think talk is cheap.

In the comment box below, please tell me why you think I am right or why I am wrong.

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC


  1. I believe talk can change behaviors, habits, and thinking. Look at how smoking, LGBTQQI rights, and driving gas saving cars are viewed today. Granted, gas prices probably had a strong impact on the car thing, but still conversations were had that changed people’s views.

    Unfortunately, most people are secluded from the nonprofit sector unless they are asked for donations. This leaves a lot of time for misguided Facebook memes that say XYZ Organizations pay their CEOs $2,000,000 a year while ABC Organizations use volunteer CEOs. People just don’t understand that nonprofit doesn’t mean an employee needs to make a starving wage or a CEO shouldn’t be compensated for her hard work.

    I believe a re-branding from major organizations would be necessary. Much like the Truth Campaign with smoking, viral memes could be developed and launched online. I believe it was the memes that built this misinformative fortress in the minds of people. I mean, occasionally I’ll see these stupid memes on Facebook and think “idiots”.

    Any thoughts?

    1. Thanks for weigh-in, Cody. I can’t disagree with anything you’ve said, but I am left thinking:

      1. The cultural shifts and changes you point to didn’t happen overnight. In fact, it took generations in some cases.
      2. Additionally, in each of your instances, there was a group that “owned” the change and “pushed” the change. I’m left wondering if charitynavigator.com or BBB or GuideStar are in this for the long haul like HRC and the American Cancer Society were. And how much money will they invest in things like you suggest (e.g. re-branding and education campaigns).

      I guess we’ll just have to wait and see.

      Thanks for sharing your thoughts! I hope we see a lot more of you around here. 😉


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