The Executive Director: Simple Guidance for Leaders of Small Organizations

The Overhead Myth

Posted on June 17, 2013

Today, three leaders of national nonprofit information groups signed a historic letter aimed at eliminating the overhead ratio as the primary measure of a nonprofit’s performance.

The letter is historic because it has been demonstrated many, many times that the overhead ratio — often calculated as (administrative + fundraising expenses) / total expenses — should not be the primary factor in determining a nonprofit’s effectiveness.

The letter notes: “When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called “The Nonprofit Starvation Cycle.” We starve charities of the freedom they need to best serve the people and communities they are trying to serve.” In other words, an appropriate expenditure on overhead expenses — training, planning, and internal systems — help nonprofits serve more effectively.

Click on this link to read the letter: The Overhead Myth Letter.

To learn more, visit The Overhead Myth Challenge web site.