Looking at overhead


Ten years ago, the Bridgestone Group, a nonprofit consulting firm, conducted a survey of nonprofits, and found that many were operating without sufficient infrastructure. They found that many of the organizations had “nonfunctioning computers, staff members who lacked the training needed for their positions, and, in one instance, furniture so old and beaten down that the movers refused to move it.”

Whether you are a beneficiary, supporter, employee or director of a nonprofit organization, you want to see the organization’s challenges dealt with efficiently and effectively, and hope for innovative programs and approaches. But in thinking about those objectives, how much thought do you give to whether the organization has enough personnel, office supplies, up to date computers and electronics, a functioning air conditioning system and reasonably modern furniture? Most people take all of that for granted. But they shouldn’t. It is all part of the cost of the operation, and is as important to the organization’s success as every other component of the work done.

Last week, in a thoughtful piece published on eJewishPhilanthropy.com, Lisa Eisen, president of the U.S. Jewish Portfolio of the Charles and Lynn Schusterman Family Foundation, and Barry Finestone, president and CEO of the Jim Joseph Foundation, suggested that Jewish foundations should follow the lead of five of America’s wealthiest foundations, who have pledged to do more to help grantees pay for rent, decent wages, technology and other overhead.

According to Eisen and Finestone: “At a time when organizations are eager to dream big, tackle community challenges and strengthen their operations, many funders continue to direct their grants to a narrow set of programmatic goals. And all too often, these grants do not cover the true cost of the work.”

Darren Walker, who leads the Ford Foundation, put it this way: “We funders like to think that we are fair in our funding in terms of administrative costs, overhead, etc., when in fact we kid ourselves. We’re not being honest with ourselves if we think that [paying] 10 percent of overhead actually covers the true administration of our project grants.”

These philanthropists make a very valid point. The business of nonprofits needs to be viewed through the economic lens of for-profit activity. And just like it takes significant financial investment to build a functioning and productive enterprise, it takes similar investment to build and sustain the infrastructure to operate high performance nonprofit organizations that attract our interest and support.

Eisen and Finestone encourage increased focus on the cost of getting
results, and suggest that philanthropists consider unrestricted multiyear grants to nonprofits, and increased focus on and sensitivity toward significant
institutional operating costs that feed the growth and success of work in the nonprofit world.

Over the past several years, we have seen an increasing application of fundamental business principles to the operations in the nonprofit world. The focus on the importance of sustaining nonprofit infrastructure is a welcome step in that process.

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